-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GIEmqi5vuP/MG0rmWm9adfoPsVVLjijaT0C9kjpBxt2WupHfToQBM9v5ImWNEre5 0GGrrRKa74Cf+egojonWFA== 0000891618-99-004896.txt : 19991108 0000891618-99-004896.hdr.sgml : 19991108 ACCESSION NUMBER: 0000891618-99-004896 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 29 FILED AS OF DATE: 19991105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILICON ENTERTAINMENT INC /CA/ CENTRAL INDEX KEY: 0001053689 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-87019 FILM NUMBER: 99741505 BUSINESS ADDRESS: STREET 1: 210 HACIENDA AVE CITY: CAMPBELL STATE: CA ZIP: 95008 BUSINESS PHONE: 4087778082 MAIL ADDRESS: STREET 1: 210 HACIENDA AVE CITY: CAMPBELL STATE: CA ZIP: 95008 FORMER COMPANY: FORMER CONFORMED NAME: SILICON ENTERTAINMENT INC /CA/ DATE OF NAME CHANGE: 19990806 S-1/A 1 AMENDMENT #3 TO S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1999 REGISTRATION NO. 333-87019 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ SILICON ENTERTAINMENT, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 7999 77-0389433 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NO.)
210 HACIENDA AVENUE CAMPBELL, CALIFORNIA 95008 (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) DAVID S. MORSE CHAIRMAN, CEO & PRESIDENT 210 HACIENDA AVENUE CAMPBELL, CALIFORNIA 95008 (408) 364-6710 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: JAMES M. KOSHLAND, ESQ. NORA L. GIBSON, ESQ. NICOLE D. ALSTON, ESQ. RICHARD R. PLUMRIDGE, ESQ. LYNN E. FULLERTON, ESQ. JOHN E. HAYES, ESQ. GRAY CARY WARE & FREIDENRICH LLP BROBECK, PHLEGER & HARRISON LLP 400 HAMILTON AVENUE SPEAR STREET TOWER, ONE MARKET PALO ALTO, CALIFORNIA, 94301-1825 SAN FRANCISCO, CALIFORNIA 94105 (650) 833-2000 (415) 442-0900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE - ------------------------------------------------------------------------------------------------------------------------------ Common stock, $0.001 par value 5,175,000 $10.00 $51,750,000 $14,387 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------
(1) Includes 675,000 shares which the underwriters have the option to purchase to cover over-allotments, if any. (2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE The purpose of this Amendment No. 3 is solely to file certain exhibits to the Registration Statement as set forth below in Item 16(a) of Part II. 3 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth all expenses, other than the underwriting discounts and commissions, payable by the Registrant in connection with the sale of the common stock being registered. All amounts shown are estimates except for the registration fee, the NASD filing fee and the Nasdaq National Market fee. Registration fee............................................ $ 14,387 NASD filing fee............................................. 5,675 Nasdaq National Market fee.................................. Blue sky qualification fees and expenses.................... Printing and engraving expenses............................. 200,000 Legal fees and expenses..................................... 300,000 Accounting fees and expenses................................ 200,000 Transfer agent and registrar fees........................... Miscellaneous............................................... ---------- Total............................................. $1,000,000 ==========
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Section 145 of the Delaware Law permits indemnification of officers, directors and other corporate agents under certain circumstances and subject to certain limitations. The Registrant's Certificate of Incorporation and By-laws provide that the Registrant shall indemnify its directors, officers, employees and agents to the full extent permitted by the Delaware Law, including circumstances in which indemnification is otherwise discretionary under Delaware law. In addition, the Registrant has entered into separate indemnification agreements with its directors and executive officers which require the Registrant, among other things, to indemnify them against certain liabilities which may arise by reason of their status or service (other than liabilities arising from acts or omissions not in good faith or willful misconduct). These indemnification provisions and the indemnification agreements entered into between the Registrant and its executive officers and directors may be sufficiently broad to permit indemnification of the Registrant's executive officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act. The Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification by the Underwriters of the Registrant and its officers and directors for certain liabilities arising under the Securities Act, or otherwise. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Since January 1, 1996, we sold and issued the following unregistered securities: 1. From inception through August 1, 1999, we granted stock options to purchase an aggregate of 2,588,141 shares of our common stock at an average weighted exercise price of approximately $1.90 per share to employees, consultants, directors and other service providers pursuant to our 1996 Stock Option Plan, 1997 Nonstatutory Stock Option Plan, and 1998 Executive Stock Option Plan. 2. From inception through August 1, 1999, we issued and sold an aggregate of 1,078,368 shares of our common stock to employees, consultants, directors and other service providers for aggregate consideration of approximately $2,050,085 pursuant to exercise of options granted under our 1996 Stock Option Plan, 1997 Nonstatutory Stock Option Plan, and 1998 Executive Stock Option Plan. Of the $2,050,085 consideration, $382,000 was received in the form of promissory notes and $1,558 was received in the form of prior services rendered. II-1 4 3. From January 5, 1996 through May 16, 1996, in connection with the issuance of promissory notes, we issued warrants to certain of our existing private investors to purchase an aggregate of 106,667 shares of our common stock at an exercise price of $1.50 per share. 4. On February 7, 1996, we sold 1,633,334 shares of Series A Preferred Stock for $0.60 per share to a private investor for an aggregate purchase price of $980,000.10. 5. On October 15, 1996, in connection with an equipment lease line, we issued a warrant to Phoenix Leasing Incorporated to purchase 26,667 shares of our Series B Preferred Stock at an exercise price of $1.50 per share. 6. From May 16, 1996 through May 12, 1997, we issued and sold an aggregate of 2,769,016 shares of Series B Preferred Stock for $1.50 per share to a group of private investors for an approximate aggregate purchase price of $4,153,524. 7. From March 27, 1997 through November 19, 1997, we issued warrants to certain of our existing private investors to purchase an aggregate of 232,584 shares of our Series C Preferred Stock at an exercise price of $6.00 per share. 8. On August 14, 1997, in connection with a strategic partnership and license transaction, we issued a warrant to one of our strategic partners to purchase 50,000 shares of our Series C Preferred Stock at an exercise price of $6.00 per share. 9. On August 18, 1997, in connection with a strategic partnership and licensing agreement, we issued an option to one of our strategic partners to purchase 20,000 shares of our common stock at $0.15 per share. 10. From December 1997 through July 1999, we issued and sold an aggregate of 3,485,449 shares of Series C Preferred Stock for $6.00 per share to a group of private investors for an aggregate purchase price of $20,912,676. SG Cowen Securities Corporation acted as a broker in this transaction. 11. On April 23, 1998, in connection with a strategic partnership transaction, we issued a warrant to John Force to purchase 7,500 shares of our Series C Preferred Stock at an exercise price of $6.00 per share. 12. On May 17, 1998, in connection with a strategic partnership transaction, we issued a warrant to Simon Investors to purchase 25,000 shares of our Series C Preferred Stock at an exercise price of $6.00 per share. 13. On July 1, 1998, in connection with a strategic partnership transaction, we issued a warrant to Action Performance Companies to purchase 20,000 shares of our Series C Preferred Stock at an exercise price of $6.00 per share. 14. On July 1, 1998, in connection with an equipment lease line, we issued a warrant to Phoenix Growth Capital Corporation to purchase 13,334 shares of our Series C Preferred Stock at an exercise price of $6.00 per share. 15. From February 2, 1999 through June 18, 1999, we granted 2,413 shares of our common stock to our employees pursuant to our 1999 Employee Stock Bonus Plan. Of these shares, 1,525 shares have been exercised. 16. From January 22, 1999 through July 1, 1999, we issued warrants to certain of our existing private investors to purchase an aggregate of 131,000 shares of our common stock at an exercise price of $6.00 per share. 17. On June 17, 1999, we issued a warrant to LINC to purchase 3,224 shares of our Series C Preferred Stock in connection with a capital equipment lease agreement. II-2 5 18. On July 1, 1999, we issued a warrant to Pentech Financial Services, Inc. to purchase 20,000 shares of our Series C Preferred Stock at $6.00 per share in connection with a capital equipment lease agreement. 19. On June 30, 1999, we issued a secured subordinated convertible note to each of Galladio Holding B.V., Wagenaarkwartier's-Gravenhage B.V. and Van der Lee Partnership in the principal amount of $2,260,000, $2,260,000 and $1,130,000, respectively. All of these notes are convertible into shares of our common stock. 20. From June 16, 1999 to September 9, 1999, we issued promissory notes in an aggregate amount of $8,803,166 to various investors, $5,780,000 of which is convertible into shares of our common stock. 21. On February 2, 1999, we issued an option to purchase 100,000 shares of our common stock at $1.00 per share to one of our strategic partners in connection with a strategic partnership and license agreement. 22. On April 23, 1998, August 11, 1998 and June 17, 1999, we issued 1,817, 3,421 and 4,420 shares, respectively, of our common stock at $0.50, $1.00 and $6.00 per share, respectively, to Michael DiLorenzo in connection with consultant stock purchase agreements. 23. On June 17, 1999, we issued 4,000 and 1,000 shares of our common stock at $6.00 per share to Nagle & Ferri, L.L.C. and Michael Nichols, respectively, in connection with a consultant stock purchase agreement. 24. On February 2, 1999 and April 7, 1999, we issued an aggregate of 3,393 shares of our common stock at $1.00 per share to Madeline Canepa in connection with a consultant common stock purchase agreement. There were no underwriters employed in connection with any of the transactions set forth in Item 15. The issuances described in Items 15.3 through 15.14 and 15.16 through 15.23 were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. In addition, the issuances described in Item 15.1, 15.2 and 15.15 were deemed exempt from registration under the Securities Act in reliance on Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about the Registrant or had access, through employment or other relationships, to such information. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 1.1 Form of Underwriting Agreement. 3.1 Restated Certificate of Incorporation of the Registrant and Certificate of Amendment of Restated Certificate of Incorporation to be in effect after the offering. 3.2 Bylaws of the Registrant to be in effect after the offering. ** 4.1 Third Amended and Restated Rights Agreement, dated as of December 31, 1998, as amended to date. 4.2 Specimen Common Stock Certificate. 5.1 Opinion of Gray Cary Ware & Freidenrich LLP. 10.1 Form of Indemnification Agreement for directors and executive officers.
II-3 6
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- **10.2 1996 Stock Option Plan and forms of Incentive Stock Option Agreement and Nonstatutory Stock Option Agreement thereunder. **10.3 1997 Nonstatutory Stock Option Plan and form of Nonstatutory Stock Option Agreement thereunder. **10.4 1998 Executive Stock Option Plan and forms of Incentive Stock Option Agreement and Nonstatutory Stock Option Agreement thereunder. **10.5 Stock Bonus Plan and form of Stock Bonus Agreement thereunder. 10.6 1999 Employee Stock Purchase Plan. 10.7+ License Agreement by and between National Association for Stock Car Auto Racing, Inc. and the Registrant, dated August 18, 1997, as amended. 10.8+ The Registrant and Action Performance Companies, Inc. Terms -- Strategic Partnership, dated April 20, 1998. 10.9+ Letter Agreement with Simon Investors, LLC, dated May 17, 1998. 10.10+ Industrial Complex Lease (California) between MP Hacienda, Inc. and the Registrant, dated as of April 30, 1998. 10.11+ Dallas Galleria Lease between Dallas Galleria Limited as "Landlord" and the Registrant, as "Tenant" d/b/a/ Nascar Silicon Motor Speedway, dated as of May 22, 1998, as amended. 10.12+ Lease by and between Mall of America Company, a Minnesota General Partnership, and the Registrant, dated as of August 12, 1997. 10.13+ Irvine Retail Properties Company Retail Space Lease, dated as of April 22, 1998. 10.14+ The Palisades Center Shopping Center Lease, dated as of July 27, 1998. 10.15+ Lease, the Registrant, Tenant, "NASCAR Silicon Motor Speedway," Trade Name, Woodfield Mall, dated as of December 18, 1997. 10.16+ Lease, the Registrant, Tenant, NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway, Trade Name, Concord Mills, dated as of June 30, 1999. 10.17+ Lease, the Registrant, Tenant, NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway, Trade Name, Katy Mills, dated as of March 17, 1999. 10.18+ Universal Studios CityWalk Hollywood Lease between Universal Studios CityWalk Hollywood, a division of Universal Studios, Inc. as Landlord and the Registrant, executed as of July 20, 1999. 10.19+ Standard Shopping Center Lease, dated as of August 12, 1999 (Walden Galleria, Buffalo, New York). 10.20+ Standard Shopping Center Lease, dated as of August 12, 1999 (Crossgates Mall, Albany, New York). 10.21+ Retail Lease Agreement between Peabody Place Centre, L.P., a Tennessee limited partnership and the Registrant dated as of May 24, 1999. 10.22+ Standard Shopping Center letter, dated as of August 18, 1999 (Carousel Center, Syracuse, New York). 10.23+ Lease, the Registrant, Tenant, NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway, Trade Name, Opry Mills, dated as of August 23, 1999. 10.24+ Agreement of Lease between Mall of Georgia, L.L.C. and the Registrant, dated as of September 23, 1999. **10.25 Service Agreement by and among the Registrant, Dale Earnhardt, Inc. and Richard Childress Racing, dated as of April 30, 1997. **10.26 Jeff Gordon Personal Services and Endorsement Agreement by and among the Registrant, Jeff Gordon, Inc. and Jeff Gordon, dated as of January 1, 1998. **10.27 Licensing Agreement by and between the Registrant and Dale Jarrett, dated as of March 24, 1997. **10.28 Licensing Agreement by and between the Registrant and Rusty Wallace Inc., dated as of March 1, 1997.
II-4 7
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- **10.29 License Agreement (Auto Design) by and between the Registrant and Robert Yates Racing, Inc., dated as of February 28, 1997. 10.30 Note Purchase Agreement by and among the Registrant, Galladio Holding, Wagenaarkwartier and E.M.H. van der Lee, dated as of June 30, 1999. 10.31 Note Purchase Agreement by and among the Registrant and Galladio Holding, van der Lee Partnership, E.M.H. van der Lee E.W. van der Lee and Manschot Opportunity Fund, dated as of September 9, 1999. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Public Accountants. 23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1). **24.1 Power of Attorney.
- ------------------------- * To be filed by amendment. ** Previously filed. + Confidential treatment has been requested for portions of this exhibit. The confidential portions have been filed separately with the Securities and Exchange Commission. (b) FINANCIAL STATEMENT SCHEDULES. No schedules have been filed because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, employee or agent of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, employee or agent in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Campbell, County of Santa Clara, State of California, on the 5th day of November, 1999. SILICON ENTERTAINMENT, INC. By: /s/ ROSS C. MULHOLLAND ------------------------------------ Ross C. Mulholland Vice President Finance, Chief Financial Officer and Principal Accounting Officer Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ DAVID S. MORSE* Chairman of the Board, Chief November 5, 1999 - --------------------------------------------- Executive Officer and President David S. Morse /s/ ROSS C. MULHOLLAND Vice President Finance, Chief November 5, 1999 - --------------------------------------------- Financial Officer and Principal Ross C. Mulholland Accounting Officer /s/ WILLIAM HART* Director November 5, 1999 - --------------------------------------------- William Hart /s/ ROBERT H. MANSCHOT* Director November 5, 1999 - --------------------------------------------- Robert H. Manschot /s/ CHRISTOPHER S. BESING* Director November 5, 1999 - --------------------------------------------- Christopher S. Besing /s/ ROBERT V. CHEADLE* Director November 5, 1999 - --------------------------------------------- Robert V. Cheadle *By: /s/ ROSS C. MULHOLLAND - --------------------------------------------- Ross C. Mulholland Attorney-in-Fact
II-6 9 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 1.1 Form of Underwriting Agreement. 3.1 Restated Certificate of Incorporation of the Registrant and Certificate of Amendment of Restated Certificate of Incorporation to be in effect after the offering. 3.2 Bylaws of the Registrant to be in effect after the offering. ** 4.1 Third Amended and Restated Rights Agreement, dated as of December 31, 1998, as amended to date. 4.2 Specimen Common Stock Certificate. 5.1 Opinion of Gray Cary Ware & Freidenrich LLP. 10.1 Form of Indemnification Agreement for directors and executive officers. **10.3 1997 Nonstatutory Stock Option Plan and form of Nonstatutory Stock Option Agreement thereunder. **10.4 1998 Executive Stock Option Plan and forms of Incentive Stock Option Agreement and Nonstatutory Stock Option Agreement thereunder. **10.5 Stock Bonus Plan and form of Stock Bonus Agreement thereunder. 10.6 1999 Employee Stock Purchase Plan and form of subscription agreement thereunder. 10.7+ License Agreement by and between National Association for Stock Car Auto Racing, Inc. and the Registrant, dated August 18, 1997, as amended. 10.8+ The Registrant and Action Performance Companies, Inc. Terms -- Strategic Partnership, dated April 20, 1998. 10.9+ Letter Agreement with Simon Investors, LLC, dated May 17, 1998. 10.10+ Industrial Complex Lease (California) between MP Hacienda, Inc. and the Registrant, dated as of April 30, 1998. 10.11+ Dallas Galleria Lease between Dallas Galleria Limited as "Landlord" and the Registrant, as "Tenant" d/b/a/ Nascar Silicon Motor Speedway, dated as of May 22, 1998, as amended. 10.12+ Lease by and between Mall of America Company, a Minnesota General Partnership, and the Registrant, dated as of August 12, 1997. 10.13+ Irvine Retail Properties Company Retail Space Lease, dated as of April 22, 1998. 10.14+ The Palisades Center Shopping Center Lease, dated as of July 27, 1998. 10.15+ Lease, the Registrant, Tenant, "NASCAR Silicon Motor Speedway," Trade Name, Woodfield Mall, dated as of December 18, 1997. 10.16+ Lease, the Registrant, Tenant, NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway, Trade Name, Concord Mills, dated as of June 30, 1999. 10.17+ Lease, the Registrant, Tenant, NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway, Trade Name, Katy Mills, dated as of March 17, 1999. 10.18+ Universal Studios CityWalk Hollywood Lease between Universal Studios CityWalk Hollywood, a division of Universal Studios, Inc. as Landlord and the Registrant, executed as of July 20, 1999. 10.19+ Standard Shopping Center Lease, dated as of August 12, 1999 (Walden Galleria, Buffalo, New York). 10.20+ Standard Shopping Center Lease, dated as of August 12, 1999 (Crossgates Mall, Albany, New York). 10.21+ Retail Lease Agreement between Peabody Place Centre, L.P., a Tennessee limited partnership and the Registrant dated as of May 24, 1999. 10.22+ Standard Shopping Center letter, dated as of August 18, 1999 (Carousel Center, Syracuse, New York). 10.23+ Lease, the Registrant, Tenant, NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway, Trade Name, Opry Mills, dated as of August 23, 1999.
10
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 10.24+ Agreement of Lease between Mall of Georgia, L.L.C. and the Registrant, dated as of September 23, 1999. **10.25 Service Agreement by and among the Registrant, Dale Earnhardt, Inc. and Richard Childress Racing, dated as of April 30, 1997. **10.26 Jeff Gordon Personal Services and Endorsement Agreement by and among the Registrant, Jeff Gordon, Inc. and Jeff Gordon, dated as of January 1, 1998. **10.27 Licensing Agreement by and between the Registrant and Dale Jarrett, dated as of March 24, 1997. **10.28 Licensing Agreement by and between the Registrant and Rusty Wallace Inc., dated as of March 1, 1997. **10.29 License Agreement (Auto Design) by and between the Registrant and Robert Yates Racing, Inc., dated as of February 28, 1997. 10.30 Note Purchase Agreement by and among the Registrant, Galladio Holding, Wagenaarkwartier and E.M.H. van der Lee, dated as of June 30, 1999. 10.31 Note Purchase Agreement by and among the Registrant and Galladio Holding, van der Lee Partnership, E.M.H. van der Lee E.W. van der Lee and Manschot Opportunity Fund, dated as of September 9, 1999. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Public Accountants. 23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1). **24.1 Power of Attorney.
- ------------------------- * To be filed by amendment. ** Previously filed. + Confidential treatment has been requested for portions of this exhibit. The confidential portions have been filed separately with the Securities and Exchange Commission. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 Exhibit 1.1 [Number of Shares] SILICON ENTERTAINMENT, INC. COMMON STOCK UNDERWRITING AGREEMENT November __, 1999 SG COWEN SECURITIES CORPORATION CIBCWorld Markets Corp. J.C. Bradford & Co. E*OFFERING Corp. c/o SG Cowen Securities Corporation Financial Square New York, New York 10005 Dear Sirs: 1. INTRODUCTORY. Silicon Entertainment, Inc., a Delaware corporation (the "Company"), proposes to sell, pursuant to the terms of this Agreement, to the several underwriters named in Schedule A hereto (the "Underwriters," or, each, an "Underwriter"), an aggregate of _____ shares of common stock, $0.001 par value (the "Common Stock") of the Company (the "Company"). The aggregate of ____ shares so proposed to be sold is hereinafter referred to as the "Firm Stock". The Company also proposes to sell to the Underwriters, upon the terms and conditions set forth in Section 3 hereof, up to an additional ______ shares of Common Stock (the "Optional Stock"). The Firm Stock and the Optional Stock are hereinafter collectively referred to as the "Stock." SG Cowen Securities Corporation ("SG Cowen") and CIBC World Markets Corp, J.C. Bradford & Co. and E*OFFERING Corp. are acting as representatives of the several Underwriters and in such capacity are hereinafter referred to as the "Representatives." 2. (I) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with, the several Underwriters that: a. A registration statement on Form S-1 (File No. 333-87019) (the "Initial Registration Statement") in respect of the Stock has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations (the "Rules and Regulations") of the Commission thereunder, which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective 1 2 amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or, to the Company's knowledge, is threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the Rules and Regulations, is hereinafter called a "Preliminary Prospectus"); the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act and deemed by virtue of Rule 430A under the Securities Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the "Registration Statements"; and such final prospectus, in the form first filed pursuant to Rule 424(b) under the Securities Act, is hereinafter called the "Prospectus". No document has been or will be prepared or distributed in reliance on Rule 434 under the Securities Act. No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission. b. The Registration Statement conforms (and the Rule 462(b) Registration Statement, if any, the Prospectus and any amendments or supplements to either of the Registration Statements or the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform) in all material respects to the requirements of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable effective date (as to the Registration Statements and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the foregoing representations and warranties shall not apply to information contained in or omitted from the Registration Statements or the Prospectus or any such amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein. c. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, and it has the power and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority would not have, singularly or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of the Company (a "Material Adverse Effect"). The Company does not have any Subsidiaries (as defined in Section 14 herein) and does not own or control, directly or indirectly, any other corporations, associations or other entities. d. This Agreement has been duly authorized, executed and delivered by the Company. 2 3 e. The Stock to be issued and sold by the Company to the Underwriters hereunder has been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and nonassessable and free of any preemptive or similar rights and will conform in all material respects to the description thereof contained in the Prospectus. f. The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform in all material respects to the description thereof contained in the Prospectus. g. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except for such conflicts, breaches, violations and defaults that would not, individually or in the aggregate, result in a Material Adverse Effect, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties or assets. h. Except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby. i. PricewaterhouseCoopers LLP, who have expressed their opinions on the audited financial statements and related schedules included in the Registration Statements and the Prospectus are independent public accountants as required by the Securities Act and the Rules and Regulations. j. The financial statements, together with the related notes and schedules, included in the Prospectus and in each Registration Statement fairly present the financial position and the results of operations and changes in financial position of the Company at the respective dates or for the respective periods therein specified. Such statements and related notes and schedules have been prepared in accordance with generally accepted accounting principles applied on a consistent basis except as may be set forth in the Prospectus. k. The Company has not sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or 3 4 contemplated in the Prospectus; and, since such date, there has not been any change in the capital stock or long-term debt of the Company or any material adverse change, or to the Company's knowledge, any development involving a prospective material adverse change, in or affecting the business, general affairs, management, financial position, stockholders' equity or results of operations of the Company otherwise than as set forth or contemplated in the Prospectus. l. Except as set forth in the Prospectus, there is no legal or governmental proceeding pending to which the Company is a party or of which any property or assets of the Company is the subject which, if determined adversely to the Company, might have a Material Adverse Effect or would prevent or adversely affect the ability of the Company to perform its obligations under this Agreement; and to the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. m. The Company (i) is not in violation of its charter or by-laws, (ii) is not in default in any respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) is in violation in any respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except any violations or defaults which, singularly or in the aggregate, would not have a Material Adverse Effect. n. The Company possesses all licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate state, federal or foreign regulatory agencies or bodies which are necessary or desirable for the ownership of its properties or the conduct of its businesses as described in the Prospectus except where any failures to possess or make the same, singularly or in the aggregate, would not have a Material Adverse Effect, and the Company has not received notification of any revocation or modification of any such license, authorization or permit and has no reason to believe that any such license, certificate, authorization or permit will not be renewed. o. The Company will not, after giving effect to the offering of the Stock and the application of the proceeds thereof as described in the Prospectus, become an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder. p. Neither the Company nor any of its officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company. q. The Company owns or possesses the right to use all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by it for the 4 5 conduct of its business, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company with respect to the foregoing. The Company's business as now conducted and as proposed to be conducted (in each case, as described in the Prospectus) does not and will not infringe or conflict with any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses or other intellectual property or franchise right of any person. Except as described in the Prospectus, no claim has been made against the Company alleging the infringement by the Company of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or franchise right of any person. r. The Company has good and marketable title in fee simple to, or has valid rights to lease or otherwise use, all items of real or personal property which is material to the business of the Company, in each case free and clear of all liens, encumbrances, claims and defects that may result in a Material Adverse Effect. s. No labor disturbance by the employees of the Company exists or, to the Company's knowledge, is imminent which might be expected to have a Material Adverse Effect. The Company is not aware that any key employee or significant group of employees of the Company plans to terminate employment with the Company. t. No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")), or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan which could have a Material Adverse Effect; each employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Company has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any "pension plan"; and each "pension plan" (as defined in ERISA) for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification. u. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company (or, to the Company's knowledge, any other entity for whose acts or omissions the Company is or may be liable) upon any of the property now or previously owned or leased by the Company, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; there has been no disposal, discharge, emission or other release of any kind onto 5 6 such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission, or other release of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. v. The Company (i) has filed all necessary federal, state and foreign income and franchise tax returns, (ii) has paid all federal state, local and foreign taxes due and payable for which it is liable, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to the Company's knowledge, proposed against it which could reasonably be expected to have a Material Adverse Effect. w. The Company carries, or is covered by, insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries. x. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. y. The minute books of the Company have been made available to the Underwriters and counsel for the Underwriters, and such books (i) contain a complete summary of all meetings and actions of the directors and stockholders of the Company since the time of its incorporation through the date of the latest meeting and action, and (ii) accurately, in all material respects, reflect all transactions referred to in such minutes. z. There is no franchise, lease, contract, agreement or document required by the Securities Act or by the Rules and Regulations to be described in the Prospectus or to be filed as an exhibit to the Registration Statements which is not described or filed therein as required; and all descriptions of any such franchises, leases, contracts, agreements or documents contained in the Registration Statements are accurate and complete descriptions of such documents in all material respects. aa. No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company on the other hand, which is required to be described in the Prospectus and which is not so described. bb. No person or entity has the right to require registration of shares of Common Stock or other securities of the Company because of the filing or effectiveness of the Registration Statements or otherwise, except for persons and entities who have expressly waived such right or who have been given proper notice and have failed to exercise such right within the time or times required under the terms and conditions of such right. 6 7 cc. The Company does not own any "margin securities" as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Stock will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Federal Reserve Board. dd. The Company is not a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Underwriters for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Stock. ee. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. ff. The Company has reviewed its operations and that of any third parties with which the Company has a material relationship to evaluate the extent to which the business or operations of the Company will be affected by the Year 2000 Problem. As a result of such review, the Company has no reason to believe, and does not believe that the Year 2000 Problem will have a Material Adverse Effect. The "Year 2000 Problem" as used herein means any significant risk that computer hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000. gg. The Stock has been approved for listing subject to notice of issuance on the NASDAQ Stock Market's National Market. 3. PURCHASE SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company that number of shares of Firm Stock (rounded up or down, as determined by SG Cowen in its discretion, in order to avoid fractions) obtained by multiplying _____ shares of Firm Stock by a fraction, the numerator of which is the number of shares of Firm Stock set forth opposite the name of such Underwriter in Schedule A hereto and the denominator of which is the total number of shares of Firm Stock. The purchase price per share to be paid by the Underwriters to the Company for the Stock will be $_____ per share (the "Purchase Price"). The Company will deliver the Firm Stock to the Representatives for the respective accounts of the several Underwriters (in the form of definitive certificates, issued in such names 7 8 and in such denominations as the Representatives may direct by notice in writing to the Company given at or prior to 12:00 Noon, New York time, on the second full business day preceding the First Closing Date (as defined below)) against payment of the aggregate Purchase Price therefor by wire transfer to an account at a bank reasonably acceptable to SG Cowen, payable to the order of the Company, all at the offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of each Underwriter hereunder. The time and date of the delivery and closing shall be at 10:00 A.M., New York time, on , 1999, in accordance with Rule 15c6-1 of the Exchange Act. The time and date of such payment and delivery are herein referred to as the "First Closing Date." The First Closing Date and the location of delivery of, and the form of payment for, the Firm Stock may be varied by agreement between the Company and SG Cowen. The Company shall make the certificates for the Stock available to the Representatives for examination on behalf of the Underwriters in New York, New York at least twenty-four hours prior to the First Closing Date. For the purpose of covering any over-allotments in connection with the distribution and sale of the Firm Stock as contemplated by the Prospectus, the Underwriters may purchase all or less than all of the Optional Stock. The price per share to be paid for the Optional Stock shall be the Purchase Price. The Company agrees to sell to the Underwriters the number of shares of Optional Stock specified in the written notice by SG Cowen described below and the Underwriters agree, severally and not jointly, to purchase such shares of Optional Stock. Such shares of Optional Stock shall be purchased from the Company for the account of each Underwriter in the same proportion as the number of shares of Firm Stock set forth opposite such Underwriter's name bears to the total number of shares of Firm Stock (subject to adjustment by SG Cowen to eliminate fractions). The option granted hereby may be exercised as to all or any part of the Optional Stock at any time, and from time to time, not more than thirty (30) days subsequent to the date of this Agreement. No Optional Stock shall be sold and delivered unless the Firm Stock previously has been, or simultaneously is, sold and delivered. The right to purchase the Optional Stock or any portion thereof may be surrendered and terminated at any time upon notice by SG Cowen to the Company. The option granted hereby may be exercised by written notice given to the Company by SG Cowen setting forth the number of shares of the Optional Stock to be purchased by the Underwriters and the date and time for delivery of and payment for the Optional Stock. Each date and time for delivery of and payment for the Optional Stock (which may be the First Closing Date, but not earlier) is herein called the "Option Closing Date" and shall in no event be earlier than two (2) business days nor later than five (5) business days after written notice is given. (The Option Closing Date and the First Closing Date are herein called the "Closing Dates.") The Company will deliver the Optional Stock to the Underwriters (in the form of definitive certificates, issued in such names and in such denominations as the Representatives may direct by notice in writing to the Company given at or prior to 12:00 Noon, New York time, 8 9 on the second full business day preceding the Option Closing Date) against payment of the aggregate Purchase Price therefor in federal (same day) funds by certified or official bank check or checks or wire transfer to an account at a bank reasonably acceptable to SG Cowen payable to the order of the Company all at the offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of each Underwriter hereunder. The Company shall make the certificates for the Optional Stock available to the Representatives for examination on behalf of the Underwriters in New York, New York not later than 10:00 A.M., New York Time, on the business day preceding the Option Closing Date. The Option Closing Date and the location of delivery of, and the form of payment for, the Optional Stock may be varied by agreement between the Company and SG Cowen. The several Underwriters propose to offer the Stock for sale upon the terms and conditions set forth in the Prospectus. 4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the several Underwriters that: a. The Company will prepare the Rule 462(b) Registration Statement, if necessary, in a form reasonably satisfactory to the Representatives and file such Rule 462(b) Registration Statement with the Commission on the date hereof; prepare the Prospectus in a form reasonably satisfactory to the Representatives and file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the second business day following the execution and delivery of this Agreement; make no further amendment or any supplement to the Registration Statements or to the Prospectus to which the Representatives shall reasonably object by written notice to the Company after a reasonable period to review; advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to either Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statements or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, use promptly its best efforts to obtain its withdrawal. b. If at any time prior to the expiration of nine months after the effective date of the Initial Registration Statement when a prospectus relating to the Stock is required to be delivered any event occurs as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus, the Company will promptly notify the Representatives thereof and upon their request will prepare an amended or 9 10 supplemented Prospectus which will correct such statement or omission or effect such compliance. The Company will furnish without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of such amended or supplemented Prospectus; and in case any Underwriter is required to deliver a prospectus relating to the Stock nine months or more after the effective date of the Initial Registration Statement, the Company upon the request of the Representatives and at the expense of such Underwriter will prepare promptly an amended or supplemented Prospectus as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Securities Act. c. The Company will furnish promptly to each of the Representatives and to counsel for the Underwriters a signed copy of each of the Registration Statements as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith. d. The Company will deliver promptly to the Representatives in New York City such number of the following documents as the Representatives shall reasonably request: (i) conformed copies of the Registration Statements as originally filed with the Commission and each amendment thereto (in each case excluding exhibits), (ii) each Preliminary Prospectus, (iii) the Prospectus (not later than 10:00 A.M., New York time, of the business day following the execution and delivery of this Agreement) and any amended or supplemented Prospectus (not later than 10:00 A.M., New York City time, on the business day following the date of such amendment or supplement). e. The Company will make generally available to its stockholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158). f. The Company will promptly take from time to time such actions as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives may designate and to continue such qualifications in effect for so long as required for the distribution of the Stock; provided that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; g. During the period of three years from the date hereof, the Company will deliver to the Representatives and, upon request, to each of the other Underwriters, (i) as soon as they are available, copies of all reports or other communications furnished to shareholders and (ii) as soon as they are available, copies of any reports and financial statements furnished or filed with the Commission pursuant to the Exchange Act or any national securities exchange or automatic quotation system on which the Stock is listed or quoted. 10 11 h. The Company will not directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 180 days from the date of the Prospectus without the prior written consent of SG Cowen other than the Company's sale of the Stock hereunder and the issuance of shares pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights; the Company will cause each officer, director and shareholder listed in Schedule B to furnish to the Representatives, prior to the First Closing Date, a letter, substantially in the form of Exhibit I hereto, pursuant to which each such person shall agree not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 180 days from the date of the Prospectus, without the prior written consent of SG Cowen. i. The Company will supply the Representatives with copies of all correspondence to and from, and all documents issued to and by, the Commission in connection with the registration of the Stock under the Securities Act. j. Prior to each of the Closing Dates the Company will furnish to the Representatives, as soon as they have been prepared, copies of any unaudited interim consolidated financial statements of the Company for any periods subsequent to the periods covered by the financial statements appearing in the Registration Statement and the Prospectus. k. Prior to each of the Closing Dates, the Company will not issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Representatives are notified), without the prior consent of the Representatives, unless in the judgment of the Company and its counsel, and after notification to the Representatives, such press release or communication is required by law. l. In connection with the offering of the Stock, until SG Cowen shall have notified the Company of the completion of the resale of the Stock, the Company will not, and will cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Stock, or attempt to induce any person to purchase any Stock; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent, active trading in or of raising the price of the Stock. m. The Company will not take any action prior to the Option Closing Date which would require the Prospectus to be amended or supplemented pursuant to Section 4(b); n. The Company will apply the net proceeds from the sale of the Stock as set forth in the Prospectus under the heading "Use of Proceeds." 11 12 5. PAYMENT OF EXPENSES. The Company agrees with the Underwriter to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the Registration of the Stock under the Securities Act; (c) the costs incident to the preparation, printing and distribution of the Registration Statement, Preliminary Prospectus, Prospectus, any amendments and exhibits thereto, the costs of printing, reproducing and distributing the "Agreement Among Underwriters" between the Representatives and the Underwriters, the Master Selected Dealers' Agreement, the Underwriters' Questionnaire and this Agreement by mail, telex or other means of communications; (d) the fees and expenses (including related fees and expenses of counsel for the Underwriters) incurred in connection with filings made with the National Association of Securities Dealers; (e) any applicable listing or other fees; (f) the fees and expenses of qualifying the Stock under the securities laws of the several jurisdictions as provided in Section 4(f) and of preparing, printing and distributing Blue Sky Memoranda and Legal Investment Surveys (including related fees and expenses of counsel to the Underwriters in an amount not to exceed $10,000); (g) all fees and expenses of the registrar and transfer agent of the Stock; and (h) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement (including, without limitation, the fees and expenses of the Company's counsel and the Company's independent accountants); provided that, except as otherwise provided in this Section 5 and in Section 9, the Underwriters shall pay their own costs and expenses, including the fees and expenses of their counsel, any transfer taxes on the Stock which they may sell and the expenses of advertising any offering of the Stock made by the Underwriters. 6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the several Underwriters hereunder are subject to the accuracy, when made and on each of the Closing Dates, of the representations and warranties of the Company contained herein, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of their obligations hereunder, and to each of the following additional terms and conditions: a. No stop order suspending the effectiveness of either the Registration Statements shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, and any request for additional information on the part of the Commission (to be included in the Registration Statements or the Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Representatives. The Rule 462(b) Registration Statement, if any, and the Prospectus shall have been timely filed with the Commission in accordance with Section 4(a). b. None of the Underwriters shall have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Underwriters, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. 12 13 c. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Stock, the Registration Statement and the Prospectus and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. d. Gray Cary Ware & Freidenrich LLP shall have furnished to the Representatives such counsel's written opinion, as counsel to the Company, addressed to the Underwriters and dated the Closing Date, in form and substance reasonably satisfactory to the Representatives, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business as described in the Registration Statements requires such qualification, and it has the power and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority would not have a Material Adverse Effect. (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company, including the Stock being delivered on the Closing Date, have been duly and validly authorized and issued, are fully paid (assuming receipt of payment for the Stock by the Underwriters as provided herein) and non-assessable and conform to the description thereof contained in the Prospectus. (iii) There are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of the Stock pursuant to the Company's charter or by-laws or any agreement or other instrument known to such counsel. (iv) This Agreement has been duly authorized, executed and delivered by the Company. (v) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a material breach or violation of any agreement, stock plan or stock option plan filed as an exhibit to the Registration Statement, nor will such actions result in any violation of the Charter or by-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body or court having jurisdiction over the Company or any of its properties or assets. (vi) Except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the 13 14 execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby. (vii) The statements in the Prospectus under the headings "Business--Licensing Agreements", "Management--Stock Option Plans", "Description of Capital Stock" and "Shares Eligible for Future Sale" and in Item 14 and Item 15 of the Registration Statement, to the extent that they constitute summaries of matters of law or regulation or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects. (viii) The description in the Registration Statement and Prospectus of statutes, legal or governmental proceedings and contracts and other documents are accurate in all material respects; and to such counsel's knowledge, there are no statutes, legal or governmental proceedings, contracts or other documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement which are not described or filed as required. (ix) To such counsel's knowledge, the Company (i) is not in violation of its charter or by-laws, (ii) is not in default, and no event has occurred, which, with notice or lapse of time or both, would constitute a default, in the due performance or observance of any term, covenant or condition contained in any agreement or stock plan or stock option plan filed as an exhibit to the Registration Statement or (iii) is not in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business except, in the case of clauses (ii) and (iii), for those defaults, violations or failures which, in the aggregate, would not have a Material Adverse Effect. (x) To such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company is a party or of which any property or asset of the Company is the subject which, in the aggregate, if determined adversely to the Company, might have a Material Adverse Effect or would prevent or adversely affect the ability of the Company to perform its obligations under this Agreement; and, to such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (xi) The Registration Statement was declared effective under the Securities Act as of the date and time specified in such opinion, the Rule 462(b) Registration Statement, if any, was filed with the Commission on the date specified therein, the Prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) of the Rules and Regulations specified in such opinion on the date specified therein and no stop order suspending the effectiveness of the Registration Statement has been issued and, to the knowledge of such counsel, no proceeding for that purpose is pending or threatened by the Commission. (xii) The Registration Statements, as of the respective effective dates and the Prospectus, as of its date, and any further amendments or supplements thereto, as of their 14 15 respective dates, made by the Company prior to the Closing Date (other than the financial statements and other financial data contained therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission. (xiii) To such counsel's knowledge, no person or entity has the right to require registration of shares of Common Stock or other securities of the Company because of the filing or effectiveness of the Registration Statements or otherwise, except for persons and entities who have expressly waived such right or who have been given proper notice and have failed to exercise such right within the time or times required under the terms and conditions of such right. (xiv) The Company is not an "investment company" within the meaning of the Investment Company Act and the rules and regulations of the Commission thereunder. Such counsel shall also have furnished to the Representatives a written statement, addressed to the Underwriters and dated the Closing Date, in form and substance satisfactory to the Representatives, to the effect that (x) such counsel has acted as counsel to the Company in connection with the preparation of the Registration Statements and that (y) based on such counsel's examination of the Registration Statements and such counsel's "conferences with certain officers and employees of and with auditors for and counsel to the Company", such counsel has no reason to believe that the Registration Statements, as of the respective effective dates, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statement or the Prospectus. The foregoing opinion and statement may be qualified by a statement to the effect that such counsel has not independently verified the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus and takes no responsibility therefor except to the extent set forth in the opinion described in clauses (vii) and (viii) above. e. The Representatives shall have received from Brobeck, Phleger & Harrison LLP counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with respect to such matters as the Underwriters may reasonably require, and the Company shall have furnished to such counsel such documents as they request for enabling them to pass upon such matters. f. At the time of the execution of this Agreement, the Representatives shall have received from PricewaterhouseCoopers LLP a letter, addressed to the Underwriters and dated such date, in form and substance satisfactory to the Representatives (i) confirming that they are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Securities Act and the Rules and Regulations and (ii) stating the conclusions 15 16 and findings of such firm with respect to the financial statements and certain financial information contained or incorporated by reference in the Prospectus. g. On the Closing Date, the Representatives shall have received a letter (the "bring-down letter") from PricewaterhouseCoopers LLP addressed to the Underwriters and dated the Closing Date confirming, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus as of a date not more than three business days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by its letter delivered to the Representatives concurrently with the execution of this Agreement pursuant to Section 6(g). h. The Company shall have furnished to the Representatives a certificate, dated the Closing Date, of its Chairman of the Board, its President or a Vice President and its chief financial officer stating that (i) such officers have carefully examined the Registration Statements and the Prospectus and, in their opinion, the Registration Statements as of their respective effective dates and the Prospectus, as of each such effective date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) since the effective date of the Initial Registration Statement no event has occurred which should have been set forth in a supplement or amendment to the Registration Statements or the Prospectus, (iii) to their knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Company in this Agreement are true and correct and the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and (iv) subsequent to the date of the most recent financial statements included in the Prospectus, there has been no material adverse change in the financial position or results of operation of the Company, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole, except as set forth in the Prospectus. i. (i) The Company has not sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any change, or any development involving a prospective change, in or affecting the business, general affairs, management, financial position, stockholders' equity or results of operations of the Company, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Stock on the terms and in the manner contemplated in the Prospectus. 16 17 j. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Stock; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Stock. k. Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the sale or delivery of the Stock on the terms and in the manner contemplated in the Prospectus. l. The Nasdaq National Market System shall have approved the Stock for inclusion, subject only to official notice of issuance and evidence of satisfactory distribution. m. SG Cowen shall have received the written agreements, substantially in the form of Exhibit I hereto, of the officers, directors and shareholders of the Company listed in Schedule B to this Agreement. n. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters. 7. INDEMNIFICATION AND CONTRIBUTION. a. The Company shall indemnify and hold harmless each Underwriter, its officers, employees, representatives and agents and each person, if any, who controls any Underwriter within the meaning of the Securities Act (collectively the "Underwriter Indemnified Parties" and each an "Underwriter Indemnified Party") against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which that Underwriter Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Prospectus, either of the Registration Statements or the Prospectus or in any amendment or supplement thereto, (ii) the omission or alleged omission to state in any Preliminary Prospectus, either of the Registration Statements or the Prospectus or in any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to 17 18 act, or any alleged act or failure to act, by any Underwriter in connection with, or relating in any manner to the Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above, (provided that the Company shall not be liable in the case of any matter covered by this clause (iii) to the extent that it is determined in a final judgement by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted from any such act or failure to act undertaken or omitted to be taken by such Underwriter through its gross negligence or wilful misconduct) and shall reimburse each Underwriter Indemnified Party promptly upon demand for any legal or other expenses reasonably incurred by that Underwriter Indemnified Party in connection with investigating or preparing to defend or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon (i) an untrue statement or alleged untrue statement in or omission or alleged omission from the Preliminary Prospectus, either of the Registration Statements or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for use therein, which information the parties hereto agree is limited to the Underwriter's Information (as defined in Section 16), and, provided further, however, that with respect to any Preliminary Prospectus, the foregoing indemnity agreement shall not inure to the benefit of any Underwriter from whom the person asserting any loss, claim, damage, liability or action purchased Stock, or any person controlling such Underwriter, if copies of the Prospectus were timely delivered to the Underwriter pursuant to Section 4(a) and (d) and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Stock to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or action. This indemnity agreement is not exclusive and will be in addition to any liability which the Company might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to each Underwriter Indemnified Party. b. Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its officers, employees, representatives and agents, each of its directors and each person, if any, who controls the Company within the meaning of the Securities Act (collectively the "Company Indemnified Parties" and each a "Company Indemnified Party") against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company Indemnified Parties may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Prospectus, either of the Registration Statements or the Prospectus or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the 18 19 Company through the Representatives by or on behalf of that Underwriter specifically for use therein, and shall reimburse the Company Indemnified Parties for any legal or other expenses reasonably incurred by such parties in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided that the parties hereto hereby agree that such written information provided by the Underwriters consists solely of the Underwriter's Information. This indemnity agreement is not exclusive and will be in addition to any liability which the Underwriters might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to the Company Indemnified Parties. c. Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent it has been materially prejudiced by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized by the indemnifying party in writing, (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such indemnified parties, which firm shall be designated in writing by SG Cowen, if the indemnified parties under this Section 7 consist of any Underwriter Indemnified Party, or by the Company, if the indemnified 19 20 parties under this Section 7 consist of any Company Indemnified Parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 7(a) and 7(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. Subject to the provisions of Section 7(e) below, no indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. d. If at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by this Section 7 effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the request for reimbursement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. e. If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Stock or if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters with respect to the Stock purchased under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission; provided that the parties hereto agree that the written information furnished to the Company through the Representatives by or on behalf of the Underwriters for use in any Preliminary Prospectus, either of the Registration Statements or the Prospectus consists solely of the Underwriter's Information. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this 20 21 Section 7(e) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7(e) shall be deemed to include, for purposes of this Section 7(e), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Stock underwritten by it and distributed to the public was offered to the public less the amount of any damages which such Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. f. The Underwriters' obligations to contribute as provided in this Section 7(f) are several in proportion to their respective underwriting obligations and not joint. 8. TERMINATION. The obligations of the Underwriters hereunder may be terminated by SG Cowen, in its absolute discretion by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 6(i) or 6(k) have occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement. 9. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) this Agreement shall have been terminated pursuant to Section 8 or 10, (b) the Company shall fail to tender the Stock for delivery to the Underwriters for any reason permitted under this Agreement, or (c) the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement the Company shall reimburse the Underwriters for the fees and expenses of their counsel and for such other out-of-pocket expenses as shall have been reasonably incurred by them in connection with this Agreement and the proposed purchase of the Stock, and upon demand the Company shall pay the full amount thereof to the SG Cowen. If this Agreement is terminated pursuant to Section 10 by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any Underwriter on account of those expenses. 10. SUBSTITUTION OF UNDERWRITERS a. If any Underwriter or Underwriters shall default in its or their obligations to purchase shares of Stock hereunder and the aggregate number of shares which such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed ten percent (10%) of the total number of shares underwritten, the other Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the shares which such defaulting Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or Underwriters shall so default and the aggregate number of shares with respect to which such default or defaults occur is more than ten percent (10%) of the total number of shares underwritten and 21 22 arrangements satisfactory to the Representatives and the Company for the purchase of such shares by other persons are not made within forty-eight (48) hours after such default, this Agreement shall terminate. b. If the remaining Underwriters or substituted Underwriters are required hereby or agree to take up all or part of the shares of Stock of a defaulting Underwriter or Underwriters as provided in this Section 10, (i) the Company shall have the right to postpone the Closing Dates for a period of not more than five (5) full business days in order that the Company may effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees promptly to file any amendments to the Registration Statement or supplements to the Prospectus which may thereby be made necessary, and (ii) the respective numbers of shares to be purchased by the remaining Underwriters or substituted Underwriters shall be taken as the basis of their underwriting obligation for all purposes of this Agreement. Nothing herein contained shall relieve any defaulting Underwriter of its liability to the Company or the other Underwriters for damages occasioned by its default hereunder. Any termination of this Agreement pursuant to this Section 10 shall be without liability on the part of any non-defaulting Underwriter or the Company, except expenses to be paid or reimbursed pursuant to Sections 5 and 9 and except the provisions of Section 7 shall not terminate and shall remain in effect. 11. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the several Underwriters, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person; except that the representations, warranties, covenants, agreements and indemnities of the Company contained in this Agreement shall also be for the benefit of the Underwriter Indemnified Parties, and the indemnities of the several Underwriters shall also be for the benefit of the Company Indemnified Parties. 12. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective indemnities, covenants, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by them respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter, the Company or any person controlling any of them and shall survive delivery of and payment for the Stock. 13. NOTICES. All statements, requests, notices and agreements hereunder shall be in writing, and: a. if to the Underwriters, shall be delivered or sent by mail, telex or facsimile transmission to SG Securities Corporation Attention: Jorge Pedreira (Fax: 212-269-1690); any such statements, requests, notices or agreements shall take effect at the time of receipt thereof; 22 23 b. if to the Company shall be delivered or sent by mail, telex or facsimile transmission to Silicon Entertainment, Inc. Attention: David S. Morse (Fax: 408-364-6724); any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. 14. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. UNDERWRITERS' INFORMATION. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Underwriters' Information consists solely of the following information in the Prospectus: (i) the last paragraph on the front cover page concerning the terms of the offering by the Underwriters; and (ii) the statements concerning the Underwriters contained in the fourth, ninth and tenth paragraphs under the heading "Underwriting." 17. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement, you will act for and on behalf of the several Underwriters, and any action taken under this Agreement by the Representatives, will be binding on all the Underwriters. 18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. 19. GENERAL. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement. This Agreement may be amended or modified, and the observance of any term of this Agreement may be waived, only by a writing signed by the Company and the Representatives. 20. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 23 24 If the foregoing is in accordance with your understanding of the agreement between the Company and the several Underwriters, kindly indicate your acceptance in the space provided for that purpose below. Very truly yours, SILICON ENTERTAINMENT, INC. By: ------------------------------------- Name: Title: Accepted as of the date first above written: SG COWEN SECURITIES CORPORATION CIBC WORLD MARKETS CORP. J.C. BRADFORD & CO. E*OFFERING CORP. Acting on their own behalf and as Representatives of several Underwriters referred to in the foregoing Agreement. By: SG COWEN SECURITIES CORPORATION By: ------------------------------------- Name: Title: 24 25 SCHEDULE A
Number of Number of Firm Shares Optional Shares Name to be Purchased to be Purchased - ---- --------------- --------------- SG Cowen Securities Corporation ---------- ---------- CIBC World Markets Corp. ---------- ---------- J.C. Bradford & Co. ---------- ---------- E*OFFERING Corp. ---------- ---------- Total ========== ==========
25 26 SCHEDULE B [list of shareholders subject to Section 4(h)] 26 27 EXHIBIT I LOCK-UP AGREEMENT ----------, ---- SG Cowen Securities Corporation CIBC World Markets Corp. J.C. Bradford & Co. E*OFFERING Corp. As representatives of the several Underwriters c/o SG Cowen Securities Corporation Financial Square New York, New York 10005 Re: Silicon Entertainment, Inc. Dear Sirs: In order to induce SG Cowen Securities Corporation ("SG Cowen"), CIBC World Markets Corp., J.C. Bradford & Co. and E*OFFERING Corp. (together with SG Cowen, the "Representatives"), to enter in to a certain underwriting agreement with Silicon Entertainment, Inc. (the "Company"), with respect to the public offering of shares of the Company's Common Stock ("Common Stock"), the undersigned hereby agrees that for a period of 180 days following the date of the final prospectus filed by the Company with the Securities and Exchange Commission in connection with such public offering, the undersigned will not, without the prior written consent of SG Cowen, directly or indirectly, offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, any shares of Common Stock (including, without limitation, Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations promulgated under the Securities Act of 1933, as the same may be amended or supplemented from time to time (such shares, the "Beneficially Owned Shares")) or securities convertible into or exercisable or exchangeable in Common Stock. Anything contained herein to the contrary notwithstanding, any person to whom shares of Common Stock or Beneficially Owned Shares are transferred from the undersigned shall be bound by the terms of this Agreement. In addition, the undersigned hereby waives, from the date hereof until the expiration of 180-day period following the date of the Company's final Prospectus, any and all rights, if any, to request or demand registration pursuant to the Securities Act of any shares of Common Stock that are registered in the name of the undersigned or that are Beneficially Owned Shares. In order to enable the aforesaid covenants to be enforced, the undersigned hereby consents to the 27 28 placing of legends and/or stop-transfer orders with the transfer agent of the Common Stock with respect to any shares of Common Stock or Beneficially Owned Shares. Dated: ---------------------- By: ----------------------------------- Name: Title: 28 EX-3.1 3 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF SILICON ENTERTAINMENT, INC. DELAWARE (Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware) Silicon Entertainment, Inc. Delaware, a corporation organized and existing under the General Corporation Law of the State of Delaware on August 11, 1999, (the "Corporation") certifies as follows: 1. The Corporation's Restated Certificate of Incorporation was duly adopted by the Board of Directors and sole stockholder by written consent in accordance with Sections 242 and 245 of the General Corporation Law. 2. The Corporation's Certificate of Incorporation is restated to read in full as follows: FIRST: The name of the Corporation is Silicon Entertainment, Inc. Delaware. SECOND: The address of the registered office of the Corporation in the State of Delaware is Incorporating Services, Ltd., 15 East North Street, in the City of Dover, County of Kent. The name of the registered agent at that address is Incorporating Services, Ltd. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: A. The Corporation is authorized to issue a total of 108,387,799 shares of stock in two classes designated respectively "Preferred Stock" and "Common Stock". The total number of shares of all series of Preferred Stock that the Corporation shall have the authority to issue is 8,387,799 and the total number of shares of Common Stock that the Corporation shall have the authority to issue is 100,000,000. All of the authorized shares shall have a par value of $0.001. The shares of Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon the Preferred Stock or any series thereof with respect to any wholly unissued series of Preferred Stock, and to fix the number of shares of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any 2 resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. C. On and after the closing date of the first sale of the Corporation's Common Stock pursuant to a firmly underwritten registered public offering (the "IPO"), any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Prior to such sale, unless otherwise provided by law, any action which may otherwise be taken at any meeting of the stockholders may be taken without a meeting and without prior notice, if a written consent describing such actions is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. D. Special meetings of stockholders of the Corporation may be called only by the Board of Directors, the Chairman of the Board of Directors or the President and Chief Executive Officer. 3 SIXTH: A. The number of directors shall initially be set at five (5) and, thereafter, shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). All directors shall hold office until the expiration of the term for which elected, and until their respective successors are elected, except in the case of the death, resignation, or removal of any director. B. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation or other cause (other than removal from office by a vote of the stockholders) may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders at which the term of office of the class to which they have been elected expires, and until their respective successors are elected, except in the case of the death, resignation, or removal of any director. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. C. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. SEVENTH: The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the Corporation by the stockholders shall require, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. 4 EIGHTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing provisions of this Article EIGHTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. NINTH: The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 66-2/3% of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article NINTH, Article FIFTH, Article SIXTH, Article SEVENTH or Article EIGHTH. 5 IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate to be signed by a duly authorized officer on this ___, day of ________________, 1999. SILICON ENTERTAINMENT, INC. DELAWARE By: ---------------------------------- David S. Morse, Chief Executive Officer and President 6 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF SILICON ENTERTAINMENT, INC. Silicon Entertainment, Inc., a Delaware corporation (the "Corporation"), hereby certifies: 1. That the Corporation's Board of Directors has duly adopted the following resolutions: RESOLVED, that the first paragraph of Article FOURTH of the Restated Certificate of Incorporation is hereby amended to read in full as follows: FOURTH: The Corporation is authorized to issue a total of 100,500,000 shares of stock in two classes designated respectively "Preferred Stock" and "Common Stock." The total number of shares of all series of Preferred Stock that the Corporation shall have the authority to issue is 500,000 and the total number of shares of Common Stock that the Corporation shall have the authority to issue is 100,000,000. All of the authorized shares shall have a par value of $0.001. 2. That the proposed amendment has been duly adopted by the Corporation's Board of Directors and sole stockholder in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of Restated Certificate of Incorporation to be signed by a duly authorized officer on this _____ day of ________________, 1999. SILICON ENTERTAINMENT, INC. By: -------------------------------- David S. Morse, Chief Executive Officer and President EX-3.2 4 BYLAWS OF THE REGISTRANT 1 Exhibit 3.2 BYLAWS OF SILICON ENTERTAINMENT, INC. A DELAWARE CORPORATION 2 TABLE OF CONTENTS
Page ---- ARTICLE I Offices......................................................................1 Section 1.1 Registered Office......................................................1 Section 1.2 Other Offices..........................................................1 ARTICLE II Stockholders' Meetings.......................................................1 Section 2.1 Place of Meetings......................................................1 Section 2.2 Annual Meetings........................................................1 Section 2.3 Special Meetings.......................................................1 Section 2.4 Notice of Meetings.....................................................2 Section 2.5 Quorum, Conduct and Voting.............................................2 Section 2.6 Voting Rights..........................................................3 Section 2.7 Voting Procedures and Inspectors of Elections..........................4 Section 2.8 List of Stockholders...................................................5 Section 2.9 Stockholder Proposals at Annual Meetings...............................5 Section 2.10 Nominations of Persons for Election to the Board of Directors..........6 Section 2.11 Action Without Meeting.................................................7 ARTICLE III Directors....................................................................7 Section 3.1 Powers.................................................................7 Section 3.2 Number of Directors....................................................7 Section 3.3 Election and Term of Office............................................8 Section 3.4 Vacancies..............................................................8 Section 3.5 Resignations and Removals..............................................8 Section 3.6 Meetings...............................................................9 Section 3.7 Quorum and Voting.....................................................10 Section 3.8 Action Without Meeting................................................10 Section 3.9 Fees and Compensation.................................................10 Section 3.10 Committees............................................................10 ARTICLE IV Officers....................................................................12 Section 4.1 Officers Designated...................................................12 Section 4.2 Tenure and Duties of Officers.........................................12 ARTICLE V Execution of Corporate Instruments and Voting of Securities Owned by the Corporation.................................................................13 Section 5.1 Execution of Corporate Instruments....................................13 Section 5.2 Voting of Securities Owned by Corporation.............................14 ARTICLE VI Shares of Stock.............................................................14 Section 6.1 Form and Execution of Certificates....................................14 Section 6.2 Lost Certificates.....................................................14 Section 6.3 Transfers.............................................................15 Section 6.4 Fixing Record Dates...................................................15 Section 6.5 Registered Stockholders...............................................16
i 3 TABLE OF CONTENTS (continued)
Page ---- ARTICLE VII Other Securities of the Corporation.........................................16 ARTICLE VIII Corporate Seal..............................................................16 ARTICLE IX Indemnification of Officers, Directors, Employees and Agents................17 Section 9.1 Right to Indemnification..............................................17 Section 9.2 Authority to Advance Expenses.........................................17 Section 9.3 Right of Claimant to Bring Suit.......................................18 Section 9.4 Provisions Nonexclusive...............................................18 Section 9.5 Authority to Insure...................................................18 Section 9.6 Indemnification Contracts.............................................18 Section 9.7 Survival of Rights....................................................18 Section 9.8 Settlement of Claims..................................................18 Section 9.8 Effect of Amendment...................................................19 Section 9.10 Subrogation...........................................................19 Section 9.11 No Duplication of Payments............................................19 ARTICLE X Notices.....................................................................19 ARTICLE XI Amendments..................................................................20
ii 4 BYLAWS OF SILICON ENTERTAINMENT, INC. ARTICLE I OFFICES SECTION 1.1 REGISTERED OFFICE. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent. SECTION 1.2 OTHER OFFICES. The corporation shall also have and maintain an office or principal place of business at 210 Hacienda Avenue, Campbell, California 95008, and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 2.1 PLACE OF MEETINGS. Meetings of the stockholders of the corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors or the Chairman of the Board, or, if not so designated, then at the office of the corporation required to be maintained pursuant to section 1.2 of Article I hereof. SECTION 2.2 ANNUAL MEETINGS. The annual meetings of the stockholders of the corporation for the purpose of election of directors, and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors or the Chairman of the Board. SECTION 2.3 SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called only (i) by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exists any vacancies in previously authorized directorships at the time any such resolution is presented to 1 5 the Board of Directors for adoption) or (ii) by the holders of not less than 20% of all shares entitled to cast votes at the meeting, voting together as a single class and shall be held at such place, on such date, and at such time as they shall fix. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice. SECTION 2.4 NOTICE OF MEETINGS. (a) Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders, specifying the place, date and hour and purpose or purposes of the meeting, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote thereat, directed to his address as it appears upon the books of the corporation; except that where the matter to be acted on is a merger or consolidation of the corporation or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than twenty nor more than sixty days prior to such meeting. (b) If at any meeting action is proposed to be taken which, if taken, would entitle Stockholders fulfilling the requirements of Section 262(d) of the Delaware General Corporation Law to an appraisal of the fair value of their shares, the notice of such meeting shall contain a statement of that purpose and to that effect and shall be accompanied by a copy of that statutory section. (c) When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (d) Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, either before or after such meeting, and to the extent permitted by law, will be waived by any stockholder by his attendance thereat, in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (e) Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or of his legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given. SECTION 2.5 QUORUM, CONDUCT AND VOTING. (a) At all meetings of stockholders, except where otherwise provided by law, the Certificate of Incorporation, or these Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting have been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at said meeting. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the 2 6 shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. (b) Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting: (i) the Chairman of the Board, (ii) the Vice-Chairman of the Board, (iii) the President, (iv) the Vice-President, or (v) if none of the foregoing is present and acting, by a chairman to be chosen by the stockholders. The Chairman of the meeting shall call the meeting to order, establish the agenda, and conduct the business of the meeting in accordance therewith or, at the Chairman's discretion, it may be conducted otherwise in accordance with the wishes of the stockholders in attendance. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. The Chairman shall also conduct the meeting in an orderly manner, rule on the precedence of, and procedure on, motions and other procedural matters, and exercise discretion with respect to such procedural matters with fairness and good faith toward all those entitled to take part. The Chairman may impose reasonable limits on the amount of time taken up at the meeting on discussion in general or on remarks by any one stockholder. Should any person in attendance become unruly or obstruct the meeting proceedings, the Chairman shall have the power to have such person removed from participation. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 2.5(b). The Chairman of a meeting shall, if the facts warrant, determine and declare to the meeting that any proposed item of business was not brought before the meeting in accordance with the provisions of this Section 2.5(b), and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. (c) Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the corporation. (d) In the election of directors, a plurality of the votes cast shall elect. No stockholder shall be entitled to exercise the right of cumulative voting for the election of directors. SECTION 2.6 VOTING RIGHTS. (a) Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in 3 7 person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. (b) Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. (c) Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy pursuant to subsection (b) of this section, the following shall constitute a valid means by which a stockholder may grant such authority: (1) A stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. (2) A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Such authorization can be established by the signature of the stockholder on the proxy, either in writing or by a signature stamp or facsimile signature, or by a number or symbol from which the identity of the stockholder can be determined, or by any other procedure deemed appropriate by the inspectors or other persons making the determination as to due authorization. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. (d) Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to subsection (c) of this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. SECTION 2.7 VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. (a) The corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If 4 8 no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (b) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 212(c)(2) of the Delaware General Corporation Law, ballots and the regular books and records of the corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b)(v) of this section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. SECTION 2.8 LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. 5 9 SECTION 2.9 STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than 120 calendar days in advance of the date that the corporation's proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholder to be timely must be received not later than the close of business on the 10th calendar day following the day on which public announcement of the date of such meeting is first made. A stockholder's notice to the Secretary shall set forth, as to each matter the stockholder proposes to bring before the annual meeting, (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. For purposes of this Section 2.10, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission (the "SEC") pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). SECTION 2.10 NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS. In addition to any other applicable requirements, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2.10. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder nomination for a director to be elected at an annual meeting shall be received at the corporation's principal executive offices not less than 120 calendar days in advance of the date that the corporation's proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholders to be timely must be received not later than the close of business on the 10th calendar day following the day on which the public 6 10 announcement of the date of such meeting is first made. Each such notice shall set forth (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated, (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote for the election of Directors on the date of such notice and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder, (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors, and (e) the consent of each nominee to serve as a director of the corporation if so elected. For purposes of this Section 2.10, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act. Notwithstanding the foregoing provisions of this Section 2.10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.10. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein. In the event that a person is validly designated as a nominee in accordance with this Section 2.10 and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee upon delivery, not fewer than five days prior to the date of the meeting for the election of such nominee, of a written notice to the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to this Section 2.10 had such substitute nominee been initially proposed as a nominee. Such notice shall include a signed consent to serve as a director of the corporation, if elected, of each such substitute nominee. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 2.11 ACTION WITHOUT MEETING. Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, are signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a 7 11 meeting at which all shares entitled to vote thereon were present and voted. To be effective, a written consent must be delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this section 2.11 to the corporation, written consents signed by a sufficient number of holders to take action are delivered to the corporation in accordance with this section 2.11. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 3.1 POWERS. The powers of the corporation shall be exercised, its business conducted and its property controlled by or under the direction of the Board of Directors. SECTION 3.2 NUMBER OF DIRECTORS. The number of directors shall initially be five (5) and, hereafter, may be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors; provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office. SECTION 3.3 ELECTION AND TERM OF OFFICE. Elected directors shall hold office until the next annual meeting and until their successors shall be duly elected and qualified. A director need not be a stockholder of the corporation, a citizen of the United States, or a resident of the State of Delaware. If, for any cause, the Board of Directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws. SECTION 3.4 VACANCIES. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and each director so elected shall hold office for the unexpired portion of the term of the director whose place shall be vacant, and until his successor shall have been duly elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this section 3.4 in the case of the death, removal or resignation of any director, or if the stockholders fail at any meeting of stockholders at which directors are to be elected 8 12 (including any meeting referred to in section 3.5 below) to elect the number of directors then constituting the whole Board. SECTION 3.5 RESIGNATIONS AND REMOVALS. (a) Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been duly elected and qualified. (b) Subject to the rights of the holder of any series of Preferred Stock then outstanding, any directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class. (c) The Board of Directors may declare vacant the office of any director who has been declared of unsound mind by an order of court or convicted of a felony. SECTION 3.6 MEETINGS. (a) The annual meeting of the Board of Directors shall be held immediately after the annual stockholders' meeting and at the place where such meeting is held or at the place announced by the Chairman at such meeting. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the office of the corporation required to be maintained pursuant to section 1.2 of Article I hereof. Regular meetings of the Board of Directors may also be held at any place within or without the State of Delaware which has been designated by resolutions of the Board of Directors or the written consent of all directors. (c) Special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board or, if there is no Chairman of the Board, by the President, or by any of the directors. (d) Written notice of the time and place of all regular and special meetings of the Board of Directors shall be delivered personally to each director or sent by telegram or facsimile transmission at least 48 hours before the start of the meeting, or sent by first class mail at least 120 hours before the start of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat. 9 13 (e) The Chairman of the Board, if any and if present and acting, the Vice Chairman of the Board, if any and if present and acting, shall preside at all meetings of the Board of Directors. Otherwise, the President, if any and present and acting, or any director chosen by the Board, shall preside. SECTION 3.7 QUORUM AND VOTING. (a) A quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time in accordance with section 3.2 of Article III of these Bylaws. If a vacancy or vacancies prevents such a majority, a majority of the directors then in office shall constitute a quorum, provided such majority shall constitute at least either one-third of the authorized number of directors or two directors, whichever is larger. If the number of Directors is one, then one director shall constitute a quorum. At any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. (b) At each meeting of the Board at which a quorum is present all questions and business shall be determined by a vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation, or these Bylaws. (c) Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (d) The transactions of any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. SECTION 3.8 ACTION WITHOUT MEETING. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION 3.9 FEES AND COMPENSATION. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the Board of Directors. 10 14 SECTION 3.10 COMMITTEES. (a) EXECUTIVE COMMITTEE. The Board of Directors may, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than one member, each of whom shall be a director. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board in the management of the business and affairs of the corporation, including, without limitation, the power and authority to declare a dividend or to authorize the issuance of stock, except such committee shall not have the power or authority to amend the Certificate of Incorporation, to adopt an agreement or merger or consolidation, to recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, to recommend to the stockholders of the corporation a dissolution of the corporation or a revocation of a dissolution, or to amend these Bylaws. (b) OTHER COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committee, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws. (c) TERM. The members of all committees of the Board of Directors shall serve a term coexistent with that of the Board of Directors which shall have appointed such committee. The Board, subject to the provisions of subsections (a) or (b) of this section 3.10, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee shall consist of less than one member. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (d) MEETINGS. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this section 3.10 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter; special meetings of any such committee may be held at the principal office of the corporation required to be maintained pursuant to section 1.2 of Article I hereof; or at any place which has been designated from time to time by resolution of such committee or by written consent of all members thereof, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the 11 15 manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time after the meeting and will be waived by any director by attendance thereat. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. ARTICLE IV OFFICERS SECTION 4.1 OFFICERS DESIGNATED. The officers of the corporation shall be a President and a Secretary. The Board of Directors may appoint a Chairman of the Board, whom shall serve as the Chief Executive Officer of the corporation. The Board of Directors or the President may also appoint a Treasurer, one or more Vice-Presidents, assistant secretaries, assistant treasurers, and such other officers and agents with such powers and duties as it shall deem necessary. The order of the seniority of the Vice-Presidents shall be in the order of their nomination, unless otherwise determined by the Board of Directors. The Board of Directors may assign such additional titles to one or more of the officers as they shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors. SECTION 4.2 TENURE AND DUTIES OF OFFICERS. (a) GENERAL. All officers shall be appointed by the Board of Directors in accordance with these bylaws. All officers hold office at the pleasure of the Board of Directors until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Nothing in these Bylaws shall be construed as creating any kind of contractual right to employment with the corporation. (b) DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall be the chief executive officer of the corporation and, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. (c) DUTIES OF PRESIDENT. The President shall be the chief executive officer of the corporation in the absence of the Chairman of the Board and shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The President shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. 12 16 (d) DUTIES OF VICE-PRESIDENTS. The Vice-Presidents, in the order of their seniority, may assume and perform the duties of the President in the absence or disability of the President or whenever the office of the President is vacant. The Vice-President shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and any committee thereof, and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice, in conformity with these Bylaws, of all meetings of the stockholders, and of all meetings of the Board of Directors and any Committee thereof requiring notice. The Secretary shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (f) DUTIES OF TREASURER. The Treasurer (if there be such an officer appointed) shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner, and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Treasurer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Treasurer shall perform all other duties commonly incident to his office and shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct any Assistant Treasurer or to assume and perform the duties of the Treasurer in the absence or disability of the Treasurer, and each Assistant Treasurer shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION SECTION 5.1 EXECUTION OF CORPORATE INSTRUMENTS. (a) The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the corporation. (b) Unless otherwise specifically determined by the Board of Directors or otherwise required by law, formal contracts of the corporation, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board (if there be such an officer appointed) or by the President; such documents may also be executed by any 13 17 Vice-President and by the Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiring the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors. (c) All checks and drafts drawn on banks or other depositories on funds to the credit of the corporation, or in special accounts of the corporation, shall be signed by such person or persons as the Board of Directors shall authorize so to do. SECTION 5.2 VOTING OF SECURITIES OWNED BY CORPORATION. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors or, in the absence of such authorization, by the Chairman of the Board (if there be such an officer appointed), or by the President, or by any Vice-President. ARTICLE VI SHARES OF STOCK SECTION 6.1 FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of the corporation by, the Chairman of the Board (if there be such an officer appointed), or by the President or any Vice-President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 14 18 SECTION 6.2 LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to indemnify the corporation in such manner as it shall require and/or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 6.3 TRANSFERS. Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed. SECTION 6.4 FIXING RECORD DATES. (a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the date on which the meeting is held. A determination of stockholders of record entitled notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting, (b) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Delaware General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If 15 19 no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 6.5 REGISTERED STOCKHOLDERS. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII OTHER SECURITIES OF THE CORPORATION All bonds, debentures and other corporate securities of the corporation, other than stock certificates, may be signed by the Chairman of the Board (if there be such an officer appointed), or the President or any Vice-President or such other person as may be authorized by the Board of Directors and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signature of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation. 16 20 ARTICLE VIII CORPORATE SEAL The corporate seal shall consist of a die bearing the name of the corporation and the state and date of its incorporation. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE IX INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SECTION 9.1 RIGHT TO INDEMNIFICATION. Each person who was or is a party or is threatened to be made a party to or is involved (as a party, witness, or otherwise), in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a "Proceeding"), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent (hereafter an "Agent"), shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended or interpreted (but, in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the corporation to provide broader indemnification rights than were permitted prior thereto) against all expenses, liability, and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement, and any interest, assessments, or other charges imposed thereon, and any federal, state, local, or foreign taxes imposed on any Agent as a result of the actual or deemed receipt of any payments under this Article IX) reasonably incurred or suffered by such person in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding (hereinafter "Expenses"); provided, however, that except as to actions to enforce indemnification rights pursuant to section 9.3 of this Article IX, the corporation shall indemnify any Agent seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Article shall be a contract right. SECTION 9.2 AUTHORITY TO ADVANCE EXPENSES. Expenses incurred by an officer or director (acting in his capacity as such) in defending a Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding, provided, however, that if required by the Delaware General Corporation Law, as amended, such Expenses shall be advanced only upon delivery to the corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately 17 21 be determined that he is not entitled to be indemnified by the corporation as authorized in this Article IX or otherwise. Expenses incurred by other Agents of the corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon such terms and conditions as the Board of Directors deems appropriate. Any obligation to reimburse the corporation for Expense advances shall be unsecured and no interest shall be charged thereon. SECTION 9.3 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under section 9.1 or 9.2 of this Article is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including attorneys' fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. SECTION 9.4 PROVISIONS NONEXCLUSIVE. The rights conferred on any person by this Article IX shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. To the extent that any provision of the Certificate of Incorporation, agreement, or vote of the stockholders or disinterested directors is inconsistent with these Bylaws, the provision, agreement, or vote shall take precedence. SECTION 9.5 AUTHORITY TO INSURE. The corporation may purchase and maintain insurance to protect itself and any Agent against any Expense, whether or not the corporation would have the power to indemnify the Agent against such Expense under applicable law or the provisions of this Article. SECTION 9.6 INDEMNIFICATION CONTRACTS. The Board of Directors is authorized to enter into a contract with any director, officer, employee or agent of the corporation, or any person serving at the request of the corporation as a 18 22 director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprises, including employee benefit plans, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those providing for in this Articles IX. SECTION 9.7 SURVIVAL OF RIGHTS. The rights provided by this Article IX shall continue as to a person who has ceased to be an Agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. SECTION 9.8 SETTLEMENT OF CLAIMS. The corporation shall not be liable to indemnify any Agent under this Article IX (a) for any amounts paid in settlement of any action or claim effected without the corporation's written consent, which consent shall not be unreasonably withheld; or (b) for any judicial award if the corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action. SECTION 9.9 EFFECT OF AMENDMENT. Any amendment, repeal, or modification of this Article IX shall not adversely affect any right or protection of any Agent existing at the time of such amendment, repeal, or modification. SECTION 9.10 SUBROGATION. In the event of payment under this Article IX, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Agent, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the corporation effectively to bring suit to enforce such rights. SECTION 9.11 NO DUPLICATION OF PAYMENTS. The corporation shall not be liable under this Article IX to make any payment in connection with any claim made against the Agent to the extent the Agent has otherwise actually received payment (under any insurance policy, agreement, vote, or otherwise) of the amounts otherwise indemnifiable hereunder. ARTICLE X NOTICES Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the corporation or its transfer agent. Any notice required to be given to any director may be given by the method hereinabove stated, or by telegram or other means of electronic 19 23 transmission, except that such notice other than one which is delivered personally, shall be sent to such address or (in the case of facsimile telecommunication) facsimile telephone number as such director shall have filed in writing with the Secretary of the corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the office of the corporation required to be maintained pursuant to section 1.2 of Article I hereof. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram or other means of electronic transmission shall be deemed to have been given as at the sending time recorded by the telegraph company or other electronic transmission equipment operator transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such a stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation, or of these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. ARTICLE XI AMENDMENTS The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the corporation. Any adoption, amendment or repeal of Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). 20 24 The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or repeal of Bylaws of the corporation by the stockholders shall require, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors. 21 25 CERTIFICATE OF SECRETARY The undersigned, Secretary of Silicon Entertainment, Inc., a Delaware corporation, hereby certifies that the foregoing is a full, true and correct copy of the Bylaws of said corporation, with all amendments to date of this Certificate. WITNESS the signature of the undersigned this ____th day of August, 1999. /s/ JAMES M. KOSHLAND ----------------------------------- James M. Koshland, Secretary EX-4.2 5 SPECIMEN COMMON STOCK CERTIFICATE 1 EXHIBIT 4.2 COMMON STOCK COMMON STOCK [SEAL] SILICON [SEAL] ENTERTAINMENT INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR IN BOSTON, MA OR NEW YORK, NY CERTAIN DEFINITIONS CUSIP 82705M 10 7 THIS CERTIFIES THAT IS THE RECORD HOLDER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE PER SHARE, OF SILICON ENTERTAINMENT, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /s/ James M. Koshland [SEAL] /s/ David S. Morse - --------------------------- --------------------------- Secretary Chairman of the Board, President and Chief Executive Officer COUNTERSIGNED AND REGISTERED: TRANSFER AGENT AND REGISTRAR /s/ - ------------------------------------ 2 SILICON ENTERTAINMENT, INC. A statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights as established, from time to time, by the Certificate of Incorporation of the Corporation and by any certificate of determination, the number of shares constituting each class and series, and the designations thereof, may be obtained by the holder hereof upon request and without charge from the Secretary of the Corporation at the principal office of the Corporation. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ...................Custodian............... TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act........................................ in common (State) COM PROP -- as community property UNIF TRF MIN ACT -- .............Custodian (until age.........) (Cust) ....................under Uniform Transfers (Minor) to Minors Act.............................. (State)
Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED,___________________________hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------- - -------------------------------------- _______________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) _______________________________________________________________________________ _______________________________________________________________________________ ________________________________________________________________________ Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ______________________________________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated________________________ X_______________________________________________ X_______________________________________________ THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE NOTICE: FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. Signature(s) Guaranteed By___________________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-5.1 6 OPINION OF GRAY CARY WARE & FREIDENRICH 1 Exhibit 5.1 [GRAY CARY WARE & FREIDENRICH LLP LETTERHEAD] November 5, 1999 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Silicon Entertainment, Inc. Registration Statement on Form S-1 Ladies and Gentlemen: As counsel to Silicon Entertainment, Inc. (the "Company"), we are rendering this opinion in connection with a proposed sale of those certain shares of the Company's newly-issued Common Stock as set forth in the Registration Statement on Form S-1 to which this opinion is being filed as Exhibit 5.1 (the "Shares"). We have examined all instruments, documents and records which we deemed relevant and necessary for the basis of our opinion hereinafter expressed. In such examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies. We express no opinion with respect to (i) the availability of equitable remedies, including specific performance, or (ii) the effect of bankruptcy, insolvency, reorganization, moratorium or equitable principles relating to or limiting creditors' rights generally. Based on such examination, we are of the opinion that the Shares identified in the above-referenced Registration Statement will be, upon effectiveness of the Registration Statement and receipt by the Company of payment therefor, validly authorized, legally issued, fully paid, and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the above-referenced Registration Statement and to the use of our name wherever it appears in said Registration Statement, including the Prospectus constituting a part thereof, as originally filed or as subsequently amended. Respectfully submitted, /s/ Gray Cary Ware & Freidenrich LLP --------------------------------------- GRAY CARY WARE & FREIDENRICH LLP EX-10.1 7 FORM OF INDEMNIFICATION AGREEMENT FOR DIRECTORS 1 EXHIBIT 10.1 INDEMNITY AGREEMENT This Indemnity Agreement, dated as of __________, 1999, is made by and between Silicon Entertainment, Inc. Delaware, a Delaware corporation (the "Company"), and (the "Indemnitee"). RECITALS A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors, officers or agents of corporations unless they are protected by comprehensive liability insurance or indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors, officers and other agents. B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors, officers and agents with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take. C. Plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors, officers and other agents. D. The Company believes that it is unfair for its directors, officers and agents and the directors, officers and agents of its subsidiaries to assume the risk of huge judgments and other expenses which may occur in cases in which the director, officer or agent received no personal profit and in cases where the director, officer or agent was not culpable. E. The Company recognizes that the issues in controversy in litigation against a director, officer or agent of a corporation such as the Company or its subsidiaries are often related to the knowledge, motives and intent of such director, officer or agent, that he is usually the only witness with knowledge of the essential facts and exculpating circumstances regarding such matters, and that the long period of time which usually elapses before the trial or other disposition of such litigation often extends beyond the time that the director, officer or agent can reasonably recall such matters; and may extend beyond the normal time for retirement for such director, officer or agent with the result that he, after retirement or in the event of his death, his spouse, heirs, executors or administrators, may be faced with limited ability and undue hardship in maintaining an adequate defense, which may discourage such a director, officer or agent from serving in that position. F. Based upon their experience as business managers, the Board of Directors of the Company (the "Board") has concluded that, to retain and attract talented and experienced individuals to serve as directors, officers and agents of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, it is necessary for the Company to contractually indemnify its directors, 1 2 officers and agents and the directors, officers and agents of its subsidiaries, and to assume for itself maximum liability for expenses and damages in connection with claims against such directors, officers and agents in connection with their service to the Company and its subsidiaries, and has further concluded that the failure to provide such contractual indemnification could result in great harm to the Company and its subsidiaries and the Company's stockholders. G. Section 145 of the General Corporation Law of Delaware, under which the Company is organized ("Section 145"), empowers the Company to indemnify its directors, officers, employees and agents by agreement and to indemnify persons who serve, at the request of the Company, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive. H. The Company desires and has requested the Indemnitee to serve or continue to serve as a director, officer or agent of the Company and/or one or more subsidiaries of the Company free from undue concern for claims for damages arising out of or related to such services to the Company and/or one or more subsidiaries of the Company. I. Indemnitee is willing to serve, or to continue to serve, the Company and/or one or more subsidiaries of the Company, provided that he is furnished the indemnity provided for herein. AGREEMENT NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Definitions. (a) Agent. For the purposes of this Agreement, "agent" of the Company means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise; or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation. (b) Expenses. For purposes of this Agreement, "expenses" include all out of pocket expenses costs of any type or nature whatsoever (including, without limitation, all attorneys' fees and related disbursements), actually and reasonably incurred by the Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement or Section 145 or otherwise; provided, 2 3 however, that "expenses" shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a proceeding. (c) Proceeding. For the purposes of this Agreement, "proceeding" means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, or investigative. (d) Subsidiary. For purposes of this Agreement, "subsidiary" means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries. 2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of the Company, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the Company or until such time as he tenders his resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment by Indemnitee. 3. Liability Insurance. (a) Maintenance of D&O Insurance. The Company hereby covenants and agrees that, so long as the Indemnitee shall continue to serve as an agent of the Company and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of the fact that the Indemnitee was an agent of the Company, the Company, subject to Section 3(c), shall promptly obtain and maintain in full force and effect directors' and officers' liability insurance ("D&O Insurance") in reasonable amounts from established and reputable insurers. (b) Rights and Benefits. In all policies of D&O Insurance, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's directors, if the Indemnitee is a director; or of the Company's officers, if the Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, if the Indemnitee is not a director or officer but is a key employee. (c) Limitation on Required Maintenance of D&O Insurance. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the Company. 4. Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify the Indemnitee as follows: 3 4 (a) Successful Defense. To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding (including, without limitation, an action by or in the right of the Company) to which the Indemnitee was a party by reason of the fact that he is or was an Agent of the Company at any time, against all expenses of any type whatsoever actually and reasonably incurred by him in connection with the investigation, defense or appeal of such proceeding. (b) Third Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the Company) by reason of the fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, the Company shall indemnify the Indemnitee against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such proceeding, provided the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. (c) Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company by reason of the fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, the Company shall indemnify the Indemnitee against all expenses actually and reasonably incurred by him in connection with the investigation, defense, settlement, or appeal of such proceeding, provided the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and its stockholders; except that no indemnification under this subsection 4(c) shall be made in respect to any claim, issue or matter as to which such person shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction unless and only to the extent that the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such amounts which the court shall deem proper. (d) Actions where Indemnitee is Deceased. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, and if prior to, during the pendency of after completion of such proceeding Indemnitee becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors and administrators against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred to the extent Indemnitee would have been entitled to indemnification pursuant to Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive. (e) Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) 4 5 for which payment is actually made to Indemnitee under a valid and collectible insurance policy of D&O Insurance, or under a valid and enforceable indemnity clause, by-law or agreement. 5. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) incurred by him in the investigation, defense, settlement or appeal of a proceeding, but not entitled, however, to indemnification for all of the total amount hereof, the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion hereof to which the Indemnitee is not entitled. 6. Mandatory Advancement of Expenses. Subject to Section 8(a) below, the Company shall advance all expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall be determined ultimately that the Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to the Indemnitee within twenty (20) days following delivery of a written request therefor by the Indemnitee to the Company. 7. Notice and Other Indemnification Procedures. (a) Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. (b) If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. (c) In the event the Company shall be obligated to pay the expenses of any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee, upon the delivery to the Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (i) the Indemnitee shall have the right to employ his counsel in any such proceeding at the Indemnitee's expense; and (ii) if (A) the employment of counsel by the Indemnitee has been previously authorized by the Company, (B) the Indemnitee shall have reasonably concluded that there may be a conflict of 5 6 interest between the Company and the Indemnitee in the conduct of any such defense; or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, the fees and expenses of Indemnitee's counsel shall be at the expense of the Company. 8. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the General Corporation Law of Delaware or (iv) the proceeding is brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145. (b) Lack of Good Faith. To indemnify the Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or (c) Unauthorized Settlements. To indemnify the Indemnitee under this Agreement for any amounts paid in settlement of a proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld. 9. Non-exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Company's Certificate of Incorporation or Bylaws, the vote of the Company's stockholders or disinterested directors, other agreements, or otherwise, both as to action in his official capacity and to action in another capacity while occupying his position as an agent of the Company, and the Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee. 10. Enforcement. Any right to indemnification or advances granted by this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. Indemnitee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under this Agreement (other than an action brought to enforce a claim for expenses pursuant to Section 6 hereof, provided that the required undertaking has been tendered to the Company) that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 4 and 8 hereof. Neither the failure of the Corporation (including its Board of Directors or its stockholders) to have made a determination prior to the 6 7 commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company (including its Board of Directors or its stockholders) that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. 11. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 12. Survival of Rights. (a) All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an agent of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Indemnitee was serving in the capacity referred to herein. (b) The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. 13. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent permitted by law including those circumstances in which indemnification would otherwise be discretionary. 14. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 13 hereof. 15. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 7 8 16. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee or (ii) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 17. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. 18. Consent to Jurisdiction. The Company and the Indemnitee each hereby consent to the jurisdiction of the courts of the State of Delaware with respect to any action or proceeding which arises out of or relates to this Agreement. 8 9 The parties hereto have entered into this Indemnity Agreement effective as of the date first above written. THE COMPANY: SILICON ENTERTAINMENT, INC. DELAWARE By ------------------------------------ Its ------------------------------------ Address: INDEMNITEE: --------------------------------------- [NAME] Address: --------------------------------------- --------------------------------------- 9 EX-10.6 8 1999 EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10.6 SILICON ENTERTAINMENT, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN 1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN. 1.1 ESTABLISHMENT. This 1999 Employee Stock Purchase Plan (the "PLAN") is hereby established effective as of the effective date of the initial registration by the Company of its Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the "EFFECTIVE DATE"). 1.2 PURPOSE. The purpose of the Plan is to advance the interests of Company and its shareholders by providing an incentive to attract, retain and reward Eligible Employees of the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan provides such Eligible Employees with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock. The Company intends that the Plan qualify as an "employee stock purchase plan" under Section 423 of the Code. 1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued. 2. DEFINITIONS AND CONSTRUCTION. 2.1 DEFINITIONS. Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. Whenever used herein, the following terms shall have their respective meanings set forth below: (a) "BOARD" means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, "Board" also means such Committee(s). (b) "CODE" means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. (c) "COMMITTEE" means a committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. (d) "COMPANY" means Silicon Entertainment, Inc., a California corporation, or any successor corporation thereto. 1 2 (e) "COMPENSATION" means, with respect to any Offering Period, base wages or salary, commissions, overtime, bonuses, annual awards, other incentive payments, shift premiums, and all other compensation paid in cash during such Offering Period before deduction for any contributions to any plan maintained by a Participating Company and described in Section 401(k) or Section 125 of the Code. Compensation shall not include reimbursements of expenses, allowances, long-term disability, workers' compensation or any amount deemed received without the actual transfer of cash or any amounts directly or indirectly paid pursuant to the Plan or any other stock purchase or stock option plan, or any other compensation not included above. (f) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan. (g) "EMPLOYEE" means a person treated as an employee of a Participating Company for purposes of Section 423 of the Code. A Participant shall be deemed to have ceased to be an Employee either upon an actual termination of employment or upon the corporation employing the Participant ceasing to be a Participating Company. For purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while such individual is on any military leave, sick leave, or other bona fide leave of absence approved by the Company of ninety (90) days or less. In the event an individual's leave of absence exceeds ninety (90) days, the individual shall be deemed to have ceased to be an Employee on the ninety-first (91st) day of such leave unless the individual's right to reemployment with the Participating Company Group is guaranteed either by statute or by contract. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual's employment or termination of employment, as the case may be. For purposes of an individual's participation in or other rights, if any, under the Plan as of the time of the Company's determination, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that the Company or any governmental agency subsequently makes a contrary determination. (h) "FAIR MARKET VALUE" means, as of any date, if there is then a public market for the Stock, the closing price of a share of Stock (or the mean of the closing bid and asked prices if the Stock is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its discretion. If, as of any date, there is then no public market for the Stock, the Fair Market Value on any relevant date shall be as determined by the Board. Notwithstanding the foregoing, the Fair Market Value per share of Stock on the Effective Date shall be deemed to be the public offering price set forth in the final prospectus filed with the Securities and Exchange Commission in connection with the initial public offering of the Stock. (i) "OFFERING" means an offering of Stock as provided in Section 6. 2 3 (j) "OFFERING DATE" means, for any Offering, the first day of the Offering Period with respect to such Offering. (k) "OFFERING PERIOD" means a period established in accordance with Section 6.1. (l) "PARENT CORPORATION" means any present or future "parent corporation" of the Company, as defined in Section 424(e) of the Code. (m) "PARTICIPANT" means an Eligible Employee who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan. (n) "PARTICIPATING COMPANY" means the Company or any Parent Corporation or Subsidiary Corporation designated by the Board as a corporation the Employees of which may, if Eligible Employees, participate in the Plan. The Board shall have the sole and absolute discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies. (o) "PARTICIPATING COMPANY GROUP" means, at any point in time, the Company and all other corporations collectively which are then Participating Companies. (p) "PURCHASE DATE" means the last day of an Offering Period (or Purchase Period, if so determined by the Board). (q) "PURCHASE PERIOD" means a period, if any, established in accordance with Section ERROR! REFERENCE SOURCE NOT FOUND.. (r) "PURCHASE PRICE" means the price at which a share of Stock may be purchased under the Plan, as determined in accordance with Section 9. (s) "PURCHASE RIGHT" means an option granted to a Participant pursuant to the Plan to purchase such shares of Stock as provided in Section 8, which the Participant may or may not exercise during the Offering Period in which such option is outstanding. Such option arises from the right of a Participant to withdraw any accumulated payroll deductions of the Participant not previously applied to the purchase of Stock under the Plan and to terminate participation in the Plan at any time during an Offering Period. (t) "STOCK" means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2. (u) "SUBSCRIPTION AGREEMENT" means a written agreement in such form as specified by the Company, stating an Employee's election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee's Compensation. (v) "SUBSCRIPTION DATE" means the last business day prior to an Offering Date or such other date as the Company shall establish. 3 4 (w) "SUBSIDIARY CORPORATION" means any present or future "subsidiary corporation" of the Company, as defined in Section 424(f) of the Code. 2.2 CONSTRUCTION. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise. 3. ADMINISTRATION. 3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the Board. All questions of interpretation of the Plan, of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase Right shall be determined by the Board and shall be final and binding upon all persons having an interest in the Plan or the Purchase Right. Subject to the provisions of the Plan, the Board shall determine all of the relevant terms and conditions of Purchase Rights granted pursuant to the Plan; provided, however, that all Participants granted Purchase Rights pursuant to the Plan shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code. All expenses incurred in connection with the administration of the Plan shall be paid by the Company. 3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the officer has apparent authority with respect to such matter, right, obligation, determination or election. 3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The Company may, from time to time, consistent with the Plan and the requirements of Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its sole discretion, for the proper administration of the Plan, including, without limitation, (a) a minimum payroll deduction amount required for participation in an Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant in order to adjust for the Company's delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant's election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan. 4. SHARES SUBJECT TO PLAN. 4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be Five Hundred Thousand (500,000), cumulatively increased on February 1, 2001 and each February 1 thereafter until and including February 1, 2010 by an 4 5 amount equal to the lesser of (a) One Hundred Thousand (100,000) shares or (b) a lesser amount of shares determined by the Board, and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof. If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of such Purchase Right shall again be available for issuance under the Plan. 4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, or in the event of any merger (including a merger effected for the purpose of changing the Company's domicile), sale of assets or other reorganization in which the Company is a party, appropriate adjustments shall be made in the number and class of shares subject to the Plan, the purchase limit set forth in Section 8.1 and each Purchase Right and in the Purchase Price. If a majority of the shares which are of the same class as the shares that are subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the "NEW SHARES"), the Board may unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject to the Purchase Right. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive. 5. ELIGIBILITY. 5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a Participating Company is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the following: (a) Any Employee who is customarily employed by the Participating Company Group for less than twenty (20) hours per week; or (b) Any Employee who is customarily employed by the Participating Company Group for not more than five (5) months in any calendar year. 5.2 EXCLUSION OF CERTAIN SHAREHOLDERS. Notwithstanding any provision of the Plan to the contrary, no Employee shall be granted a Purchase Right under the Plan if, immediately after such grant, such Employee would own or hold options to purchase stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code. For purposes of this Section 5.2, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee. 5 6 6. OFFERINGS. 6.1 OFFERING PERIODS. The Plan shall be implemented by sequential Offerings (an "OFFERING PERIOD"). The first Offering Period shall commence on the Effective Date and end on August 31, 2000 (the "INITIAL OFFERING PERIOD"). Subsequent Offerings shall commence on the first day of March and September of each year and end on the last day of August and February, respectively, occurring thereafter, and will have a duration of approximately six (6) months. 6.2 PURCHASE PERIODS. If the Board so determines, in its discretion, each Offering Period may consist of two (2) or more consecutive Purchase Periods having such duration as the Board shall specify, and the last day of each such Purchase Period shall be a Purchase Date. 6.3 DISCRETION TO VARY DURATION. Notwithstanding the foregoing, the Board may establish a different duration for one or more Offering Periods or Purchase Periods or different commencing or ending dates for such periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. If the first or last day of an Offering Period or a Purchase Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the period. 7. PARTICIPATION IN THE PLAN. 7.1 INITIAL PARTICIPATION. An Eligible Employee may become a Participant in an Offering Period by delivering a properly completed Subscription Agreement to the Company not later than the close of business for such office on the Subscription Date established by the Company for the applicable Offering Date. An Eligible Employee who does not deliver a properly completed Subscription Agreement to the Company's designated office on or before the Subscription Date shall not participate in that Offering Period or any subsequent Offering Period unless such Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate office of the Company on or before the Subscription Date for such subsequent Offering Period. An Employee who becomes an Eligible Employee after the Offering Date of an Offering Period (other than the Initial Offering Period) shall not be eligible to participate in such Offering Period but may participate in any subsequent Offering Period provided such Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period. 7.2 CONTINUED PARTICIPATION. A Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that such Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan, or (b) terminated employment as provided in Section 13. A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan. However, a Participant may deliver a new 6 7 Subscription Agreement for a subsequent Offering Period in accordance with the procedures set forth in Section 7.1 if the Participant desires to change any of the elections contained in the Participant's then effective Subscription Agreement. 8. RIGHT TO PURCHASE SHARES. 8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be granted automatically, on the Offering Date, a Purchase Right consisting of an option to purchase, on each Purchase Date within such Offering Period, that number of whole shares of Stock determined by dividing the aggregate payroll deductions collected from the Participant by the applicable Purchase Price on such Purchase Date; provided, that no Participant may purchase more than one thousand (1,000) shares of Stock on any Purchase Date. 8.2 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted a Purchase Right which permits his or her right to purchase shares of Stock under the Plan to accrue at a rate which, when aggregated with such Participant's rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right is outstanding at any time. For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period. The limitation described in this Section shall be applied in conformance with applicable regulations under Section 423(b)(8) of the Code. 9. PURCHASE PRICE. The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the Board; provided, however, that the Purchase Price shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date. Unless otherwise provided by the Board prior to the commencement of an Offering Period, the Purchase Price for that Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date. 10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for only by means of payroll deductions from the Participant's Compensation accumulated during the Offering Period for which such Purchase Right was granted, subject to the following: 10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided herein, the amount to be deducted under the Plan from a Participant's Compensation on each payday during 7 8 an Offering Period (after the Offering Date) shall be determined by the Participant's Subscription Agreement. The Subscription Agreement shall set forth the percentage of the Participant's Compensation to be deducted on each payday during an Offering Period (after the Offering Date) in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions made effective following the first payday during an Offering after the Offering Date) or more than ten percent (10%). Notwithstanding the foregoing, the Board may change the limits on payroll deductions effective as of any future Offering Date. 10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall commence on the first payday following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided herein. 10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an Offering Period, a Participant may elect to increase or decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company an amended Subscription Agreement authorizing such change on or before the "Change Notice Date." The "CHANGE NOTICE DATE" shall be a date prior to the beginning of the first pay period for which such election is to be effective as established by the Company from time to time and announced to the Participants. A Participant who elects to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in the current Offering Period unless such Participant withdraws from the Plan as provided in Section 12.1. 10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company may, in its sole discretion, suspend a Participant's payroll deductions under the Plan as the Company deems advisable to avoid accumulating payroll deductions in excess of the amount that could reasonably be anticipated to purchase the maximum number of shares of Stock permitted during a calendar year under the limit set forth in Section 8.2. Payroll deductions shall be resumed at the rate specified in the Participant's then effective Subscription Agreement at the beginning of the next Offering Period the Purchase Date of which falls in the following calendar year. 10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall be maintained for each Participant. All payroll deductions from a Participant's Compensation shall be credited to such Participant's Plan account and shall be deposited with the general funds of the Company. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose. 10.6 NO INTEREST PAID. Interest shall not be paid on sums deducted from a Participant's Compensation pursuant to the Plan. 10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may withdraw all or any portion of the payroll deductions credited to his or her Plan account and not previously applied toward the purchase of Stock by delivering to the Company a written notice on a form provided by the Company for such purpose. A Participant who withdraws the entire remaining balance credited to his or her Plan account shall be deemed to have withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn shall be returned to the 8 9 Participant as soon as practicable after the withdrawal and may not be applied to the purchase of shares in any Offering under the Plan. The Company may from time to time establish or change limitations on the frequency of withdrawals permitted under this Section, establish a minimum dollar amount that must be retained in the Participant's Plan account, or terminate the withdrawal right provided by this Section. 11. PURCHASE OF SHARES. 11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant's Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant's payroll deductions accumulated in the Participant's Plan account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price. No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated before such Purchase Date. 11.2 PRO RATA ALLOCATION OF SHARES. In the event that the number of shares of Stock which might be purchased by all Participants in the Plan on a Purchase Date exceeds the number of shares of Stock available in the Plan as provided in Section 4.1, the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be practicable and as the Company shall determine to be equitable. Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded. 11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each Purchase Date, the Company shall arrange the delivery to each Participant, as appropriate, of a certificate representing the shares acquired by the Participant on such Purchase Date; provided that the Company may deliver such shares to a broker that holds such shares in street name for the benefit of the Participant. Shares to be delivered to a Participant under the Plan shall be registered in the name of the Participant, or, if requested by the Participant, in the name of the Participant and his or her spouse, or, if applicable, in the names of the heirs of the Participant. 11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a Participant's Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date. However, if the cash to be returned to a Participant pursuant to the preceding sentence is an amount less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain such amount in the Participant's Plan account to be applied toward the purchase of shares of Stock in the subsequent Offering Period (or Purchase Period, if applicable). 11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the foreign, federal, state and local tax withholding obligations of the Participating Company Group, if any, which arise upon exercise of the Purchase Right or upon such disposition of shares, 9 10 respectively. The Participating Company Group may, but shall not be obligated to, withhold from the Participant's compensation the amount necessary to meet such withholding obligations. 11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period. 11.7 REPORTS TO PARTICIPANTS. Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant's Plan account setting forth the total payroll deductions accumulated prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant's Plan account pursuant to Section 11.4. The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine. 12. WITHDRAWAL FROM OFFERING OR PLAN. 12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the Plan by signing and delivering to the Company a written notice of withdrawal on a form provided by the Company for such purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period. A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1. The Company may impose a requirement that the notice of withdrawal from the Plan be on file with the Company for a reasonable period prior to the effectiveness of the Participant's withdrawal. 12.2 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary withdrawal from the Plan pursuant to Section 12.1, the Participant's accumulated payroll deductions which have not been applied toward the purchase of shares of Stock shall be refunded to the Participant as soon as practicable after the withdrawal, without the payment of any interest, and the Participant's interest in the Plan shall terminate. Such accumulated payroll deductions to be refunded in accordance with this Section may not be applied to any other Offering under the Plan. 13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Upon a Participant's ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or the failure of a Participant to remain an Eligible Employee, the Participant's participation in the Plan shall terminate immediately. In such event, the payroll deductions credited to the Participant's Plan account since the last Purchase Date shall, as soon as practicable, be returned to the Participant or, in the case of the Participant's death, to the Participant's legal representative, and all of the Participant's rights under the Plan shall terminate. Interest shall not be paid on sums returned pursuant to this Section 13. A Participant whose participation has been so terminated 10 11 may again become eligible to participate in the Plan by again satisfying the requirements of Sections 5 and 7.1. 14. CHANGE IN CONTROL. 14.1 DEFINITIONS. (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. (b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the "TRANSACTION") wherein the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company's voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the "TRANSFEREE CORPORATION(s)"), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. 14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"), may assume the Company's rights and obligations under the Plan. If the Acquiring Corporation elects not to assume the Company's rights and obligations under outstanding Purchase Rights, the Purchase Date of the then current Offering Period shall be accelerated to a date before the date of the Change in Control specified by the Board, but the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are neither assumed by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. 15. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not be transferred in any manner otherwise than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant. 11 12 16. COMPLIANCE WITH SECURITIES LAW. The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. A Purchase Right may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any securities exchange or market system upon which the Stock may then be listed. In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act of 1933, as amended, shall at the time of exercise of the Purchase Right be in effect with respect to the shares issuable upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of said Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of a Purchase Right, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Company. 17. RIGHTS AS A SHAREHOLDER AND EMPLOYEE. A Participant shall have no rights as a shareholder by virtue of the Participant's participation in the Plan until the date of the issuance of a certificate for the shares purchased pursuant to the exercise of the Participant's Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 4.2. Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant's employment at any time. 18. LEGENDS. The Company may at any time place legends or other identifying symbols referencing any applicable federal, state or foreign securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representing shares of Stock issued under the Plan. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include but shall not be limited to the following: 12 13 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)." 19. NOTIFICATION OF SALE OF SHARES. The Company may require the Participant to give the Company prompt notice of any disposition of shares acquired by exercise of a Purchase Right within two (2) years from the date of granting such Purchase Right or one (1) year from the date of exercise of such Purchase Right. The Company may require that until such time as a Participant disposes of shares acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant's name (or, if elected by the Participant, in the name of the Participant and his or her spouse but not in the name of any nominee) until the lapse of the time periods with respect to such Purchase Right referred to in the preceding sentence. The Company may direct that the certificates evidencing shares acquired by exercise of a Purchase Right refer to such requirement to give prompt notice of disposition. 20. NOTICES. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 21. INDEMNIFICATION. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or 13 14 proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. 22. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend or terminate the Plan, except that (a) such termination shall not affect Purchase Rights previously granted under the Plan, provided that the Board mayterminate the Plan (and any Offering thereunder) on any Purchase Date if the Board determines that such termination is in the best interests of the Company and its shareholders except as permitted under the Plan, and (b) no amendment may adversely affect a Purchase Right previously granted under the Plan (except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to obtain qualification or registration of the shares of Stock under applicable federal, state or foreign securities laws). In addition, an amendment to the Plan must be approved by the shareholders of the Company within twelve (12) months of the adoption of such amendment if such amendment would authorize the sale of more shares than are authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Board as Participating Companies. 14 15 SILICON ENTERTAINMENT, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT NAME (Please print): ------------------------------------------------------------ (Last) (First) (Middle) ADDRESS: ------------------------------------------------------------------------ MY SOCIAL SECURITY NUMBER: ------------------------------------------------------ (TM) Original Application for the Offering Period beginning _________, 199__. (TM) Change in Payroll Deduction rate effective with the pay period ending __________, 199__. I hereby elect to participate in the 1999 Employee Stock Purchase Plan (the "PLAN") of Silicon Entertainment, Inc. (the "COMPANY") and subscribe to purchase shares of the Company's Stock in accordance with this Subscription Agreement and the Plan. I hereby authorize payroll deductions in the amount of ________ percent (in whole percentages not less than 1% or more than 10%) of my "COMPENSATION" on each payday throughout the "OFFERING PERIOD" in accordance with the Plan. I understand that these payroll deductions will be accumulated for the purchase of shares of Stock at the applicable purchase price determined in accordance with the Plan. I understand that, except as otherwise provided by the Plan, I will automatically purchase shares on each Purchase Date under the Plan unless I withdraw from the Plan by giving written notice on a form provided by the Company or unless my employment terminates. I understand that I will automatically participate in each subsequent Offering that commences immediately after the last day of an Offering in which I am participating until I withdraw from the Plan by giving written notice on a form provided by the Company or my employment terminates. Shares I purchase under the Plan should be issued in the name(s) set forth below. (Shares may be issued in the participant's name alone or together with the participant's spouse as community property or in joint tenancy.) NAME(S): --------------------------------------------------------------- (TM) In my name alone (TM) Community Property (TM) Joint Tenancy I agree to make adequate provision for the federal, state, local and foreign tax withholding obligations, if any, which may arise upon my purchase of shares under the Plan and/or my disposition of such shares. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet such withholding obligations. I agree that while I hold shares acquired under the Plan, unless otherwise permitted by the Company, I will hold such shares in the name(s) entered above (and not in the name of any nominee). This restriction only applies to the name(s) in which shares are held and does not affect my ability to dispose of Plan shares. THE TAX TREATMENT OF A DISPOSITION OF PLAN SHARES (INCLUDING A GIFT) DEPENDS ON WHEN THE DISPOSITION OCCURS. I AGREE THAT I WILL NOTIFY THE CHIEF FINANCIAL OFFICER OF THE COMPANY IN WRITING WITHIN 30 DAYS AFTER ANY DISPOSITION OF PLAN SHARES THAT OCCURS WITHIN 2 YEARS AFTER THE OFFERING DATE OR 1 YEAR AFTER THE PURCHASE DATE (A "DISQUALIFYING DISPOSITION"). I FURTHER AGREE THAT IF I DO NOT RESPOND WITHIN 30 DAYS TO A COMPANY SURVEY DELIVERED TO ME REQUESTING INFORMATION ABOUT A POSSIBLE DISQUALIFYING DISPOSITION, THE COMPANY MAY (1) TREAT MY NONRESPONSE AS MY NOTICE TO THE COMPANY THAT A DISQUALIFYING DISPOSITION OCCURRED, AND (2) REPORT THE ORDINARY INCOME I MUST RECOGNIZE AS A RESULT OF THE DISQUALIFYING DISPOSITION TO THE INTERNAL REVENUE SERVICE. I am familiar with the provisions of the Plan and agree to participate in the Plan subject to all of its provisions. I understand that the Board of Directors of the Company reserves the right to terminate the Plan or to amend the Plan and my right to purchase stock under the Plan to the extent provided by the Plan. I understand that the effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan. Date: Signature: ------------------------------ -------------------------- 16 SILICON ENTERTAINMENT, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN NOTICE OF WITHDRAWAL NAME (Please print): ------------------------------------------------------------ (Last) (First) (Middle) I hereby elect to withdraw from the Offering under Silicon Entertainment, Inc. 1999 Employee Stock Purchase Plan (the "PLAN") which began on _________________________, 19____ and in which I am currently participating (the "CURRENT OFFERING"). ELECT EITHER A OR B BELOW: (TM) A. I elect to terminate immediately my participation in the Current Offering and in the Plan. I request that the Company cease all further payroll deductions from my Compensation under the Plan (provided that I have given sufficient notice prior to the next payday). I request that all payroll deductions credited to my account under the Plan (if any) not previously used to purchase shares under the Plan shall not be used to purchase shares on the Purchase Date of the Current Offering. Instead, I request that all such amounts be paid to me as soon as practicable. I understand that this election immediately terminates my interest in the Current Offering and in the Plan. (TM) B. I elect to terminate my participation in the Current Offering and in the Plan following my purchase of shares on Purchase Date of the Current Offering. I request that the Company cease all further payroll deductions from my Compensation under the Plan (provided that I have given sufficient notice prior to the next payday). I request that all payroll deductions credited to my account under the Plan (if any) not previously used to purchase shares under the Plan shall be used to purchase shares on the Purchase Date of the Current Offering to the extent permitted by the Plan. I understand that this election will terminate my interest in the Current Offering and in the Plan immediately following such purchase. I request that any cash balance remaining in my account under the Plan after my purchase of shares be paid to me as soon as practicable. I understand that by making this election I am terminating my interest in the Plan and that no further payroll deductions will be made (provided that I have given sufficient notice prior to the next payday) unless I elect in accordance with the Plan to become a participant in another Offering under the Plan by filing a new Subscription Agreement with the Company. Date: Signature: ------------------------------ -------------------------- EX-10.7 9 LICENSE AGREEMENT BY AND BETWEEN NASCAR 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT. THE CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT 10.7 LICENSE AGREEMENT BY AND BETWEEN NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. AND LBE TECHNOLOGIES, INC. THIS LICENSE AGREEMENT (this "Agreement") is made and entered into this 18th day of August, 1997 (the "Effective Date") by and between the NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC., a Florida corporation with a principal business address of P.O. Box 2875, Daytona Beach, Florida 32120-2875 ("Licensor") and LBE TECHNOLOGIES, INC., a California corporation with a principal business address of 10401 Bubb Road, Cupertino, California 95014 ("Licensee"). RECITALS WHEREAS, Licensor, by the expenditure of time, skill, effort and money, has developed and owns a distinctive system for establishing, operating and sanctioning stock car and stock truck racing in North America and is engaged in, among other things, the promotion of racing events and development and merchandising of various products relating to stock car and stock truck racing, and is the owner of certain trademarks and service marks and the goodwill related thereto; and WHEREAS, Licensee, by the expenditure of time, skill, effort and money, has developed and owns a distinctive system for photonic, electronic, electromechanical and hydraulic simulated representation real world vehicle operation, including stock car racing and for simultaneous competitive display of multiple vehicles in apparent real-time and for the engagement of viewers and spectators, and is the owner of certain trademarks, technical know-how, and trade secrets. WHEREAS, Licensee desires to acquire a license from Licensor to obtain the right to use certain trademarks, service marks and trade dress owned by Licensor (i) for implementation of the NASCAR marks into the visual display of the NASCAR stock car and NASCAR stock truck simulators (as defined below), and (ii) in the development, design, operation, promotion and advertising of retail outlets that offer to the general public simulator games and concessions predominately consisting of interactive stock car and stock truck simulation entertainment (including the Simulators) and which retail outlets have a theme associated and identified with NASCAR stock car and stock truck racing, and other related NASCAR themes, and Licensor desires to grant Licensee such license upon the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, for and in consideration of the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1 ***Confidential treatment requested. 2 1. DEFINITIONS The following terms shall have the following meanings in this Agreement: (a) "Advertising" means all forms of advertising, including but not limited to print advertisements and promotional literature, television and radio commercials, and advertisements on or through on-line services, the World Wide Web and other portions of the Internet. (b) "Affiliate" means, with respect to any Person, any other natural person or Entity that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such Person. The term "control" (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with" means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise; provided, however, that in no event shall Licensor be deemed an Affiliate of Licensee. For purposes of the definition of Affiliate, the term "Contract" shall mean any agreement, lease, license, evidence of debt, mortgage, deed of trust, note, bond, indenture, security agreement, commitment, instrument, understanding, or other contract, obligation or arrangement of any kind. (c) "Entertainment Store" or collectively "Entertainment Stores" shall mean a self contained retail outlet that offers entertainment to the general public predominately consisting of indoor simulated stock car and stock truck race driving experiences using the Simulators and indoor grandstand spectator seating, but also including a refreshment area and a retail merchandise area, with a predominant theme associated and identified with NASCAR stock car and stock truck racing, and other NASCAR racing theme(s) promoted and approved by NASCAR during the term of this Agreement. (d) "Entity" or collectively "Entities" shall mean corporations, limited liability companies, partnerships, joint ventures or other forms of legal entity. (e) "Gross Revenue" shall mean all monies and things of value received or earned or accrued by the Licensee or relating to or associated with the Entertainment Store, less applicable sales and use taxes, as a result of or in connection with a revenue-producing activity of any kind on or in connection with the goods and services licensed under this Agreement. In computing Gross Revenue, the gross amount set forth in any contract or agreement giving rise to the right of payment shall be included, and any applicable commissions, fees or expenses paid to or deducted by sales agents, consultants and other parties shall not be deducted therefrom. However, Licensee may approach Licensor from time to time, when unique circumstances warrant the Licensee's use of a third party sales agent in securing, a sponsorship for the Entertainment Stores and/or the Remote Sites, at which time the Licensor shall reasonably consider deducting the sales commission from Gross Revenue computation. Provided however, that the sales commission rate is based upon a reasonable industry standard and that the sales agent has been pre-approved by the Licensor, such approval shall not be unreasonably withheld. (f) "NASCAR Marks" shall mean only those trademarks, service marks, logos, emblems or indicia of origin owned exclusively by NASCAR as are listed and described on 2 3 Exhibit A attached hereto, which NASCAR Marks may be supplemented from time to time by NASCAR in NASCAR's sole discretion. (g) "NASCAR Trade Dress" refers to the overall image and impression of the NASCAR and its sanctioned events and shall be given the meaning ascribed to it under the cases applying Section 43(a) of the Lanham Act and the cases applying and interpreting that statute. (h) "Person" shall mean any natural person or Entity. (i) "Royalties" shall mean the aggregate of all royalties described in this Agreement, including, but not limited to royalties described in Section 4 of this Agreement. (j) "Simulators" shall mean interactive, two-passenger, stock car or stock truck simulation equipment developed and owned by Licensee, including hardware, software, firmware and other components, with working gas, clutch and brake pedals, rearview mirrors and racing tires, which will be mounted on "motion platforms" capable of moving the Simulator in four degrees of freedom, and which will incorporate NASCAR stock car and/or stock truck racing theme(s) and which are developed and owned by the Licensee and which incorporate the NASCAR Marks and any other elements unique to NASCAR as licensed in this Agreement. Licensor recognizes that the Licensee has agreements with and will from time to time establish agreements with stock car drivers, team owners and tracks which are not subject to the terms herein. In addition, Licensor acknowledges that Licensee may develop simulations that do not pertain to stock car and stock truck racing; these simulators shall not be subject to the term herein. (k) "Site" shall mean the individual location of an Entertainment Store as approved by Licensor in accordance with Section 9(a) hereof. (l) "Site Trade Dress" refers to the overall image and impression of the Entertainment Stores and the Remote Sites and shall be given the meaning ascribed to it under the cases applying Section 43(a) of the Lanham Act, and the cases applying and interpreting that statute. 2. GRANT OF LICENSE (a) Grant of License. Subject to the terms and conditions set forth herein, Licensor hereby grants to Licensee, during the term of this Agreement, the non-exclusive, limited right and license to use the NASCAR Marks and NASCAR Trade Dress solely in connection with: (i) the development, design, creation, implementation and display of software in the Simulators at locations approved by NASCAR as provided in this Agreement; (ii) the design, development, building, construction of the Entertainment Stores and the Remote Sites (as defined in Section 2(c) hereof) within the territory consisting of the entire world (the "Territory") and the ownership and operation thereof (the "Business"); and (iii) "Promotional Activities" relating to the Entertainment Stores and Remote Sites, all such Promotional Activities are subject to the prior approval of Licensor. As used herein, the term "Promotional Activities" shall mean all forms of advertising, marketing, promotional and sponsorship activities relating to or associated with the Entertainment Stores or Remote Sites. 3 4 (b) Non-Exclusivity. Licensee acknowledges, understands and confirms that the license granted to Licensee by Licensor during the term of this Agreement and subject to the terms and conditions of this Agreement are nonexclusive and Licensor retains the right, at its sole option and discretion, to operate, or grant to any other Person the right to operate, Entertainment Stores (or any other related concept) at any location within or outside the Territory, however, Licensor shall not be entitled to use any of the Licensee's Intellectual Property [as defined in Section 12(b) of this Agreement] in any other Entertainment Store not associated with the Licensee. Upon termination or expiration (without renewal of this Agreement), Licensee shall have no further rights hereunder, other than the rights held prior to the Grant of License. (c) Remote Sites. In connection with the license granted to Licensee by Licensor pursuant to this Agreement, Licensee shall have the right, at its sole expense, to transport one or more Simulators to locations other than the premises of the Entertainment Stores temporarily operated by Licensee (individually a "Remote Site" or collectively the "Remote Sites") for the purpose of making the Simulators available for use by the general public at sporting or other entertainment and promotional events; provided that the locations and times of operation for each Remote Site has been previously approved in writing by Licensor; and further provided that, in connection with each Remote Site, Licensee complies with all of the terms and conditions of this Agreement applicable to the Entertainment Stores insofar as such terms and conditions could apply to the Simulators or the Remote Site. Notwithstanding the foregoing, in connection with the Remote Sites, except with respect to the fee charged by Licensee with respect to the use and operation of the Simulators by customers, Licensee shall not be permitted to sell at or around a Remote Site located at or in close proximity to any NASCAR-sanctioned race track facility, any merchandise or other products or services bearing, containing or displaying the NASCAR Marks, without Licensor's prior approval. Licensee shall be permitted to sell approved merchandise at locations other than NASCAR-sanctioned race track facilities, provided that Licensee has obtained any and all necessary permits, permissions, licenses, etc. necessary for this type of activity. (d) Limitations on License Granted to Licensee. In connection with the license granted to Licensee by Licensor hereunder, Licensee understands and agrees that: (1) Theme. Licensee shall use the NASCAR Marks and NASCAR Trade Dress only in connection with a NASCAR stock car or NASCAR stock truck racing theme. (2) Premiums, Bundling and Sweepstakes. Licensee agrees it is not entitled to, and shall not, except as approved in advance by Licensor in accordance with the procedures of this subparagraph 2(d)(2) of this Section 2, use any of the NASCAR Marks or NASCAR Trade Dress (1) in connection with the manufacture, sale or distribution of goods or services as premiums or for promotional, publicity, fund-raising, giveaways, bundling, or disposal purposes or (2) in connection with any sweepstakes, lottery, game of chance or any similar promotional or sales program. Licensee may submit from time to time proposals for the activities described in this subparagraph 2(d)(1) and (2). Each proposal shall be in writing and describe the proposal in reasonable detail. NASCAR, in its sole discretion, shall approve or disapprove each proposal within fifteen (15) business days after actual receipt of such proposal. Failure of NASCAR to reply to a proposal within this time will be deemed a disapproval of the proposal. Furthermore, Licensee shall not use any of the NASCAR Marks or NASCAR Trade Dress in connection with 4 5 any sweepstakes, lottery, game of chance or any similar promotional or sales program unless such program is consistent with applicable law. (3) Other Trade Names, Trademarks and Service Marks. Except to the extent permitted by applicable law, Licensee understands and agrees that it is not entitled to, and shall not, use the names, pictures, identities, trade names, trademarks or service marks of any racetrack promoting and presenting NASCAR-sanctioned events, Persons involved in sponsoring or advertising in connection with such events, NASCAR-licensed officials, drivers, car and truck owners and crew members, or the cars or trucks involved in such events (the "Third Party Marks") either by themselves or in conjunction with the NASCAR Marks, unless Licensee has obtained the rights beforehand to use such Third Party Marks from the owners(s) of such marks by written agreement. Unless approved in advance by NASCAR, Licensee shall not use the NASCAR Marks in such close physical proximity or in such close connection or combination with its own marks or the marks of any third party that a reasonable consumer of the services would be likely to get the impression that the NASCAR Marks do not indicate a separate source of goods or services from other marks. (4) Sublicensing. Licensee understands and agrees that this Agreement does not in any manner whatsoever grant to Licensee any right to sublicense. Licensee may request Licensor's approval, such approval in Licensor's sole discretion, for sublicensing the rights and license granted to it under this Agreement to any Person. Each of such request by Licensee shall be in writing and describe the proposal in reasonable detail. NASCAR, in its sole discretion, shall approve or disapprove of each proposal within fifteen (15) business days after actual receipt of such proposal. Failure of NASCAR to reply to a proposal within this time will be deemed a disapproval of the proposal. The parties agree that no such sublicensing agreements approved by Licensor and between Licensee and any other Person may without NASCAR's express written permission include rights which allow the Person to use the NASCAR Marks or NASCAR Trade Dress in marketing anything other than the activities licensed in this Agreement or to hold himself or itself out to the public as an "official" (or "home" or other words of similar import) provider of NASCAR goods or services or to be otherwise endorsed by NASCAR. (5) Warranty Within Territory. NASCAR expressly does not warrant or represent that the rights under the license granted hereunder are enforceable or noninfringing upon the rights of others outside of the United States, Canada and Australia, even though the Territory provided in this Agreement extends beyond the United States, Canada and Australia. Licensee agrees that use of the Marks outside of these countries shall be at the sole risk of the Licensee, and that Licensee agrees to indemnify and hold NASCAR and its Affiliates, and the shareholders, employees, directors, officers and agents of each of them harmless against all cost and expense incurred, including settlements, judgments and reasonable attorneys' fees in the defense of any claim that arises solely as a result of the use by one of the Licensee (and not by NASCAR or any other NASCAR licensee) of the NASCAR Marks outside of the United States, Canada and Australia. From time to time Licensee may present a list of prospective territories outside of the United States, Canada and Australia in which the Licensee is considering establishing additional Entertainment Store locations, at which time the Licensor will notify the Licensee of any known rights-related issues that might encumber such expansion. (e) "NASCAR Silicon Motor Speedway" Mark and Logo. The word mark NASCAR SILICON MOTOR SPEEDWAY is included in the NASCAR Marks licensed to Licensee in 5 6 Section 2(a) above. In addition, Licensee may develop logos containing this mark and versions of the mark in stylized lettering (collectively, the "Speedway Logos") which, subject to the prior written approval by NASCAR of the appearance and use of such Speedway Logos, shall also be included in the NASCAR Marks licensed under this Agreement. NASCAR shall, at its own discretion and expense pursue U.S. trademark registrations for the word mark NASCAR SILICON MOTOR SPEEDWAY and the Speedway Logos, and such foreign registrations as are mutually agreed upon between the parties. NASCAR shall, both during and after the Term of this Agreement, own all right, title and interest in the word mark NASCAR SILICON MOTOR SPEEDWAY and the Speedway Logos, which may be used by Licensee only during the term of this Agreement and only in accordance with the terms of this Agreement, except that Licensee shall be permitted both during and after the term of this Agreement to use the word mark SILICON and the word mark SILICON MOTOR SPEEDWAY (without the word NASCAR) and logos containing these marks and stylized letter versions of these marks, provided that such logos and stylized letter versions are not confusingly similar to any of the Speedway logos. Notwithstanding the foregoing, Licensee shall be permitted to use the fonts contained in the stylized letter version of the words "SILICON MOTOR SPEEDWAY" found in the NASCAR Marks and Speedway logos and attached to this Agreement, provided that these uses are not confusingly similar to any of the Speedway logos and provided that these fonts shall not be used by the Licensee or featured in any logo for an Entertainment Store following the termination of this Agreement. Licensor agrees not to use the NASCAR SILICON MOTOR SPEEDWAY word mark or any of the Speedway Logos following the termination of this Agreement without the prior consent of the Licensee. Licensor also agrees not to alter the Speedway logos without the prior consent of the Licensee; however, Licensor shall be permitted to alter the word-mark NASCAR and its design as part of the Speedway logos at any time and at the Licensor's sole discretion. 3. TERM OF LICENSE (a) Term. The Term of this Agreement shall be for a period of four (4) consecutive years commencing on the Effective Date and ending on August 12, 2001 (the "Term"). The Term may be earlier terminated by Licensor and Licensee as provided in this Agreement. (b) Renewal. The term of this Agreement may only be renewed upon the mutual written agreement of Licensor and Licensee. 4. ROYALTIES (a) Guaranteed Minimum Royalty. (1) Schedule. In consideration of the license granted to Licensee hereunder, Licensee shall pay to Licensor a nonrefundable advance against royalties owed under this Agreement (the "Guaranteed Minimum Royalty") as follows: 6 7
Quarterly Guaranteed Annual Guaranteed Minimum Royalty Minimum Royalty Calendar Year Payment by Licensee Payment by Licensee ------------- -------------------- ------------------- 1998 $ 50,000 $200,000 1999 $125,000 $500,000 2000 $200,000 $800,000 2001 (through Aug. 18) $278,970 $650,000
(2) Payment Terms. Guarantees shall be calculated on a [***] basis and payable in conjunction with the [***] royalty payment schedule, as specified in this Section 4(b)(4). The Guaranteed Minimum Royalty for each calendar year shall be credited against the Revenue Royalty only for that same calendar year. Under no circumstances shall any payments of the Guaranteed [***] Minimum Royalty be refundable, including upon termination or expiration of this Agreement by either party for any reason. (3) Guarantee Waiver. In the event that Licensee pays Licensor [***] in royalties by end of the [***] , Guarantee Minimum Royalties for years three and four shall be waived. (b) Revenue Royalty. In consideration of the license granted hereunder, Licensee shall pay to Licensor a percentage of the categories of Gross Revenue defined in this Section 4(b) (collectively referred to as the "Revenue Royalty") as follows: (1) Entertainment Store Revenue Royalty. Licensee shall pay to Licensor the following royalties associated with each Entertainment Store: (i) Simulator Revenue Royalty. Licensee shall pay to Licensor a revenue royalty in an amount equal to [***] of each Entertainment Store's Simulator Revenue for each calendar [***] (the "Simulator Revenue Royalty"). The term "Simulator Revenue" means Gross Revenue derived directly from allowing use of the Simulators located in such Entertainment Store, whether by cash, check, credit card, debit card, or any other means of payment and any revenue derived from the sale of NASCAR Silicon Motor Speedway Driver Licenses. The value of gift certificates relating to Simulators and the amounts paid therefor shall be included in Simulator Revenue upon the issuance of such gift certificates. (ii) Merchandise/Food and Beverage Revenue Royalty. Licensee shall pay to Licensor a royalty in an amount equal to [***] of each Entertainment Store's Merchandise/Food and Beverage Revenue for each calendar [***] (the "Merchandise/Food and Beverage Revenue Royalty"). The term "Merchandise/Food and Beverage Revenue" means Gross Revenue derived from sales by Licensee of merchandise and food and beverages at such Entertainment Store, whether by cash, check, credit card, debit card or other means of payment. The value of gift certificates relating to merchandise and/or food and beverage sales and the amounts paid therefor shall be included in Merchandise/Food and Beverage Revenue upon the issuance of such gift certificates. (iii) Sponsor Revenue Royalty. Licensee shall pay to Licensor a royalty in an amount equal to [***] of each Entertainment Store's Sponsor 7 ***Confidential treatment requested. 8 Revenue for each calendar year (the "Sponsor Revenue Royalty"). The term "Sponsor Revenue" means Gross Revenue derived from sponsors, promoters, and advertisers in connection with the development and operation of the Entertainment Stores or one or more parts thereof or activities therein. (2) Remote Site Revenue Royalty. Licensee shall pay to Licensor the following royalties associated with each Remote Site: (i) Remote Simulator Revenue Royalty. Licensee shall pay to Licensor a royalty in an amount equal to [***] of each Remote Site's Remote Simulator Revenue for each calendar [***] (the "Remote Simulator Revenue Royalty"). The term "Remote Simulator Revenue" means Gross Revenue derived from allowing use of the Simulators located in each Remote Site, whether by cash, check, credit card, debit card or other means of payment. The value of gift certificates relating to the Simulators of the Remote Sites and the amounts paid therefor shall be included in Remote Simulator Revenue upon the issuance of such gift certificates. (ii) Remote Sponsor Revenue Royalty. Licensee shall pay to Licensor a royalty in an amount equal to [***] of each Remote Site's Remote Sponsor Revenue for each calendar [***] (the "Remote Sponsor Revenue Royalty"). The term "Remote Sponsor Revenue" means Gross Revenue derived from sponsors, promoters, and advertisers in connection with the development and operation of the Remote Sites or activities therein. (3) Miscellaneous Revenue Royalty. In the event that the Entertainment Stores produce revenue related to a stock car or stock truck theme other than the revenue derived in the aforementioned categories, Licensee and Licensor shall [***]. The term "Miscellaneous Revenue" means any Gross Revenue not included in Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, and Remote Sponsor Revenue as defined above. (4) Payment of the Revenue Royalty. The Revenue Royalty hereunder shall be accounted for and paid [***] during the term of this Agreement, shall be nonrefundable, and shall be fully earned when paid. Such [***] payments of the Revenue Royalty will be based on the Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, Remote Sponsor Revenue, and Miscellaneous Revenue for the preceding calendar quarter, with a credit for any Guaranteed Minimum Royalty payment made to Licensor for that calendar year. Payment of the Revenue Royalty shall be due and payable by Licensee to Licensor on or before the [***] day of the first calendar month following each calendar [***] . (5) Interest on Late Payments. All payments which are not timely paid to Licensor by Licensee in accordance with this Section 4, will bear interest after their due date at a rate of [***] per month or the highest contract rate of interest permitted by law, whichever is less. Licensee and Licensor each acknowledge that this Section 4(b)(5) does not constitute Licensor's agreement to accept any payments after they are due or its commitment to extend credit to, or otherwise finance Licensee's operation of, any Entertainment Store or Remote Site. 8 ***Confidential treatment requested. 9 (6) Quarterly and Annual Revenue Royalty Reports. On or before the thirtieth (30th) day of the first calendar month following each calendar quarter during the term of this Agreement, Licensee shall deliver to Licensor a complete and accurate written statement setting forth the amount of Licensee's Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, Remote Sponsor Revenue, and Miscellaneous Revenue for the preceding calendar quarter, including a complete and accurate copy of the state and local sales tax return (if any is required) at such time that the tax returns are actually due to the state and local governments. On or before March 1 of each calendar year during the term of this Agreement, Licensee shall deliver to Licensor a complete and accurate written statement setting forth the amount of the Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, Remote Sponsor Revenue, and Miscellaneous Revenue for the calendar year. Each of the quarterly reports and the annual reports referenced herein shall be signed and verified by one of Licensee's principal executive officers. Licensee shall also deliver to Licensor any other sales data which may be reasonably requested from time to time by Licensor in the form, manner and frequency requested. (7) Underpayment or Overpayment of the Revenue Royalty. On or before March 1st of each calendar year during the term of this Agreement, Licensee shall calculate the Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, Remote Sponsor Revenue, and Miscellaneous Revenue for the preceding calendar year and shall deliver directly to Licensor funds in an amount equal to the total Revenue Royalty payment owed for the preceding calendar year less (i) all [***] Revenue Royalty payments made by Licensee to Licensor with respect to the preceding calendar year and (ii) the Guaranteed Minimum Royalty paid by Licensee to Licensor with respect to the preceding calendar year ("Reconciliation Amount"); provided, however, that no interest shall be due on the Reconciliation Amount if timely paid [including, but not limited to, the interest set forth in Section 4(b)(5)]. If Licensee overpaid the Revenue Royalty owed for the preceding calendar year, such overpayment may be applied to offset against subsequent Revenue Royalty payments owed by Licensee pursuant to this Section 4(b)(7). (8) No Credits Against the Guaranteed Minimum Royalty. No payment of the Revenue Royalty for any calendar year in excess of payments of the Guaranteed Minimum Royalty shall be credited against the Guaranteed Minimum Royalty due to Licensor for any other calendar year. (9) Payment of Revenue Royalty Upon expiration of the Agreement. Upon expiration of the term of this Agreement, Licensee shall as soon as practicable calculate the Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, Remote Sponsor Revenue, and Miscellaneous Revenue for the partial calendar year ending on the date of such expiration and shall deliver to Licensor an amount equal to Revenue Royalty owed for such partial calendar year less all [***] Revenue Royalty payments previously made by Licensee to Licensor with respect to such partial calendar year; provided, however, that in the event that Licensee overpaid the Revenue Royalty owed for such partial calendar year, such overpayment shall be promptly refunded to Licensee by Licensor. (10) Records and Audits. Licensee's books and records which relate to the calculation and determination of the Revenue Royalty shall be made available at Licensee's office for inspection, examination, copying, or audit by a certified public accountant or other 9 ***Confidential treatment requested. 10 authorized representative selected by Licensor at its sole discretion during, normal business hours upon ten (10) business days prior written notice to Licensee by Licensor, provided that the Licensor shall not be entitled to no more than to two (2) individual audits each year. Such examination, copying or audit shall be at Licensor's sole expense unless it is disclosed that the Simulator Revenue, Merchandise/Food and Beverage Revenue, Sponsor Revenue, Remote Simulator Revenue, Remote Sponsor Revenue, and Miscellaneous Revenue reported by Licensee for the period being audited by Licensor is understated to the extent of [***] or more, in which case all costs and expenses related to such audit shall be borne by Licensee. Licensee shall immediately pay Licensor on demand any deficiency in the Revenue Royalty, together with: (i) interest at the lower of the maximum rate permitted by law or [***] per annum, accruing from the date on which they are paid in full, (ii) a late fee of [***] of the amount of fees so understated, and (iii) if applicable, all costs and expenses of Licensor related to such audit. 5. DEVELOPMENT FEE (a) Development Fee. Simultaneously with the execution and delivery of this Agreement, Licensee shall pay, by cashier's check, money order or by wire transfer, to NASCAR an amount equal to [***] (the "Development Fee"), which Development Fee shall be nonrefundable and fully earned by Licensor when paid by Licensee. (b) Credit Applied Against Royalty Payments. Upon execution of this Agreement and the payment to Licensor of the Development Fee by Licensee, Licensor agrees to provide Licensee with an aggregate credit in the amount of [***] (the "Credit") which shall be applied against the payments of Royalties otherwise due to Licensor hereunder as such Royalties become due and payable until such time as the Credit has been applied in full to payment of such Royalties by Licensee after which time Licensee shall be required to pay all further Royalties to Licensor as they become due as provided hereunder. 6. DEVELOPMENT OF THE INITIAL PLAN OF BUSINESS (a) Initial Plan. On or before the Effective Date of the Agreement, Licensee agrees to submit, in the form of a written proposal to Licensor, Licensee's plans and specifications (the "Initial Plan") regarding the development, design, building, construction and operation of the Entertainment Stores (the "Business"). Such Initial Plan shall be prepared by Licensee at its own expense and shall include, without limitation, detailed and specific plans regarding the management, marketing, advertising, design, attractions, building, construction, proposed locations of the Entertainment Stores, Site Trade Dress, and systems development for the Business as well as future plans for expansion of the Business. Licensor agrees to approve or disapprove the Initial Plan within thirty (30) days after the delivery of the Initial Plan to Licensor from License, such approval shall not be unreasonably withheld. (b) Licensee's Continuing Obligation to Provide Status Reporting to Licensor. Licensee agrees that at least once every three (3) months commencing on the last day of the third (3rd) month following the date on which the Initial Plan is approved by Licensor, and on the last day of the month each and every three (3) months thereafter during the term of this Agreement, Licensee shall have a continuing obligation to deliver to Licensor a written status report 10 ***Confidential treatment requested. 11 providing a general overview of progress made by Licensee in meeting the objectives and plans set forth and described in the Initial Plan. Any proposed material modifications by Licensee to the Initial Plan or any material alterations to any previously approved Initial Plan are subject to the approval of Licensor. 7. ENTERTAINMENT STORES' DESIGN AND TRADE DRESS (a) Entertainment Stores' Design. Licensee shall be responsible for developing the Business, including, without limitation the requirements for building and constructing each Entertainment Store, the Simulators and the dimensions, design, image, interior, layout, and Site Trade Dress of each Entertainment Store; all of which shall be in substantial compliance with the Initial Plan. (b) Site Trade Dress. The Site Trade Dress of each Entertainment Store that is opened to the general public must substantially comply with the Initial Plan, as such Initial Plan may be amended from time to time with Licensor's approval. 8. DEVELOPMENT SCHEDULE (a) Total Number of Entertainment Stores. Licensee shall develop a total of at least eleven (11) Entertainment Stores within the Territory during the term of this Agreement pursuant to the terms of this Agreement in accordance with the following development schedule (the "Development Schedule"): (i) Licensee shall have opened to the general public at least [***] Entertainment Store on or before December 31, 1997; (ii) Licensee shall have opened to the general public at least [***] additional Entertainment Stores on or before December 31, 1998, resulting in a cumulative minimum number of at least [***] Entertainment Stores opened to the general public and in operation by December 31, 1998; (iii) Licensee shall have opened to the general public at least [***] additional Entertainment Stores on or before August 31, 1999, resulting in a cumulative minimum number of at least [***] Entertainment Stores opened to the general public and in operation by August 31, 1999; and (iv) Licensee shall have opened to the general public at least [***] additional Entertainment Stores on or before August 31, 2000, resulting in a cumulative minimum number of at least eleven (11) Entertainment Stores opened to the general public and in operation by August 31, 2000. Licensee understands and acknowledges that the development and establishment by Licensee of any Remote Units shall not be counted towards nor shall it satisfy any of Licensee's obligations to fully comply with the development schedule contained in this Section 8. (b) Additional Entertainment Stores. During the term of this Agreement, and subject to the other provisions of this Agreement, including, but not limited to, Licensor's consent to the 11 ***Confidential treatment requested. 12 Site of each of the Entertainment Stores as set forth in Section 9(a) below, Licensee is free to develop more than the minimum number of Entertainment Stores specified in the Development Schedule. (c) Failure to Comply with Development Schedule. Strict compliance with the Development Schedule specified in this Section 8(a) is of the essence in this Agreement. Licensee's failure to fulfill its specified development obligations with respect to the Development Schedule specified in Section 8(a) shall constitute a default under Section 20 hereof. However, if the Licensee is working in good faith to rectify any Development Schedule deficiencies, Licensor shall consider waiving a portion or all of this stipulation using its reasonable discretion. (d) Force Majeure. Notwithstanding the foregoing, if Licensee is unable to comply with the Development Schedule as set forth in this Section 8 solely due to an event of "Force Majeure," the Development Schedule shall be extended by Licensor for a reasonable period of time not to exceed nine (9) months, as determined by Licensor in its reasonable discretion; provided that, Licensee continues at all times during the term of this Agreement to use its best efforts to fully comply with and timely satisfy the Development Schedule and perform all of its obligations in accordance with this Agreement. For purposes of this Agreement, "Force Majeure" shall mean an event caused by fire, strike, flood, embargo, Acts of God, or other similar causes beyond Licensee's control. 9. CONDITIONS PRECEDENT TO THE DEVELOPMENT OF THE ENTERTAINMENT STORES Prior to developing, acquiring, constructing, designing and building each Entertainment Store, Licensee shall have satisfied all of the following conditions (each of which shall be in form and substance reasonably satisfactory to Licensor). Licensor recognizes that some of these conditions may be unable to be met by the Licensee until after the development process has already begun; Licensee shall notify the Licensor when this occurs: (a) Site. Licensee shall have received the prior approval of Licensor as to the suitability and selection of the Site on which the Entertainment Store shall be located and Licensee shall have obtained all rights necessary in order to operate the Entertainment Store in the manner provided for in this Agreement by either holding fee simple title to the Site, Letter of Intent with the Leasor, or by entering into a lease for the Site (provided that the term of such lease shall not be less than the term of this Agreement): (b) Licenses and Permits. Licensee shall have obtained all licenses, permits and other governmental authorizations and approvals necessary or required for the development, construction and building of the Entertainment Store or to conduct the businesses currently contemplated by Licensee (including without limitation all necessary licenses and permits relating to zoning, building, utility, sign, health, sanitation, business and other permits and licenses required to build, acquire and construct the Entertainment Store): (c) Compliance with Laws. Licensee shall have complied with all applicable federal, state, local, municipal and county laws, rules and regulations necessary or required for the development, construction, acquisition and building of the Entertainment Store: 12 13 (d) Insurance. Licensee has furnished Licensor with complete and accurate copies of all certificates of insurance and copies of insurance policies pertaining to the Entertainment Store, as required by this Agreement in accordance with Section 18: (e) Design. Licensee shall have received the prior approval of Licensor as to the design (including the Site Trade Dress) of the Entertainment Store. Provided, however, if the design is consistent with the Initial Plan previously approved by the Licensor, no such additional approval shall be necessary: (f) Related Items. Licensee shall have provided to Licensor all other related items which Licensor may reasonably request or require in connection with the development, construction, acquiring and building, of the Entertainment Store. Licensee acknowledges that Licensor's consent to a proposed Site for an Entertainment Store and any information communicated to Licensee regarding the proposed Site does not constitute a representation or warranty of any kind, express or implied, as to the suitability of the proposed Site for an Entertainment Store or for any other purpose. Licensor's consent to such Site indicates only that Licensor believes that the particular Site meets the general criteria of Site acceptability which Licensor has established as of the time of its consent to the Site. Application of criteria that have appeared effective with respect to other locations of Entertainment Stores may not accurately reflect the potential for all locations of the Entertainment Stores, and, after Licensor's consent to the Site, demographic and/or other factors included in or excluded from Licensor's Site criteria could change, thereby altering the Site's potential. The uncertainty and instability of such criteria are beyond Licensor's control, and Licensee agrees that Licensor will not be responsible for the failure of the Site to which Licensor has consented to meet Licensee's expectations as to potential revenue or operational criteria. 10. CONDITIONS PRECEDENT TO THE OPENING OF EACH ENTERTAINMENT STORE Prior to the opening to the general public of each Entertainment Store, Licensee shall have satisfied all of the following conditions (each of which shall be in form and substance satisfactory, to the Licensor): (a) Compliance with Initial Plan. The Entertainment Store has been designed and constructed in substantial compliance with the Initial Plan, and as such Initial Plan may be modified from time to time with the approval of Licensor. (b) Inspection. Licensor has inspected and/or approved the Entertainment Store. As an alternative to Licensor's physical inspection of the Entertainment Store, Licensor may request that Licensee provide Licensor with such videotapes and/or photographs of the Entertainment Store as Licensor deems necessary to provide Licensor's approval as to the Entertainment Store. (c) Licenses and Permits. Licensee shall have obtained all licenses, permits and other governmental authorizations and approvals necessary or required for the ownership, use and operation of the Entertainment Store and to conduct the related businesses currently contemplated by Licensee (including without limitation all necessary licenses and permits 13 14 relating to zoning, building, utility, sign, health, sanitation, business and other permits and licenses required to own and operate the Entertainment Store): (d) Compliance with Laws. Licensee shall have complied with all applicable federal, state, local, municipal and county laws, rules and regulations necessary or required for the ownership, operation and use of the Entertainment Store: (e) Insurance. Licensee has furnished to Licensor with complete and accurate copies of all certificates of insurance and copies of insurance policies pertain to the Entertainment Store, as required by this Agreement in accordance with Section 18: (f) Simulators. Licensee shall have at least four (4) Simulators on display at each Entertainment Store and offered for use to prospective customers of the Entertainment Store. (g) Related Items. Licensee has provided Licensor with all other related items which Licensor may reasonably request or require in connection with the opening to the general public of the Entertainment Store. Licensor shall not unreasonably uphold the opening of the Entertainment Store locations. 11. DESIGN AND OPERATION STANDARDS OF THE ENTERTAiNMENT STORES (a) General Provisions. In order to maintain uniform standards of operation for the Entertainment Stores to be developed by Licensee under the terms of this Agreement and to protect the goodwill of Licensor in the NASCAR Marks and NASCAR Trade Dress, Licensee covenants and agrees to operate the Entertainment Store at all times as a high quality retail outlet consisting of interactive stock car and stock truck racing simulation entertainment as described herein, offering high quality products and services to the general public, and Licensee further covenants and agrees at all times during the Term to fully comply with the following standards and operating procedures: (i) Licensee shall maintain accurate, orderly books and records, including, without limitation sales, inventory, and expense information. (ii) Licensee shall maintain an amount of capital that is necessary or desirable for the efficient and profitable operation of the Entertainment Stores, including sufficient working capital. (iii) Licensee shall (1) maintain its trade accounts in current status and seek to resolve any disputes with trade suppliers promptly, (2) timely pay all creditors of Licensee and the Entertainment Stores in full, (3) satisfy all debts and liabilities of Licensee and the Entertainment Stores as they become due and (4) timely pay all taxes incurred in connection with the operation of the Business or the assets related thereto, unless Licensee is, in good faith and by appropriate proceedings, contesting such amount. (iv) Licensee shall operate the Entertainment Stores in compliance with all applicable federal, state, local, county and municipal laws, rules and regulations relating thereto. 14 15 (v) Upon five (5) days advance written request by Licensor, Licensee shall provide Licensor or its employees, representatives and agents access to any of the Entertainment Stores in order to conduct physical inspections of such Entertainment Store and interview Licensee's managers and employees at any reasonable time to determine whether such Entertainment Store is being operated in accordance with the terms of this Agreement and to ensure protection of the NASCAR Marks, NASCAR Trade Dress and the Site Trade Dress, and the goodwill associated therewith. In addition, Licensor and/or its designated representatives or agents shall have the right at any time during such Entertainment Store's regular business hours to observe, photograph and videotape the operations of such Entertainment Store for such consecutive or intermittent periods as it deems necessary and inspect and copy any books, records and documents relating to Licensee's operation of such Entertainment Store. Licensee agrees to fully cooperate with Licensor in connection with any such inspection, observations, photographing, videotaping, copying, and interviews, all such costs shall be at Licensor's expense. (vi) Licensee shall maintain each of the Entertainment Stores' interior and exterior and the surrounding area within Licensee's control in a high degree of cleanliness, orderliness and sanitation and comply with the requirements of all federal, state, municipal and county laws, rules and regulations relating thereto. (vii) Licensee shall maintain all licenses, permits and other governmental authorizations and approvals necessary or required for the ownership, use and operation of the Entertainment Stores, and Licensee shall maintain all minimum levels of insurance as required by this Agreement in accordance with Section 18. (viii) Licensee shall maintain at least four (4) Simulators on display at each Entertainment Store and offered for use to prospective customers of the Entertainment Store. (ix) During the Term of this Agreement, in connection with those Entertainment Stores that predominately contain the NASCAR stock car and NASCAR stock truck racing theme(s), Licensee shall use the name "NASCAR Silicon Motor Speedway" in identifying itself and in connection with all related signage thereof, provided however, in connection with any Entertainment Store which predominately contains racing themes other than the stock car and stock truck racing theme, Licensee may, at its option, in the alternative, use the name "Silicon Motor Speedway" in identifying itself. (b) Retail Merchandising Sales Space. Licensee covenants and agrees that any retail merchandising sales areas within an Entertainment Store shall not have in excess of 700 square feet of Retail Merchandising Sales Space and/or not exceed more than fifteen (15) percent of the total Entertainment Store space or whichever is less, unless a larger space is expressly approved by Licensor in writing. As used herein, the term "Retail Merchandising Sales Space" means the actual square footage of any and all space in the Entertainment Store in which any of the following take place: (i) merchandise sales occur, (ii) merchandise is displayed, (iii) merchandise is stored, or (iv) merchandise is otherwise sold. Licensee from time to time may request from the Licensor that the Retail Merchandising Sales Space be expanded, Licensor will evaluate each request on a case-by-case basis and issue any approval or disapproval. In the event that the Licensee's Retail Merchandising Sales Space in any way violates any of the 15 16 Licensor's current Agreements with any of the Licensor's other licensees or sponsors, the Licensee shall use its best efforts to work with the Licensor to resolve any of these issues. In addition, the Licensee shall not be permitted to operate any "free-standing" merchandise kiosks within sixteen (16) miles of any NASCAR Thunder retail store developed or opened prior to or subsequent to the date of this Agreement. Licensee understands and agrees that in no event shall any such "free-standing" merchandise kiosks be any larger than 300 square feet. Licensee further understands and agrees that it shall be required to cease operation and close to the general public any such "free-standing" merchandise kiosk within five (5) months following written notice by Licensor. (c) Advertising/Promotion and Right of Approval. All advertising and Promotional Activities shall conform to the standards and requirements that Licensor prescribes from time to time and must be approved in advance by Licensor, and, in connection therewith, Licensee covenants and agrees as follows: (i) Licensee shall be required to conduct all advertising or promotion generally in accordance with the general marketing and design aspects set forth in the Initial Plan. Any actual advertising or promotion by Licensee shall be conducted in a dignified and professional manner generally consistent with the Initial Plan. Not in limitation of the foregoing, Licensee shall continuously maintain white pages and yellow pages telephone directory listings in the telephone book(s) which cover the local telephone calling area in which each of the Entertainment Stores are located. (ii) Licensor shall have the right of prior approval of all uses of the NASCAR Marks on or in conjunction with the Entertainment Stores and in materials used for Promotional Activities. Licensee agrees to submit in a timely manner to Licensor, free of cost, for its prior approval as to quality, style and content, all uses of the NASCAR Marks on or in conjunction with the Entertainment Stores and all advertising and promotional materials used for Promotional Activities. Comments or approval with respect to any materials for which Licensee must seek Licensor's approval hereunder will be provided by Licensor to Licensee within [***] business days from the date of Licensor's receipt of such materials. Licensor shall provide Licensee with a copy of any existing advertising guidelines developed from time to time by Licensor. (iii) Licensee agrees that [***] or more of its Promotional Activities for advertising with respect to the activity licensed by this Agreement shall be directed to the interactive Simulators contained within the Entertainment Stores licensed hereunder by Licensor. (d) Maintenance and Changes to the Entertainment Stores. In connection with the operation of the Entertainment Stores, Licensee covenants and agrees that: (i) It shall at all times maintain the Entertainment Stores, their respective furnishings, fixtures and equipment (including without limitation, the Simulators) in good condition and in repair and shall be solely responsible for all maintenance, repair, and replacement where necessary to maintain such furnishings, fixtures and equipment in the Entertainment Stores in good operating condition, and it shall be solely responsible for all liabilities arising from the operation of the Entertainment Stores. 16 ***Confidential treatment requested. 17 (ii) It shall obtain the approval of Licensor prior to making any changes to the Site Trade Dress as applied at the Entertainment Stores if such changes result in any of the Entertainment Stores being materially different from any other Entertainment Stores developed pursuant to this Agreement or from the Entertainment Stores design approved pursuant to Section 7 hereof. To the extent any change is made to the Site Trade Dress as applied at any of the Entertainment Stores Licensor shall have reasonable access to such Entertainment Store while the work is in progress to verify that such alterations or modifications of the Site Trade Dress as applied at such Entertainment Store complies with this Section 11. (e) Approved Products, Merchandise, Merchandise Sales, and Food Sales. In connection with the sale of approved products, merchandise and food sales at or around the Entertainment Stores, in connection with any activity approved in advance by Licensor in accordance with the terms and conditions contained in Section 2(d), Licensee covenants and agrees as follows: (i) Unless otherwise approved by Licensor, Licensee agrees to purchase from Licensor's approved and authorized licensees all articles, products and merchandise that bear, contain or display any of the NASCAR Marks, provided that this merchandise is comparable to any other vendor merchandise that the Licensee is considering and within [***] of the other vendor's pricing. However, if the Licensor's licensees do not offer merchandise that is comparable to other vendor's merchandise and not within [***] of the other vendor's prices, the Licensor will consider licensing the Licensee's other vendors on a temporary basis to produce NASCAR SILICON MOTOR SPEEDWAY exclusive merchandise, provided that each vendor would enter into a separate License Agreement with Licensor, such approval and licensing of other vendors shall not be unreasonably withheld. (ii) Except as provided herein, Licensee agrees that [***] of the merchandise bearing or containing the NASCAR Marks sold by Licensee at the Entertainment Stores shall be manufactured pursuant to license agreements with Licensor's approved and authorized licensees unless Licensor expressly approves the sale of other items bearing, displaying or containing, the NASCAR Marks at the Entertainment Stores. (iii) "Official Label" means an "Officially Licensed Product" tag or label in the form prescribed by Licensor which shall be affixed to each Licensed Product, its Packaging or Advertising by the Licensee. (iv) Licensee agrees not to sell any food or beverage items at the Entertainment Stores other than items listed and described on the menu attached on Exhibit B. Food items shall be limited to snack food types (i.e., pre-packaged chips, pretzels, soft-drinks, etc.) and be self service (meaning no waiters and/or waitresses). In addition, prior to offering any food item for sale, Licensee shall seek written approval for all such food items for each Entertainment Store, except for items previously approved by Licensor and appearing on Exhibit B. Licensee may request, from time to time, that Licensor approve additional food items for sale at the Entertainment Stores, such approval subject to Licensor's sole discretion. 17 ***Confidential treatment requested. 18 (f) Exclusive Sponsors and Exclusive Licensee. (i) Licensee acknowledges and agrees that Licensor has entered into and may in the future enter into exclusive relationships with sponsors and licensees (to the exclusion of Licensee) with respect to, among other things, merchandise, programming, racing events, racing services, advertising and promotion, official sponsorships and other designations, and products and services that display or promote the NASCAR Marks (collectively, "Exclusive Sponsors and Licensees"). A current listing of all Exclusive Sponsors and Licensees is attached hereto as Exhibit C. Licensor agrees to provide Licensee updates and changes to such listing periodically during the term of this Agreement. Licensee agrees to honor the commitments that Licensor has made to Exclusive Sponsors and Licensees. Licensee agrees that prior to negotiating with any sponsor or company that manufactures or produces a product or provides a service in a category in which one of Licensor's Exclusive Sponsors and Licensees engages, Licensee shall first negotiate with Licensor's Exclusive Sponsors and Licensees for any and all Promotional Activities for the Entertainment Stores. If Licensee desires to enter into a relationship with a sponsor that is not one of Licensor's Exclusive Sponsors and Licensees for Promotional Activities that will take place within the Entertainment Stores, Licensee must obtain Licensor's approval, which approval shall not be unreasonably withheld. (ii) If, however, Licensee desires to enter into a relationship with a sponsor that is not one of Licensor's Exclusive Sponsors and Licensees for Promotional Activities outside of the Entertainment Stores, Licensee must obtain Licensor's approval, which may not be unreasonably withheld. Notwithstanding the foregoing, Licensee may however, have [***] sponsors per Entertainment Store location in competing categories with Licensor's Exclusive Sponsors and Licensees per year. If Licensee enters into an agreement with one of Licensor's Exclusive Sponsors and Licensees but is thereafter notified by Licensor that such sponsor or entity is no longer one of Licensor's Exclusive Sponsors and Licensees, Licensee may continue to use such sponsor or entity only during the term of Licensee's agreement with such entity. From and after the expiration of the term of such agreement or its earlier termination, whichever shall occur first. Except as provided herein, Licensee agrees to use its best efforts to enter into an agreement with one of Licensor's then current Exclusive Sponsors and Licensees unless otherwise approved by Licensor, which approval shall not be unreasonably withheld. All sponsor or vendor agreements entered into by Licensee shall have a term of no more than five (5) years with no automatic renewals. 12. OWNERSHIP AND PROTECTION OF NASCAR MARKS AND TRADE OR RELATED PROPRIETARY RIGHTS (a) Licensor's Rights. Licensee acknowledges and agrees that NASCAR exclusively owns and will continue to exclusively own during and after the Term of this Agreement the NASCAR Marks and any registrations therefor and all goodwill associated with them, as well as any trademarks, trade names, logos and service marks adopted and used or approved for use by NASCAR and all goodwill associated with them, and the NASCAR Trade Dress and all goodwill associated with them, along with NASCAR's unique characteristics, NASCAR Rulebook, and "look and feel" (all collectively referred to herein as the "NASCAR Indicia"). Licensor acknowledges that the Licensee owns the Site Trade Dress, however, Licensee agrees that all NASCAR Trade Dress items and NASCAR Indicia contained within the Site Trade Dress are owned by the Licensor. Licensee further acknowledges that NASCAR owns and will 18 ***Confidential treatment requested. 19 continue to own during and after the Term of this Agreement all common law and statutory copyrights in its rules, procedures, publications and all other original works of authorship fixed in a tangible means of expression (hereinafter "NASCAR Copyrighted Works"), and that NASCAR owns and will continue to own during and after the Term of this Agreement trade secret rights in its customer lists, membership lists, and other information meeting the definition of a Licensor Trade Secret in Section 15 of this Agreement. The NASCAR Marks, NASCAR Indicia, NASCAR Copyrighted Works, and Licensor Trade Secrets are hereinafter referred to collectively as the "NASCAR Intellectual Property." Licensee acknowledges that nothing contained in this Agreement shall provide Licensee with any right, title or interest to the NASCAR Intellectual Property other than the right to use the NASCAR Marks and NASCAR Trade Dress pursuant to the licenses granted under this Agreement. Licensee further acknowledges and agrees that nothing contained in this Agreement shall, in any manner whatsoever, preclude, restrict or prohibit Licensor from selling, distributing, manufacturing or providing, or authorizing others to do so, any products, merchandise or services containing, displaying or bearing the NASCAR Marks or the NASCAR Trade Dress, or any trade or service marks other than the NASCAR Marks, within or outside the Territory through distribution channels other than the Entertainment Stores. (b) Licensee's Intellectual Property. Except for NASCAR's right, title and interest in the Marks, NASCAR Indicia, NASCAR Copyrighted Works, and NASCAR Trade Secrets, it is expressly agreed that Licensee is the sole owner of all right, title and interest, including all copyrights, patents, trademarks, trade names, trade secrets, algorithms, audio visual rights and moral rights and other intellectual property rights, in the Entertainment Stores and pertaining to the Simulators created by Licensee and its personnel and any collateral materials such as customer lists, source code, object code, algorithms, audio visual displays, technical specifications, user manuals, documentation, fonts (such as that used in the "Silicon" portion of the NASCAR Silicon Motor Speedway logo as found in Exhibit A) and quick reference guides underlying the Entertainment Stores and Simulators created, designed, authored or conceived by Licensee or its personnel (hereinafter referred to collectively as "Licensee's Intellectual Property"). (c) Acknowledgment of Validity of the Marks. Licensee acknowledges the validity of each of the NASCAR Marks and the state and federal registrations NASCAR owns, obtains or acquires for the NASCAR Marks. Licensees shall not, at any time, file any trademark application with the United States Patent and Trademark Office, or any application with any other governmental entity in any country claiming rights in the NASCAR Marks, NASCAR Indicia, NASCAR Copyrighted Works, or Licensor Trade Secrets. Except as expressly authorized in advance by NASCAR, Licensee shall not use any of the NASCAR Marks or any similar mark as, or as part of, a trademark, service mark, trade name, fictitious name, company or corporate name anywhere in the world other than "NASCAR Silicon Motor Speedway" as provided in this Agreement. Any trademark or service mark registration obtained or applied for that contains the Marks or any similar mark shall be transferred to NASCAR without compensation beyond the mutual promises in this Agreement. (d) Challenge or Objection. Licensee shall not oppose or seek to cancel or challenge in any forum, including, but not limited to, the United States Patent and Trademark Office, any application or registration of NASCAR. Licensee shall not object to, or file any action or lawsuit 19 20 because of, any use by NASCAR of the NASCAR Intellectual Property for any goods or services, whether such use is by NASCAR directly or through different licenses or authorized users, except that Licensees may bring a breach of contract claim for breach of any exclusive rights they are granted under this Agreement. (e) Good Will. Licensee acknowledges that: (1) the NASCAR Marks are unique and original and NASCAR holds the right to the commercial exploitation of the NASCAR Marks; (2) NASCAR has acquired valuable goodwill in the Marks and the NASCAR Trade Dress; and (3) all goodwill derived from Licensee's use of any NASCAR Marks, NASCAR Trade Dress and Site Trade Dress will inure to the benefit of NASCAR. (f) Infringement by Third Parties. Licensee shall not, during the Term or anytime thereafter, dispute or contest, nor cause or assist or aid others in disputing or contesting, NASCAR's exclusive right to the NASCAR Intellectual Property. Licensee shall fully cooperate with and assist NASCAR (at NASCAR's cost and expense) in preventing or prosecuting any infringement of NASCAR Intellectual Property which NASCAR in its sole discretion decides to pursue, and Licensee shall not share in any recovery in any such action. Licensee shall give prompt written notice to Licensor of any improper use of the NASCAR Marks or NASCAR Trade Dress, any other trademark or service mark or trade dress used by any third party except Licensor's authorized licensees which is confusingly similar to the NASCAR Marks or NASCAR Trade Dress which comes to Licensee's attention or any event or advertisement which it believes may constitute an infringement upon NASCAR Marks or other NASCAR Intellectual Property or any challenge to Licensor's ownership or Licensee's use of the NASCAR Marks or NASCAR Intellectual Property, which comes to Licensee's attention. (g) Quality Standards. Licensee acknowledges that if any aspect of the goods and services promoted and marketed by it hereunder were of inferior quality in design or workmanship, the goodwill which NASCAR has established and now possesses in the NASCAR Marks and NASCAR Trade Dress would be impaired. Licensee agrees to maintain the quality of goods and services offered in connection with the NASCAR Marks, NASCAR Trade Dress, Site Trade Dress at a high level. (h) Copyright. Licensee shall not attempt to obtain or assert copyright or trademark rights on behalf of Licensee in any artwork, logo or design which contains the NASCAR Marks or the NASCAR Trade Dress. If any such works are created, Licensee shall include copyright notices on behalf of NASCAR in such works, and assign to NASCAR any copyrights obtained or asserted by Licensee. (i) Injunctive Relief. Licensee acknowledges that its breach of the intellectual property provisions of this Agreement will result in immediate and irreparable harm to Licensor and that money damages alone would be inadequate to compensate Licensor. Therefore, in the event of such breach, Licensor may, in addition to other remedies, immediately obtain and enforce injunctive relief prohibiting the breach or threatened breach or compelling specific performance. 20 21 13. NON-ASSIGNABILITY AND TRANSFERABILITY OF AGREEMENT OR OWNERSHIP INTEREST OF LICENSEE (a) Transfer by Licensor. This Agreement is fully assignable by Licensor to any Affiliate of Licensor and inures to the benefit of such assignee or any other legal successor to the interest of Licensor and if such assignee or other legal successor agrees to assume the rights and obligations of Licensor under this Agreement, Licensor shall be released from all obligations and liabilities hereunder. Licensee agrees to execute any documents and other forms that Licensor may reasonably request in connection with any such transfer or assignment by Licensor. (b) Transfer by Licensee. Licensee understands and acknowledges that the rights and duties created by this Agreement are personal to Licensee and that Licensor has granted the licenses hereunder to Licensee in reliance upon its perceptions of Licensee's individual character, skill, aptitude, attitude, business ability and financial capacity. Accordingly, Licensee agrees as follows: (i) Restrictions on Transfer of Licenses. Licensee shall not sell, assign, convey, give away, pledge, encumber, mortgage, or otherwise transfer all or any portion of any right and/or interest in this Agreement, the NASCAR Marks, or the NASCAR Trade Dress, any license granted hereunder, or any interest herein or related thereto (collectively, the "Proprietary Interests") without the prior written consent of Licensor, which may be withheld by Licensor for any reason whatsoever. (ii) Permitted Transfers. If Licensor shall consent to a transfer under subparagraph (i) of this Section 13 above, Licensee shall nonetheless remain primarily and fully obligated to Licensor under this Agreement. In addition, the transferee shall be bound by the terms of this Agreement (including, but not limited to Licensor's right to terminate this Agreement) as if such transferee had originally signed this Agreement as Licensee, and the transferee shall sign all documents, instruments and agreements that Licensor requires in order to bind transferee to the terms and conditions of this Agreement. (iii) Exception to Restrictions on Transfers. The restrictions in Section 13(b)(i) above shall not apply to an Initial Public Offering or any Secondary Offering by Licensee (as such terms are defined in the Warrant attached hereto as Exhibit D to this Agreement), provided that such Initial Public Offering or any Secondary Offering by Licensee is in accordance with the terms of this Agreement and the Warrant. Licensor's consent to a transfer of this Agreement or any interest in Licensee does not constitute a representation as to the fairness of the terms of any contract between Licensee and the transferee, does not provide any guarantee of the prospects of success of the transferee nor does such consent provide any waiver of any claims Licensor may have against Licensee or as to Licensor's right to demand the transferee's exact compliance with any of the terms and conditions of this Agreement. 14. NON-DISCLOSURE (a) Non-Disclosure of Licensor Trade Secrets. For purposes of this Agreement, the term "Licensor Trade Secrets" means any information of Licensor and/or its Affiliates which (i) derives its economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use, (ii) is the subject of efforts 21 22 that are reasonable under the circumstances to maintain its secrecy or confidentiality, or (iii) is identified by Licensor in writing as confidential. Licensor Trade Secrets shall include, without limitation, financial documents and information, marketing, plans and strategies and other items not related to the Business but excluding Licensee Trade Secrets and Licensee Confidential Information (the above information hereinafter referred to as the "Licensor Proprietary Information"). Licensee acknowledges and agrees that all of the Licensor Proprietary Information is economically valuable, that such value is derived from such Licensor Proprietary Information containing Licensor Trade Secrets not generally known to others, and that reasonable efforts have been taken by Licensor to maintain the secrecy and confidentiality of the Licensor Proprietary Information and Licensor Trade Secrets, and that Licensee has entered into this Agreement in order to use such Licensor Proprietary Information to the economic benefit of Licensee. To the extent that any Licensor Trade Secrets are disclosed to Licensee pursuant to this Agreement, Licensee shall not, during and after the term of this Agreement for so long as any such information shall remain trade secrets, use or permit the duplication or disclosure of any such Licensor Trade Secrets, unless such use, duplication or disclosure is specifically authorized by Licensor in advance in writing. (b) Non-Disclosure of Licensee Trade Secrets. For purposes of this Agreement, the term "Licensee Trade Secrets" means any information of Licensee and/or its Affiliates which (i) derives its economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use, (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality, or (iii) is identified by Licensee in writing as confidential. Licensee Trade Secrets shall include, without limitation, financial documents and information, marketing plans and strategies of Licensee and other items whether or not related to the Business (the above information hereinafter referred to as "Licensee Proprietary Information"). Licensor acknowledges and agrees that all of the Licensee Proprietary Information is economically valuable, that such value is derived from such Licensee Proprietary Information containing Licensee Trade Secrets not generally known to others, and that reasonable efforts have been taken by Licensee to maintain the secrecy and confidentiality of the Licensee Proprietary Information and Licensee Trade Secrets. To the extent that any Licensee Trade Secrets are disclosed to Licensor pursuant to this Agreement or otherwise, Licensor will not, during and after the term of this Agreement for so long as any such information shall remain trade secrets, use or permit the duplication or disclosure of any such Licensee Trade Secrets, unless such use, duplication or disclosure is specifically authorized by Licensee in advance in writing. (c) Non-Disclosure of Licensor Confidential Information. For purposes of this Agreement, the term "Licensor Confidential Information" shall mean any data or information of Licensor which is not related to the Business, other than Licensor Trade Secrets, that is competitively sensitive, that is not disclosed to the public by Licensor or that is not generally known by the public, including without limitation any of the Licensor Proprietary Information, and other items or compilations of such information, whether in printed or magnetic form, relating to Licensor and/or its business or that is identified by Licensor in writing as confidential. Licensor Confidential Information shall also mean any information received by Licensee from Licensor or any agent or Affiliate of Licensor or any other third party providing such information in confidence to Licensee. To the extent that any Licensor Confidential Information is disclosed to Licensee, Licensee shall not, during the term of this Agreement and for five (5) years after 22 23 termination or expiration of this Agreement, use or permit the duplication or disclosure of any such Licensor Confidential Information, unless such use, duplication or disclosure is specifically authorized by Licensor in advance. (d) Non-Disclosure of Licensee Confidential Information. For purposes of this Agreement, the term "Licensee Confidential Information" shall mean any data or information, other than Licensee Trade Secrets, that is competitively sensitive, that is not disclosed to the public by Licensee or that is not generally known to the public, including without limitation items or compilations of such information, whether in printed or magnetic form, used in or related to the Business, or that is identified by Licensee in writing, as confidential. Licensee Confidential Information also shall mean any information received by Licensor or Licensee from any agent or Affiliate of Licensee or any other third party providing such information in confidence to such party. To the extent that any Licensee Confidential Information is disclosed to Licensor, Licensor shall not, during the term of this Agreement and for five (5) years after termination or expiration of this Agreement, use or permit the duplication or disclosure of any such Licensee Confidential Information, unless such use, duplication or disclosure is specifically authorized by Licensee in advance in writing. (e) Exception. Licensee and Licensor shall not be obligated to maintain in confidence under Sections 14(a) through 14(d) above: (i) information which is, or subsequently may become within the knowledge of the public generally through no fault of the receiving party; (ii) information which the receiving party can show was previously known to it as a matter of record at the time of receipt; (iii) information which may subsequently be obtained lawfully from a third party who has lawfully obtained the information through no fault of Licensee or Licensor; and (iv) information which may subsequently be developed as a matter of record, independently of disclosure, by the Licensee. (f) Ownership. All Licensor Trade Secrets and Licensor Confidential Information furnished or disclosed by Licensor to Licensee directly or indirectly hereunder are and shall remain the property of Licensor. Any reproductions, notes, summaries or similar documents relating to the Licensor Trade Secrets and Licensor Confidential Information and any files, memoranda or reports relating thereto shall become and remain the property of Licensor immediately upon their creation. Upon termination of this Agreement or upon the prior demand of Licensor, Licensee shall immediately return all such materials together with all copies thereof to Licensor. It is also understood that all Licensee Trade Secrets and Licensee Confidential Information furnished or disclosed by Licensee to Licensor directly or indirectly hereunder are and shall remain the property of Licensee. Any reproductions, notes, summaries or similar documents relating to the Licensee Trade Secrets and Licensee Confidential Information and any files, memoranda or reports relating thereto shall become and remain the property of Licensee immediately upon their creation. Upon termination of this Agreement or upon the prior demand 23 24 of Licensee, Licensor shall immediately return all such materials together with all copies thereof to Licensee. 15. LICENSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS Licensee makes to and for the benefit of Licensor the following representations, warranties and covenants: (a) Authority. Licensee has the requisite authority to execute, deliver and perform its obligations under this Agreement, Licensee has obtained all required corporate approval including board of directors or other consents, Licensee is duly organized or formed and validly existing, in good standing, under the laws of the state of its incorporation or formation, and Licensee's entering into this Agreement does not in any manner whatsoever violate or conflict with any other agreement previously entered into by Licensee, an Affiliate of Licensee, any Owner or any Affiliate of any Owner. Furthermore, Licensee represents and warrants that it is the sole and exclusive owner of all intellectual property rights in the Simulators, including but not limited to all patents, copyrights, trade secrets and other proprietary rights in the software, hardware, firmware and other components of the Simulators. (b) Exclusivity Regarding Simulators. Except as expressly provided in Section 16(h) hereof, Licensee covenants and agrees that the Simulators shall be available for use by the general public or otherwise solely at the Sites of the Entertainment Stores [each Site subject to the prior approval of Licensor in accordance with Section 9(a) hereof] and in connection therewith. Except as provided herein, Licensee further covenants and agrees not to sell, convey, transfer or assign, nor grant a license to use, any of the stock car or stock truck themed Simulators nor any of the hardware, software, firmware or other components of these Simulators to any Person without the prior approval of Licensor, which approval shall not be unreasonably withheld, however, Licensee shall be permitted to sell Simulators or any components of the Simulators to any Licensor wholly-owned subsidiaries or Licensor joint venture partners of the Licensee. Notwithstanding the foregoing, if at any time during the Term of this Agreement Licensee is willing to sell one or more Simulators solely to Licensor, Licensee agrees to sell [***] individual Simulators to Licensor at a purchase price equal to Licensee's actual cost of labor, equipment and materials for each such Simulator. (c) Ownership. Exhibit E to this Agreement completely and accurately describes all of Licensee's current owners together with their respective ownership and voting interests in Licensee (such owners, together with any successors thereto or other owners of ownership or voting interest in Licensee, the "Owners" or, singly, an "Owner"). Each of the Owners are set forth on Exhibit E. (d) Warrant. Licensee has duly executed and delivered to Licensor the Warrant in the form attached hereto as Exhibit D (the "Warrant). (e) Conflicts. Licensee acknowledges that upon execution of the Agreement, that the Licensor has previously engaged in various marketing and promotional activities which are designed to promote and enhance the sport of stock car and stock truck racing and the goodwill of the NASCAR Marks. Licensee further acknowledges that Licensor's marketing, and promotional activities involve relationships with numerous companies, organizations and 24 ***Confidential treatment requested. 25 individuals who serve as sponsors, owners, advertisers and business partners (hereinafter referred to as "Other NASCAR Licensees"). Licensee agrees that in the event Licensor determines that Licensee's activities taken pursuant to this Agreement come into conflict with the interests or rights of other NASCAR Licensees, Licensee shall in good faith cooperate with Licensor in order to resolve the conflict and, in the event the conflict cannot be resolved, shall take the action requested by NASCAR as long as it is legal and commercially practical to do so. Licensee acknowledges that NASCAR has previously granted a license to third parties who will operate an online multiplayer service (which has been referred to publicly as the NASCAR Racing Online Series) which will allow multiple players to compete online in the same race, and may to some extent directly or indirectly compete with Licensee for the same users (although targeted at home users rather than users in retail outlet locations). (f) Control of NASCAR Marks and NASCAR Trade Dress. It understands that it is an essential condition of this Agreement to protect the high reputation enjoyed by Licensor and the NASCAR Marks, and that Licensor retains the sole and exclusive right and authority to control the nature and quality of each and every use of the NASCAR Marks and NASCAR Trade Dress by Licensee, and Licensee shall comply with and abide by any and all requirements or restrictions on the use of the NASCAR Marks and NASCAR Trade Dress under the terms of this Agreement. Licensee agrees that the NASCAR Marks and NASCAR Trade Dress shall be used solely in connection with the Entertainment Stores and that Licensor shall retain the sole and exclusive right and authority to control the nature, quality, and character of the goods and services with which the NASCAR Marks and NASCAR Trade Dress are utilized, provided, however, that Licensee shall not be obligated to replicate the numbers, sponsors, or colors of the cars of actual NASCAR competitors. Licensee agrees that it shall not use the term "SpeedPark" in any manner to identify the Entertainment Stores or in conjunction with the NASCAR trials. In the event that it becomes advisable at any time, in Licensor's sole discretion, to modify or discontinue the use of any one or more of the NASCAR Marks or to use one or more additional or substitute marks, Licensee agrees at its expense to promptly comply with the instructions of Licensor in that regard as soon as commercially practicable but, in any event, no later than four (4) years from receipt of notice of such instructions from Licensor. (g) Additional Covenant by Licensee. Licensee covenants and agrees to use its best efforts to provide and grant to Licensor the licensing right to use Simulators within the theme park commonly known as "DAYTONA USA" located on the property of the Daytona International Speedway, provided that financially reasonable terms are reached with Licensor. In addition, proposed Entertainment Stores within the Volusia County, Florida limits shall be approved or disapproved based on the Licensor's sole discretion. (h) Licensee's Requirement to Disclose to Licensor all Owners and Directors of Licensee. Licensee covenants and agrees to provide Licensor, within five (5) business days following any request by Licensor from time to time during the Term of this Agreement, a complete and accurate written list and description, as of the date of such request by Licensor, of: (x) all of the owners of Licensee, together with their respective ownership and voting interest in Licensee; and (y) the Members of the Board of Directors of Licensee, and the total authorized number of Board of Directors of Licensee. 25 26 16. LICENSOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS Licensor hereby makes to and for the benefit of Licensee the following representations, warranties and covenants: (a) Authority. It has the authority to execute, deliver and perform its obligations under this Agreement, Licensor has obtained all required board of directors or other consents, and it is duly organized or formed and validly existing in good standing under the laws of the state of its incorporation or formation. (b) Representations. It has the exclusive ownership right, title, and interest to all of the existing registrations and pending applications for registration of the NASCAR Marks as listed from time to time on Exhibit A hereto, and within the United States, to the knowledge of Licensor, the NASCAR Marks do not infringe the rights of any third party, and that Licensor is authorized to grant to Licensee the license to use such NASCAR Marks on the terms and conditions in this Agreement. (c) Covenant. Licensor shall use commercially reasonable efforts to assist Licensee in creating the most NASCAR authentic experience possible. NASCAR's Competition, Administration, Marketing, Licensing, and Public Relations departments shall work with Licensee to develop an official and realistic NASCAR atmosphere in the Entertainment Stores. In addition, Licensor shall provide Licensee with reasonable assistance and direction in the Licensee's efforts to obtain sponsorship. 17. INDEMNIFICATION (a) Licensee agrees to indemnify, defend and hold harmless Licensor, its shareholders, directors, officers, employees, affiliates, professionals and agents, from any and all loss, costs, expenses (including reasonable attorneys' fees) claims, damages and liabilities related to or associated with Licensee or arising out of Licensee's ownership or operation of the Entertainment Stores, including, but not limited to (i) claims related to personal or property injuries occurring in the Entertainment Stores or any surrounding area within Licensee's control, (ii) any unauthorized use of or infringement of any trademark, service mark, trade dress, copyright patent, process, method or device by Licensee, (iii) alleged defects or deficiencies in any of the Entertainment Stores or the use thereof, or any false advertising, fraud or misrepresentation by Licensee, (iv) the unauthorized use of the NASCAR Marks or NASCAR Trade Dress or any breach by Licensee of this Agreement (v) libel or slander against, or invasion of the right of privacy, publicity or property of, or violation or misappropriation of any other right of any third party, (vi) the breach of any covenants, representations, and/or warranties of Licensee contained in this Agreement and/or (vii) the breach of agreements or alleged agreements made or entered into by Licensee to effectuate the terms of this Agreement. Licensor shall give Licensee notice of the making of any claim or the institution of any action hereunder and Licensor may at its sole discretion participate in any action. (b) Licensee agrees to notify Licensor immediately of any apparent infringement or challenge to Licensee's use of any NASCAR Marks, or of any claim by any person of any rights in any NASCAR Marks, and Licensee agrees not to communicate with any person other than Licensor, or its respective attorneys and Licensee's attorneys, in connection with any such 26 27 infringement, challenge, or claim, unless legally required to do so. Licensor has sole discretion to take such action as Licensor deems appropriate and the right to control exclusively any litigation, U.S. Patent and Trademark Office proceeding, or any other proceeding arising out of such infringement, challenge, or claim or otherwise relating to any NASCAR Marks, the Speedway Logos or related wordmarks. Licensee agrees to render such assistance and do such acts and things as, in the opinion of Licensor's attorneys, may be reasonably necessary or advisable to protect and maintain Licensor's interest in any litigation, Patent and Trademark Office or other proceeding, or otherwise to protect and maintain Licensor's interest in the wordmark NASCAR SILICON MOTOR SPEEDWAY and the Speedway Logos. Licensee shall not institute any suit or take any action on account of any infringements or imitations without first obtaining the consent of Licensor to do so. Licensee understands and agrees that it is not entitled to share in any proceeds received by Licensor (by settlement or otherwise) in connection with any formal or informal action brought by Licensor hereunder. (c) Licensor agrees to indemnify and defend Licensee against and to reimburse Licensee for all damages for which Licensee is held liable in any claim or proceeding referred to in Section 17(b) hereof in the United States, Canada and Australia, provided that Licensee's use of the NASCAR Marks was authorized by Licensor pursuant to and in compliance with this Agreement and for all costs reasonably incurred by Licensee in the defense of any such claim brought against Licensee or in any such proceeding, in which Licensee is named as a party, provided that Licensee has timely notified Licensor of such claim or proceeding, having given Licensor sole control of the defense (including the selection of attorneys to represent Licensee) and settlement of any such claim or proceeding, and have otherwise complied with this Agreement. If it becomes legally necessary for Licensee to modify or discontinue the use of any NASCAR Marks and/or use one or more additional or substitute trademarks or service marks, Licensee agrees to comply with Licensor's directions within a reasonable time after receiving notice thereof. Licensor shall not be obligated in any manner whatsoever to reimburse Licensee for any loss of revenue, lost profits, start-up or other such expenses, or any direct or consequential damages attributable to any modified or discontinued NASCAR Marks or for any expenditures Licensee makes to promote a modified or substitute trademark or service mark. 18. INSURANCE (a) Insurance Coverage. Licensee shall secure and maintain insurance coverage for itself and its concessionaires, including general liability and products liability coverage, with insurance carriers acceptable to Licensor and in accordance with Licensor's current insurance requirements, as set forth from time to time by Licensor. Licensee shall provide evidence of such insurance before obtaining possession of a Site or at such other time that Licensor specifies. The coverage shall comply with the requirements of any lease for financing for a Site and include coverage for risk, in such amounts and subject to such policy limits and deductible amounts as Licensor shall determine from time to time. In any event (i) the amount of coverage provided for each Site under any comprehensive general liability insurance shall not be less than [***]; (ii) property and casualty insurance shall be for the full replacement value of the Entertainment Store and its contents; (iii) Licensee shall carry business interruption insurance which shall provide benefits over a period of not less than [***] and (iv) no insurance shall have greater than a [***] deductible unless approved in writing in advance by Licensor. Licensee also shall carry such workers' 27 ***Confidential treatment requested. 28 compensation insurance for itself and its concessionaires as may be required by applicable law. In addition, Licensor may require as a condition to approval of any food and beverage supplier to the Entertainment Stores that such supplier includes Licensor and Licensee as additional insureds on such supplier's product liability insurance. (b) Conditions of Coverage. Licensee agrees to name Licensor as an additional insured on all insurance policies required by this Section 18 to the extent of its interest and provide Licensor certificates of insurance evidencing such coverage. All policies shall provide Licensor with at least thirty (30) days' prior written notice of cancellation or termination of coverage. Licensor reserves the right to specify reasonable changes in the types and amounts of insurance coverage required by this Section 18. Should Licensee fail or refuse to procure the required insurance coverage from an insurance carrier acceptable to Licensor, or to maintain such coverage throughout the Term of this Agreement, Licensor may, but not shall be obligated to, procure such coverage for Licensee, in which event Licensee agrees to pay the required premiums and/or to fully reimburse Licensor for them. 19. TERMINATION BY LICENSEE WITH CAUSE During the term of this Agreement, Licensee in the exercise of its best business judgment, may determine that it is necessary or advisable to close an Entertainment Store or to otherwise cease operating such Entertainment Store pursuant to the terms of this Agreement. If, and only if, Licensee reasonably determines that with respect to an Entertainment Store it is unprofitable and the expenses of an Entertainment Store exceed the Gross Revenue from such Entertainment Store during any full calendar year in the operation of such Entertainment Store; provided, however, that Licensee shall timely pay all creditors and satisfy all of its debts and liabilities relating to such Entertainment Store prior to closing of such Entertainment Store to the general public. In connection therewith, in the event that Licensee discontinues the operation of an Entertainment Store or causes the operation of an Entertainment Store to be discontinued in accordance with this Section 20, Licensee shall provide Licensor sixty (60) days written notice prior to discontinuing the operation of an Entertainment Store and Licensee shall fully comply with Section 21 hereof. This Agreement (i) shall be automatically terminated (without any further action required by Licensee) upon the expiration of the Term and (ii) may be terminated, subject to any applicable cure period, in Licensee's sole discretion, upon the occurrence of any Default (as defined below). (a) Events of Default; Termination. Licensee may elect, without prejudice to any other rights or remedies which it may have hereunder, at law or in equity, immediately to terminate this Agreement upon occurrence of any of the following (a "Default"), which shall constitute an event of default under this Agreement. (i) Misrepresentation and Misconduct. Licensor has knowingly made any material misrepresentation or omission in connection with its ownership of the license granted hereby or in connection with entering into this Agreement; or if Licensor engages in any dishonest conduct or act of moral turpitude that materially adversely affects the goodwill associated with the license granted hereunder or the NASCAR Marks. 28 29 20. TERMINATION BY LICENSOR This Agreement (i) shall be automatically terminated (without any further action required by Licensor) upon the expiration of the Term and (ii) may be terminated, subject to any applicable cure period, in Licensor's sole discretion, upon the occurrence of any Default (as defined below). (a) Events of Default; Termination. Licensor may elect, without prejudice to any other rights or remedies which it may have hereunder, at law or in equity, immediately to terminate this Agreement upon occurrence of any of the following (a "Default"), which shall constitute an event of default under this Agreement: (i) Sums Due. Licensee's failure to pay any sum which is due and payable within thirty (30) days after written notice from Licensor that such amount is due pursuant to this Agreement; (ii) Misrepresentation and Misconduct. Licensee has knowingly made any material misrepresentation or omission in connection with its securing of the license granted hereby or in connection with entering into this Agreement; or if Licensee engages in any dishonest conduct or act of moral turpitude that materially adversely affects the goodwill associated with the NASCAR Marks and/or the NASCAR Trade Dress; (iii) Violations of Laws and Regulations. Licensee violates any laws, rules and regulations (including without limitation, health, safety or sanitation law, ordinance or regulation) and does not cure the noncompliance or violation within ten (10) days or such longer grace period as the authorities allow) of discovering such noncompliance or violation; (iv) Transfer or Assignment. Licensee makes an unauthorized transfer or assignment of this Agreement or the Entertainment Store(s); (v) Understatement of Gross Revenue. Licensee intentionally understates any of the Entertainment Stores' Gross Revenue; (vi) Payment of Taxes. Licensee fails to pay within thirty (30) days when due any federal or state income, service, sales or other taxes due on the Licensee's operations, unless it is in good faith contesting its liability for such taxes, has effectively stayed the enforcement of liability for such taxes and has established adequate reserves for such taxes; (vii) Abandonment. Licensee's abandonment of any Entertainment Store(s) by failure to have any Entertainment Store(s) open to the general public and operating for five (5) or more consecutive days, or an aggregate of ten (10) days within any calendar quarter (other than in connection with the permanent cessation of operating an Entertainment Store pursuant to Section 20 hereof) unless such failure to operate is due to scheduled remodeling repairs, technology upgrades or renovation approved by Licensor, or due to fire, flood, earthquake or other similar Acts of God beyond Licensee's control; (viii) Creditor's Remedies, etc. Licensee or any Entertainment Store is seized, taken over or foreclosed on by a government official in the exercise of his duties, or by a 29 30 creditor, lien holder or lessor, or any legal action against Licensee by a creditor resulting in attachment, garnishment or sequestration of Licensee's interest in any Entertainment Store, and possession is not regained by Licensee within thirty (30) days or the attachment, garnishment or sequestration is not discharged within thirty (30) days; or a levy of execution has been made upon Licensee or upon any property used in the business and it is not discharged within thirty (30) days of such levy; or the making of an assignment for the benefit of creditors or the filing of a voluntary or involuntary petition by or against Licensee or any Entertainment Store under any Section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any state thereof; or the appointment of a receiver for all or substantially all of the assets of any Entertainment Store; (ix) Litigation. Licensee shall contest the enforceability of this Agreement, or ownership by Licensor of the NASCAR Marks and/or the NASCAR Trade Dress; (x) Closing of Multiple Entertainment Stores. An aggregate of five (5) or more Entertainment Stores are closed to the general public, in accordance with Section 19 during the Term of this Agreement; (xi) Licensor's Failure to Approve Initial Plan. Licensor disapproves or fails to approve Licensee's Initial Plan within thirty (30) days after the delivery of the Initial Plan by Licensee to Licensor in accordance with Section 6(a) hereof; (xii) Breach of Representations, Warranties and Covenants. Licensee breaches any representation, warranty or covenant contained in this Agreement; (xiii) Change in Majority Ownership or Majority Control of Licensee. Except upon the completion of an Initial Public Offering, the original owners of Licensee, such original owners' being all of those Owners of Licensee as of December 15, 1997 (collectively, the "Original Owners"), fail to maintain at all times during the Term of this Agreement, for any reason whatsoever, at least fifty-one percent (51%) or more of the outstanding total and ownership interest in Licensee; (xiv) Certain Changes in Connection with Board of Directors of Licensee. More than two (2) of the six (6) original Members of the Board of Directors of Licensee, such original Members of the Board of Directors of Licensee being those Members of the Board of Directors of Licensee as of the Effective Date of this Agreement, as are listed and described on Exhibit E (the "Original Directors"), do not remain or serve, for any reason whatsoever, as Members of the Board of Directors of Licensee, unless otherwise approved in writing by Licensor; or the authorized number of Board of Directors of Licensee at any time during the Term of this Agreement exceeds seven (7), unless otherwise approved in writing by Licensor; (xv) Breach of any Term. Licensee fails to comply with or violates any of the terms or conditions of this Agreement and such failure or violation is not cured within twenty (20) days of the date of notice that such failure or violation occurred; provided, however, such failure or violation can be corrected or cured but cannot be corrected and cured (to the satisfaction of Licensor) within such twenty (20) days, Licensee shall be provided with an additional reasonable amount of time to correct and cure such failure or such violation; provided 30 31 that Licensee at all times uses its best efforts to correct and cure such failure or violation; and further provided that, in no event shall such time period to correct or cure such failure or violation by Licensee extend beyond sixty (60) days following the date of notice that such failure or violation occurred; and Notwithstanding the provisions described in this Section 20, if any, applicable law or regulation of a governmental authority having jurisdiction over this Agreement, Licensor and/or Licensee limit-, Licensor's rights of termination or requires different or longer notice periods than those set forth herein, the affected portions of this Section 20 shall be deemed amended solely to conform to such laws and regulations. (b) Successive Breaches. In addition to and not in limitation of any of Licensor's remedies for any event of Default set forth in Section 20, if, after a breach by Licensee of a provision of this Agreement, for which License has been given notice and an opportunity to cure (if any) as provided herein, Licensee breaches the same provision twice within any one hundred eighty (180) day period, Licensor may also immediately terminate this Agreement upon any such subsequent breach of the same provision within such one hundred eighty day (180) period, provided that Licensee has been given notice of such subsequent breach and, if the provision breached provides for an opportunity to cure, Licensee has also been provided with an additional ten (10) day period during which to cure such subsequent breach. (c) Effective Date of Termination. Termination of this Agreement shall be effective immediately upon Licensor's giving to Licensee written notice of termination in accordance with the notification provisions set forth in Section 22. (d) Choice of Remedies. Upon the occurrence of an event of Default under this Agreement, Licensor may in its sole discretion independently exercise or not exercise any or all rights which it may have under this Agreement or any other agreements by and between Licensee and Licensor, and the exercise of Licensor's rights under this Agreement shall not exclude any other remedies which Licensor may have at law or in equity. All such remedies of Licensor are cumulative. 21. EFFECT OF TERMINATION OR EXPIRATION Upon termination or expiration of this Agreement with respect to any of the Entertainment Stores, or the closing of an Entertainment Store pursuant to Section 20: (a) De-identification. Licensee covenants and agrees that it shall: (i) after [***] days following the date of termination, not directly or indirectly at any time or in any manner identify itself or any business as one of Licensor's licensees, use any NASCAR Mark, any colorable imitation thereof or other indicia of NASCAR in any manner or for any purpose or utilize for any purpose any trade-name, trade or service mark or other commercial symbol that indicates or suggests a connection or association with Licensor; (ii) cease all use of and remove, destroy and/or deliver to Licensor all signs, signs/faces, advertising and promotion materials, forms and other materials containing any 31 ***Confidential treatment requested. 32 NASCAR Mark or otherwise identifying or relating to NASCAR, to the satisfaction of Licensor within [***] days following the date of termination; (iii) during the period prior to the discontinuance of use of the NASCAR Marks at the Entertainment Stores, remain obligated to pay Royalties with respect to the Gross Revenue of the Entertainment Stores and otherwise comply with the terms of this Agreement; (iv) within [***] days following such termination, turn over to Licensor all copies of all records, files, instructions, correspondence, agreements, and any and all other materials relating to the NASCAR Marks, in Licensee's possession, and all copies thereof (all of which are hereby acknowledged to be Licensor's sole property); (v) within [***] days and at its own expense make such alterations to the Entertainment Stores or otherwise to distinguish the Entertainment Stores clearly from their former appearance and remove any tradename, trade or service mark or other commercial symbol that indicates or suggests a connection or association with Licensor so as to prevent confusion therewith by the public; and (vi) subject to the terms and conditions in this Agreement, Licensee shall within [***] days remove from the software of all Simulators all uses of the NASCAR Marks, NASCAR Trade Dress, NASCAR Indicia, NASCAR Copyrighted Works, and Licensor Trade Secrets. (vii) furnish Licensor, within [***] days after the effective date of expiration or termination of this Agreement, with evidence satisfactory to Licensor of Licensee's compliance with the foregoing obligations. (b) Licensee further covenants and agrees that within [***] days following such termination or expiration of this Agreement, it shall pay all creditors of the Entertainment Stores in full and discharge and fully satisfy all debts and liabilities relating to or associated with the Entertainment Stores. (c) All of Licensee's obligations that expressly or by their nature survive the expiration or termination of this Agreement under this Agreement will continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire. 22. NOTICES Unless otherwise specified herein, all notices, requests, demands, payments, consents and other communications hereunder shall be transmitted in writing, and shall be deemed to have been duly given when hand delivered, upon delivery when sent by express mail, courier, overnight mail or other overnight or next day delivery service, or three (3) days after the date mailed when sent by registered or certified United States mail, postage prepaid, return receipt requested, or when deposited with a public telegraph company for immediate transmittal, charges prepaid, or by telecopier, with a confirmation copy sent by U.S. mail, postage prepaid, addressed as follows: 32 ***Confidential treatment requested. 33 Licensor: NASCAR P.O. Box 2875 Daytona Beach, FL 32120-2875 Attention: Tom Bledsoe with a copy to (which shall not constitute notice): NASCAR 13801 Reese Boulevard West Huntersville, NC 28078 Attention: Contract Administrator with a copy to (which shall not constitute notice): Alston & Bird LLP 1201 W. Peachtree Street Atlanta, GA 30309-3424 Attention: Martin J. Elison, Esq. Licensee: LBE Technologies, Inc 10401 Bubb Road Cupertino, CA 95014 Attention: Chris Morse with a copy to (which shall not constitute notice): Gray Cary Ware & Freidenrich LLP 400 Hamilton Road Palo Alto, CA 94301 Attention: James Koshland, Esq.
23. MISCELLANEOUS (a) Further Acts. The parties agree to execute such other documents and perform such further acts as may be necessary or desirable to carry out the purposes of this Agreement. (b) Entire Agreement. This Agreement and the exhibits hereto, which are incorporated herein by this reference, represent the entire understanding between the parties with respect to the subject matter contained herein and supersedes all other negotiations, agreements, representations and covenants, oral or written, and any other agreement executed by Licensor or its affiliates and Licensee in connection herewith. The parties intend this Agreement to be the entire integration of all of their agreements of any nature on the subject matter hereof. This Agreement may not be modified except by a written instrument signed by the parties. (c) Waiver. Failure by the parties to enforce any of their respective rights under this Agreement shall not be construed as waiver of such rights. Any waiver, including waiver of default, in any one instance shall not constitute a continuing waiver or a waiver in any other 33 34 instance. Any acceptance of money or other performance by one party from another party shall not constitute a waiver of any default except as to the payment of the particular payment or performance so received. (d) Effectiveness. The submission of this Agreement does not constitute an offer to license and this Agreement shall become effective only upon execution thereof by Licensee and Licensor. (e) Governing Law. THIS AGREEMENT IS A CONTRACT MADE UNDER AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. (f) Severability. In the event that any term or provision in this Agreement is held to be invalid, void, illegal or unenforceable in any respect, the Agreement shall not fail, but shall be deemed amended to delete the void or unenforceable term or provision, and the remainder of this Agreement shall be enforced in accordance with its terms and shall not in any way be affected or impaired thereby. In the event that any term or provision of this Agreement is held to be unreasonable, the same shall not fail, but shall be deemed amended only to the extent necessary to render it reasonable, and the parties agree to be bound by the same as thus amended. (g) Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (h) Disclaimer of Warranties. Licensee hereby acknowledges and agrees that Licensor has made no promises, representations, guarantees or warranties, of any nature, that the Entertainment Stores will be successful or profitable. Licensee further represents to Licensor that Licensee has independently reviewed and evaluated the business to be conducted by Licensee hereunder, and the decision to enter into this Agreement was made by Licensee solely in reliance upon such independent evaluation. (i) Relationship of the Parties. The relationship between the parties hereto is solely that of licensee and licensor, and nothing herein shall be deemed or construed to create any franchise, joint venture, partnership or any relationship other than that of licensee and licensor. In all dealings with third parties, including, without limitation, employers, suppliers and customers, Licensee shall disclose in an appropriate manner acceptable to Licensor, that Licensee is an independent entity licensed by Licensor. Nothing in this Agreement is intended by the parties hereto to create a fiduciary relationship between them, nor to constitute one party an agent, legal representative, subsidiary, franchise, joint venture, partner, employee or servant of another party for any purpose whatsoever. It is understood and agreed that Licensee is an independent contractor and is in no way authorized to make any contract, warranty or representation or to create any obligation on behalf of Licensor. (j) Jurisdiction. ANY DISPUTE ARISING OUT OF OR RELATED TO THE AGREEMENT, WHICH CANNOT BE RESOLVED BY NEGOTIATION, SHALL BE SETTLED BY BINDING ARBITRATION IN ACCORDANCE WITH THE AMERICAN ARBITRATION ASSOCIATION COMMERCIAL ARBITRATION RULES AND PROCEDURES AS AMENDED BY THIS AGREEMENT. THE COST OF ARBITRATION, 34 35 INCLUDING THE FEES AND EXPENSES OF THE ARBITRATOR, SHALL BE SHARED EQUALLY BY THE PARTIES UNLESS THE ARBITRATION AWARD PROVIDES OTHERWISE. EACH PARTY SHALL BEAR THE COST OF PREPARING AND PRESENTING ITS CASE. THE PARTIES AGREE THAT THIS PROVISION AND THE ARBITRATOR'S AUTHORITY TO GRANT RELIEF SHALL BE SUBJECT THE UNITED STATES ARBITRATION ACT, 9 U.S.C. 1-16 ET SEQ. (AUSAA@), THE PROVISIONS OF THIS AGREEMENT, AND THE ABA-AAA CODE OF ETHICS FOR ARBITRATORS IN COMMERCIAL DISPUTES. THE PARTIES AGREE THAT THE ARBITRATOR SHALL HAVE NO POWER OR AUTHORITY TO MAKE AWARDS OR ISSUE ORDERS OF ANY KIND EXCEPT AS EXPRESSLY PERMITTED BY THIS AGREEMENT, AND IN NO EVENT SHALL THE ARBITRATOR HAVE THE AUTHORITY TO MAKE ANY AWARD THAT PROVIDES FOR PUNITIVE OR EXEMPLARY DAMAGES. THE ARBITRATOR'S DECISION SHALL FOLLOW THE PLAIN MEANING OF THE RELEVANT DOCUMENTS, AND SHALL BE FINAL AND BINDING. THE AWARD MAY BE CONFIRMED AND ENFORCED IN ANY COURT OF COMPETENT JURISDICTION. ALL POST-AWARD PROCEEDINGS SHALL BE GOVERNED BY THE USAA. THIS PROVISION SHALL NOT BE CONSTRUED SO AS TO PROHIBIT EITHER PARTY FROM SEEKING PRELIMINARY OR PERMANENT INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION. (k) Headings. Titles and captions of sections, subsections and clauses in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. (l) Survival of Representations, Warranties and Covenants. The several representations and warranties of Licensee contained in this Agreement and each of the covenants of Licensee contained in Section 4, Section 12, Section 14, Section 15, Section 16, Section 18(b) and Section 21 hereof, and the indemnification obligations of Licensee contained herein, shall all survive the expiration or termination of this Agreement indefinitely. The representations and warranties of Licensor contained in this Agreement, and each of the covenants of Licensor contained in Section 14 and Section 16 hereof, shall all survive the expiration or termination of this Agreement indefinitely. (m) Approvals and Similar Actions. Where the approval, acceptance, consent, authorization, or similar action of Licensor is required under this Agreement, such approval, acceptance, consent, authorization, or similar action must be in writing, and the same may be given, denied or withheld by Licensor in its sole discretion, except where otherwise indicated. (n) Equitable Relief. In the event of a breach or threatened breach by either Licensor or Licensee of the terms hereof, the non-breaching party shall be entitled to injunctive and other equitable relief. (o) Warranty Disclaimer. EXCEPT AS PROVIDED HEREIN, EACH OF THE PARTIES AGREES THAT NONE OF THE PARTIES HERETO MAKES ANY WARRANTIES, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE SIGNS, FIXTURES, FURNISHINGS, DECOR, APPROVED EQUIPMENT, OTHER EQUIPMENT, PRODUCTS, SUPPLIES, INVENTORY AND MATERIALS THAT MAY BE 35 36 USED IN CONNECTION WITH ANY ENTERTAINMENT STORE. FURTHERMORE, NONE OF THE PARTIES MAKES ANY WARRANTY OF MERCHANTABILITY FOR A PARTICULAR PURPOSE. (p) Marketing Fund Contribution. In addition to any amounts payable by Licensee under this Agreement, Licensee shall pay to Licensor an amount equal to [***] in each year of the term, beginning in 1998, of this Agreement in consideration for Licensee's participation in Licensor's Buyer's Guide and other promotional projects determined by Licensor. The fee payable by Licensee under this SECTION 23(p) shall be subject to an [***] increase of up to [***] during the term of this Agreement in Licensor's sole discretion and without notice to Licensee. Licensee hereby agrees to participate in Licensor's Buyer's Guide, which participation includes, but is not limited to, providing Licensor with all necessary materials for the Buyer's Guide. [Signatures Appear on the Following Page] 36 ***Confidential treatment requested. 37 IN WITNESS WHEREOF, the parties have executed this Agreement as of the Agreement Date first above written. LICENSOR: NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. By: /s/ --------------------------------------------- Title: VP Licensing ------------------------------------------ LICENSEE: LBE TECHNOLOGIES, INC. By: /s/ DAMON DANIELSON --------------------------------------------- Title: President & CEO ------------------------------------------ Attest: CHRIS MORSE ----------------------------------------- Title: VP Business Development ------------------------------------------ 37 38 EXHIBIT A GENERAL DESCRIPTION OF NASCAR MARKS 1. The general mark NASCAR & DESIGN as reflected in U.S. Reg. No. 1,850,527, and any modifications or replacements thereof. 2. The mark NASCAR SILICON MOTOR SPEEDWAY & Design [picture to be included]. H-1 39 [GRAPHICS] H-2 40 AMENDMENT #1 TO THE LICENSE AGREEMENT BY AND BETWEEN LBE TECHNOLOGIES, INC. AND NATIONAL ASSOCIATION FOR STOCK CARE AUTO RACING, INC. This Amendment (the "Amendment") shall amend the License Agreement (the "Agreement") by an between LBE TECHNOLOGIES, INC. ("License") and National Association for Stock Car Auto Racing, Inc. ("Licensor"). RECITALS WHEREAS, Licensee and Licensor have entered into the Agreement, the effective date of which was August 18, 1997. WHEREAS, Licensee and Licensor wish to amend the Agreement as set forth in this Amendment. WHEREAS, Defined terms not defined herein will have the same meanings as ascribed to such terms in this Agreement. THEREFORE, for adequate consideration, receipt of which is hereby acknowledged, the parties agree as follows: AMENDMENT The License Agreement is hereby modified by the following: 1. Both parties acknowledge and agree that Licensee has changed its corporate name to SILICON ENTERTAINMENT, INC. a, California Corporation with a principal business address of 210 Hacienda Avenue, Campbell, California 95008. All rights and obligations held by LBE Technologies, Inc. under the Agreement and Amendment hereto shall now be held by Silicon Entertainment, Inc. 2. DEFINITIONS. "Category" means operator assisted location-based interactive stockcar or stock-truck entertainment experiences that consist of no less than five (5) linked simulator units, with each on a motion-based platform and each allowing a maximum of two (2) people to participate in each individual simulator unit; each location shall be permanent in nature, in an out of home retail environment, such as a mall, and shall be no less than 3,000 square feet in size with a minimum of three (3) permanent perimeter walls and a fixed ceiling. 3. Paragraph 2(b) is amended, in its entirety as follows: "Exclusivity. Licensee acknowledges, understands and confirms that the license granted to Licensee by Licensor during the term of this Agreement and subject to the terms and conditions of this Agreement are EXCLUSIVE in the category only for a period commencing the date of this Amendment and ending on H-3 41 December 31, 2002. The license does not include coin-operated video games or arcade games, including, but not limited to networked arcade units; individual "free-standing" simulator units; simulators that permit more than two users to participate at one time and that are not user controlled, such as the "Thompson" simulators. In the event Licensor elects to exercise its option to render this Agreement NON-EXCLUSIVE in the category as provided for in Section 5(a) herein; Licensor shall retain the right, at its sole discretion, to operate or grant to any other person the right to operate Entertainment Stores (or any other related concept) at any location within or outside the Territory, provided however, Licensor shall not be entitled to use any of Licensee's Intellectual Property (as defined in Section 12(b) of the Agreement) in any other Entertainment Store associated with the Licensor. Upon termination or expiration (without renewal of this Agreement), Licensee shall have no further rights hereunder, other than the rights held prior to the Grant of License." 4. Paragraph 2(d)(5) shall be amended, in its entirety, as follow: "Warranty Within Territory". Licensor imposes upon Licensee no limitation on the territorial scope of the License, which is worldwide in scope, but Licensor expressly does not warrant or represent that the rights under the license granted hereunder are enforceable or non-infringing upon the rights of others outside of the United States and Canada. Licensee agrees that use of the Marks outside of these countries shall be at the sole risk of the Licensee, and that Licensee agrees to indemnify and hold Licensor and its affiliates, shareholders, employees, directors, officers and agents of each of them harmless against all cost and expense incurred, including settlements, judgments and reasonable attorney's fees in the defense of any claim that arises solely as a result of the use by of Licensee of the Marks outside of the United States and Canada. At Licensee's expense, Licensee may present a list of prospective territories outside of the United States and Canada in which the Licensee is considering establishing additional Entertainment Store locations, at which time the Licensor will research and notify the Licensee of any known rights-related issues that might encumber such expansion; provided that Licensee may offset such costs and expenses against future royalties earned from such countries. For example; if Licensee notifies Licensor that it would like to go to Country X, Licensor will research any and all third-parties rights, which might encumber such expansion and Licensor shall take any steps it deems necessary, at its sole discretion with respect to clearing such rights, and all costs associated with such research and steps taken to clear the NASCAR Marks ("Costs") shall be paid for by Licensee; provided further that Licensee may offset future royalties or Guaranteed Minimum Royalties earned in Country X against such Costs." 5. Paragraph (3) "TERMS OF LICENSE" shall be amended, in its entirety, as follows: "(a) Term. The Term of this Agreement shall commence on the Effective Date of the Agreement and end on December 31, 2005; with the period beginning with the Effective Date of the Amendment and commencing until December 31, 2002 being EXCLUSIVE. At the end of the Exclusivity Period NASCAR shall have the option, in its sole discretion, to extend the exclusivity period. If Licensor H-4 42 elects to not extend the exclusivity period, the remaining term January 1, 2003 through December 31, 2005 shall be NON-EXCLUSIVE." 6. Paragraph 4(a)(1) "Guaranteed Minimum Royalty" shall be amended, in its entirety, as follows: "(1) Schedule. In consideration of the license granted to Licensee, hereunder, Licensee shall pay to Licensor a non-refundable advance against royalties owed under this Agreement (the "Guaranteed Minimum Royalty") as follows:
Quarterly Guaranteed Annual Guaranteed Minimum Royalty Minimum Royalty Calendar Year Payment by Licensee Payment by Licensee ------------- -------------------- ------------------- 1998 $50,000 $200,000 1999 $125,000 $500,000 2000 $200,000 $800,000 2001 $243,750 $975,000 2002 $292,500 $1,170,000 2003 $336,250 $1,345,000 2004 $375,000 $1,500,000 2005 $412,500 $1,650,000
7. Paragraph 8(a)(iii) shall be amended, in its entirety, as follows: "(iii) Licensee shall have opened to the general public at least [***] additional Entertainment Stores on or before September 30, 1999, resulting in a cumulative minimum number of at least [***] Entertainment Stores opened to the general public and in operation by September 30, 1999; and . . . 8. EXCLUSIVITY FEE (a) Licensee shall pay Licensor an Exclusivity Fee of [***] which shall be fully earned and non-refundable upon receipt by Licensor upon the signing of this Amendment #1 and shall not be credited against royalties or Annual Guaranteed Minimum payments owed to the Licensor by the Licensee. (b) Licensor shall have the rights provided in the Nonstatutory Stock Option, included as Exhibit A. These rights include but are not limited to the purchase of [***] shares of Licensee's stock at [***] per share. 9. SPECIAL STIPULATIONS (a) Licensee acknowledges, understands and confirms that the license granted to Licensee by Licensor during the term of this Agreement and Addendum thereto shall become non-exclusive on July 1, 2000, in the event Licensee fails to execute a public offering of stock on or before June 30, 2000. H-5 ***Confidential treatment requested. 43 (b) The Las Vegas location of the NASCAR Cafe shall be permitted to operate a simulator experience similar to that of Licensee and this operation shall be excluded from the exclusivity provision in Paragraph 3(a) of this Amendment. Notwithstanding the foregoing, NASCAR will utilize commercially reasonable efforts to ensure that the simulator experience located at the NASCAR Cafe in Las Vegas does not directly convey an "official" or perceived endorsement by NASCAR. NASCAR shall determine what constitutes an "official" or perceived endorsement at its reasonable discretion. 10. All other provisions of the Agreement shall remain in full force and effect, it being understood that, in the event of a conflict the terms of this Amendment and the Agreement, the terms of this Amendment will take precedence. IN WITNESS WHEREOF, the parties have executed the Amendment to be effective the date of last signature below. LICENSEE: LICENSOR: SILICON ENTERTAINMENT, INC. NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. By: /s/ CHRIS MORSE By: /s/ --------------------------------- --------------------------------- Print Name: Print Name: ------------------------- ------------------------- Title: VP Title: ------------------------------ ------------------------------ Date: 7-7-99 Date: ------------------------------- -------------------------------
H-6 44 AMENDMENT #2 TO THE LICENSE AGREEMENT BY AND BETWEEN LBE TECHNOLOGIES, INC. AND NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. This Amendment (the "Amendment") shall amend the License Agreement (as amended), (the "Agreement") by and between LBE TECHNOLOGIES, INC. ("Licensee") and National Association for Stock Car Auto Racing, Inc. ("Licensor"). RECITALS WHEREAS, Licensee and Licensor have entered into the Agreement, the effective date of which was August 18, 1997 and which was subsequently amended. WHEREAS, Licensee and Licensor wish to amend the Agreement as set forth in this Amendment. WHEREAS, Defined terms not defined herein will have the same meanings as ascribed to such terms in the Agreement (as amended). THEREFORE, for adequate consideration, receipt of which is hereby acknowledged, the parties agree as follows: AMENDMENT The Licensee Agreement is hereby modified by the following: 1. Section 20(a)(xiv) of the Agreement, as amended, is hereby deleted in its entirety and the following language is substituted therefore: Section 20(a)(xiv) Certain Changes In Connection With Board of Directors of Licensee More than two (2) of the (5) Members of the Board of Directors of Licensee, such members of the Board of Directors of Licensee being those Members of the Board of Directors of Licensee as of the Effective Date of this Amendment, and as are listed and described on Exhibit E, do not remain or serve, for any reason whatsoever, as Members of the Board of Directors of Licensee, unless otherwise approved in writing by Licensor; or the authorized number of Board of Directors of Licensee at any time during the Term of this Agreement exceeds seven (7), unless otherwise approved in writing by Licensor. 2. Section 8 of the Agreement (as amended is hereby deleted in its entirety and the following is substituted therefore 8. DEVELOPMENT SCHEDULE (a) Total Number of Entertainment Stores. Licensee shall develop a total of at least eleven (11) Entertainment Stores within the Territory during the Term of this 45 Agreement pursuant to the terms of this Agreement in accordance with the following development schedule (the "Development Schedule") (i) Licensee shall have opened to the general public at least [***] Entertainment Store on or before December 31, 1997; (ii) Licensee shall have opened to the general public at least [***] additional Entertainment stores on or before December 31, 1998 resulting in a cumulative minimum number of at least [***] Entertainment Stores opened to the general public and in operation by December 31, 1998; (iii) Licensee shall have opened to the general public at least [***] additional Entertainment stores on or before January 31, 2000 resulting in a cumulative minimum number of at least nine (9) Entertainment Stores opened to the general public and in operation by January 31, 2000; (iv) Licensee shall have opened to the general public at least [***] additional Entertainment stores on or before August 31, 2000 resulting in a cumulative minimum number of at least thirteen (13) Entertainment Stores opened to the general public and in operation by August 31, 2000; 3. Exhibit E, the section titled Board of Directors is hereby deleted and the following substituted therefore: Board of Directors David S. Morse - President, Chief Executive Officer and Chairman of the Board William Hart - Director Robert Manschot - Director Chris Besing - Director Robert Cheadle - Director 10. All other provisions of the Agreement, as amended, shall remain in full force and effect, it being understood that, in the event of a conflict the terms of this Amendment and the Agreement, the terms of this Amendment will take precedence. IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THE AMENDMENT TO BE EFFECTIVE THE DATE OF LAST SIGNATURE BELOW. *** Confidential treatment requested. 46 LICENSEE: SILICON LICENSOR: National Association for ENTERTAINMENT, Inc. Stock Car Auto Racing, Inc. By: /s/ CHRISTOPHER O. MORSE By: /s/ ------------------------------ ------------------------------ Print Name: Christopher O. Morse Print Name: ---------------------- ---------------------- Title: V.P. Title: --------------------------- --------------------------- Date: 9-7-99 Date: ---------------------------- ---------------------------- EX-10.8 10 THE REGISTRANT AND ACTION PERFORMANCE COMPANIES 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.8 LBE TECHNOLOGIES, INC. & ACTION PERFORMANCE COMPANIES, INC. TERMS - STRATEGIC RELATIONSHIP TERM: Five years from of date of signing of this term sheet MERCHANDISE: LBE Technologies, Inc. (LBET) will put an "Action Pit Stop" merchandise concept in all NASCAR Silicon Motor Speedway (NSMS) entertainment centers. Design to be consistent with NSMS style and approved by both parties. LBET to Provide: - Own and operate all merchandise operations. - Purchase *** NASCAR related merchandise from Action Performance Companies, Inc. (Action) except for the merchandise of NSMS official drivers not covered by Action. - First right of refusal on NSMS merchandise. Action will provide a *** turnaround on all quotas. The choice of vendor will be based on price, quality, availability and will be made at the determination of LBET. - "Action Pit Shop" identification and signage in each merchandise location. Design to be consistent with NSMS style and approved by both parties. Action to Provide - *** access to the top Action product lines including merchandise and die-cast. - *** pricing. - Dedicated account rep to work with LBET to ensure we have newest and best products on a timely basis. - Input on merchandise area design in all locations. - Exclusive items for NSMS (e.g. NSMS Dale Earnhardt T-shirt, hat...) - NSMS store specific die-cast. - "Action Pit Stop" signage for all sites. Design to be consistent with NSMS style and approved by both parties. CLUB PROMOTION: Agreement to cross promote the NSMS Drivers Club and the Action Performance RCCA Club. *** CONFIDENTIAL TREATMENT REQUESTED. 2 TRAVELING SHOW: Action will have first right of refusal on any annual sponsorship of the touring version of NSMS tht includes NASCAR track-sde events. Action to have first right of refusal to operate all mobile units if not operated by LBET. WARRANT: LBET will provide Action Performance with a Warrant to purchase 50,000 shares of common stock at $3.00 per share. Action will use reasonable best efforts to assist LBET with driver appearances and relationships within the racing community. TERMS AGREED TO AND SIGNED BY: /s/ - ------------------------------------- Date: 4/20/98 LBE Technologies, Inc. _____________________ Authorized Representative /s/ - ------------------------------------- Date: April 17-98 Action Performance, Inc. _____________________ Authorized Representative EX-10.9 11 LETTER AGREEMENT WITH SIMON INVESTORS, LLC 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.9 VIA FACSIMILE Mr. Stephen Simon Simon Investors, LLC National City Center 115 West Washington Street Indianapolis, Indiana 46204 Dear Steve, We welcome Simon Investors, LLC ("Simon Investors") as an investor in LBE Technologies, Inc. (the "Company") and as part of our strategic team. We understand that Simon Investors will use *** to assist the Company in obtaining real estate locations for a minimum of *** NASCAR Silicon Motor Speedways. Such *** consist of putting the Company into contact with the appropriate parties at Simon DeBartolo Group, Inc. ("SDG") during the next three year period. We understand that Simon Investors will disclose its relationship with the Company to SDG and that entering into this letter agreement does not bind SDG to its terms. We acknowledge and agree that Simon Investors cannot make any binding commitments or guarantees or assurances that the Company will be able to obtain leases in properties owned by SDG or its affiliates. The decision on whether to enter into such leases will be based on the merits of the proposed transaction and each lease shall in all events be an arms length transaction between the Company and SDG or its affiliates. In consideration for the services to be rendered pursuant to the above paragraph, the Company hereby agrees to issue to Simon a five-year warrant to purchase 50,000 shares of Series C Preferred Stock at an exercise price of $3.00 per share. The form of such warrant is attached for your reference. *** CONFIDENTIAL TREATMENT REQUESTED. 2 Please acknowledge your understanding of these terms by signing and dating a copy of this letter and returning it to me via facsimile (408.777.8086). Sincerely, LBE TECHNOLOGIES, INC. By: /s/ DAVID S. MORSE ------------------------------------------ David S. Morse, Chairman of the Board Attachment AGREED TO AND ACCEPTED: SIMON INVESTORS, LLC BY: MELVIN SIMON & ASSOCIATES, INC. By: /s/ ------------------------------------------ Stephen Simon, President Date: May 17, 1998 ---------------------------------------- -2- EX-10.10 12 INDUSTRIAL COMPLEX LEASE BETWEEN MP HACIENDA, INC. 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.10 INDUSTRIAL COMPLEX LEASE (California) Industrial Complex: Hacienda Business Park Landlord: MP Hacienda, Inc. Tenant: LBE Technologies, Inc. Reference Date: April 30, 1998 INDEX TO LEASE
TITLE PAGE ARTICLE 1. DEFINITIONS AND CERTAIN BASIC PROVISIONS........................... 1 ARTICLE 2. GRANTING CLAUSE.................................................... 2 ARTICLE 3. DELIVERY OF DEMISED PREMISES....................................... 2 ARTICLE 4. RENT............................................................... 2 ARTICLE 5. FINANCIAL REPORTS.................................................. 4 ARTICLE 6. TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGES AND INSURANCE EXPENSES......................... 4 ARTICLE 7. COMMON AREA........................................................ 5 ARTICLE 8. INTENTIONALLY DELETED.............................................. 7 ARTICLE 9. USE AND CARE OF DEMISED PREMISES................................... 7 ARTICLE 10. MAINTENANCE AND REPAIR OF DEMISED PREMISES......................... 7 ARTICLE 11. ALTERATIONS........................................................ 8 ARTICLE 12. LANDLORD'S RIGHT OF ACCESS......................................... 9 ARTICLE 13. SIGNS; STORE FRONTS................................................ 9 ARTICLE 14. UTILITIES.......................................................... 10 ARTICLE 15. INSURANCE COVERAGES................................................ 10 ARTICLE 16. WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION.................. 11 ARTICLE 17. DAMAGES BY CASUALTY................................................ 12 ARTICLE 18. EMINENT DOMAIN..................................................... 13 ARTICLE 19. ASSIGNMENT AND SUBLETTING.......................................... 13 ARTICLE 20. SUBORDINATION; ATTORNMENT; ESTOPPELS............................... 15 ARTICLE 21. TENANT'S INDEMNIFICATION........................................... 16 ARTICLE 22. DEFAULT BY TENANT AND REMEDIES..................................... 17 ARTICLE 23. INTENTIONALLY DELETED.............................................. 19 ARTICLE 24. HOLDING OVER....................................................... 20
i 2 ARTICLE 25. NOTICES............................................................ 20 ARTICLE 26. COMMISSIONS........................................................ 20 ARTICLE 27. REGULATIONS........................................................ 20 ARTICLE 28. HAZARDOUS MATERIALS................................................ 21 ARTICLE 29. MISCELLANEOUS...................................................... 23 EXHIBIT "A" DEMISED PREMISES EXHIBIT "B" CONSTRUCTION: TENANT ACCEPTANCE OF SPACE "AS IS" EXHIBIT "C" TENANT CONSTRUCTION RULES AND REGULATIONS EXHIBIT "D" OPTION TO EXTEND
ii 3 INDUSTRIAL COMPLEX LEASE (California) ARTICLE 1. DEFINITIONS AND CERTAIN BASIC PROVISIONS 1.1 The following list sets out certain defined terms and certain financial and other information pertaining to this lease: (a) "Landlord": MP Hacienda, Inc., a Delaware corporation, whose taxpayer identification number is 94-3226571. (b) Landlord's address: c/o GE Capital Investment Advisors, Inc., 444 Market Street, Suite 2100, San Francisco, California 94111, Attention: Asset Management and Legal Department. (c) "Tenant": LBE Technologies, Inc., a California corporation, whose taxpayer identification number is 77-038943. (d) Tenant's address: Prior to Commencement Date: 10401 Bubb Road Cupertino, CA 95104 Upon Commencement Date: 210 East Hacienda Avenue Campbell, CA 95008 (e) Tenant's trade names: LBE Technologies and NASCAR Silicon Motor Speedway (f) Tenant's Guarantor: N/A (g) "Agent": South Bay Development Company, whose address is 511 Division Street, Campbell, California 95008, Attention: James D. Mair. (h) "Industrial Complex": Landlord's property in the City of Campbell, Santa Clara County, California, which property is commonly known as: 200-254 E. Hacienda Avenue and 1315-1357 Dell Avenue, Hacienda Business Park, Campbell, California. (i) "Demised Premises": that certain area in the Industrial Complex located at 210 East Hacienda Avenue, Campbell, CA 95008, California and being described or shown cross-hatched on the floor plan(s) attached hereto as EXHIBIT "A" which Landlord and Tenant acknowledge and agree to contain 40,000 square feet of rentable area. (j) "Commencement Date": the later of June 1, 1998, or that date following vacation of the Demised Premises by any existing tenant therein. (k) "Lease term": commencing on the Commencement Date and continuing for five (5) years and no months after the Commencement Date; provided that if the Commencement Date is a date other than the first day of a calendar month, the lease term shall be extended by the number of days remaining in the calendar month in which the Commencement Date occurs. Provided further, Tenant shall have the right to extend the Lease term in accordance with and subject to the terms of the Option to Extend attached hereto as EXHIBIT "D". (l) Minimum guaranteed rental: [***], subject to increases in accordance with Section 4.1 below. (m) Prepaid rental: [***], being an estimate of the initial minimum guaranteed rental, for the first month of the lease term, such prepaid rental being due and payable upon execution of this lease. (n) "Security Deposit": [***], such Security Deposit being due and payable upon execution of this lease; provided, however, that the amount of the Security Deposit may be increased pursuant to Section 4.7 below. The Security Deposit shall be held and/or applied by Landlord pursuant to the terms of Section 22.7 below. (o) Permitted use: Office use, marketing, warehousing, research and development and product integration in connection with a NASCAR driving simulator machine business and any other legally permitted use related to such business, and for no other purpose whatsoever. Any use not *** Confidential treatment requested. 1 4 permitted pursuant to the foregoing sentence shall be subject to Landlord's prior written consent, not to be unreasonably withheld. (p) Tenant's maximum insurance deductible: [***]. (q) "Tenant's Broker": Colliers Parrish International, Inc. (r) "Tenant's Proportionate Share": [***]. (s) "Letter of Credit Amount": [***], such Letter of Credit Amount subject to the terms and conditions of Section 4.7 below. ARTICLE 2. GRANTING CLAUSE 2.1 Landlord leases the Demised Premises to Tenant and Tenant leases the Demised Premises from Landlord, upon all of the terms and conditions set forth in this lease. ARTICLE 3. DELIVERY OF DEMISED PREMISES 3.1 Except to the extent modified by Landlord's express assumption of construction obligations, if any, in EXHIBIT "B" attached to this lease, the Demised Premises are being leased "AS IS," with Tenant accepting all defects, if any; and Landlord makes no warranty of any kind, express or implied, with respect to the Demised Premises (without limitation, Landlord makes no warranty as to the habitability, fitness or suitability of the Demised Premises for a particular purpose nor as to the absence of any toxic or otherwise hazardous substances). This Section 3.1 is subject to any contrary requirements under applicable law; however, in this regard Tenant acknowledges that it has been given the opportunity to inspect the Demised Premises and to have qualified experts inspect the Demised Premises prior to the execution of this lease. 3.2 If any present tenant or occupant of the Demised Premises holds over and Landlord cannot acquire possession of the Demised Premises and/or Landlord cannot complete and improvements to the Demised Premises required to be made by Landlord as provided in this lease prior to the Commencement Date, this lease shall not be void or voidable and Landlord shall not be deemed to be in default under this lease or otherwise liable to Tenant for any claims, damages or liabilities in connection therewith or by reason thereof; and in such event Tenant agrees to accept possession of the Demised Premises at such time as Landlord is able to tender the same. If Landlord utilizes the provisions of this Section, Landlord will waive the payment of rent and other charges covering any period prior to tender of possession of the Demised Premises to Tenant. Notwithstanding the foregoing, if possession of the Demised Premises is not delivered to Tenant by October 1, 1998, Tenant shall have the right to terminate this lease upon written notice to Landlord delivered at any time prior to the date upon which Landlord is able to deliver possession of the Premises to Tenant. ARTICLE 4. RENT 4.1 The minimum guaranteed rental shall be subject to periodic increases based upon the following schedule and which increases shall become effective automatically and without further notice as of the first day of the specified lease month:
Lease Months Monthly Rental ------------ ------------- Month 13 - 24 [***] Month 25 - 36 [***] Month 37 - 48 [***] Month 49 - 60 [***]
4.2 Rental shall accrue from the Commencement Date, and shall be payable to Landlord at Agent's address specified in Section 1.1(g) above or at such other address as Landlord shall so notify Tenant from time to time. 4.3 Tenant shall pay to Landlord minimum guaranteed rental in monthly installments in the amounts specified in Section 1.1(l) and Section 4.1 of this lease. The first such monthly installment shall be due and payable on or before the Commencement Date, and subsequent installments shall be due *** Confidential treatment requested. 2 5 and payable on or before the first day of each succeeding calendar month during the lease term; provided that if the Commencement Date is a date other than the first day of a calendar month, there shall be due and payable on or before such date as minimum guaranteed rental for the balance of such calendar month a sum equal to that proportion of the rent specified for the first full calendar month as herein provided, which the number of days from the Commencement Date to the end of the calendar month during which the Commencement Date shall fall bears to the total number of days in such month. Tenant agrees to pay to Landlord, if assessed by the jurisdiction in which the Industrial Complex is located, any sales, excise or other tax imposed, assessed or levied in connection with Tenant's payment of rents. 4.4 It is understood that the minimum guaranteed rental is payable on or before the first day of each calendar month (in accordance with Section 4.2 above), without offset or deduction of any nature. In the event any rental is not received within ten (10) days after its due date for any reason whatsoever, or if any rental payment is by check which is returned for insufficient funds, then in addition to the past due amount Tenant shall pay to Landlord one of the following (the choice to be at the sole option of Landlord unless one of the choices is improper under applicable law, in which event the other alternative will automatically be deemed to have been selected): (a) a late charge in an amount equal to [***] of the rental then due, in order to compensate Landlord for its administrative and other overhead expenses; or (b) interest on the rental then due at the [***], such interest to accrue continuously on any unpaid balance due to Landlord by Tenant during the period commencing with the rental due date and terminating with the date on which Tenant makes full payment of all amounts owing to Landlord at the time of said payment. Any such late charge or interest payment shall be payable as additional rental under this lease, shall not be considered a waiver by Landlord of any default by Tenant hereunder, and shall be payable immediately on demand. 4.5 If Tenant fails in two (2) consecutive months to make rental payments within ten (10) days after it is due, Landlord, in order to reduce its administrative costs, may require, by giving written notice to Tenant (and in addition to any late charge or interest accruing pursuant to Section 4.4 above, as well as any other rights and remedies accruing pursuant to Article 22 or Article 23 below or any other provision of this lease or at law), that minimum guaranteed rentals are to be paid quarterly in advance instead of monthly, and that all future rental payments are to be made on or before the due date by cash, cashier's check, or money order and that the delivery of Tenant's personal or corporate check will no longer constitute a payment of rental as provided in this lease. Any acceptance of a monthly rental payment or of a personal or corporate check thereafter by Landlord shall not be construed as a subsequent waiver of said rights. 4.6 Tenant shall pay when due any and all sales taxes levied, imposed or assessed by the United States of America, the State of California, or any political subdivision thereof or other taxing authority upon the minimum guaranteed rental, additional rent and all other sums payable hereunder. 4.7 (a) Within three (3) business days of the execution of this lease by Tenant, Tenant shall cause a standby, irrevocable letter of credit to be issued for the benefit of Landlord by a financial institution acceptable to Landlord in its sole discretion, in form and substance acceptable to Landlord in its sole discretion, in the amount of [***] (the "Letter of Credit"). The term of the Letter of Credit shall not expire until at least ninety (90) days after the expiration of the lease term (as the same may be extended by Tenant). If the foregoing requirement necessitates the annual renewal of the Letter of Credit, such Letter of Credit shall, inter alia, provide that the Letter of Credit shall be deemed to extend automatically for successive one (1) year periods following the initial expiration date thereof unless Landlord is provided at least thirty (30) days prior notice of such scheduled expiration. Notwithstanding the foregoing, in the event that Tenant has at no time been in default of its obligations under this lease during the first one hundred and eighty days (180) of the lease term following the Commencement Date, the amount of the Letter of Credit shall be reduced to [***] (the "First Reduction"). Provided further, at any time following the First Reduction, so long as Tenant has at no time been in default of its obligations under this lease, then upon Tenant's satisfaction of "Tenant's Financial Requirements" (as defined below), the Letter of Credit shall be extinguished. For purposes of this Section 4.7, Tenant shall be deemed to have satisfied Tenant's Financial Requirements at such time as Landlord determines in its reasonable discretion that Tenant is sufficiently profitable to meet its financial obligations under this lease as they become due. Tenant shall provide Landlord with such information concerning Tenant's financial status as Landlord may request to determine if Tenant's Financial Requirements have been satisfied. Landlord's rights to draw down on the Letter of Credit shall be governed by Section 4.7(b) below. (b) Tenant's failure to timely provide the Letter of Credit as herein required shall be deemed a default hereunder entitling Landlord to terminate this lease without notice or opportunity to cure. In the event of any default by Tenant under this lease (beyond any applicable notice and cure periods) during such period as the Letter of Credit is required by the terms of this Section 4.7, or in the event of the noticed expiration of the Letter of Credit during such time period (without immediate replacement thereof *** Confidential treatment requested. 3 6 to Landlord's sole satisfaction), Landlord shall be entitled to exercise any and all rights and remedies to which it is entitled hereunder or under applicable law, including without limitation the right to draw down the Letter of Credit. 4.8 Provided Tenant has at no time been in default of its obligations under this lease, Tenant may upon thirty (30) days prior written notice to Landlord, replace all or a portion of the amount of the Letter of Credit then required under Section 4.7 above with an equivalent increase in the amount of the Security Deposit. Any such replacement must be in good funds received by Landlord in advance of the reduction and shall be documented to Landlord's satisfaction (including any necessary amendments to the Letter of Credit or amendments to this Lease). Any such increase in the Security Deposit shall be governed by the terms of Section 22.7 of this lease. In the event that (i) Tenant shall have replaced all or a portion of the Letter of Credit with an increase in the Security Deposit pursuant to this Section 4.8 and (ii) Tenant would have been entitled to a reduction in the Letter of Credit under Section 4.7 above had such replacement not occurred, then Landlord shall refund to Tenant such amount as would have been subject to reduction had it still been in the form of the Letter of Credit. ARTICLE 5. FINANCIAL REPORTS 5.1 Tenant shall, when requested by Landlord from time to time, furnish a true and accurate audited statement of its financial condition prepared in conformity with recognized accounting principles and in a form reasonably satisfactory to Landlord. ARTICLE 6. TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGES AND INSURANCE EXPENSES 6.1 Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Demised Premises which taxes shall be paid when due and before any delinquency. If any such taxes are levied against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Demised Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder. 6.2 Tenant shall also be liable for Tenant's Proportionate Share (as specified in Section 1.1(r) above) of all "real estate charges" (as defined below) and "insurance expenses" (as defined below) related to the Industrial Complex or Landlord's ownership of the Industrial Complex. Tenant's obligations under this Section 6.2 shall be prorated during any partial year (i.e., the first year and the last year of the lease term). Tenant's Proportionate Share shall be adjusted as reasonably determined by Landlord in the event that the total rentable area of the buildings in the Industrial Complex shall change after the date hereof. "Real estate charges" shall include ad valorem taxes, general and special assessments, parking surcharges, any tax or charge for governmental services (such as street maintenance or fire protection) which are attributable to the transfer or transaction directly or indirectly represented by this Lease, by any sublease or assignment hereunder or by other Leases in the Industrial Complex or by any document to which Tenant is a party creating or transferring (or reflecting the creation or transfer of) any interest or an estate in the Demised Premises and any tax or charge which replaces or is in addition to any of such above-described "real estate charges"; real estate charges shall also include any fees, expenses or costs (including attorneys' fees, expert fees and the like) incurred by Landlord in protesting or contesting any assessments levied or the tax rate. "Real estate charges" shall not be deemed to include sales tax payable by Tenant pursuant to Section 4.6 above and any franchise, estate, inheritance or general income tax. "Insurance expenses" shall include all premiums and other expenses incurred by Landlord for liability insurance and fire and extended coverage property insurance (plus whatever endorsements or special coverages which Landlord, in Landlord's sole discretion, may consider appropriate) business interruption, and rent loss, earthquake and any other insurance policy which may be carried by Landlord insuring the Demised Premises, the Common Area, the Industrial Complex, or any improvements thereon. 6.3 At Landlord's sole option, Landlord and Tenant shall attempt to obtain separate assessments for Tenant's obligations pursuant to Section 6.1 and, with respect to Section 6.2, for such of the "real estate charges" as are readily susceptible of separate assessment. To the extent of a separate assessment, Tenant agrees to pay such assessment before it becomes delinquent and to keep the Demised Premises free from any lien or attachment; moreover, as to all periods of time during the lease term,this covenant of Tenant shall survive the termination of the lease. With regard to the calendar year during which the lease term expires, Landlord at its option either may bill Tenant when the charges become payable or may charge Tenant an estimate of Tenant's pro rata share of whichever 4 7 charges have been paid directly by Tenant (based upon information available for the current year plus, if current year information is not adequate in itself, information relating to the immediately preceding year). 6.4 At such time as Landlord has reason to believe that at some time within the immediately succeeding twelve (12) month period Tenant will owe Landlord any amounts pursuant to one or more of the preceding sections of this Article 6, Landlord may direct that Tenant prepay monthly a pro rata portion of the prospective future payment (i.e., the prospective future payment divided by the number of months before the prospective future payment will be due). Tenant agrees that any such prepayment directed by Landlord shall be due and payable monthly on the same day that minimum guaranteed rental is due. 6.5 In the event that any payment due from Tenant to Landlord is not received within ten (10) days after its due date for any reason whatsoever, or if any such payment is by check which is returned for insufficient funds, then in addition to the amount then due, Tenant shall pay to Landlord interest on the amount then due at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance until paid. ARTICLE 7. COMMON AREA 7.1 The term "Common Area" is defined for all purposes of this lease as that part of the Industrial Complex intended for the common use of all tenants, including among other facilities (as such may be applicable to the Industrial Complex), parking areas, private streets and alleys, landscaping, curbs, leading areas, sidewalks, recreation/picnic areas, malls and promenades (enclosed or otherwise), lighting facilities, drinking fountains, meeting rooms, public toilets, and the like, but excluding (i) space in buildings (now or hereafter existing) designated for rental for commercial purposes, as the same may exist from time to time; (ii) streets and alleys maintained by a public authority; (iii) areas within the Industrial Complex which may from time to time not be owned by Landlord (unless subject to a cross-access agreement benefiting the area which includes the Demised Premises); and (iv) areas leased to a single-purpose user where access is restricted. In addition, although the roof(s) of the building(s) in the Industrial Complex are not literally part of the Common Area, they will be deemed to be so included for purposes of (i) Landlord's ability to prescribe rules and regulations regarding same, and (ii) their inclusion for purposes of common area maintenance reimbursements. Landlord reserves the right to change from time to time the dimensions and location of the Common Area, as well as the dimensions, identities, locations and types of any buildings, signs or other improvements in the Industrial Complex. For example, and without limiting the generality of the immediately preceding sentence, Landlord may from time to time substitute for any parking area other areas reasonably accessible to the tenants of the Industrial Complex, which areas may be elevated, surface or underground. 7.2 Tenant, and its employees and customers, and when duly authorized pursuant to the provisions of this lease, its subtenants, licensees and concessionaires, shall have the nonexclusive right to use the Common Area (excluding roofs of buildings in the Industrial Complex) as constituted from time to time, such use to be in common with Landlord, other tenants in the Industrial Complex and other persons permitted by Landlord to use the same, and subject to rights of governmental authorities, easements, other restrictions of record, and such reasonable rules and regulations governing use as Landlord may from time to time prescribe. For example, and without limiting the generality of Landlord's ability to establish rules and regulations governing all aspects of the Common Area, Tenant agrees as follows: (a) Landlord may from time to time designate specific areas within the Industrial Complex or in reasonable proximity thereto in which automobiles owned by Tenant, its employees, subtenants, licensees, and concessionaires shall be parked; and in this regard, Tenant shall furnish to Landlord upon request a complete list of license numbers of all automobiles operated by Tenant, its employees, its subtenants, its licensees or its concessionaires, or their employees; and Tenant agrees that if any automobile or other vehicle owned by Tenant or any of its employees, its subtenants, its licensees or its concessionaires, or their employees, shall at any time be parked in any part of the Industrial Complex other than the specific areas designated for employee parking, Tenant shall pay to Landlord as additional rent upon demand an amount equal to the daily rate or charge for such parking as established by Landlord from time to time for each day, or part thereof, that such automobile or other vehicle is so parked. (b) Tenant shall not solicit business within the Common Area nor take any action which would interfere with the rights of other persons to use the Common Area. *** Confidential treatment requested. 5 8 (c) Landlord may temporarily close any part of the Common Area for such periods of time as may be necessary to make repairs or alterations or to prevent the public from obtaining prescriptive rights. (d) With regard to the roof(s) of the building(s) in the Industrial Complex, use of the roof(s) is reserved to Landlord, or with regard to any tenant demonstrating to Landlord's satisfaction a need to use same, to such tenant after receiving prior written consent from Landlord. 7.3 Landlord shall be responsible for the operation, management and maintenance of the Common Area, the manner of maintenance and the expenditures therefor to be in the sole discretion of Landlord, but to be generally in keeping with similar industrial centers within the same geographical area as the Industrial Complex. Landlord shall be the sole determinant of the type and amount of security services to be provided, if any. Landlord shall not be liable to Tenant, and Tenant hereby waives any claim against Landlord for (i) any unauthorized or criminal entry of third parties into the Demised Premises or Industrial Complex, (ii) any damage to persons or property, or (iii) any loss of property in and about the Demised Premises or Industrial Complex from any unauthorized or criminal acts of third parties, regardless of any action, inaction, failure, breakdown or insufficiency of security. 7.4 In addition to the rentals and other charges prescribed in this lease, Tenant shall pay to Landlord Tenant's Proportionate Share of the cost of operation and maintenance of the Common Area which may be incurred by Landlord in its discretion, including, among other costs, those for lighting, painting, cleaning, policing, inspecting, repairing, replacing, and, if there is an enclosed mall or promenade in the Industrial Complex, heating and cooling; Tenant's Proportionate Share of capital expenditures and expenses incurred by Landlord to increase the operating efficiency of the Industrial Complex or to cause the Common Area to comply with applicable Regulations (as such term is defined in Section 27.1), it being agreed that the cost of such capital expenditures and installation shall be amortized over the reasonable life of the capital expenditure, with the reasonable life and amortization schedule being determined in accordance with generally accepted accounting principles consistently applied; a reasonable portion of whatever management fee Landlord pays to the property manager for the Industrial Complex; a reasonable allowance for Landlord's overhead costs and the cost of any insurance for which Landlord is not reimbursed pursuant to Section 6.2, but specifically excluding all expenses paid or reimbursed pursuant to Article 6. In addition, although the roof(s)of the building(s) in the Industrial Complex are not literally part of the Common Area, Landlord and Tenant agree that roof, maintenance, repair and replacement shall be included as a common area maintenance item to the extent not specifically allocated to Tenant under this lease nor to another tenant pursuant to its lease. With regard to capital expenditures other than the capital expenditures contemplated by the first sentence of this Section, (i) the original investment in capital improvements, i.e., upon the initial construction of the Industrial Complex, shall not be included, and (ii) improvements and replacements, to the extent capitalized on Landlord's records, shall be included only to the extent of a reasonable depreciation or amortization (including interest accruals commensurate with Landlord's interest costs). If this lease should commence on a date other than the first day of a calendar year or terminate on a date other than the last day of a calendar year, Tenant's reimbursement obligations under this Section 7.4 shall be prorated based upon Landlord's expenses for the entire calendar year. Tenant shall make such payment to Landlord on demand, at intervals not more frequent than monthly. Landlord may, at its option, make monthly or other periodic charges based upon the estimated annual cost of operation and maintenance of the Common Area, payable in advance but subject to adjustment after the end of the year on the basis of the actual cost for such year. Landlord has the right to establish as a reserve, such commercially reasonable amounts as Landlord deems reasonable for the maintenance, repair and restoration of the roof and parking of the Industrial Complex. In the event that any payment due from Tenant to Landlord is not received within ten (10) days after its due date for any reason whatsoever, or if any such payment is by check which is returned for insufficient funds, then, in addition to the amount then due, Tenant shall pay to Landlord interest on the amount then due at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance until paid. Any delay or failure of Landlord in delivering any estimate or statement described in this Section 7.4 or in computing or billing Tenant's Proportionate Share of the foregoing costs shall not constitute a waiver of Landlord's right to require an increase in rent as provided herein or in any way impair the continuing obligations of Tenant under this Section. Notwithstanding anything to the contrary contained herein, the following costs shall be excluded from Tenant's pro rata share of Landlord's common area costs: (a) repairs or replacements to the roof, walls, floor slab and foundation for which Landlord is reimbursed by insurance proceeds, and (b) all items for which Tenant or any other party directly compensates Landlord such that no duplication of payment shall occur. Tenant at its expense shall have the right at any reasonable time within twelve (12) months after the end of any calendar year during the lease term, upon prior written notice to Landlord, to audit Landlord's books and records relating to this Lease with respect to the costs of operation and maintenance of the Common Area paid by Tenant for such calendar year. Any such audit shall be conducted by a certified public accountant who shall be paid on an hourly, as opposed to contingent fees, basis. 6 9 ARTICLE 8. INTENTIONALLY DELETED ARTICLE 9. USE AND CARE OF DEMISED PREMISES 9.1 The Demised Premises shall be used and occupied by Tenant solely for the permitted use specified in Section 1.1(o) above and for no other purpose. Tenant, at its sole cost and expense, shall obtain and keep in effect during the term, all permits, licenses and other authorizations necessary to permit Tenant to use and occupy the Demised Premises for the permitted use. Without limiting the generality of the foregoing, Tenant shall not use or store any gasoline or flammable or so called "Red Label" materials in or about the Demised Premises. All equipment used within the Demised Premises shall be subject to approval by Landlord's insurance carriers and shall be Underwriters Laboratory or Factory Mutual approved for the uses intended, evidence of which shall be furnished to Landlord upon request. Tenant shall not operate any machinery or equipment in the Demised Premises which, in Landlord's sole discretion, shall cause any excessive noise, vibration, damage or disturbance to the other tenants in the Industrial Complex. 9.2 Tenant shall take good care of the Demised Premises and keep the same free from waste at all times. Tenant shall not overload the floors in the Demised Premises, nor deface or injure the Demised Premises. Tenant shall keep the Demised Premises and all sidewalks, service-ways and loading areas adjacent to the Demised Premises neat, clean and free from dirt, rubbish, ice or snow at all times. Tenant shall store all trash and garbage within the Demised Premises or in a trash dumpster or similar container approved by Landlord as to type, location and screening; and Tenant shall arrange for the regular pick-up of such trash and garbage at Tenant's expense (unless Landlord finds its necessary to furnish such a service, in which event Tenant shall be changed an equitable portion of the total of the charges to all tenants using the service). Receiving and delivery of goods and merchandise and removal of garbage and trash shall be made only in the manner and areas prescribed by Landlord. Tenant shall not operate an incinerator or burn trash or garbage within the Industrial Complex. ARTICLE 10. MAINTENANCE AND REPAIR OF DEMISED PREMISES 10.1 Landlord shall keep the foundation, the exterior walls, foundation, floor slabs, and structural walls (except plate glass; windows, doors and other exterior openings; window and door frames, molding, closure devices, locks and hardware; special store fronts; lighting, heating, air conditioning, plumbing and other electrical, mechanical and electromotive installation, equipment and fixtures; signs, placards, decorations or other advertising media of any type; and interior painting or other treatment of exterior walls) and roof (subject to the second sentence in Section 7.4 above) of the Demised Premises in good repair. Landlord, however, shall not be required to make any repairs occasioned by the act or negligence of Tenant, its agents, contractors, employees, subtenants, invitees, customers, licensees and concessionaires (including, but not limited to, roof leaks resulting from Tenant's installation of air conditioning equipment or any other roof penetration or placement); and the provisions of the previous sentence are expressly recognized to be subject to the provisions of Article 17 and Article 18 of this lease. In the event that the Demised Premises should become in need of repairs required to be made by Landlord hereunder, Tenant shall give immediate written notice thereof to Landlord and Landlord shall have a reasonable time after receipt by Landlord of such written notice in which to make such repairs. Landlord shall not be liable to Tenant for any interruption of Tenant's business or inconvenience caused due to any work performed in the Demised Premises or in the Industrial Complex pursuant to Landlord's rights and obligations under the Lease, so long as the work is performed without gross negligence or willful misconduct. 10.2 Tenant shall keep the Demised Premises in good, clean and habitable condition and shall at its sole cost and expense keep the Demised Premises free of insects, rodents, vermin and other pests and make all needed repairs and replacements, including replacement of cracked or broken glass, except for repairs and replacements required to be made by Landlord under the provisions of Section 10.1, Article 17 and Article 18. Without limiting the coverage of the previous sentence, it is understood that Tenant's responsibilities therein include the repair and replacement in accordance with all applicable Regulations (as defined in Section 27.1 below) of all lighting, heating, air conditioning, plumbing and other electrical, mechanical and electromotive installation, equipment and fixtures and also include all utility repairs in ducts, conduits, pipes and wiring, and any sewer stoppage located in, under and above the Demised Premises, regardless of when or how the defect or other cause for repair or replacement occurred or became apparent; provided, however, that as to the maintenance and repair of the HVAC equipment in the Demised Premises, Landlord shall have the option of contracting directly with an HVAC servicing company for all such work and charging Tenant for all costs thereof. If any repairs required 7 10 to be made by Tenant hereunder are not made within ten (10) days after written notice delivered to Tenant by Landlord, Landlord may at its option make such repairs without liability to Tenant for any loss or damage which may result to its stock or business by reason of such repairs and Tenant shall pay to Landlord upon demand, as additional rental hereunder, the cost of such repairs plus interest at the maximum contractual rate which could legally be charged in the event of a loan of such payment to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously from the date of payment by Landlord until repayment by Tenant. At the expiration of this lease, Tenant shall surrender the Demised Premises in good condition, excepting reasonable wear and tear and losses required to be restored by Landlord in Section 10.1, Article 17 and Article 18 of this lease. 10.3 Tenant waives the right to make repairs at Landlord's expense under Sections 1941 and 1942 of the California Civil Code and all other laws now or hereafter in effect. ARTICLE 11. ALTERATIONS 11.1 Tenant shall not make any alterations, additions or improvements to the Demised Premises (collectively, the "Alterations") without the prior written consent of Landlord, except for the installation of unattached, movable trade fixtures which may be installed without drilling, cutting or otherwise defacing the Demised Premises. Tenant shall furnish complete plans and specifications to Landlord at the time it requests Landlord's consent to any Alterations if the desired Alterations (i) will affect the Industrial Complex's mechanical, electrical, plumbing or life safety systems or services, or (ii) will affect any structural component of the Demised Premises or the Industrial Complex, or (iii) will require the filing of plans and specifications with any governmental or quasi-governmental agency or authority, or (iv) will cost in excess of [***]. Subsequent to obtaining Landlord's consent and prior to commencement of the Alterations, Tenant shall deliver to Landlord any building permit required by applicable law and a copy of the executed construction contract(s). Tenant shall reimburse Landlord within ten (10) days after the rendition of a bill for all of Landlord's actual out-of-pocket costs incurred in connection with any Alterations, including, without limitation, all management, engineering, outside consulting, and construction fees incurred by or on behalf of Landlord for the review and approval of Tenant's plans and specifications and for the monitoring of construction of the Alterations. If Landlord consents to the making of any Alterations, such Alterations shall be made by Tenant at Tenant's sole cost and expense by a contractor approved in writing by Landlord. Tenant shall give Landlord not less than ten (10) days advance written notice of the commencement of Tenant's Alterations to enable Landlord to post and record notices of nonresponsibility. Tenant shall require its contractor to maintain insurance in such amounts and in such form as Landlord may require. Any construction, alteration, maintenance, repair, replacement, installation, removal or decoration undertaken by Tenant in connection with the Demised Premises shall be completed in accordance with plans and specifications which must be approved by Landlord, shall be carried out in a good, workmanlike and prompt manner and in accordance with the provisions of EXHIBIT "C" attached hereto, shall comply with all applicable Regulations of the authorities having jurisdiction thereof, and shall be subject to supervision by landlord or its employees, agents or contractors. Without limiting the generality of the immediately preceding sentence, any installation or replacement of Tenant's heating or air conditioning equipment must be effected strictly in accordance with Landlord's instructions, the Clean Air Act and all other applicable Regulations. Without Landlord's prior written consent, Tenant shall not use any portion of the Common Areas either within or without the Industrial Complex in connection with the making of any Alterations. If the Alterations which Tenant causes to be constructed result in Landlord being required to make any alterations and/or improvements to other portions of the Industrial Complex in order to comply with any applicable Regulations, then Tenant shall reimburse Landlord upon demand for all costs and expenses incurred by Landlord in making such alterations and/or improvements. Any Alterations made by Tenant shall become the property of Landlord upon installation and shall remain on and be surrendered with the Demised Premises upon the expiration or sooner termination of this lease, except Tenant shall upon demand by Landlord, at Tenant's sole cost and expense, forthwith and with all due diligence remove all or any portion of any Alterations made by Tenant which are designated by Landlord to be removed and repair and restore the Demised Premises in a good and workmanlike manner to their original condition, reasonable wear and tear excepted. 11.2 All construction work done by Tenant within the Demised Premises shall be performed in a good and workmanlike manner with new materials of first-class quality, lien-free and in compliance with all governmental requirements and Regulations, and in such manner as to cause a minimum of interference with other construction in progress and with the transaction of business in the Industrial Complex. Tenant agrees to indemnify Landlord and hold Landlord harmless against any loss, liability or damage resulting from such work, and Tenant shall, if requested by Landlord, furnish a bond or other security satisfactory to Landlord against any such loss, liability or damage. *** Confidential treatment requested. 8 11 11.3 In the event Tenant uses a general contractor to perform construction work within the Demised Premises, Tenant shall, prior to the commencement of such work, require said general contractor to execute and deliver to Landlord a waiver and release of any and all claims against Landlord and liens against the Industrial Complex to which such contractor might at any time be entitled. The delivery of the waiver and release of lien within the time period set forth above shall be a condition precedent to Tenant's ability to enter on and begin its construction work at the Demised Premises and, if applicable, to any reimbursement from Landlord for its construction work. 11.4 Nothing contained in this lease shall be construed as constituting the consent or request of Landlord, express or implied, to or for the performance 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 Demised Premises or any part thereof. All materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter furnishing any labor, services, materials, supplies or equipment to Tenant with respect to any portion of the Demised Premises are hereby charged with notice that they must look exclusively to Tenant to obtain payment for same. Tenant and any subtenants shall have no power to do any act or make any contract which may create or be the foundation of any lien, mortgage or other encumbrance upon the reversionary or other estate of Landlord, or any interest of Landlord in the Demised Premises. NOTICE IS HEREBY GIVEN THAT LANDLORD IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING THE DEMISED PREMISES OR ANY PART THEREOF, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE DEMISED PREMISES. 11.5 In the event that Landlord elects to remodel all or any portion of the Industrial Complex, Tenant will cooperate with such remodeling, including Tenant's tolerating temporary inconveniences (and even the temporary removal of Tenant's signs in order to facilitate such remodeling, as it may relate to the exterior of the Demised Premises). ARTICLE 12. LANDLORD'S RIGHT OF ACCESS 12.1 Landlord and Landlord's agents and representatives shall have the right to enter the Demised Premises at any time in case of an emergency, and at all reasonable times for any purpose permitted pursuant to the terms of this lease, including, but not limited to, examining the Demised Premises; making such repairs or alterations therein as may be necessary or appropriate in Landlord's sole judgment for the safety and preservation thereof; erecting, installing, maintaining, repairing or replacing wires, cables, conduits, vents, ducts, risers, pipes, HVAC equipment or plumbing equipment running in, to or through the Demised Premises; showing the Demised Premises to prospective purchasers or mortgagees and during the last year of this lease, prospective tenants; and posting notices of nonresponsibility. 12.1 If requested in writing by Landlord, Tenant shall give Landlord a key for all of the doors of the Demised Premises, excluding Tenant's vaults, safes and files. Landlord shall have the right to use any and all means to open the doors to the Demised Premises in an emergency in order to obtain entry thereto without liability to Tenant therefor. Any entry to the Demised Premises by Landlord by any of the foregoing means, or otherwise, shall not be construed or deemed to be a forcible or unlaw entry into or a detainer of the Demised Premises, or an eviction, partial eviction or constructive eviction of Tenant from the Demised Premises or any portion thereof, and shall not relieve Tenant of its obligations hereunder. ARTICLE 13. SIGNS; STORE FRONTS 13.1 Tenant shall not place or permit to be placed any signs upon (i) the roof of the Demised Premises, or (ii) the Common Areas or any exterior area of the Industrial Complex without Landlord's prior written approval which approval shall not be unreasonably withheld or delayed provided any proposed sign is placed only in those locations as may be designated by Landlord, and complies with the sign criteria promulgated by landlord from time to time. Upon request of Landlord, Tenant shall immediately remove any sign, advertising material or lettering which Tenant has placed or permitted to be placed upon the exterior or interior surface of any door or window or at any point inside the Demised Premises, on the exterior of the Industrial Complex if required in connection with any cleaning, maintenance or repairs to the Industrial Complex or which, in Landlord's reasonable opinion, is of such a nature as to not be in keeping with the standards of the Industrial Complex and if Tenant fails to do so, Landlord may without liability remove the same at Tenant's expense. Tenant shall comply with such regulations as may from time to time be promulgated by Landlord governing signs, advertising material or lettering of all tenants in the Industrial Complex. 9 12 ARTICLE 14. UTILITIES 14.1 Tenant shall obtain all water, electricity, sewerage, gas, telephone and other utilities directly from the public utility company furnishing same. Any meters required in connection therewith shall be installed at Tenant's sole cost. Tenant shall pay all utility deposits and fees, and all monthly service charges for water, electricity, sewage, gas, telephone and any other utility services furnished to the Demised Premises during the term of this lease. In the event any such utilities are not separately metered on the Commencement Date, then until such time as such services are separately metered, Tenant shall pay Landlord Tenant's equitable share of the cost of such services, as determined by Landlord. If for any reason the use of any utility is measured on a meter(s) indicating the usage of Tenant and other tenants of the Industrial Complex, Tenant and such other tenants shall allocate the cost of such utility amongst themselves and shall each be responsible for the payment of its allocable share. Landlord shall furnish and install all piping, feeders, risers and other connections necessary to bring utilities to the perimeter walls of the Demised Premises. Anything to the contrary notwithstanding, Tenant shall remain obligated for the payment of Tenant's pro rata share of any heating costs and/or other utilities or services furnished to the Common Areas pursuant to Section 7.4. 14.2 Tenant shall have the right to use the existing heating, air conditioning and ventilation equipment in the Demised Premises, if any. All such equipment shall be maintained, repaired and replaced, as necessary, by Tenant at its sole expense and shall be surrendered by Tenant to Landlord at the end of the term of this lease together with the Demised Premises. Landlord makes no representation or warranty as to the condition or capacity of such equipment. Landlord shall have no obligation whatsoever to provide the Demised Premises with any additional heat, air conditioning, ventilation or hot water. 14.3 Landlord shall not be liable for any interruption whatsoever, nor shall Tenant be entitled to an abatement or reduction of rent on account thereof, in utility services not furnished by Landlord, nor for interruptions in utility services furnished by Landlord which are due to fire, accident, strike, acts of God or other causes beyond the control of Landlord or which are necessary or useful in connection with making any alterations, repairs or improvements. 14.4 Tenant shall not install any equipment which exceeds or overloads the capacity of the utility facilities serving the Demised Premises. ARTICLE 15. INSURANCE COVERAGES 15.1 Landlord shall procure and maintain throughout the term of this lease a policy or policies of insurance, at its sole cost and expense (but subject to Article 6 above), causing the Industrial Complex to be insured under standard fire and extended coverage insurance (excluding hurricane and storm insurance unless readily obtainable at commercially reasonable rates) and liability insurance (plus whatever endorsements or special coverages Landlord, in its sole discretion, may consider appropriate), to the extent necessary to comply with Landlord's obligations pursuant to other provisions of this lease. All payments for losses thereunder shall be made solely to Landlord. If the annual premiums charged to Landlord shall exceed the standard rates because Tenant's operations, the contents of the Demised Premises, or improvements made to the Demised Premises beyond standard improvements result in extra-hazardous exposure, Tenant shall pay the excess amount of the premium upon demand therefor by Landlord. 15.2 Tenant shall procure and maintain throughout the term of this Lease, at its sole cost and expense, all of the following insurance coverages: (i) Commercial General Liability Insurance providing coverage for bodily injury (including death), property damage and products liability insurance (where such exposure exists). This policy shall contain a broad form contractual liability endorsement under which the insurer agrees to insure Tenant's obligations under Section 16.2 and Article 21 hereof. Such insurance shall have a combined single limit of not less than [***] per occurrence, or such greater amount as Landlord may from time to time require. If Tenant uses vehicles, owned and non-owned, in any way to carry out business on or about the Industrial Complex, Tenant shall also maintain Motor Vehicle Liability Insurance; such insurance shall have a combined single limit of not less than [***] for bodily injury and property damage. (ii) Fire and extended coverage insurance covering Tenant's personal property, fixtures, improvements, wall coverings, floor coverings, window coverings, signs, alterations, furniture, furnishings, equipment, lighting, ceilings, heating, ventilation and air conditioning *** Confidential treatment requested. 10 13 equipment and interior plumbing against loss or damage by fire, flood, windstorms, hail, earthquakes, explosion, riot, damage from aircraft and vehicles, smoke damage, vandalism and malicious mischief and such other risks as are from time to time covered under "extended coverage" endorsements and special extended coverage endorsements commonly known as "all risks" endorsements, containing the waiver of subrogation required in Section 16.3 of this lease and in an amount equal to the greater of the full replacement value or the amount required by the holder of any mortgage from time to time placed upon the Industrial Complex or a portion of the Industrial Complex containing the Demised Premises, with business interruption insurance covering the Demised Premises. Replacement value is understood to mean the cost to replace without deduction for depreciation. (iii) State Worker's Compensation Insurance in the statutorily mandated limits. (iv) Employer's Liability Insurance with limits of not less than [***] for bodily injury per accident and each disease, per employee, and a total combined limit for bodily injury in amounts not less than [***] per accident and [***] per each disease, or such greater amount as Landlord may from time to time require. (v) Plate Glass Insurance. It is expressly understood and agreed that the foregoing minimum limits of insurance coverage shall not limit the liability of Tenant for its acts or omissions as provided in this lease. All of the foregoing insurance policies (with the exception of Worker's Compensation Insurance to the extent not available under applicable law) shall name Landlord, GE Capital Investment Advisors, Inc., the Agent identified in Section 1.1(g), any mortgagee, the managing agent for the Industrial Complex, and such other parties as Landlord shall from time to time designate, as additional insureds as their respective interests may appear, through an ISO Additional Insured Endorsement CG20261185 or equivalent, and shall provide that any loss shall be payable to Landlord and such other additional insured parties as their respective interests may appear. All insurance required hereunder shall be placed with companies which are rated A:VII or better by Best's Insurance Guide (or such other comparable publication if Best's is no longer published) and which are licensed to do business in the State of California. All such policies shall be written as primary policies with deductibles not to exceed the amount specified in Section 1.1(p) above; provided, however, that the deductible for the Plate Glass Insurance shall not exceed [***]. Any other policies, including Landlord's policy, will serve as excess coverage. Tenant shall deliver duplicate original copies of all such policies and all endorsements thereto (or certificates evidencing that the required insurance coverages and endorsements, including waiver of subrogation, are in full force and effect) to Landlord, prior to the Commencement Date, or, in the case of renewals thereto, fifteen (15) days prior to the expiration of the prior insurance policy, together with evidence that (1) such policies are fully paid for, and (2) no cancellation, material change or non-renewal thereof shall be effective except upon thirty (30) days' prior written notice by registered mail from the insurer to Landlord, as well as to Landlord's managing agent (at the address for the payment of rent set forth in Section 4.2 above). Whenever, in Landlord's reasonable judgment, good business practice or change in conditions indicate a need for additional or different types of insurance, Tenant shall, within fifteen (15) days of receipt of Landlord's request therefor, obtain the insurance at its own expense. If Tenant should fail to comply with the foregoing requirements relating to insurance, Landlord may obtain such insurance and Tenant shall pay to Landlord on demand as additional rental hereunder the premium cost thereof [***] from the date of payment by Landlord until repaid by Tenant. 15.3 In addition to the foregoing, Tenant shall obtain certificates of insurance evidencing Commercial General Liability Insurance, including Completed Operations, Motor Vehicle Liability Insurance, Worker's Compensation Insurance and Employer's Liability Insurance in the amounts required above from any contractor or subcontractor engaged by Tenant for repairs or maintenance during the lease term. ARTICLE 16. WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION 16.1 Landlord and Landlord's agents and employees shall not be liable to Tenant, nor to Tenant's employees, agents, contractors, subcontractors, invitees, subtenants or licensees, nor to any other person whomsoever, for any injury to person or damage to property caused by the Demised Premises or other portions of the Industrial Complex becoming out of repair or by defect or failure of any structural element of the Demised Premises or of any equipment, pipes or wiring, or broken glass, or by the backing up of drains, or by gas, water, steam, electricity, or oil leaking, escaping or flowing into the Demised Premises (except where due to Landlord's willful failure to make repairs required to be made by Landlord hereunder, after the expiration of a reasonable time after written notice to Landlord of the need for such repairs), nor shall Landlord be liable to Tenant, nor to Tenant's employees, agents, contractors, subcontractors, invitees, subtenants or licensees, nor to any other person whomsoever, for *** Confidential treatment requested. 11 14 any loss or damage that may be occasioned by or through the acts or omissions of other tenants of the Industrial Complex or of any other persons whomsoever, excepting only duly authorized employees and agents of Landlord. Landlord shall not be held responsible in any way on account of any construction, repair or reconstruction (including widening) of any private or public roadways, walkways or utility lines. 16.2 Landlord shall not be liable to Tenant or to Tenant's employees, agents, contractors, subcontractors, invitees, subtenants or licensees, or to any other person whomsoever, for any injury to person or damage to property on or about the Demised Premises or the Common Area caused by the negligence or misconduct of Tenant, its employees, agents, contractors, subcontractors, invitees, subtenants or licensees, or of any other person entering the Industrial Complex under express or implied invitation of Tenant (with the exception of invitees in the Common Area), or arising out of the use of the Demised Premises by Tenant and the conduct of its business therein, or arising out of any breach or default by Tenant in the performance of its obligations under this lease; and Tenant hereby agrees to indemnify, defend and hold Landlord harmless from any loss, expense or claims arising out of such damage or injury. Furthermore, Tenant agrees to indemnify, defend and hold Landlord harmless from and against any and all liability, claims, demands, causes of action of any kind and nature arising or growing out of or in any way connected with Tenant's use, occupancy, management or control of the Demised Premises and Tenant's operations or activities in the Industrial Complex. Upon notice from Landlord, Tenant shall defend any such claim, demand, cause of action or suit referenced hereinabove at Tenant's expense by counsel satisfactory to Landlord in its sole discretion. 16.3 Landlord and Tenant each hereby release the other from any and all liability or responsibility to the other, or to any other party claiming through or under them by way of subrogation or otherwise, for any loss or damage to property caused by a casualty which is insurable under standard fire and extended coverage insurance; provided, however, that this mutual waiver shall be applicable only with respect to a loss or damage occurring during the time when property insurance policies, which are readily available in the marketplace, contain a clause or permit an endorsement to the effect that any such release shall not adversely affect or impair the policy or the right of the insured party to receive proceeds under the policy; provided, further, that this release shall not be applicable to the portion of any damage which is not reimbursed by the damaged party's insurer because of the "deductible" in the damaged party's insurance coverage. The release specified in this Section 16.3 is cumulative with any releases or exculpations which may be contained in other provisions of this lease. Landlord and Tenant agree that all policies of insurance obtained by them pursuant to the terms of this lease shall contain provisions or endorsements thereto waiving the insurer's rights of subrogation with respect to claims against the other, and, unless the policies permit waiver of subrogation without notice to the insurer, each shall immediately notify its insurance companies of the existence of the waiver and indemnity provisions set forth in this lease. ARTICLE 17. DAMAGES BY CASUALTY 17.1 Tenant shall give immediate written notice to Landlord of any damage caused to the Demised Premises by fire or other casualty. 17.2 In the event that the Demised Premises shall be damaged or destroyed by fire or other casualty insurable under standard fire and extended coverage insurance and Landlord does not elect to terminate this lease as hereinafter provided, Landlord shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Demised Premises. In the event (a) the building in which the Demised Premises are located is destroyed or substantially damaged by a casualty not covered by Landlord's insurance, or (b) such building is destroyed or rendered untenantable to an extent in excess of fifty percent (50%) of the first floor area by a casualty covered by Landlord's insurance, or (c) the holder of a mortgage, deed of trust or other lien on such building at the time of the casualty elects, pursuant to such mortgage, deed of trust or other lien, to require the use of all or part of Landlord's insurance proceeds in satisfaction of all or part of the indebtedness secured by the mortgage, deed of trust or other lien, or (d) the Demised Premises shall be damaged to the extent of fifty percent (50%) or more of the cost of replacement, then Landlord may elect either to terminate this lease or to proceed to rebuild and repair the Demised Premises. Landlord shall give written notice to Tenant of such election within sixty (60) days after the occurrence of such casualty and, if it elects to rebuild and repair, shall proceed to do so with reasonable diligence and at its sole cost and expense. 17.3 Landlord's obligation to rebuild and repair under this Article 17 shall in any event be limited to restoring one of the following (as may be applicable): (a) if this lease does not include an attached exhibit describing Landlord's initial construction responsibility ("Landlord's Work"), restoring the Demised Premises to substantially the condition in which the same existed prior to such casualty, exclusive of any alterations, additions, improvements, fixtures and equipment installed by Tenant; or (b) restoring Landlord's Work, as described in the applicable exhibit attached to this lease (if such an exhibit is attached), to substantially the same condition in which the same existed prior to the casualty. 12 15 Tenant agrees that promptly after completion of such work by Landlord, Tenant will proceed with reasonable diligence and at Tenant's sole cost and expense to restore, repair and replace all alterations, additions, improvements, fixtures, signs and equipment installed by Tenant, and, if an exhibit describing Tenant's Work is attached hereto, all items of Tenant's Work as described in such exhibit. 17.4 Tenant agrees that during any period of reconstruction or repair of the Demised Premises, it will continue the operation of its business within the Demised Premises to the extent practicable. During the period from the occurrence of the casualty until Landlord's repairs are completed, the minimum guaranteed rental shall be reduced to such extent as may be fair and reasonable under the circumstances; however, there shall be no abatement of the charges provided for herein. 17.5 Tenant hereby waives the provisions of California Civil Code Sections 1932(2) and 1933(4) and the provisions of any successor or other law of like import. ARTICLE 18. EMINENT DOMAIN 18.1 If more than thirty percent (30%) of the floor area of the Demised Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, this lease shall terminate and the rent shall be abated during the unexpired portion of this lease, effective on the date physical possession is taken by the condemning authority. 18.2 If less than thirty percent (30%) of the floor area of the Demised Premises should be taken as aforesaid, this lease shall not terminate; however, the minimum guaranteed rental payable hereunder during the unexpired portion of this lease shall be reduced in proportion to the area taken, effective on the date physical possession is taken by the condemning authority. Following such partial taking, Landlord shall make all necessary repairs or alterations to the remaining premises or, if an exhibit describing Landlord's Work is attached to this lease, all necessary repairs within the scope of Landlord's Work as described in such exhibit, as the case may be, required to make the remaining portions of the Demised Premises an architectural whole, but in no event shall Landlord be required to expend an amount greater than the award actually received by Landlord in connection with such taking. 18.3 If any part of the Common Area should be taken as aforesaid, this lease shall not terminate, nor shall the rent payable hereunder be reduced, except that either Landlord or Tenant may terminate this lease if the area of the Common Area remaining following such taking plus any additional parking area provided by Landlord in reasonable proximity to the industrial Complex shall be less than seventy percent (70%) of the area of the Common Area immediately prior to the taking. Any election to terminate this lease in accordance with this provision shall be evidenced by written notice of termination delivered to the other party within thirty (30) days after the date physical possession is taken by the condemning authority. 18.4 All compensation awarded for any taking (or the proceeds of private sale in lieu thereof) of the Demised Premises or Common Area shall be the property of Landlord, and Tenant hereby assigns its interest in any such award to Landlord; provided, however, Landlord shall have no interest in any award made to Tenant for Tenant's moving and relocation expenses or for the loss of Tenant's fixtures and other tangible personal property if a separate award for such items is made to Tenant as long as such separate award does not reduce the amount of the award that would otherwise be awarded to Landlord. 18.5 The rights contained in this Article 18 shall be Tenant's sole and exclusive remedy in the event of a taking or condemnation. Each party waives the provisions of Sections 1265.130 and 1265.150 of the California Code of Civil Procedure and the provisions of any successor or other law of like import. 18.6 Notwithstanding anything to the contrary, Landlord may terminate this lease with no further liability to Tenant if (i) fifty percent (50%) or more of the gross leasable area of the Industrial Complex is taken or (ii) if following any taking, Landlord's mortgagee elects to require Landlord to apply all or a portion of such award to the outstanding indebtedness. ARTICLE 19. ASSIGNMENT AND SUBLETTING 19.1 Tenant shall not assign or in any manner transfer this lease or any estate or interest therein, or sublet the Demised Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the Demised Premises without the prior written consent of Landlord. Landlord agrees that it will not withhold consent in a wholly unreasonable and arbitrary manner (as 13 16 further explained in Section 29.4 of this lease); however, in determining whether or not to grant its consent, Landlord shall be entitled to take into consideration factors such as Landlord's desired tenant mix, the reputation and net worth of the proposed transferee, and the then current market conditions (including market rentals). In addition, Landlord shall also be entitled to charge Tenant a reasonable fee for processing Tenant's request. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord's rights as to any subsequent assignments and sublettings. In all events, Landlord can refuse to consent to an assignment or sublease if there shall exist any uncured default of Tenant or a matter which will become a default with the passage of time. Notwithstanding the foregoing, Tenant shall have the right upon written notice to Landlord to assign this lease or sublet the Demised Premises or any part thereof without Landlord's consent (and without triggering any right of Landlord to terminate this lease or recapture any part of the Demised Premises) to an Affiliate (as hereinafter defined) or to any corporation, partnership or entity which survives the consolidation or merger of Tenant or which acquires all of Tenant's stock or all or substantially all of Tenant's assets; provided, however, that (i) all of the obligations of Tenant hereunder shall be expressly assumed in writing by the transferee, (ii) notwithstanding such assumption, Tenant shall remain primarily liable for all of its obligations under this lease, and (iii) in the case of a merger, consolidation, sale or conveyance, such transferee has a net worth equal to or greater than the net worth of Tenant immediately prior to any such merger, consolidation, sale or conveyance. "Affiliate" is any entity which controls, is controlled by or is under common control (at least 51% ownership interest) with Tenant. 19.2 If Tenant is a corporation, partnership or other entity and if at any time during the term of this lease the person or persons who own a majority of either the outstanding voting rights or the outstanding ownership interests of Tenant at the time of the execution of this lease cease to own a majority of such voting rights or ownership interests (except as a result of transfers by devise or descent), the loss of a majority of such voting rights or ownership interests shall be deemed an assignment of this lease by Tenant and, therefore, subject in all respects to the provisions of Section 19.1 above. The previous sentence shall not apply, however, if (i) at the time of the execution of this lease Tenant is a corporation and the outstanding voting shares of capital stock of Tenant are listed on a recognized security exchange or over-the-counter market, or (ii) if such transfer of control of Tenant is as a result of a public offering of the capital stock of Tenant on a recognized security exchange or over-the-counter market. 19.3 Notwithstanding anything to the contrary contained herein, and without prejudice to Landlord's right to require a written assumption from each assignee, any person or entity to whom this lease is assigned including, without limitation, assignees pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Paragraph 101, et seq. (the "Bankruptcy Code"), shall automatically be deemed, by acceptance of such assignment or sublease or by taking actual or constructive possession of the Demised Premises, to have assumed all obligations of Tenant arising under this lease effective as of the earlier of the date of such assignment or sublease or the date on which the assignee or sublessee obtains possession of the Demised Premises. In the event this lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord and shall remain the exclusive property of Landlord and not constitute the property of Tenant or Tenant's estate within the meaning of the Bankruptcy Code. All such money or other consideration not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord. 19.4 Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant's obligations under this lease shall at all times remain fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under this lease (even if future assignments and sublettings occur subsequent to the assignment or subletting by Tenant, and regardless of whether or not Tenant's approval has been obtained for such future assignments and sublettings). Moreover, in the event that the rental due and payable by a sublessee (or a combination of the rental payable under such sublease plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this lease, or if with respect to a permitted assignment, permitted license or other transfer by Tenant permitted by Landlord, [***]. Finally, in the event of an assignment or subletting, it is understood and agreed that all rentals paid to Tenant by an assignee or sublessee shall be received by Tenant in trust for Landlord, to be forwarded immediately to Landlord without offset or reduction of any kind; and upon election by Landlord such rentals shall be paid directly to Landlord as specified in Section 4.2 of this lease (to be applied as a credit and offset to Tenant's rental obligation). 19.5 Tenant shall not mortgage, pledge or otherwise encumber its interest in this lease or in the Demised Premises. *** Confidential treatment requested. 14 17 19.6 In the event of the transfer any assignment by Landlord of its interest in this lease and in the building containing the Demised Premises to a person expressly assuming Landlord's obligations under this lease, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any security given by Tenant to secure performance of Tenant's obligations hereunder may be assigned and transferred by Landlord to such successor in interest and Landlord shall thereby be discharged of any further obligation relating thereto. 19.7 Notwithstanding anything to the contrary contained herein, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this lease, or in the case of a proposed subletting of less than the entire Demised Premises for substantially all of the remaining term of this lease, to recapture the portion of the Demised Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised by Landlord giving Tenant written notice as required above. If this lease shall be terminated with respect to the entire Demised Premises, the term shall end on the date stated in Tenant's notice ("Landlord's Recapture Notice") within twenty (20) days following Landlord's receipt of Tenant's written notice as the effective date of the sublease or assignment as if that date had been originally fixed in this lease for the expiration of the term. If Landlord recaptures only a portion of the Demised Premises, the minimum guaranteed rental during the unexpired term shall abate, proportionately, based on the minimum guaranteed rental due as of the date immediately prior to such recapture. Notwithstanding the foregoing, if, within seven (7) days of Tenant's receipt of Landlord's Recapture Notice, Tenant sends Landlord a notice informing Landlord that Tenant withdraws its request to assign or sublet this lease, then Landlord shall not exercise its termination or recapture election (as the case may be) stated in Landlord's Recapture Notice. Provided, further, notwithstanding the foregoing, Landlord's right of recapture pursuant to this Section 19.7 shall not apply in the event of an assignment or sublet by Tenant to any entity owned by or under common control with Landlord (i.e., at lease 51% of ownership interest). 19.8 Tenant hereby waives any suretyship defenses it may now or hereafter have to an action brought by Landlord including those contained in Sections 2787 through 2856, inclusive, 2899 and 3433 of the California Civil Code, as now or hereafter amended, or similar laws of like import. ARTICLE 20. SUBORDINATION; ATTORNMENT; ESTOPPELS 20.1 Tenant accepts this lease subject and subordinate to any mortgage, deed of trust or other lien presently existing or hereafter placed upon the Industrial Complex or any portion of the Industrial Complex which includes the Demised Premises, and to any renewals, modifications and extensions thereof and this subordination shall be self operative and no further instrument of subordination is needed. Tenant agrees that any mortgagee shall have the right at any time to subordinate its mortgage, deed of trust or other lien to this lease; provided, however, notwithstanding that this lease may be (or is made to be) superior to a mortgage, deed of trust or other lien, the mortgagee shall not be liable for prepaid rentals, security deposits and claims accruing during or with respect to Landlord's ownership, any amendment or modification made to this lease without its prior written consent or any offsets or claims against Landlord; further provided that the provisions of a mortgage, deed of trust or other lien relative to the right of the mortgagee with respect to proceeds arising from an eminent domain taking (including a voluntary conveyance by Landlord) and provisions relative to proceeds arising from insurance payable by reason of damage to or destruction of the Demised Premises shall be prior and superior to any contrary provisions contained in this instrument with respect to the payment or usage thereof. Landlord is hereby irrevocably vested with full power and authority to subordinate this lease to any mortgage, deed of trust or other lien hereafter placed upon the Demised Premises or the Industrial Complex as a whole, and Tenant agrees upon demand to execute such further instruments subordinating this lease as Landlord may request. If the holder of any mortgage, indenture or deed of trust or similar instrument (each a "Mortgagee") succeeds to Landlord's interest in the Demised Premises, Tenant shall, upon request of any such Mortgagee, automatically become the tenant of and attorn to and recognize such Mortgagee as the landlord under this lease and will pay to it all rents and other amounts payable by Tenant under this lease, in accordance with the applicable terms of this lease. Notwithstanding that the foregoing provisions of this Section are self-operative, upon request of Landlord or any Mortgagee, Tenant shall execute and deliver to Landlord and to such Mortgagee a subordination and attornment agreement in recordable form confirming the foregoing and otherwise in form and substance acceptable to Landlord and such Mortgagee. 20.2 Tenant may not exercise any remedies for default by Landlord hereunder unless and until Landlord and the holder(s) of any indebtedness secured by mortgage, deed of trust or other lien on the Demised Premises shall have received written notice of such default and a reasonable time (not less than 90 days) shall thereafter have elapsed without the default having been cured. 15 18 20.3 Tenant agrees that it will from time to time upon request by Landlord execute and deliver to Landlord a written statement addressed to Landlord (and to a party[ies] designated by Landlord), which statement shall identify Tenant and this lease, shall certify that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), shall confirm that Landlord is not in default as to any obligations of Landlord under this lease (or if Landlord is in default, specifying any default), shall confirm Tenant's agreements contained above in this Article 20, and shall contain such other information or confirmations as Landlord may reasonably require. Landlord is hereby irrevocably appointed and authorized as the agent and attorney-in-fact of Tenant to execute and deliver any such written statement on Tenant's behalf if Tenant fails to do so within seven (7) days after the delivery of a written request from Landlord to Tenant. ARTICLE 21. TENANT'S INDEMNIFICATION 21.1 Tenant shall indemnify, defend and hold harmless Landlord, Landlord's asset manager, Landlord's subasset manager, Landlord's partners, any subsidiary or affiliate of Landlord and the officers, directors, shareholders, partners, employees, managers, independent contractors, attorneys and agents of any of the foregoing (collectively, the "Indemnitees") from and against any and all claims, demands, causes of action, judgments, costs and expenses, and all losses and damages (including consequential and punitive damages) arising from Tenant's use of the Demised Premises or from the conduct of its business or from any activity, work, or other acts or things done, permitted or suffered by Tenant in or about the Demised Premises, and shall further indemnify, defend and hold harmless the Indemnitees from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this lease, or arising from any act, omission or negligence or willful or criminal misconduct of Tenant, or any officer, agent, employee, independent contractor, guest, or invitee thereof, and from all costs, attorneys' fees and disbursements, and liabilities incurred in the defense of any such claim or any action or proceeding which may be brought against, out of or in any way related to this lease. Upon notice from Landlord, Tenant shall defend any such claim, demand, cause of action or suit at Tenant's expense by counsel satisfactory to Landlord in its sole discretion. As a material part of the consideration to landlord for this Lease, Tenant hereby assumes all risk of damage to property or injury to persons in, upon or about the Demised Premises from any cause, and Tenant hereby waives all claims with respect thereto against landlord. Tenant shall give immediate notice to Landlord in case of casualty or accidents in the Demised Premises. The provisions of this Article 21 shall survive the expiration or sooner termination of this lease. 21.2 All personal property of Tenant, including goods, wares, merchandise, inventory, trade fixtures and other personal property of Tenant, shall be stored at the sole risk of Tenant. Landlord or its agents shall not be liable for any loss or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Industrial Complex or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other places resulting from dampness or any other cause whatsoever, or from the act or negligence of any other tenant or any officer, agent, employee, contractor or guest of any such tenant, except personal injury caused by or due to the gross negligence or willful misconduct of Landlord. Landlord or its agents shall not be liable for interference with the electrical service, ventilation, or for any latent defect in the Demised Premises. 21.3 The parties hereto acknowledge that all or a part of the Demised Premises may be used for the storage and shipment of goods not owned by Tenant, and Landlord is not willing to enter into this lease unless Tenant indemnifies the indemnitees to Landlord's satisfaction from any liability on the part of the Indemnitees to the owner(s) of such goods for damage to the same arising out of any acts or omissions of the Indemnitees. As a material inducement to Landlord to enter into this lease, Tenant agrees to defend, indemnify and hold the indemnitees harmless from and against any and all losses, claims, liabilities, obligations and damages imposed upon or incurred or asserted against the indemnitees by reason of damage to goods of persons storing such goods with Tenant, notwithstanding the fact that such losses, claims, liabilities, obligations or damages may have been caused by the acts or omissions of Landlord. Tenant agrees that at all times during which it shall store goods not owned by it in the Demised Premises, it shall insure the indemnity described under this Section 21.3 in a manner reasonably satisfactory to landlord. Landlord shall not be deemed a bailee, consignee, or warehouseman (or responsible for the standard of care incidental thereto) with respect to any goods stored or shipped to or from the Demised Premises for consignment or bailment and Tenant shall insert a clause to that effect in all warehouse receipts or consignment agreements for the storage or shipment of goods to or from the Demised Premises. 16 19 ARTICLE 22. DEFAULT BY TENANT AND REMEDIES 22.1 The following events shall be deemed to be events of default by Tenant under this lease: (a) Tenant shall fail to pay any installment of rental or any other obligation under this lease involving the payment of money on the date such payment shall become due and payable. (b) Tenant shall fail to comply with any provision of this lease, other than as described in subsection (a) above, and either shall not cure such failure within fifteen (15) days after written notice thereof to Tenant, or shall cure that particular failure but shall again fail to comply with the same provision of this lease within three (3) months after Landlord's written notice; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under Section 1161 et seq. of the California Code of Civil Procedure. (c) Tenant or any guarantor of Tenant's obligations under this lease shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors. (d) Tenant or any guarantor of Tenant's obligations under this lease shall file a petition under any section or chapter of the federal Bankruptcy Code, as amended, or under any similar law or statute of the United States or any state thereof; or Tenant or any guarantor of Tenant's obligations under this lease shall be adjudged bankrupt or insolvent in proceedings filed against Tenant or any guarantor of Tenant's obligations under this lease thereunder. (e) A receiver or Trustee shall be appointed for the Demised Premises or for all or substantially all of the assets of Tenant or any guarantor of Tenant's obligations under this lease. (f) Tenant shall desert or vacate or shall commence to desert or vacate the Demised Premises or any substantial portion of the Demised Premises or at any time prior to the last month of the lease term shall remove or attempt to remove, without the prior written consent of Landlord, all or a substantial amount of Tenant's goods, wares, equipment, fixtures, furniture, or other personal property. (g) Tenant shall do or permit to be done anything which creates a lien upon the Demised Premises or upon all or any part of the Industrial Complex. (h) Any transfer of a substantial portion of the assets of Tenant, or any incurrence of a material obligation by Tenant, unless such transfer or obligation is undertaken or incurred in the ordinary course of Tenant's business or in good faith for equivalent consideration, or with Landlord's consent. (i) The default of any guarantors of Tenant's obligations hereunder under any guaranty of this Lease, or the attempted repudiation or revocation of any such guaranty. 22.2 Upon the occurrence of any such event of default, Landlord shall have the option to pursue any one or more of the following remedies to the extent permitted by law: (a) Without any further notice or demand whatsoever, Tenant shall be obligated to reimburse Landlord for the damages suffered by Landlord as a result of the event of default, plus interest on such amount at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month); and Landlord may pursue a monetary recovery from Tenant. (b) Without any further notice or demand whatsoever, Landlord may take any one or more of the actions permissible at law to insure performance by Tenant of Tenant's covenants and obligations under this lease. In this regard, and without limiting the generality of the immediately preceding sentence, it is agreed that if Tenant fails to open for business as required in this lease or, having opened for business, deserts or vacates the Demised Premises, Landlord may enter upon and take possession of such premises in order to protect them from deterioration and continue to demand from Tenant the monthly rentals and other charges provided in this lease, without any obligation to relet; however, if Landlord does, at its sole discretion, elect to relet the Demised Premises, such action by Landlord shall not be deemed an acceptance of Tenant's surrender of the Demised Premises unless Landlord expressly notifies Tenant of such acceptance in writing pursuant to this subsection (b), Tenant hereby acknowledging that Landlord shall otherwise be reletting as Tenant's agent and Tenant furthermore hereby agreeing to pay to Landlord on demand any deficiency that may arise between the monthly rentals and other charges provided in this lease and that actually collected by Landlord. In the event that Landlord shall elect to relet, then rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness (other than rent) due hereunder from Tenant to 17 20 Landlord; second, to the payment of any cost of such reletting (including brokerage commissions); third, to the payment of the cost of any alterations and repairs to the Demised Premises; fourth, to the payment of rent due and unpaid hereunder, and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Should reletting, during any month to which such rent is applied, result in the actual payment of rentals at less than the rent payable during the month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting. Finally, it is agreed that in the event of any default described in subsection (g) of Section 22.1 of this lease, Landlord may pay or bond around such lien, whether or not consented by Tenant; and in such event Tenant agrees to reimburse Landlord on demand for all costs and expenses incurred in connection with any such action, with Tenant further agreeing that Landlord shall in no event be liable for any damages or claims resulting from such action. No action or inaction by Landlord including, without limitation, the re-entry or taking of possession of the Demised Premises by Landlord pursuant to this Section 22.2(b) shall be construed as an election to terminate this lease or as interference with Tenant's rights of possession, assignment or subletting unless a written notice of such election shall be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord, Landlord may, at any time after such reletting, elect to terminate this lease for any such default. (c) Landlord may terminate this lease by written notice to Tenant, in which event Tenant shall immediately surrender the Demised Premises to Landlord. In the event that Landlord shall elect to so terminate this lease, then Landlord may recover from Tenant: (i) The worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus (ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves reasonably could have been avoided; plus (iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves reasonably could be avoided; plus (iv) Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this lease or which in the ordinary course would be likely to result therefrom, plus (v) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. As used in subparagraphs (i) and (ii) above, the "worth at the time of award" is computed by allowing interest at the maximum rate permitted by law. AS used in subparagraph (iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus [***]. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. Tenant hereby waives for Tenant and for all those claiming under Tenant all right now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Demised Premises after any termination of this lease. (d) In addition to all other rights and remedies provided Landlord in this lease and by law, Landlord shall have the remedy described in California Civil Code Section 1951.4 (Landlord may continue the lease in effect after Tenant's breach and abandonment and recover rent as it becomes due if Tenant has the right to sublet or assign the lease, subject to reasonable limitations). 22.3 It is expressly agreed that in determining "the unpaid rent" as that term is used throughout subsections 22.2(c)(i) and 22.2(c)(ii) above, there shall be added to the minimum guaranteed rental (as specified in Sections 1.1(l) and 4.1 of this lease) a sum equal to the charges for maintenance of the Common Area (as specified in Section 7.4 of this lease), and the payments for taxes, charges and insurance (as specified in Article 6 of this lease). *** Confidential treatment requested. 18 21 22.4 It is further agreed that, in addition to payments required pursuant to subsections 22.2(b) and 22.2(c) above, Tenant shall compensate Landlord for all expenses incurred by Landlord in repossession (including, among other expenses, any increase in insurance premiums caused by the vacancy of the Demised Premises), all expenses incurred by Landlord in reletting (including, among other expenses, repairs, remodeling, replacements, advertisements and brokerage fees), all concessions granted to a new tenant upon reletting (including, among other concessions, renewal options), all losses incurred by Landlord as a direct or indirect result of Tenant's default (including, among other losses, any adverse reaction by Landlord's mortgagee or by other tenants or potential tenants of the Industrial Complex) and a reasonable allowance for Landlord's administrative efforts, salaries and overhead attributable directly or indirectly to Tenant's default and Landlord's pursuing the rights and remedies provided herein and under applicable law. 22.5 Landlord may restrain or enjoin any breach or threatened breach of any covenant, duty or obligation of Tenant herein contained without the necessity of proving the inadequacy of any legal remedy or irreparable harm. The remedies of Landlord hereunder shall be deemed cumulative and not exclusive of each other. 22.6 If on account of any breach or default by Tenant in its obligations hereunder, Landlord shall employ an attorney to present, enforce or defend any of Landlord's rights or remedies hereunder. Tenant agrees to pay any reasonable attorneys' fees incurred by Landlord in such connection. 22.7 Tenant acknowledges its obligation to deposit with Landlord the sum stated in Section 1.1(n) above, to be held by Landlord without interest as security for the performance by Tenant of Tenant's covenants and obligations under this Lease. Tenant agrees that such deposit may be commingled with Landlord's other funds and that such security deposit is not an advance payment of rental or a measure of Landlord's damages in case of default by Tenant. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make good any arrears of rentals and any other damage, injury, expense or liability caused to Landlord by such event of default, and Tenant shall pay to Landlord on demand the amount so applied in order to restore the security deposit to its original amount. If Tenant is not then in default hereunder, any remaining balance of such security deposit shall be returned by Landlord to Tenant upon termination of this lease (subject to the provisions of Section 19.5 above). 22.8 (a) In the event of any default described in subsection (d) of Section 22.1 of this lease, any assumption and assignment must conform with the requirements of the Bankruptcy Code and, in order to provide Landlord with the assurances contemplated by the Bankruptcy Code, Tenant must fulfill the following obligations, in addition to any other reasonable obligations that Landlord may require, before any assumption of this lease is effective: (i) all defaults under subsection (a) of Section 22.1 of this lease must be cured within ten (10) days after the date of assumption; (ii) all other defaults under Section 22.1 of this lease other than under subsection (d) of Section 22.1 must be cured within fifteen (15) days after the date of assumption; (iii) all actual monetary losses incurred by Landlord (including, but not limited to, reasonable attorneys' fees) must be paid to Landlord within ten (10) days after the date of assumption; and (iv) Landlord must receive within ten (10) days after the date of assumption a security deposit in the amount of six (6) months minimum guaranteed rent (using the minimum guaranteed rent in effect for the first full month immediately following the assumption) and an advance prepayment of minimum guaranteed rent in the amount of three (3) months minimum guaranteed rent (using the minimum guaranteed rent in effect for the first full month immediately following the assumption), both sums to be held by Landlord in accordance with Section 22.7 above and deemed to be rent under this lease for the purposes of the Bankruptcy Code as amended and from time to time in effect. (b) In the event this lease is assumed in accordance with the requirements of the Bankruptcy Code and this lease, and is subsequently assigned, then, in addition to any other reasonable obligations that Landlord may require and in order to provide Landlord with the assurances contemplated by the Bankruptcy Code, Landlord shall be provided with (i) a financial statement of the proposed assignee prepared in accordance with generally accepted accounting principles consistently applied, though on a cash basis, which reveals a net worth in an amount sufficient, in Landlord's reasonable judgment, to assure the future performance by the proposed assignee of Tenant's obligations under this lease; or (ii) a written guaranty by one or more guarantors with financial ability sufficient to assure the future performance of Tenant's obligations under this lease, such guaranty to be in form and content satisfactory to Landlord and to cover the performance of all of Tenant's obligations under this lease. ARTICLE 23. INTENTIONALLY DELETED 19 22 ARTICLE 24. HOLDING OVER 24.1 In the event Tenant remains in possession of the Demised Premises after the expiration of this lease and without the execution of a new lease or an amendment hereto, it shall be deemed to be occupying said premises as a tenant from month to month at a rental equal to the rental herein provided [***] of such amount and otherwise subject to all the conditions, provisions and obligations of this lease insofar as the same are applicable to a month-to-month tenancy. Neither any provision hereof nor acceptance by Landlord of rent after such expiration or earlier termination shall be deemed a consent to a holdover hereunder or result in a renewal of this lease or an extension of the term. Notwithstanding any provision to the contrary contained herein, (i) Landlord expressly reserves the right to require Tenant to surrender possession of the Demised Premises upon the expiration of the term of this lease or upon the earlier termination hereof, the right to reenter the Demised Premises, and the right to assert any remedy at law or in equity to evict Tenant and collect damages in connection with any such holding over, and (ii) Tenant shall indemnify, defend and hold Landlord harmless from and against any and all claims, demands, actions, losses, damages, obligations, costs and expenses, including, without limitation, attorneys' fees incurred or suffered by Landlord by reason of Tenant's failure to surrender the Demised Premises on the expiration or earlier termination of this Lease in accordance with the provisions of this lease. ARTICLE 25. NOTICES 25.1 Wherever any notice is required or permitted hereunder, such notice shall be in writing. Any notice or document required or permitted to be delivered hereunder shall be deemed to be delivered when actually received by the designated addressee or, if earlier and regardless of whether actually received or not, when deposited in the United States mail, postage prepaid, certified mail, return receipt requested, addressed to the parties hereto at the respective addresses set out in Section 1.1 above (or at Landlord's option, to Tenant at the Demised Premises), or at such other addresses as they have theretofore specified by written notice. 25.2 If and when included within the term "Landlord" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Landlord; if and when included within the term "Tenant" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Tenant. All parties included within the terms "Landlord" and "Tenant," respectively, shall be bound by notice and payments given in accordance with the provisions of this Article to the same effect as if each had received such notice or payment. In addition, Tenant agrees that actions by Landlord and notices to Tenant hereunder may be taken or given by Agent, Landlord's attorney, or any other property manager or agent. 25.3 A copy of any notice or document required or permitted to be delivered hereunder to Landlord shall simultaneously be delivered to Agent. ARTICLE 26. COMMISSIONS 26.1 Tenant and Landlord warrant that they have had no dealings with any broker or agent in connection with this lease, other than Agent and Tenant's Broker. Landlord and Tenant covenant to pay, hold harmless and indemnify each other from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by any other broker or agent utilized by the indemnitor with respect to this lease or the negotiation hereof. ARTICLE 27. REGULATIONS 27.1 Landlord and Tenant acknowledge that there are now in effect and may hereafter be enacted or go into effect federal, state, county and municipal laws, orders, rules, directives and regulations relating to or affecting the Demised Premises or the Industrial Complex, concerning the impact on the environment of construction, land use, maintenance and operation of structures, toxic or otherwise hazardous substances, and the conduct of business, including, without limitation, the Americans With Disabilities Act of 1990 and the Clean Air Act and regulations issued thereunder (all of the foregoing, as amended from time to time, being herein called the "Regulations"). Tenant will not *** Confidential treatment requested. 20 23 cause or permit to be caused, any act or practice, by negligence, omission or otherwise, that would adversely affect the environment or do anything or permit anything to be done that would violate any of said Regulations. Moreover, Tenant shall have no claim against Landlord by reason of any changes Landlord may make in the Industrial Complex or the Demised Premises pursuant to said Regulations or any charges imposed upon Tenant, Tenant's customers or other invitees pursuant to same. 27.2 If, by reason of any Regulations, the payment to, or collection by, Landlord of any rental or other charge (collectively referred to hereinafter as "Lease Payments") payable by Tenant to Landlord pursuant to the provisions of this lease is in excess of the amount (the "Maximum Charge") permitted by the Regulations, then Tenant, during the period (the "Freeze Period") when the Regulations shall be in force and effect shall not be required to pay, nor shall Landlord be permitted to collect, any sum in excess of the Maximum Charge. Upon the earlier of (i) the expiration of the Freeze Period, or (ii) the issuance of a final order or judgment of a court of competent jurisdiction declaring the Regulations to be invalid or not applicable to the provisions of this lease, Tenant, to the extent not then proscribed by law, and commencing with the first day of the month immediately following, shall pay to Landlord as additional rental, in equal monthly installments during the balance of the term of this lease, a sum equal to the cumulative difference between the Maximum Charges and the Lease Payments during the Freeze Period. If any provisions of this Section, or the application thereof, shall to any extent be declared to be invalid and unenforceable, the same shall not be deemed to affect any of the other provisions of this Section or of this lease, all of which shall be deemed valid and enforceable to the fullest extent permitted by law. 27.3 Tenant acknowledges that it will be wholly responsible for any accommodations or alterations which need to be made to the Demised Premises to accommodate disabled employees and customers of Tenant, including without limitation, the requirements under the Americans With Disabilities Act of 1990 and any equivalent California law. Any alterations made to the Demised Premises in order to comply with either statute must be made solely at Tenant's expense and in compliance with all terms and requirements of this lease. Landlord agrees to make reasonable efforts to ensure that the Common Area is in compliance with the applicable disability access laws as of the date hereof. If a complaint is received by Landlord from either a private or government source regarding disability access to the Common Area of the Industrial Complex, Landlord reserves the right to mediate, contest, comply with or otherwise respond to such complaint as Landlord deems to be reasonably prudent under the circumstances. If Landlord decides to make alterations to the Common Area of the Industrial Complex in response to any such complaints or in response to legal requirements Landlord considers to be applicable to the Common Area of the Industrial Complex, the cost of such alterations shall be included in the Common Area maintenance charge under this lease. Landlord and Tenant agree that so long as the governmental entity or entities charged with enforcing such statutes have not expressly required Landlord to take specific action to effectuate compliance with such statutes, Landlord shall be conclusively deemed to be in compliance with such statutes. Tenant agrees to provide Landlord with written notice should Tenant become aware of a violation of such statutes with respect to the Common Area. In the event Landlord is required to take action to effectuate compliance with such statutes, Landlord shall have a reasonable period of time to make the improvements and alterations necessary to effectuate such compliance, which period of time shall be extended by any time necessary to cause any necessary improvements and alterations to be made. ARTICLE 28. HAZARDOUS MATERIALS 28.1 During the term of this lease, Tenant shall comply with all Environmental Laws and Environmental Permits (each defined in Section 28.7 hereof) applicable to the operation or use of the Demised Premises, will cause all other persons occupying or using the Demised Premises to comply with all such Environmental Laws and Environmental Permits, will immediately pay or cause to be paid all costs and expenses incurred by reason of such compliance, and will obtain and renew all Environmental Permits required for the operation or use of the Demised Premises. 28.2 Tenant shall not generate, use, treat, store, handle, release or dispose of, or permit the generation, use, treatment, storage, handling, release or disposal of Hazardous Materials (as defined in Section 28.7 hereof) on the Demised Premises, or the Industrial Complex, or transport of permit the transportation of Hazardous Materials to or from the Demised Premises or the Industrial Complex except for limited quantities used or stored at the Demised Premises and required in connection with the routine operation and maintenance of the Demised Premises, and then only upon the written consent of Landlord and in compliance with all applicable Environmental Laws and Environmental Permits. 28.3 At any time and from time to time during the term of this lease, Landlord may perform at Tenant's sole cost and expense, an environmental site assessment report concerning the Demised Premises, prepared by an environmental consulting firm chosen by Landlord, indicating the presence or absence of Hazardous Materials caused or permitted by Tenant and the potential cost of any compliance, 21 24 removal or remedial action in connection with any such Hazardous Materials on the Demised Premises. Tenant shall grant and hereby grants to Landlord and its agents access to the Demised Premises and specifically grants Landlord an irrevocable non-exclusive license to undertake such an assessment; and the cost of such assessment shall be immediately due and payable on demand. 28.4 Tenant will immediately advise Landlord in writing of any of the following: (1) any pending or threatened Environmental Claim (as defined in Section 28.7 hereof) against Tenant relating to the Demised Premises or the Industrial Complex; (2) any condition or occurrence on the Demised Premises or the industrial Complex that (a) results in noncompliance by Tenant with any applicable Environmental Law, or (b) could reasonably be anticipated to form the basis of an Environmental Claim against Tenant or Landlord or the Demised Premises; (3) any condition or occurrence on the Demised Premises or any property adjoining the Demised Premises that could reasonably be anticipated to cause the Demised Premises to be subject to any restrictions on the ownership, occupancy, use or transferability of the Demised Premises under any Environmental Law; and (4) the actual or anticipated taking of any removal or remedial action by Tenant in response to the actual or alleged presence of any Hazardous Material on the Demised Premises or the Industrial Complex. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Tenant's response thereto. In addition, Tenant will provide Landlord with copies of all communications regarding the Demised Premises with any government or governmental agency relating to Environmental Laws, all such communications with any person relating to Environmental Claims, and such detailed reports of any such Environmental Claim as may reasonably be requested by Landlord. 28.5 Tenant will not change or permit to be changed the present use of the Demised Premises unless Tenant shall have notified Landlord thereof in writing and Landlord shall have determined, in its sole and absolute discretion, that such change will not result in the presence of Hazardous Materials on the Demised Premises except for those described in Section 28.2 above. 28.6 (a) Tenant agrees to defend, indemnify and hold harmless the Indemnitees (as defined in Section 21.1) from and against all obligations (including removal and remedial actions), losses, claims, suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including attorneys' and consultants' fees and expenses) of any kind or nature whatsoever that may at any time be incurred by, imposed on or asserted against such Indemnitees directly or indirectly based on, or arising or resulting from (a) the actual or alleged presence of Hazardous Materials on the Industrial Complex which is caused or permitted by Tenant and (b) any Environmental Claim relating in any way to Tenant's operation or use of the Demised Premises (the "Hazardous Materials Indemnified Matters"). The provisions of this Article 28 shall survive the expiration or sooner termination of this lease. (b) To the extent that the undertaking in the preceding paragraph may be unenforceable because it is violative of any law or public policy, Tenant will contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Hazardous Materials Indemnified Matters incurred by the Indemnitees. (c) All sums paid and costs incurred by Landlord with respect to any Hazardous Materials Indemnified Matter shall bear interest at the lessor of (i) [***], or (ii) [***], from the date so paid or incurred until reimbursed by Tenant, and all such sums and costs shall be immediately due and payable on demand. 28.7 (a) "Hazardous Materials" means (i) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and radon gas; (ii) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any applicable Environmental Law; and (iii) any other substance exposure to which is regulated by any governmental authority; (b) "Environmental Law" means any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or Hazardous Materials, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3001 et seq.; the Atomic Energy Act, 42 U.S.C. Section 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq.; and the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; (c) "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation. *** Confidential treatment requested. 22 25 investigations, proceedings, content orders or consent agreements relating in any way to any Environmental Law or any Environmental Permit, including without limitation (i) any and all Environmental Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Environmental Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment; and (d) "Environmental Permits" means all permits, approvals, identification numbers, licenses and other authorizations required under any applicable Environmental Law. ARTICLE 29. MISCELLANEOUS 29.1 Nothing in this lease shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant. 29.2 Tenant shall not for any reason withhold or reduce Tenant's required payments of rentals and other charges provided in this lease, it being agreed that the obligations of Landlord under this lease are independent of Tenant's obligations except as may be otherwise expressly provided. The immediately preceding sentence shall not be deemed to deny Tenant the ability of pursuing all rights granted it under this lease or at law; however, at the direction of Landlord, Tenant's claims in this regard shall be litigated in proceedings different from any litigation involving rental claims or other claims by Landlord against Tenant (i.e., each party may proceed to a separate judgment without consideration, counterclaim or offset as to the claims asserted by the other party). 29.3 The liability of Landlord, any agent of Landlord, or any of their respective officers, directors, shareholders, or employees to Tenant for or in respect of any default by Landlord under the terms of this lease or in respect of any other claim or cause of action shall be limited to the interest of Landlord in the Industrial Complex, and Tenant agrees to look solely to Landlord's interest in the Industrial Complex for the recovery and satisfaction of any judgment against Landlord, any agent of Landlord, or any of their respective officers, directors, shareholders, and employees. 29.4 In all circumstances under this lease where the prior consent of one party (the "consenting party"), whether it be Landlord or Tenant is required before the other party (the "requesting party") is authorized to take any particular type of action, such consent shall not be withheld in a wholly unreasonable and arbitrary manner; however, the requesting party agrees that its exclusive remedy if it believes that consent has been withheld improperly (including, but not limited to, consent required from Landlord pursuant to Section 19.1) shall be to institute litigation either for a declaratory judgment or for a mandatory injunction requiring that such consent be given (with the requesting party hereby waiving any claim for damages, attorneys' fees or any other remedy unless the consenting party refuses to comply with a court order or judgement requiring it to grant its consent). 29.5 Whenever a period of time is herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the reasonable control of Landlord. 29.6 If any provision of this lease should be held to be invalid or unreasonable, the validity and enforceability of the remaining provisions of this lease shall not be affected thereby. 29.7 If this lease is in fact a sublease, Tenant accepts this lease subject to all of the terms and conditions of the underlying lease under which Landlord holds the Industrial Complex as lessee. Tenant covenants that it will do no act or thing which would constitute a violation by Landlord of its obligation under such underlying lease; provided, however, that Tenant's agreement in this regard is premised on Landlord's assurances to the effect that the terms of this lease do not violate such underlying lease. 29.8 The laws of the State of California shall govern the interpretation, validity, performance and enforcement of this lease. Venue for any action under this lease shall be the county in which rentals are due pursuant to Section 4.2 and Section 1.1 of this lease. 29.9 The captions used herein are for convenience only and do not limit or amplify the provisions hereof. 23 26 29.10 Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender. 29.11 All covenants and obligations contained within this lease shall bind and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon Tenant, its permitted successors and assigns. 29.12 This lease contains the entire agreement between the parties, and no rights are created in favor of either party other than as specified or expressly contemplated in this lease. No brochure, rendering, information or correspondence shall be deemed to be a part of this agreement unless specifically incorporated herein by reference. In addition, no agreement shall be effective to change, modify or terminate this lease in whole or in part unless such is in writing and duly signed by the party against whom enforcement of such change, modification or termination is sought. 29.13 LANDLORD AND TENANT HEREBY ACKNOWLEDGE THAT THEY ARE NOT RELYING UPON ANY BROCHURE, RENDERING, INFORMATION, REPRESENTATION OR PROMISE OF THE OTHER, OR OF THE AGENT, EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THIS LEASE. 29.14 No waiver of any of the terms, covenants, provisions, conditions, rules and regulations imposed by this lease, and no waiver of any legal or equitable relief or remedy, shall be implied by the failure of Landlord to assert any rights, declare any forfeiture, or for any other reason. No waiver of any of the terms, provisions, covenants, conditions, rules and regulations shall be valid unless it shall be in writing signed by Landlord. No waiver by Landlord or forgiveness of performance by Landlord for one or more tenants shall constitute a waiver or forgiveness of performance in respect to Tenant. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval under this lease shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act of Tenant. No act or thing done by Landlord or Landlord's agents during the term of this lease shall be deemed an acceptance of a surrender of the Demised Premises, unless in writing signed by Landlord. The delivery of the keys to any employee or agent of Landlord shall not operate as a termination of this lease or a surrender of the Demised Premises. The acceptance of any rent by Landlord following a breach of this lease by Tenant shall not constitute a waiver by Landlord of such breach or any other breach unless such waiver is expressly stated in a writing signed by Landlord. 29.15 Tenant shall deliver and surrender to Landlord possession of the Demised Premises (including all of Tenant's permanent work upon and to the Demised Premises, all replacements and all fixtures permanently attached to the Demised Premises) immediately upon the expiration of the term or the termination of this lease in as good condition and repair as the same were on the delivery date (loss by any insured casualty and ordinary wear and tear only excepted) and deliver the keys at the office of Landlord or Landlord's agent; provided, however, that upon Landlord's request made at least thirty (30) days prior to the end of the term, or the date Tenant is otherwise required to vacate the Demised Premises, Tenant shall remove all fixtures and equipment affixed to the Demised Premises by Tenant, and repair and restore the Demised Premises to their condition on the delivery date (loss by any insured casualty and ordinary wear and tear only excepted), at Tenant's sole expense. The removal shall be performed prior to the earlier of the end of the term or the date Tenant is required to vacate the Demised Premises. 29.16 Tenant shall not record this lease. Without the prior written consent of Landlord, Tenant shall not record any memorandum of this lease, short form or other reference to this lease. 29.17 The submission of this lease for examination does not constitute a reservation of or option for the Demised Premises or any other space in the Industrial Complex, and shall not vest any right in Tenant. This lease shall become effective as a lease only upon its execution and delivery by the parties. 29.18 LANDLORD AND TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT. COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE DEMISED PREMISES (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER INTO AND ACCEPT THIS LEASE. 24 27 29.19 This lease consists of twenty-nine Articles and Exhibits "A" through "D". With the exception of Article 7, in the event any provision of an exhibit shall be inconsistent with a provision in the body of the lease, the provision as set forth in the exhibit shall be deemed to control. EXECUTED as of the latest date accompanying a signature by Landlord or Tenant below. LANDLORD: MP HACIENDA, INC., a Delaware corporation By: GE CAPITAL INVESTMENT ADVISORS, INC., Its agent By: /s/ DANIEL S. MELLEN ----------------------------------- Name: Daniel S. Mellen Title: VP Date of Signature: 5/5/98 TENANT: LBE TECHNOLOGIES, INC., a California corporation By: /s/ DAVID S. MOESE ---------------------------------------- Name: David S. Moese Title: Chairman of the Board By: /s/ [ILLEGIBLE] ---------------------------------------- Name: [illegible] Title: VP & CTO Date of Signature: 5/1/98 25 28 EXHIBIT "A" DEMISED PREMISES BUILDING C FIRST FLOOR PLAN BUILDING C SECOND FLOOR PLAN 210 HACIENDA AVENUE 29 EXHIBIT "B" CONSTRUCTION: TENANT ACCEPTANCE OF SPACE "AS IS" ARTICLE I. GENERAL Tenant hereby accepts the Demised Premises "as is" and "ready for occupancy" and Landlord shall have no obligation to make or pay for any improvements, renovations or alterations in or to the Demised Premises to prepare or make ready the Demised Premises for Tenant's occupancy as of the Commencement Date. Provided, however, Landlord shall deliver the Demised Premises to Tenant in broom clean condition with the building systems, including plumbing, electrical, lighting and elevator (but excluding the HVAC system), serving the Demised Premises in good working order. Tenant acknowledges that the existing HVAC system serving the Demised Premises is not in good working order and that costs incurred by Tenant to repair the existing HVAC system may be reimbursed to Tenant as a "Reimbursable Improvement" (as defined in this Exhibit "B"). Prior to any modification of the existing premises, Tenant shall adhere to the following as well as the provisions contained in Article 11 of the lease: ARTICLE II. TENANT IMPROVEMENTS A. Tenant Improvement Allowance: Tenant shall be entitled to a tenant improvement allowance (the "Tenant Improvement Allowance") in the maximum amount of [***] for the costs relating to the initial design and construction of Tenant's improvements which are (i) permanently affixed to the Demised Premises and (ii) are "Reimbursable Improvements", as defined in Paragraph E. below (the "Tenant Improvements"). In no event shall Landlord be obligated to make disbursements for Tenant Improvements in a total amount which exceeds the Tenant Improvement Allowance. No portion of the Tenant Improvement Allowance may be utilized for material or supplies not located on the Demised Premises for Tenant's fixturization, signage or installation of furniture or equipment. B. Disbursement of Tenant Improvement Allowance: Landlord shall reimburse Tenant for costs and expenses actually incurred by Tenant for work actually performed, construction in place and/or materials delivered to the Demised Premises in connection with the design and construction of Tenant improvements on a [***] except as provided below. The final disbursement of the Tenant Improvement Allowance, which amount shall not be less than [***] of the entire Tenant Improvement Allowance, shall be payable thirty (30) days after Tenant opens for business in the Demised Premises and Landlord has received (i) a written request from Tenant for reimbursement, (ii) invoices of Tenant's contractor, subcontractors or suppliers, as applicable, with evidence of final payment thereof, (iii) unconditional lien waivers and mechanic's lien releases executed by Tenant's contractor, subcontractors or suppliers, as applicable (all such waivers and releases to be in the forms prescribed by California Civil Code Section 3262), and (iv) all other information and documentation reasonably requested by Landlord (including, without limitation, a certificate of occupancy for the Demised Premises). Landlord may withhold the amount of any and all retentions provided for in the original contracts or subcontracts until expiration of the applicable lien periods or Landlord's receipt of unconditional lien waivers and mechanic's lien releases executed by Tenant's contractor, subcontractors or suppliers, as applicable. C. Notwithstanding anything to the contrary set forth above, Landlord, at Landlord's sole option, may elect to contract directly for the performance of some or all of the Tenant Improvements and pay the contractor(s) directly, up to the Tenant Improvement Allowance set forth above; any amounts in excess thereof shall be paid directly by Tenant upon receipt of invoices for such work; Landlord shall have the further option of requiring Tenant to pay such excess sums in advance based upon Landlord's reasonable estimation thereof. D. Under no circumstances shall Landlord be required to fund any portion of the Tenant Improvement Allowance when Tenant is in default under this lease. Tenant acknowledges that in the event Tenant is in default of any of its obligations set forth in the Lease at any time during the Lease Term which default is not cured within the applicable cure period, in addition to any other rights or remedies Landlord may have as a result of any such default, the entire amount of the Tenant Improvement Allowance funded by Landlord shall become immediately due and payable by Tenant to Landlord. *** Confidential treatment requested. 1 30 E. In the event that Tenant shall have failed to qualify under Paragraph B above for reimbursement of any portion of the Tenant Improvement Allowance by that date which is one hundred eighty (180) days after the date of execution of this lease, such amount shall no longer be available for the payment of expenses in connection with the Tenant Improvements and Landlord's obligation for funding of such amounts shall be terminated. F. As stated in Paragraph A, above, Landlord shall only be required to reimburse Tenant for Tenant Improvements which are also "Reimbursable Improvements". For purposes of this Exhibit "B", "Reimbursable Improvements" shall only consist of Improvements which (i) repair or replace the existing HVAC system serving the Demised Premises; (ii) are necessary to bring the Demised Premises into compliance with Regulations (including the Americans with Disabilities Act of 1990); (iii) involve carpeting and/or painting the Demised Premises using building standard materials; and (iv) other improvements approved in advance (in Landlord's sole discretion) and in writing by Landlord as being Reimbursable Improvements under this Exhibit "B". ARTICLE III. PRE-CONSTRUCTION OBLIGATIONS A. Plans, diagrams, schedules and other data relating to work to be performed by Tenant must be furnished by Tenant to Landlord complete, sufficient to obtain a building permit, and ready for Landlord's consideration and final approval within thirty (30) days after execution of this lease (or at such other time as may be specified by this exhibit). Without limiting the generality of the immediately preceding sentence, Tenant's submissions must include a floor plan, a reflected ceiling plan, a plumbing plan, elevations of walls and a fixture plan. All drawings shall be at scale of either 1/8" or 1/4". Tenant shall reimburse Landlord for any loss or extra cost which may result to Landlord by reason of failure on the part of Tenant to submit any such plans, diagrams, schedules, specifications and/or other data within said period of time. B. Tenant shall secure Landlord's written approval of all designs, plans, specifications, materials, contractors and contracts for work to be performed by Tenant before beginning the work (including following whatever "work letter" instructions, if any, which Landlord may deliver to Tenant in connection with the work), and shall secure all necessary licenses and permits to be used in performing the work. Tenant's finished work shall be subject to Landlord's approval and acceptance. C. The insurance requirements under Article 15 of this lease and indemnity requirements under Article 21 of this lease shall apply during the construction contemplated in this exhibit, and Tenant shall provide evidence of appropriate insurance coverage prior to beginning any of Tenant's work. Tenant shall provide Landlord with evidence of insurance covering both Tenant and Tenant's contractor against damage to their personal property, as well as against third-party liability and workers' compensation claims arising out of all construction and associated activities. All policies of insurance shall be subject to Landlord's prior approval and shall be endorsed showing Landlord as an additional named insured (or if permitted by Landlord, may provide a waiver of subrogation against Landlord). ARTICLE IV. DESCRIPTION OF TENANT'S WORK A. Signs: Tenant shall pay for all signs and the installation thereof, including the electrical hook-up, subject to the provisions of Section 13.1 of this lease. B. Utilities: All meters or other measuring devices in connection with utility services shall be provided by Tenant. All service deposits shall be made by Tenant at Tenant's expense. C. All work undertaken by Tenant shall be at Tenant's expense (except as specifically provided above with respect to the Tenant Improvement Allowance) and shall not damage the building or any part thereof. Any roof penetration shall be performed by Landlord's roofer or, at Landlord's option, by a bonded roofer approved in advance by Landlord. The work shall be begun only after Landlord has given consent, which consent shall in part be conditioned upon Tenant's plans, to include materials acceptable to Landlord, in order to prevent injury to the roof and to spread the weight of the equipment being installed. Tenant shall also be responsible for obtaining and paying for professional inspections of any structural work (including, without limitation, any roof work or concrete work). 2 31 D. All work performed by or at the behest of Tenant shall be in compliance with all applicable Regulations. 3 32 EXHIBIT "C" TENANT CONSTRUCTION RULES AND REGULATIONS 1. All demolition, removals and other categories of work that may inconvenience other tenants or disturb building operations must be scheduled and performed before or after normal working hours, and the property manager for the Industrial Complex (the "Property Manager") shall be provided with at least twenty-four (24) hours notice prior to proceeding with such work. 2. All structural and floor loading requirements shall be subject to the prior approval of the Industrial Complex's structural engineer. Approval shall be obtained by Tenant and any fees shall be at Tenant's sole expense. 3. All mechanical (HVAC, plumbing and sprinkler) and electrical requirements shall be subject to the prior approval of Landlord's mechanical engineers. When necessary, Property Manager will require engineering and shop drawings, which drawings must be approved by Property Manager before the work is started. Drawings shall be prepared by Tenant and all approvals shall be obtained by Tenant. 4. If the shutdown of risers and mains for electrical, HVAC, sprinkler and/or plumbing work is required, such work shall be supervised by a representative of Landlord at Tenant's sole expense at a time approved in advance by Property Manager. 5. Tenant's general contractor is responsible to do all of the following: (a) Properly supervise construction at the Demised Premises at all times. (b) Police the work at all times, continually keeping the affected space(s) safe and orderly. (c) Maintain the cleanliness and protection of all affected areas. (d) Avoid and prevent the disturbance of other tenants. 6. If Tenant's general contractor is negligent in any of its responsibilities, Tenant shall be charged for the corrective work done by Landlord's personnel. 7. No electrical cords are to be stretched across any walkways or public areas in any manner that would cause any safety hazard. 8. Radios may not be played if the sound can be heard in the Common Area or in other tenant suites. 9. Electrical rooms may not be used to store any materials, fixtures, etc. 10. All sprinkler shutdowns, draining or filling shall be scheduled and coordinated with the Landlord's chief engineer or his delegate. 11. Bracing, soldering or welding shall be scheduled in advance with Property Manager. 12. Dust shall be kept at a minimum to avoid smoke detector activation. 13. If requested by Tenant, Property Manager shall provide space in the parking lot at a location to be determined by Landlord for a trash and debris bin during construction of the tenant improvements. 14. Damage to any pre-installed fixtures (e.g., water fountains, sinks, lights, commodes, signage, etc.) shall be repaired at Tenant's sole expense. 15. Tenant's general contractor shall coordinate the keying schedule, Tenant's key requirements and cylinder installation with Landlord's designated locksmith. 16. Where appropriate, Tenant shall submit to Property Manager a final "as-built" set of drawings showing all items of work in full detail. "As-builts" shall be sepias or vellums. 1 33 17. Throughout the construction period and upon conclusion of the work, Tenant's general contractor shall cause the work areas and all other affected areas to be clean and free of debris. 2 34 EXHIBIT "D" RENEWAL OPTION Tenant shall have the right to renew the term of this Lease for one (1) five (5) year term upon prior written notice ("Tenant's Election Notice") to Landlord given not sooner than fifteen (15) months nor later than four (4) months prior to the expiration of the initial term of this Lease; provided that at the time Tenant gives such notice to Landlord and for the remainder of the initial term of this Lease (i) this Lease has not been assigned and Tenant continues to occupy at least eighty percent (80%) of the rentable area of the Demised Premises, and (ii) Tenant is not in default hereunder. The parties shall document such renewal by executing an amendment to this Lease. During the renewal term, the provisions of this Lease, as it may be amended in writing prior to the date of the commencement of such renewal term, shall continue in effect except that (a) Tenant shall occupy the Demised Premises in its then "AS IS" condition, (b) there shall be no abatement of rent, nor shall there be credit or allowances given to Tenant for improvements to the Demised Premises, (c) there shall be no further option to extend the Lease Term, and (d) the minimum guaranteed rental will be an amount equal to whatever monthly rental (plus whatever periodic adjustments) Landlord is then quoting to prospective tenants for new leases of comparable space in the Industrial Complex for a comparable term (as confirmed by written statement to Tenant by a representative of Landlord), or if no comparable space exists in the Industrial Complex, then one hundred percent (100%) of the projected prevailing market rate of rent for comparable space with comparable finish-out in comparable space within the City of Campbell, California, as of the expiration of the initial Lease Term of this Lease (as confirmed by written statement to Tenant by a written representative of Landlord). Notwithstanding the above provisions to the contrary, in no event will the adjusted monthly minimum guaranteed rental for the option period be lower than the monthly minimum guaranteed rental for the immediately preceding period. It is understood and agreed that Tenant's submittal of Tenant's Election Notice shall bind Tenant to a five (5) year extension of this Lease. *** Confidential treatment requested. 1 EX-10.11 13 DALLAS GALLERIA LEASE 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.11 DALLAS GALLERIA LEASE BETWEEN DALLAS GALLERIA LIMITED, AS "LANDLORD" AND LBE TECHNOLOGIES, INC., AS "TENANT" d/b/a NASCAR SILICON MOTOR SPEEDWAY TENANT'S ADDRESS: LBE Technologies, Inc. 10401 Bubb Road Cupertino, CA 95014 GUARANTOR'S ADDRESS: N/A LANDLORD'S ADDRESS: Dallas Galleria Limited c/o Hines Interests Limited Partnership 2800 Post Oak Boulevard Houston, TX 77056-6110 ATTENTION: Senior Vice-President - Retail Development Group With a copy to: Dallas Galleria Limited c/o Hines Interests Limited Partnership 13355 Noel Road, Suite 250 Dallas, Texas 75240-6603 ATTENTION: Retail Property Management i 2 INDEX TO DALLAS GALLERIA LEASE ARTICLE I - PREMISES.......................................................... 1 Section 1.1 Demised Premises............................................. 1 ARTICLE II -- TERM OF LEASE................................................... 3 Section 2.1 Term......................................................... 3 Section 2.2 Commencement of Term......................................... 3 Section 2.3 Occupancy Date............................................... 4 ARTICLE III - RENT............................................................ 4 Section 3.1 Minimum Rent................................................. 4 Section 3.2 Percentage Rent.............................................. 4 Section 3.3 Quarterly Payments........................................... 5 Section 3.4 Quarterly Payment Dates...................................... 5 Section 3.5 Lease Year................................................... 6 Section 3.6 Adjustment for Actual Percentage Rent........................ 6 Section 3.7 Gross Sales.................................................. 7 Section 3.8 Monthly and Annual Statements................................ 9 Section 3.9 Audits by Landlord........................................... 9 Section 3.10 Place and Manner of Payment.................................. 10 Section 3.11 Landlord/Tenant Relationship................................. 10 ARTICLE IV -- CONSTRUCTION WORK............................................... 11 Section 4.1 Landlord's Construction...................................... 11 Section 4.2 Tenant's Construction........................................ 11 Section 4.3 Timely Performance by Tenant................................. 12 Section 4.4 Barricade Graphics........................................... 12 ARTICLE V - USE OF PREMISES................................................... 13 Section 5.1 Use of Premises.............................................. 13 Section 5.2 Covenants of Tenant Regarding Use............................ 13 Section 5.3 Tenant Signs................................................. 17 Section 5.4 Assignment or Subletting..................................... 18 Section 5.5 Cost of Assignment or Subletting............................. 20 ARTICLE VI -- PARKING FACILITIES.............................................. 20 Section 6.1 Parking Facilities........................................... 20 Section 6.2 Maintenance of Parking Facilities............................ 21 Section 6.3 Parking Designation.......................................... 21 Section 6.4 Tenant Compliance with Parking Rules......................... 22 Section 6.5 Employee Parking............................................. 22 Section 6.6 Temporary Closing............................................ 22 Section 6.7 Nonexclusivity of Parking.................................... 23 Section 6.8 Floor Space Definition....................................... 23 ARTICLE VII - COMMON AREAS ................................................... 23
ii 3 Section 7.1 Common Areas Definition...................................... 23 Section 7.2 Maintenance of Common Areas.................................. 24 ARTICLE VIII -- CHARGES FOR AND MAINTENANCE OF COMMON AREAS................... 25 Section 8.1 Shopping Center Operating Expense............................ 25 Section 8.2 Mall HVAC Charge............................................. 27 Section 8.3 Tenant's Share of Parking Expense............................ 28 Section 8.4 Tenant's Share of Shopping Center Operating Expenses......... 30 Section 8.5 Payment of Operating Expense................................. 31 Section 8.6 Tenant's Audit Right......................................... 31 ARTICLE IX -- UTILITIES ...................................................... 32 Section 9.1 Tenant Payment for Utilities................................. 32 Section 9.2 Central System............................................... 33 ARTICLE X - MAINTENANCE OF SHOPPING CENTER AND DEMISED PREMISES............... 33 Section 10.1 Landlord's Obligations....................................... 33 Section 10.2 Tenant's Obligations......................................... 34 Section 10.3 No Change to Demised Premises................................ 35 Section 10.4 Fixtures..................................................... 35 Section 10.5 Surrender of Demised Premises................................ 36 ARTICLE XI -- TAXES........................................................... 36 Section 11.1 Payment Before Delinquency................................... 36 Section 11.2 Separate Assessments......................................... 37 Section 11.3 Tenant Renders Tenant Improvements........................... 37 Section 11.4 Parking Taxes................................................ 38 Section 11.5 Other Taxes.................................................. 38 Section 11.6 Monthly Payments and Year End Adjustments.................... 38 Section 11.7 Pro Rata Adjustment for Partial Years........................ 39 ARTICLE XII - INDEMNITY AND LIABILITY INSURANCE............................... 39 Section 12.1 Tenant's Indemnity and Release Agreement..................... 39 Section 12.2 Tenant's Liability Insurance................................. 41 Section 12.3 Tenant's Waiver and Release of Claims for Tenant's Property.. 41 Section 12.4 Release of Landlord Liability for Acts of Adjoining Tenants.. 42 Section 12.5 Worker's Compensation Insurance.............................. 43 ARTICLE XIII -- CASUALTY INSURANCE............................................ 43 Section 13.1 Landlord's Insurance......................................... 43 Section 13.2 Tenant Insurance............................................. 43 Section 13.3 Waiver of Subrogation........................................ 44 Section 13.4 Payment of Premiums.......................................... 44 ARTICLE XIV -- DAMAGE CLAUSE.................................................. 45 Section 14.1 Partial Damage............................................... 45 Section 14.2 Substantial Damage........................................... 45 Section 14.3 Termination for Damage....................................... 46
iii 4 Section 14.4 Abatement of Rent When Damage Interferes..................... 46 Section 14.5 Effect of Termination for Damage............................. 47 Section 14.6 Definitions of "Partial Damage" and "Substantial Damage"..... 47 Section 14.7 Other Damage................................................. 47 ARTICLE XV -- EMINENT DOMAIN.................................................. 48 Section 15.1 Effect of a Taking........................................... 48 Section 15.2 Right to Receive Awards...................................... 48 Section 15.3 Abatement of Rent............................................ 49 Section 15.4 Taking of Other Portions..................................... 49 ARTICLE XVI - MISCELLANEOUS COVENANTS OF TENANT............................... 49 Section 16.1 Landlord's Right to Inspect.................................. 49 Section 16.2 Access to Show Premises...................................... 50 Section 16.3 Promotional Programs......................................... 50 Section 16.4 Cooperative Promotional Opportunities........................ 51 Section 16.5 Grand Re-Opening Promotion................................... 51 Section 16.6 Tenant Certificates.......................................... 51 Section 16.7 Curing Landlord Defaults..................................... 52 Section 16.8 Obligations of a Mortgagee................................... 53 Section 16.9 Discharge of Mechanic's and Materialman's Liens.............. 53 Section 16.10 Recording Prohibited......................................... 54 Section 16.11 Force Majeure................................................ 54 Section 16.12 Holding Over................................................. 55 Section 16.13 Interest on Amount Past Due.................................. 55 Section 16.14 No Termination............................................... 56 Section 16.15 Ratings of Insurance Companies............................... 56 Section 16.16 Tenant Records............................................... 56 Section 16.17 Landlord Not Liable for Interest............................. 57 Section 16.18 Reimbursement for Legal Expenses............................. 57 ARTICLE XVII -- LANDLORD'S COVENANT OF QUIET ENJOYMENT AND LIMITATIONS OF LIABILITY.................................................... 57 Section 17.1 Peaceful Enjoyment........................................... 57 Section 17.2 No Personal Liability of Landlord............................ 58 Section 17.3 Landlord and Tenant Not Liable for Special Damages........... 58 Section 17.4 Independent Obligations/Curing Landlord Defaults............. 58 ARTICLE XVIII -- LANDLORD'S REMEDIES.......................................... 59 Section 18.1 Events of Default............................................ 59 Section 18.2 Landlord Remedies............................................ 60 Section 18.3 Percentage Rent After Entry by Landlord...................... 62 Section 18.4 Lease Guaranty............................................... 62 Section 18.5 No Waiver.................................................... 62 Section 18.6 Security Interest............................................ 62 ARTICLE XIX - NOTICE.......................................................... 62 Section 19.1 Address and Manner of Giving Notice.......................... 62
iv 5 ARTICLE XX - MISCELLANEOUS PROVISIONS REGARDING LEASE......................... 63 Section 20.1 Governing Law................................................ 63 Section 20.2 Representation by Corporate Tenant........................... 64 Section 20.3 No Accord and Satisfaction................................... 64 Section 20.4 Headings and Index........................................... 64 Section 20.5 Partial Invalidity........................................... 64 Section 20.6 Successors and Assigns....................................... 64 Section 20.7 When Lease Becomes Binding................................... 65 Section 20.8 Other Leases and Tenants..................................... 65 Section 20.9 Attorneys' Fees.............................................. 66 Section 20.10 Third Party Contracts........................................ 66 Section 20.11 No Broker.................................................... 66 Section 20.12 Security Deposit............................................. 66 Section 20.13 Time of the Essence.......................................... 67 ARTICLE XXI - LEASE SUPERIOR OR SUBORDINATE TO MORTGAGES...................... 67 Section 21.1 Lease Superior or Subordinate................................ 67 Section 21.2 Attornment by Tenant......................................... 67 ARTICLE XXII - ADDITIONAL TERMS............................................... 68 Section 22.1 "Galleria" Servicemark....................................... 68 Section 22.2 Construction Allowance....................................... 68 Section 22.3 Repayment of Construction Allowance.......................... 69 Section 22.4 Satellite Dish............................................... 70
v 6 DALLAS GALLERIA CROSS REFERENCES 10 CERTAIN DEFINED TERMS
SECTION IN WHICH TERM DEFINITION APPEARS - ---- ------------------ Additional Rent .................................................. 3.10 Common Areas ..................................................... 7.1 Commencement Date ................................................ 2.2 Complex .......................................................... 1.1 Demised Premise .................................................. 1.1 Development ...................................................... 1.1 Floor Space ...................................................... 6.8 Force Majeure .................................................... 16.11 Full Replacement Cost ............................................ 13.1 Gross Sales ...................................................... 3.7 Landlord's Mortgagee ............................................. 21.1 Lease Year ....................................................... 3.5 Major Retail Store ............................................... 1.1 Majority Shareholder ............................................. 5.4 Mall Building .................................................... 1.1 Mall HVAC Charge ................................................. 8.2 Merchant's Association ........................................... 16.3 Minimum Rent ..................................................... 3.1 Parking Facility Taxes ........................................... 11.2 Partial Damage ................................................... 14.6 Percentage Rent .................................................. 3.2 Promotion Charge ................................................. 16.3 Quarterly Payment Date ........................................... 3.4 Security Deposit ................................................. 20.13 Shopping Center .................................................. 1.1 Shopping Center Operating Expense ................................ 8.1 Shopping Center Site ............................................. 1.1 Substantial Damage ............................................... 14.6 Tenant Improvements .............................................. 11.3 Voting Stock ..................................................... 5.4
vi 7 DALLAS GALLERIA LIST OF EXHIBITS EXHIBIT A Plan of Demised Premises EXHIBIT A-1 Location of Demised Premises in Mall Building Floor Plan EXHIBIT A-2 Description of Shopping Center Site EXHIBIT A-3 Description of Complex Site EXHIBIT A-4 Complex Site Plan EXHIBIT B Description of Landlord's Work EXHIBIT C Description of Tenant's Work EXHIBIT C-1 Design Criteria for Tenant's Mechanical and Electrical Work EXHIBIT C-1(a) Vertical Penetrations EXHIBIT C-1(b) Suspension Criteria EXHIBIT C-2 Design Criteria for Tenant's Architectural Standards and Tenant's Signage Criteria EXHIBIT D Central Heating and Cooling Rate Schedule EXHIBIT E Landlord's Electrical Work EXHIBIT F UCC-1 Financing Statement(s) EXHIBIT S Satellite Agreement vii 8 THIS INDENTURE OF LEASE (the "Lease") executed as of the 22nd day of May, 1998 by and between DALLAS GALLERIA LIMITED, a Texas limited partnership (hereinafter referred to as "Landlord"), and LBE TECHNOLOGIES, INC., a corporation duly organized and existing according to the laws of the State of California (hereinafter referred to as "Tenant"), doing business as Nascar Silicon Motor Speedway. WITNESSETH: ARTICLE I -- PREMISES SECTION 1.1 DEMISED PREMISES. The Landlord hereby demises and leases to the Tenant, and the Tenant hereby leases from the Landlord, upon and subject to the terms and provisions of this Lease (which term is used herein shall include all Exhibits attached hereto or referred to herein), the commercial space (sometimes hereinafter referred to as the "Demised Premises") depicted on Exhibit A hereto annexed and made a part hereof. Said Demised Premises contain approximately six thousand six hundred fifty-one (6,651) square feet of floor area (measuring from (i) the center of the two side demising walls and (ii) the front lease line of the Demised Premises, through the rear wall), commonly known as suite 3800 on level 3 as shown on Exhibit A-1 attached hereto of the multi-level structure (the "Mall Building"), which Landlord has constructed on a parcel of land (the "Shopping Center Site") located in Dallas, Dallas County, Texas. The metes and bounds description of the Shopping Center Site is set forth on Exhibit A-2 annexed hereto and made a part hereof. In the event, within sixty (60) days after commencement of the term of this Lease, either party hereto finds that the actual floor area of the Demised Premises differs by ten (10) square feet or more from the floor area set forth hereinabove and such difference is confirmed by Landlord's independent architect (which confirmation shall be binding upon Landlord and Tenant absent bad faith or manifest error on the part of Landlord's architect), Landlord and Tenant shall execute an amendment to this Lease setting forth the actual floor area, and proportionately changing Tenant's monetary obligations, including Minimum Rent, based upon the ratio of the actual floor area of the Demised Premises to the floor area set forth hereinabove. The term "Mall Building" shall not include any Major Retail Store (as hereinafter defined) or other structures 1 9 attached thereto. The term "Shopping Center" as used herein shall mean the Shopping Center Site and the improvements constructed thereon (including without limitation the Mall Building). The term "Major Retail Store" as used herein shall be deemed to mean any retail tenant of the Shopping Center occupying at least 75,000 square feet of floor space. The Shopping Center Site is part of a larger tract of land (the "Complex Site") upon which other improvements have been constructed, or are contemplated, in addition to the Shopping Center. The Complex Site is more particularly described in Exhibit A-3 and is shown on Exhibit A-4 (the Complex Site Plan), both of which are hereto annexed and made a part hereof. The Complex Site and the improvements now or hereafter erected thereon are herein referred to as the "Complex". The purpose of attaching Exhibit A-1 hereto is to show the approximate location of the Demised Premises within the Mall Building and certain other improvements constituting part of the Shopping Center, but Landlord hereby reserves the unrestricted right at any time to relocate, modify and add to the parking areas, common areas and other facilities provided for the Shopping Center and specifically hereby reserves the unrestricted right at any time to reduce or expand the Mall Building and the Shopping Center (and the Shopping Center Site) to exclude or include land and improvements. With respect to expansion of the Complex, the same shall be accomplished by execution and recordation by Landlord of an annexation supplement, in the office of the County Clerk of Dallas County, Texas at which time "Complex" and "Complex Site", as used herein shall include the land and improvements (then or thereafter erected thereon) annexed pursuant to said instrument. Landlord agrees not to place any kiosks within an area in front of the Demised Premises, determined as if extending the side demising walls fifteen feet (15') in front of the Demised Premises. Landlord reserves the right to place a kiosk in any other location. Tenant shall receive by virtue of this Lease only the rights and privileges herein specifically granted and/or leased unto Tenant, and Landlord specifically excepts and reserves unto itself, without limiting the generality of the foregoing, (i) the exclusive use of the roof (including, without limitation, the installation of antennae, signs, displays, equipment and/or other objects, as well as the right to construct additional stories if Landlord so elects), exterior walls (other than store fronts) and the area above and below the Demised Premises and (ii) the 2 10 right to place or to permit to be placed in the Demised Premises (above or inside ceilings, below floors or next to columns), in such manner as to reduce to a minimum any interference with Tenant's use of the Demised Premises, utility lines, pipes, and the like, to serve the Common Area or premises other than the Demised Premises, and to replace, maintain and repair, in such a manner as to minimize to the extent possible any interference with Tenant's use of the Demised Premises, such utility lines, pipes and the like, in, over and upon the Demised Premises as may have been installed therein. ARTICLE 11 -- TERM OF LEASE SECTION 2.1 TERM. TO HAVE AND TO HOLD the Demised Premises unto Tenant, subject to matters of record affecting the Shopping Center Site and the terms, provisions and conditions of this Lease for the term of sixty (60) calendar months (plus the partial month, if any) immediately following the commencement of the term hereof. SECTION 2.2 COMMENCEMENT OF TERM. The term hereof shall commence on that date (the "Commencement Date") which is the earlier to occur of: (a) one hundred twenty (120) days from the first day on which the Demised Premises are ready for occupancy (in accordance with the provisions of Section 2.3 hereof) by Tenant or (b) the opening by Tenant of its business in the Demised Premises; and the term hereof shall end on the last day of the sixtieth (60th) full calendar month (exclusive of any partial month) after such Commencement Date. From and after the execution of this Lease until the Commencement Date, all the terms and conditions of this Lease shall be applicable to Landlord and Tenant (and any entry into the Demised Premises by Tenant shall be subject to the terms hereof), except Tenant's obligations to (i) pay Minimum Rent and Additional Rent and (ii) conduct business from the Demised Premises. *** Confidential treatment requested. 3 11 SECTION 2.3 OCCUPANCY DATE. The Demised Premises shall be deemed to be ready for occupancy by the Tenant on the date Landlord sends to Tenant a notice that the Demised Premises are ready for occupancy by Tenant (subject to Tenant completing Tenant's work described in Section 4.2 hereof). ARTICLE III -- RENT SECTION 3.1 MINIMUM RENT. Tenant covenants and agrees to pay to Landlord, in the manner and at the place specified in Section 3.10 hereof, minimum rent ("Minimum Rent") for the Demised Premises at the rate of (a) [***] per calendar month during calendar months [***] through [***] following the Commencement Date of this Lease, plus proportionately for any partial calendar month at the commencement of the term; and (b) [***] per calendar month commencing with the [***] calendar month following the Commencement Date and continuing through the remainder of the term of this Lease, and proportionately at such rate for any partial month, which Minimum Rent shall be paid monthly in advance, without prior notice or demand, on the first day of each and every calendar month during the term hereof. The term "Minimum Rent", wherever such term is used herein, shall be deemed to mean the Minimum Rent above specified, less any abatements or reductions of said Minimum Rent which may result during the applicable period by reason of the application of Sections 8.2, 14.4 or 15.3 hereof, and it is hereby expressly agreed that said Sections 8.2, 14.4 and 15.3 of this Lease set forth the only instances in which Tenant shall have any right to reduce or abate rentals due hereunder. In no event shall Tenant have any right to apply any offset or counterclaim to Minimum Rent, Percentage Rent or any Additional Rent due hereunder. SECTION 3.2 PERCENTAGE RENT. In addition to Minimum Rent, and as part of the total rent to be paid by Tenant to Landlord, Tenant covenants and agrees to pay to Landlord, as percentage rent ("Percentage *** Confidential treatment requested. 4 12 Rent") for each "Lease Year" (as that term is defined in Section 3.5 hereof) of the term hereof, a sum equal to the amount, if any, by which [***] of gross sales (as defined in Section 3.7 hereof) are in excess of [***] during such Lease Year. Computation of the amount of Percentage Rent specified herein shall be made separately with regard to each Lease Year of the term hereof, it being understood and agreed that the calculation of the gross sales of any Lease Year and the Percentage Rent due thereon shall have no bearing on, or connection with, the gross sales of any other Lease Year of the term hereof. Tenant shall pay the final Lease Year's Percentage Rent remaining to be paid, if any, thirty (30) days prior to the end of the term of this Lease based upon gross sales to date with an estimate of gross sales for the final month. Tenant's obligation to pay Percentage Rent for the final Lease Year of the term hereof shall survive the expiration or termination of this Lease. SECTION 3.3 QUARTERLY PAYMENTS. Tenant shall pay estimated Percentage Rent quarterly with respect to each Lease Year on or before each "Quarterly Payment Date" (as that term is defined in Section 3.4 hereof). The estimated amount to be paid on any Quarterly Payment Date shall be a sum equal to the amount, if any, by which [***] of gross sales for the three calendar months (and the partial month, if any, other than the partial month in the same calendar month as the Quarterly Payment Date) immediately preceding said Quarterly Payment Date shall exceed the Minimum Rent to be paid by Tenant with respect to such quarter-annual period. The partial month, if any, immediately following the Commencement Date shall be considered a part of the quarter-annual period preceding the first Quarterly Payment Date. SECTION 3.4 QUARTERLY PAYMENT DATES. The term "Quarterly Payment Date" is hereby defined to mean the twentieth (20th) day of the fourth (4th), seventh (7th) and tenth (10th) full calendar months during each Lease Year of the term of this Lease. For example, (i) if the term of this Lease commenced on January 1, the quarterly payments of Percentage Rent would be due on the 20th day of each *** Confidential treatment requested. 5 13 April, July and October or (ii) if the term of this Lease commenced on August 15, the quarterly payments of Percentage Rent would be due on the 20th day of each December, March and June. In each example, an adjustment for actual gross sales during the Lease Year would be made in accordance with Section 3.6. SECTION 3.5 LEASE YEAR. The term "Lease Year" is hereby defined to mean each twelve (12) full calendar month period during the term hereof commencing on the first day of the first calendar month immediately following the Commencement Date and on each anniversary thereof; provided, however, that the first Lease Year shall begin on the Commencement Date and will end on the last day of the twelfth (12th) full calendar month thereafter. SECTION 3.6 ADJUSTMENT FOR ACTUAL PERCENTAGE RENT. Within forty-five (45) days after the end of each Lease Year of the term of this Lease, Tenant shall deliver to Landlord (i) a month-by-month statement of gross sales for the preceding Lease Year as described in Section 3.8, (ii) a sum of money equal to the amount of unpaid Percentage Rent due with respect to such preceding Lease Year, and (iii) if the amount of Percentage Rent paid on Quarterly Payment Dates for the preceding Lease Year exceeds the amount of Percentage Rent due for such Lease Year, a statement detailing the amount of Percentage Rent due and the amount of excess payments made by Tenant. Upon receipt of the statements required by this Section 3.6 or Section 3.8, after any review of the computations contained therein, Landlord shall (i) bill Tenant for any deficiency or (ii) refund to Tenant the amount, if any, which has been paid by Tenant to Landlord as Percentage Rent in excess of the Percentage Rent due under the provisions of Section 3.2. If Landlord's computation of Percentage Rent reflects that the entire Percentage Rent has not been paid, Tenant shall pay any remaining Percentage Rent due and payable, together with interest thereon from the date or dates due until paid at the rate provided in Section 16.13 hereof, as reflected by the bill or statement submitted to Tenant by Landlord, within twenty (20) days after receipt of such statement. 6 14 SECTION 3.7 GROSS SALES. The term "gross sales" wherever used herein is hereby defined to mean the dollar aggregate of: (a) The sales prices of all goods, wares and merchandise sold, and the charges for all services performed, by the Tenant to the extent originating solely in, at, on or from the Demised Premises, whether made for cash, on credit, or otherwise, without reserve or deduction for inability or failure to collect, including but not limited to such sales and services (i) where the orders therefor originate at, or are accepted by the Tenant in, the Demised Premises whether delivery or performance thereof is made from or at any place other than the Demised Premises; (ii) pursuant to mail, telegraph, telephone or other similar orders received or filled at or from the Demised Premises; (iii) by means of mechanical and other vending devices in the Demised Premises; (iv) as a result of transactions originating upon the Demised Premises; and/or (v) which the Tenant in the normal and customary course of its operations would credit or attribute to its business upon the Demised Premises, or any part or parts thereof; and (b) All moneys or other things of value received by the Tenant from its operations at, in or from the Demised Premises which are neither included in nor excluded from gross sales by the other provisions of this definition. The term "gross sales" shall not include: (a) the exchange of merchandise between stores of Tenant where such exchanges are made solely for the convenient operation of Tenant's business and not for the purpose of consummating a sale which has theretofore been made at, in, on or from the Demised Premises and/or for the purpose of depriving Landlord of the benefit of a sale which otherwise would have been made at, in, on or from the Demised Premises; or (b) returns to shippers or manufacturers; or (c) sales of fixtures after use thereof in the conduct of the Tenant's business in the Demised Premises; or (d) the sales price of all merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon, or (e) sums and credits received in settlement of claims for loss or damage to merchandise or other personal property or fixtures of Tenant; or (f) the consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee; or (g) sales taxes, so-called luxury taxes, excise taxes, gross receipt taxes and other taxes not or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of the merchandise or services and collected from customers or included in the retail selling price; or (h) receipts from public telephones and vending machines; or (i) any fees, costs or charges deducted by third party credit card issuers (including, but not limited to, MasterCard and Visa) 7 15 whether based on a percentage or flat rate, not to exceed [***] of Tenant's gross sales in any given Lease Year; or (j) finance, interest, service or carrying charges or other charges, however denominated, paid by customers for extension of credit on sales and where not included in the merchandise sales price; or (k) sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail; or (l) sales by Tenant to its employees at a discounted price not to exceed [***] of Tenant's gross sales in any one Lease Year; or (m) revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers; or (n) Tenant's accounts receivable, not to exceed [***] of gross sales per Lease Year, which have been determined to be uncollectible for federal income tax purposes during the applicable lease year, provided, however, that if such accounts are actually collected in a later lease year, the amount shall he included in gross sales for such later lease year; or (o) rents, subrents or other consideration received in connection with an assignment, sublease, license, concession or other transfer of any portion of the store (however, gross sales of any such transferee shall be included), including license fees otherwise payable by Tenant in connection with a third party license agreement; or (p) amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in the store; or (q) discounts given for promotional coupons that are redeemed from time to time; or (r) gift certificates until such time as the certificates are redeemed; or (s) amounts received in connection with promotional activities not located in the Shopping Center; or (t) amounts received by Tenant in connection with its Construction Allowance pursuant to Section 22.2 of the Lease; and there shall be deducted from gross sales: (i) cash or credit refunds made upon transactions included within gross sales, not exceeding the selling price of merchandise returned by the purchaser and accepted by the Tenant, and (ii) the amount of any city, county, state or federal sales, luxury or excise tax on such sales which is both (a) added to the selling price or absorbed therein and (b) paid to the taxing authority by the Tenant. The term "gross sales" shall also include such gross sales made by any sublessee, concessionaire, licensee or otherwise at, in, on or from the Demised Premises; and such gross *** Confidential treatment requested. 8 16 sales made by sublessees, concessionaires, licensees or otherwise shall be included in the reports submitted by Tenant as herein provided. SECTION 3.8 MONTHLY AND ANNUAL STATEMENTS. Tenant agrees to deliver to Landlord, within twenty (20) days after the end of each month during the term hereof, a complete statement signed by an agent of the Tenant showing gross sales for the preceding month. Within forty-five (45) days after the end of each Lease Year, Tenant shall deliver to Landlord a statement of the gross sales of the Tenant made at, in, on and/or from the Demised Premises for such Lease Year, certified by a duly authorized officer of Tenant. If Tenant shall fail to furnish to Landlord the annual certified statement required by this Section 3.8 within forty-five (45) days after the end of each Lease Year or the monthly statement required by this Section 3.8 on the due date thereof, Landlord shall give Tenant notice thereof. If Tenant fails to supply said statements within twenty (20) days of such notice, then in addition to the remedies available to Landlord for default by Tenant hereunder, and regardless whether the same constitutes a default by Tenant hereunder, Landlord shall have the right to perform (or cause to be performed by an independent auditing firm) an audit of Tenant's books and records to ascertain the information required to be contained in the statement to be provided by Tenant. Such audit shall be conducted at the sole cost and expense of Tenant; and Tenant shall pay to Landlord within ten (1O) days of demand therefor the cost of such audit as Additional Rent. SECTION 3.9 AUDITS BY LANDLORD. Landlord shall have the right, upon not less than twenty (20) days prior written notice to Tenant, at any time within thirty-six (36) months after the close of each Lease Year of the term hereof, to audit all of the books of account, documents, records, returns, papers and files of the Tenant relating to gross sales for such Lease Year, and the Tenant, on written request of the Landlord, shall make all such matters available for such examination at either the principal office of the Tenant or the Demised Premises. If the Landlord shall have such an audit made for any Lease Year and the gross sales shown by the Tenant's statement for such Lease Year should 9 17 be found to be understated, Tenant shall pay any rent deficiency revealed thereby, plus interest on the amount past due from the date or dates due until paid at the rate provided in Section 16.13 of this Lease within [***] days of demand therefor. In addition, if gross sales shall be found to be understated by [***] or more, then Tenant shall pay to Landlord the cost of such audit. If such audit establishes an overpayment of Percentage Rent by Tenant, then Landlord shall refund to Tenant the amount of such overpayment. Such examination and audits shall be made, if at all, by an independent auditor designated by the Landlord from time to time. Such auditor shall be compensated at usual and customary rates and shall not be compensated on a contingency basis. It is understood and agreed that in the case of an audit pursuant to Section 3.8 or pursuant to this Section 3.9, any payments or adjustments in Percentage Rent to be made shall be accomplished on the basis of the audit results absent manifest error. SECTION 3.10 PLACE AND MANNER OF PAYMENT. Tenant shall make, without the necessity of prior demand therefor, all payments due from Tenant to Landlord pursuant to the provisions of this Lease, whether under this Article III, or otherwise, at Landlord's office in Dallas, Texas (the address of which is set forth on the cover page of this Lease), or such other place as Landlord shall from time to time designate in writing. All sums due and payable by Tenant except for Minimum Rent and Percentage Rent shall be collectively referred to herein as "Additional Rent". All statements deliverable by Tenant to Landlord under this Lease shall be delivered to the place where rent is then payable, or at such other place or places as Landlord may from time to time direct by written notice to Tenant pursuant to Article XIX hereof. SECTION 3.11 LANDLORD/TENANT RELATIONSHIP. It is further understood and agreed that the Landlord and the Tenant shall in no event be construed or held to be partners, joint venturers or associates of the other in the conduct of each party's business, nor shall Landlord be liable for any debts incurred by the Tenant in the conduct of Tenant's business; but it is understood and agreed that the relationship is and at all times shall remain that of landlord and tenant. *** Confidential treatment requested. 10 18 ARTICLE IV -- CONSTRUCTION WORK SECTION 4.1 LANDLORD'S CONSTRUCTION. Landlord has constructed the following improvements: (a) the exterior of the Mall Building and a minimum of 300,000 square feet of total Floor Space (as defined in Section 6.8 of this Lease) in the Mall Building, and (b) parking facilities for the Shopping Center as described in Article VI hereof. That portion of the Demised Premises identified as "Landlord's Work" has been constructed substantially in accordance with the Outline Specifications contained in Exhibit B annexed hereto. SECTION 4.2 TENANT'S CONSTRUCTION. Landlord and Tenant hereby acknowledge and agree that Tenant is leasing previously built and occupied premises. Tenant has been in occupancy of and made a complete inspection of the Demised Premises, has found them to be suitable for their intended purposes and agrees that it will take the Demised Premises in an "AS-IS" condition on the date hereof without any representations or warranties, expressed or implied, of any kind whatsoever, including, without limitation, fitness for a particular purpose or tenantability, and without recourse to Landlord. Promptly after the Demised Premises are ready for Tenant's occupancy (as defined in Section 2.3), Tenant shall perform at its own cost and expense all the Tenant's work set forth in Exhibit C hereto annexed and made a part hereof, shall equip the Demised Premises with trade fixtures and all personal property necessary or proper for the operation of Tenant's business, and shall, subject to the provisions of this Lease, open for business as soon thereafter as possible (but, in any event, shall complete such work and open for business by the Commencement Date). All such activities of the Tenant shall not interfere with (i) any construction work of Landlord, (ii) the management and operation of the Shopping Center, or (iii) the use of the Mall Building by other tenants or occupants. Tenant hereby specifically agrees that any construction or remodeling of the Demised Premises shall comply with the applicable portions of Landlord's design and construction criteria set forth in Exhibits C, C-1, and C-2 attached hereto and shall be subject to Landlord's prior written approval. 11 19 Notwithstanding anything to the contrary contained in this Lease and the Exhibits attached hereto, in the event of a conflict between the provisions of this Lease and/or the Exhibits and Tenant's plans and specifications approved by Landlord ("Tenant's Approved Plans") for Tenant's Work within the Demised Premises, Tenant's Approved Plans shall control. SECTION 4.3 TIMELY PERFORMANCE BY TENANT. Tenant recognizes that it is imperative that the Demised Premises be fully fixtured and open for business on the Commencement Date. Tenant agrees to furnish to Landlord (i) the name of Tenant's architect and/or store designer for approval no later than five (5) days after the execution of this Lease, and (ii) complete plans and specifications for approval for the work to be performed by Tenant in accordance with the provisions of Exhibit C, attached hereto and made a part hereof, within twenty (20) days after the execution of this Lease. If Tenant shall not timely perform its obligations pursuant to (i) or (ii) above, Landlord, in addition to all other remedies available to it, shall have the right to terminate this Lease after giving Tenant twenty (20) days' written notice and opportunity to perform such obligations. Furthermore, if Tenant shall fail timely to perform its obligations under Section 4.2 and the Demised Premises shall not open for business by the Commencement Date, Tenant agrees to pay to Landlord, as liquidated damages therefor and not as a penalty, for each calendar day commencing on the date set forth in Section 2.2 to the date Tenant shall open for business to the public, the greater of the following: (i) [***] of the monthly installment of Minimum Rent (as specified in Section 3.1), or (ii) [***] The foregoing provision with respect to liquidated damages shall not alter Tenant's obligation to open the Demised Premises for business by the Commencement Date. SECTION 4.4 BARRICADE GRAPHICS. Upon the construction of Tenant's barricade, Landlord shall place or cause to be placed on the construction barricade or storefront of the Demised Premises a sign identifying Tenant and Tenant's expected store opening date, and including Tenant's logo wherever possible. In consideration of such work undertaken by Landlord on Tenant's behalf, Tenant shall pay to *** Confidential treatment requested. 12 20 Landlord with Tenant's initial payment of Minimum Rent, a one-time "Graphics Fee" of [***]. ARTICLE V -- USE OF PREMISES SECTION 5.1 USE OF PREMISES. It is understood, and Tenant so agrees, that at all times during the term of this Lease the Demised Premises shall be continuously used and occupied by Tenant (i) primarily for the purpose of conducting a simulated automobile racing entertainment center using interactive computer simulators operated by the use of coins, tokens or otherwise, provided, however, at no time shall Tenant devote less than seventy percent (70%) of the floor area of the Demised Premises for such use, (ii) secondarily for the sale of auto racing and other racing related entertainment merchandise, provided, however, Tenant may not devote more than thirty percent (30%) of the floor area of the Demised Premises for such secondary use and (iii) incidentally for the sale of snack foods, non-alcoholic hot and cold beverages, provided, however, Tenant may not devote more than one hundred (100) square feet of floor space for such incidental use. The Demised Premises shall be used for no other purpose or purposes whatsoever. The Demised Premises shall at all times be and appear to be a Nascar Silicon Motor Speedway or Silicon Motor Speedway entertainment center. SECTION 5.2 COVENANTS OF TENANT REGARDING USE. Tenant further agrees that: (a) Tenant shall always conduct its operations in and from the Demised Premises under its present assumed or trade name or the name "Silicon Motor Speedway", unless Landlord shall otherwise consent in writing, and in such a manner as to maximize Tenant's gross sales from the Demised Premises. Tenant shall carry at all times in the Demised Premises merchandise of sufficient quantity as shall be necessary to maximize gross sales; (b) No auction, fire, distress, liquidation or bankruptcy sales (whether real or fictitious) may be conducted within the Demised Premises without the previous written consent of the Landlord; (c) Tenant shall not use the malls, sidewalks, or other parts of the Shopping Center outside of the Demised Premises (or outside the Tenant's storefront if the storefront is set back from the outer perimeter of the Demised Premises) for the sale or display of any merchandise or signs or for any other business purposes or *** Confidential treatment requested. 13 21 for outdoor public meetings or entertainment without the previous written consent of the Landlord; (d) Tenant shall keep the display windows of the Demised Premises electrically lighted from the opening of the Mall Building for business each day until the Mall Building is closed to the public each day, or if Landlord shall set different hours, then during such shorter or longer hours as Landlord shall so set by notice to Tenant; provided however, that Tenant shall keep such windows lighted during such shorter period as Landlord shall designate in keeping with energy conservation methods or such time periods as may be designated by applicable governmental or utility regulation. If Tenant shall breach the provisions of this subsection (d), Landlord may elect in lieu of exercising any other remedies available to Landlord, to receive from Tenant liquidated damages for each calendar day in which a breach under this subsection shall occur commencing after the second (2nd) breach in any consecutive twelve (12) month period, equal to the sum of [***]. Landlord and Tenant agree that the failure to keep the display windows of the Demised Premises electrically lighted during the hours specified herein will cause great harm to the Shopping Center, that it is difficult to specify exactly the amount of damages resulting therefrom and that the liquidated damages provided for above is a reasonable amount. If Landlord elects to demand liquidated damages for any breach of this Section 5.2, subsection (d), the liquidated damages shall commence to accrue on the first day of the breach (not the first day following the expiration of the grace period for cure, if any). Tenant shall pay such liquidated damages to Landlord within five (5) days of demand therefor and failure timely to pay such sums to Landlord shall constitute a breach of this Lease without further notice; (e) Tenant shall receive and deliver goods and merchandise only in the manner, at such times, and in such areas, as may be designated by Landlord, and in this connection Tenant specifically agrees (i) not to use any loading areas designated exclusively for use by other tenants of the Shopping Center or the Complex, (ii) to use Tenant's best efforts to complete or cause to be completed, all deliveries, loading, unloading and services to the Demised Premises prior to 10 a.m. each day, (iii) to abide by such further reasonable regulations as Landlord shall implement to regulate the activities of tenants of the Shopping Center with respect to deliveries to and servicing of the premises occupied by such tenants, (iv) to reimburse Landlord for any costs of repairs to any part of the Shopping Center necessitated by Tenant's receipt or delivery of goods and merchandise, and (v) not to operate or cause to be operated any "elephant trains" or similar transportation devices; (f) Tenant shall not use, or permit to be used, any sound broadcasting or amplifying device which can be heard outside of the Demised Premises without the prior written consent of Landlord; (g) Tenant shall not sell counterfeit merchandise or alcoholic beverages, or display or sell indecent, sexually explicit or pornographic literature, printed material, video products or merchandise in or from the Demised Premises; (h) Tenant shall not use or permit the use of any portion of the Demised Premises for any unlawful purpose, or use or permit the use of any portion of said Demised Premises as living quarters, sleeping apartments or lodging rooms; (i) Tenant shall not use the Demised Premises for any shooting gallery, flea circus, funeral establishment, automobile showroom or lot, secondhand store (other than antiques), bowling alley, video game (other than racing simulators) or vending machine parlor, pool or billiard establishment, or similar business or activity. *** Confidential treatment requested. 14 22 Notwithstanding anything to the contrary contained in this subparagraph (i), Tenant shall be permitted to display one (1) full size NASCAR stock car in the Demised Premises; (j) Tenant shall not use, operate or maintain the Demised Premises in such manner that any of the rates for any insurance carried by Landlord, or any other owner or occupant of premises in the Shopping Center, shall thereby be increased, unless Tenant shall pay to Landlord, or the affected other owner or occupant of premises in the Shopping Center, an amount equal to any such increase in rates on demand as each premium which shall include such increase shall become due and payable; (k) Tenant shall not (i) perform any act or carry on any practice which may injure the Demised Premises, any other part of the Shopping Center, or the reputation and good will of Landlord and the Shopping Center, (ii) cause any strong, unusual or offensive odors or vapors or (iii) emit noises or sounds which have an adverse effect on the operation of the Shopping Center or interfere with any other tenant's quiet enjoyment of its premises due to intermittence, beat, frequency, shrillness or loudness (including, but without limitation, the use of loudspeakers) and Tenant shall immediately act to reduce such noises or sounds upon Landlord's request, or (iv) create a nuisance or a menace to any other tenant or tenants or other persons in the Shopping Center. Notwithstanding anything to the contrary contained in this paragraph, Tenant shall be permitted to install a video wall, mounted video screen or video panel provided such installation is more than ten feet (10') from the lease line; (l) Recognizing that it is in the interests of both the Tenant and the Landlord to have regulated hours of business for all of the Shopping Center, Tenant agrees that commencing with the date Tenant opens for business in the Demised Premises and continuing throughout the remainder of the term of this Lease, Tenant shall keep the front door(s) to the Demised Premises physically open and shall operate the business conducted within the Demised Premises at such hours and on such days and evenings of the week (including Sundays) as may be determined from time to time by Landlord, excepting only Christmas Day and Thanksgiving Day. Tenant shall also have the right to remain open for business until 2:00 a.m. If Tenant shall breach the provisions of this subsection (1), Landlord may elect, in lieu of exercising any other remedies available to Landlord, to receive from Tenant liquidated damages for each calendar day in which a breach under this subsection (1) shall occur commencing after the second (2nd) breach in any consecutive twelve (12) month period, equal to the greater of the following: (i) [***] of the monthly installment of Minimum Rent (as specified in Section 3.1), or (ii) [***]. Landlord and Tenant agree that the failure to keep the Demised Premises open in accordance with this subsection will cause great harm to the Shopping Center, that it is difficult to specify exactly the amount of damages resulting therefrom and that the liquidated damages provided for above is a reasonable amount. If Landlord elects to demand liquidated damages for any breach of this subsection (1), the liquidated damages shall commence to accrue on the first day of the breach (not the first day following the expiration of the grace period for cure, if any). Tenant shall pay such liquidated damages to Landlord within five (5) days of demand therefor and failure timely to pay such sums to Landlord shall constitute a breach of this Lease without further notice. *** Confidential treatment requested. 15 23 Notwithstanding anything contained in this subsection (1) to the contrary, Tenant may close its business for two (2) days during any consecutive twelve (12) month period for the sole purpose of taking inventory in the Demised Premise; (m) Tenant shall not use any portion of the Demised Premises for storage or other services except as customary for its operations in the Demised Premises in accordance with the uses of the Demised Premises permitted in Section 5.1 of this Lease; (n) Unless otherwise agreed to in writing by Landlord, Tenant shall not display or sell merchandise or allow carts, signs, devices or other objects to be stored or to remain outside the defined exterior walls and permanent doorways or store front of the Demised Premises, even on a temporary basis, and Tenant shall not solicit in any manner in any of the automobile parking and common areas of the Shopping Center or other parts of the Complex; (o) Tenant shall comply with all rules and regulations prescribed by Landlord for the removal of trash from the Demised Premises, including (i) the collection and removal of trash, refuse and garbage from the Demised Premises in a manner approved by Landlord and (ii) storage of such trash in a collecting area approved or designated by Landlord. Tenant shall not permit trash, rubbish, cartons, merchandise or other goods intended for use in the Demised Premises to accumulate in the service corridors, hallways, truck docks or other areas outside of the Demised Premises; and Tenant shall be responsible for insuring that any service corridor immediately adjacent to the Demised Premises is kept clear of all items at all times. Landlord shall have the right to remove and dispose of items in the service corridor, and Tenant shall reimburse Landlord upon demand for the cost of such removal and disposal, in the amount equal to the greater of Landlord's actual cost or One Hundred Dollars ($100.00). Landlord shall not be responsible or liable to Tenant for such removal of any property of Tenant; (p) Tenant shall keep the Demised Premises free of pests and vermin by periodic pest control treatment, which shall be undertaken by Tenant in a manner approved by Landlord; (q) The parties hereto acknowledge that the realization of the benefits of a percentage rent lease is dependent upon Tenant's maximizing its gross sales, and that self-competition is inconsistent with the generation of maximum gross sales and with Tenant's general contribution to the promotion of customer traffic and commerce within the Shopping Center. The parties further acknowledge that the annual Minimum Rent was negotiated together with and giving consideration to the Percentage Rent rate and base sales amount, and that self-competition by Tenant will deprive Landlord of a bargained-for consideration. Accordingly, Tenant covenants and agrees that during the term of this Lease, in the event either Tenant or any person, firm or corporation, directly or indirectly controlling, controlled by, or under common control with, Tenant (and also, if Tenant is a corporation, if any officer or director thereof, or any shareholder owning more than ten percent (10%) of the outstanding stock thereof, or any parent, subsidiary or related or affiliated corporation) either directly or indirectly, or by means of any license or sublease, engages in any business similar to or in competition with that for which the Demised Premises are let, within a radius of seven (7) miles of the boundary of the Shopping Center Site without Landlord's prior written consent, then Landlord shall include all gross sales generated by Tenant's other store or stores within seven (7) miles of the Shopping Center in calculating the Percentage Rent due under this Lease. This covenant is not intended to restrict the sale of Tenant's merchandise, but shall only apply to the operation of a Nascar Silicon Motor Speedway entertainment center within the aforementioned area. This covenant will be 16 24 inapplicable to (i) any business of Tenant extant as of the date hereof, provided the size, trade name, nature and character of such business remains the same and is continuously operated at the same location and (ii) remote site promotional activities which do not exceed sixty (60) days in any Lease Year; (r) Tenant shall maintain positive air pressure in the Demised Premises so as to prevent the drawing of heated or chilled air from the Common Areas of the Mall Building. SECTION 5.3 TENANT SIGNS. To insure the operation of a first-class Shopping Center Landlord reserves the right of approval with respect to all signage located in the Demised Premises. Tenant specifically covenants and agrees that (except for signs and lighting permitted in accordance with the provisions of Exhibit C-2 attached hereto and made a part hereof and Tenant's plans, as approved by Landlord) Tenant shall not: (a) paint, decorate or make any changes to the store front of the Demised Premises; or (b) install any exterior lighting or awnings, or any exterior signs, advertising matter, decoration or painting in or upon the Demised Premises; or (c) install any drapes, blinds, shades or other coverings on exterior windows or doors of the Demised Premises; or (d) affix any window or door lettering, sign decoration or advertising matter to any window or door glass of the Demised Premises; or (e) erect or install any signs, window or door lettering placards, decoration, or advertising media of any type which can be viewed from the exterior of the Demised Premises, or erect or install any of the foregoing which are suspended from the ceiling of the Demised Premises except for (i) signs placed on the interior walls of the Demised Premises which signs are located more than five (5) feet from the lease line of the Demised Premises which abuts the Common Area of the Shopping Center, and (ii) signs located within five (5) feet of such lease line, provided such signs are professionally prepared and limited in number; without the prior written consent of Landlord first had and obtained. Tenant shall install and maintain a sign on the exterior of the Demised Premises in accordance with Exhibit C-2 attached hereto, at Tenant's expense. Tenant shall keep all signs installed in or for the Demised Premises in good condition and in proper operating order at all times. If Tenant without the prior written consent of Landlord erects or installs a sign with any dimension greater than two (2) feet within the Demised Premises, and such sign is visible from the exterior of the Demised Premises, and Landlord notifies Tenant (or, the manager of Tenant's store in the Demised Premises) to remove such sign or signs, then, if Tenant does not remove such sign or signs within twenty-four (24) hours after such notice to Tenant, Landlord 17 25 may elect, in lieu of exercising any other remedies available to Landlord, to receive from Tenant liquidated damages for each calendar day in which a breach under this Section shall occur equal to Two Hundred Fifty Dollars and No/100 ($250.00). Landlord and Tenant agree that signs with any dimension greater than two (2) feet in the Demised Premises and visible from the exterior thereof will cause great harm to the Shopping Center, that it is difficult to specify exactly the amount of damages resulting therefrom and that the liquidated damages provided for above is a reasonable amount. If Landlord elects to demand liquidated damages for any breach of limitation on the size of any sign, as contained in this Section 5.3, the liquidated damages shall commence to accrue on the first day of the breach (not the first day following the expiration of the grace period for cure, if any). Tenant shall pay such liquidated damages to Landlord within five (5) days of demand therefor and failure timely to pay such sums to Landlord shall constitute a breach of this Lease without further notice. SECTION 5.4 ASSIGNMENT OR SUBLETTING. Notwithstanding any other provisions of this Lease to the contrary, Tenant covenants and agrees that it will not assign this Lease or sublet (which term without limitation, shall include the granting of concessions, licenses, and the like) the whole or any part of the Demised Premises or mortgage, pledge, or encumber this Lease or any estate or interest therein without in each instance having first received the express prior written consent of Landlord, and only if an event of default by Tenant shall not have occurred and be continuing. Landlord shall respond to any request by Tenant for permission to sublease or assign within thirty (30) days after receipt of written request. In any case where Landlord shall consent to such assignment or subletting, the Tenant named herein shall remain fully liable for the obligations of the Tenant hereunder, including, without limitation, the obligation to pay the rent and all other amounts provided under this Lease. Further, in the event Tenant sublets the whole or a part of the Demised Premises for an amount in excess of the Minimum Rent (or proportionate Minimum Rent applicable to the space covered by any sublease) payable by Tenant hereunder, Tenant shall pay [***] of such excess amount to Landlord as Additional Rent. The provisions of this Section 5.4 prohibiting the right of Tenant to assign this Lease or sublet the Demised Premises without Landlord's prior consent shall not, however, be applicable to an assignment of this Lease by the Tenant to a subsidiary, affiliate or controlling corporation of Tenant, provided (and it shall be a condition of the validity of such assignment) that such subsidiary, affiliate or controlling *** Confidential treatment requested. 18 26 corporation agrees in writing directly with Landlord to assume and be bound by all the obligations of the Tenant hereunder, including without limitation (i) the obligation to pay the rent and other amounts provided for under this Lease, (ii) the use restrictions contained in Section 5.1, and (iii) the covenant against further assignment of this Lease without Landlord's prior written consent; but such assignment shall not relieve the Tenant named herein of any of its obligations hereunder, and Tenant shall remain fully and primarily liable therefor. In no event shall the granting of such written consent by Landlord ever be construed as a waiver by Landlord of the requirement that each subsequent assignment, if any, shall also require the prior written consent of Landlord; and each subsequent assignor, if any, shall likewise remain fully liable for the obligations of the Tenant hereunder. For the purposes of this Section 5.4, the term "affiliate" of Tenant shall mean and refer to any entity controlling, controlled by or under common control with Tenant or Tenant's parent, as the case may be. "Control" as used herein shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such controlled entity; and the ownership, or possession of the right to vote, in the ordinary direction of its affairs, of at least fifty percent (50%) of the voting interest in any entity. The acceptance by Landlord of the payment of any sums from any party other than the Tenant (whether or not such party is an occupant of the Demised Premises) shall not be deemed to constitute consent by Landlord to any assignment or transfer of this Lease, nor shall such acceptance be deemed to be a waiver of Landlord's rights under this Section 5.4. If Tenant is a corporation and if at any time during the lease term the person or persons who then own or control a majority of its voting shares ("majority shareholder") cease for any reason, including but not limited to merger, consolidation or other reorganization involving another corporation, to own or control a majority of such shares (except as the result of transfers by gift, bequest or inheritance to or for the benefit of members of the immediate family of the majority shareholder), Tenant shall so notify Landlord and Landlord may terminate this Lease by notice to Tenant given within ninety (90) days thereafter. For the purposes of this provision, stock ownership shall be determined in accordance with the principles set forth in Section 544 of the Internal Revenue Code of 1954, as the same existed on August 16, 1954, and the term "voting stock" shall refer to shares of stock regularly entitled to vote for the election of directors of the corporation. Failure by Tenant to notify Landlord of such a change of ownership of the majority of voting shares shall constitute an act of default hereunder. Tenant may sell shares of its stock to the public as part of a public offering registered with the Securities and Exchange Commission and/or once registered by and through a nationally or regionally recognized securities exchange. Tenant also may transfer or issue shares 19 27 of its capital stock in connection with any private placement of equity securities, and so long as such shares are transferred or issued in compliance with all federal and state securities laws the prior consent of Landlord to such transfer or issuance shall not be required. SECTION 5.5 COST OF ASSIGNMENT OR SUBLETTING. In the event Landlord gives its consent to an assignment of this Lease or a subletting of the Demised Premises, Tenant shall pay all reasonable costs and expenses in connection with such assignment or subletting, including, without limitation, any attorneys' fees of Landlord for work requested by Tenant in connection with the assignment or subletting (such fees not to exceed [***] and any cost of renovating, altering or decorating the Demised Premises for a new occupant and any leasing brokerage fees payable. ARTICLE VI -- PARKING FACILITIES SECTION 6.1 PARKING FACILITIES. Landlord agrees that no structures shall be erected on the Shopping Center Site unless at the time of completion thereof and the opening of such structure for business to the public, surface, subsurface and/or multi-level (or any combination thereof) parking facilities for use by tenants, employees and patrons of such structures shall be available and shall meet the following requirements: (a) 5 parking spaces per 1080 square feet of Floor Space (as defined in Section 6.8 hereof) devoted to retail and commercial uses (other than as provided in (b) and (c) below); (b) 3.5 parking spaces per 1000 square feet (i) of Floor Space devoted to office space (including Floor Space in all office buildings within the Shopping Center) and (ii) of Floor Space in banks, trust companies, savings and loan institutions, stock brokerage firms, barber shops and beauty salons in the Complex, including the Mall Building and other office-type users in the Mall Building; (c) one (1) parking space for each bedroom in a hotel, apartment, condominium or other residential unit; or such greater or lesser requirements as are set forth in applicable ordinances (or permitted variances therefrom) of the City of Dallas, Texas. 20 28 Notwithstanding anything contained to the contrary in this Section 6.1, it is understood and agreed that to the extent permitted by applicable governmental authorities, additional parking facilities shall not be required for restaurants, clubs, cinemas and other establishments (a) whose primary business is after 5:00 P.M. or (b) whose primary business is on the weekend or (c) whose customers, visitors, patients, clients, invitees, licensees, subtenants or concessionaires are largely tenants or customers, visitors, patients, clients, invitees, licensees, subtenants or concessionaires of other Complex facilities for which parking is otherwise required or provided pursuant to this Section 6.1. SECTION 6.2 MAINTENANCE OF PARKING FACILITIES. In addition to parking spaces, the parking facilities shall include such additional space as is customarily included in parking areas and garages, such as entrances, exits, and aisles and walkways. Landlord agrees that all of said parking facilities, including proper lighting thereof, shall be maintained by Landlord in reasonably good repair and clean condition throughout the term of this Lease. SECTION 6.3 PARKING DESIGNATION. Landlord agrees that Tenant may during the term hereof, with others, have the nonexclusive right (subject to the same limitations as are applicable to others) to use the parking facilities designated from time to time by Landlord within the Complex (and in addition thereto, any parking areas outside the Complex provided and designated by Landlord for Shopping Center tenants) for the accommodation and parking of such automobiles of the Tenant, its officers, agents and employees, and its customers while in the Shopping Center; but it is understood and agreed that Landlord shall have the right to designate from time to time, and to change from time to time, the portions of the Shopping Center parking facilities (and such other parking facilities) that shall be used as parking areas, approaches, exits, entrances, roadways, and the like. 21 29 SECTION 6.4 TENANT COMPLIANCE WITH PARKING RULES. Tenant agrees that it and all persons claiming by, through and under it, shall at all times abide by all rules and regulations promulgated by Landlord with respect to the parking facilities and other common areas of the Shopping Center or the Complex. Without limitation, Landlord may establish permit parking or such other devices Landlord deems appropriate to control use of the parking facilities and may allow and/or institute and operate valet parking. Landlord shall have the right to restrict parking for particular users during certain hours of the day, in such manner as Landlord deems advisable for the benefit of the Shopping Center or the Complex. Nothing in this Lease shall be deemed to prohibit the establishment and enforcement by Landlord of a system of charging for the use of parking spaces provided by Landlord for retail tenants of the Complex, and for such tenants' employees and/or customers. SECTION 6.5 EMPLOYEE PARKING. Landlord may prescribe certain sections within the parking facilities in the Complex, or on the other land outside the Complex within a reasonable distance, for use as parking space for the employees, contractors, licensees and concessionaires of Tenant to use. Tenant shall be fully responsible to cause all of its employees, contractors, licensees and concessionaires to park their cars only in those areas as Landlord may from time to time designate. To this end, Tenant shall furnish the Landlord, upon Landlord's request at reasonable intervals, the license numbers of automobiles of all such parties; and Tenant shall pay to Landlord, on demand, an amount equal to [***] per incident for every time an employee, contractor, licensee or concessionaire of Tenant parks in areas not designated as employee parking. Any areas so designated for such parking, whether within or without the Shopping Center Site, shall be deemed parking facilities for all purposes. SECTION 6.6 TEMPORARY CLOSING. Landlord may from time to time temporarily close any portion of the parking facilities provided for the Shopping Center to make repairs or changes, to prevent the acquisition of public rights in such areas, or to discourage non-customer parking or use thereof. *** Confidential treatment requested. 22 30 SECTION 6.7 NONEXCLUSIVITY OF PARKING. Subject to the other provisions of this Article VI, all parking spaces provided for use by Tenant shall be used by Tenant on a nonexclusive and co-mingled basis with (i) Landlord and (ii) other tenants or occupants and customers and patrons of the Shopping Center, and (iii) other tenants and occupants and their customers and patrons of the Complex; provided, however, that Landlord shall at all times have the right to designate and control parking facilities in such manner as Landlord deems advisable and for the benefit of the Shopping Center or the entire Complex. SECTION 6.8 FLOOR SPACE DEFINITION. The term "Floor Space" as used in this Lease means "gross leasable area" which is defined as the actual number of square feet of floor space, determined by the linear dimensions in feet, from the center of party or interior walls (or the outside of the exterior building perimeter walls, as applicable) to the center of party or interior walls (or the outside of the exterior building perimeter walls, as applicable), but excluding (i) the second level of any multi-level storage area created by fixture installation to increase usability for stock keeping purposes, as contrasted to structural building installation, (ii) service corridors, truckways, walkways, loading docks and common areas, (iii) escalators and elevators available for use by more than one occupant of the Shopping Center and (iv) physically separated areas used exclusively to house mechanical, building service or maintenance equipment. With respect to office space (other than space in retail stores used for office purposes), "Floor Space" shall mean seventy percent (70%) of the total floor area. ARTICLE VII -- COMMON AREAS SECTION 7.1 COMMON AREAS DEFINITION. "Common Areas", as used herein with respect to the Shopping Center (as the same may be altered or expanded pursuant to Section 1.1), means the improvements and portions of the Shopping Center which have been designated and provided for common use by or for the benefit of more than one occupant of the Shopping Center and/or Complex, including without 23 31 limitation (if and to the extent facilities therefor are provided at the time in question), the land and facilities (within or without the Complex, as provided in Article VI hereof) utilized for or as parking areas for the Shopping Center; access and perimeter roads, entrances and exits to and from the Shopping Center and Complex and to and from the public highways and streets abutting the Complex; truck passageways, loading courts, loading platforms, truck docks and truck maneuvering areas; service corridors and stairways and/or loading facilities; landscaped areas; open malls (except retail areas therein where permitted under this Lease); on-site and off-site signs identifying or advertising the Shopping Center and the Complex; exterior walks, sidewalks and arcades; skylights, stairs, stairway, elevators, escalators, ramps and any other pedestrian direction and control measures; interior corridors, arcades and balconies; directory signs and equipment; underground storm and sanitary sewers, utility lines and the like to the junction box serving one occupant exclusively, and any of the foregoing which serves the Common Areas; sprinkler systems, fire protection and security alarm systems; lockers and locker rooms, wash rooms, comfort rooms, drinking fountains, toilets and auditoriums; maintenance buildings or areas; custodial facilities; office for the marketing director to carry out the services described in Section 16.3; and other public facilities; and bus stations, taxi stands and the like, if any. It is understood that some of the facilities to fulfill Landlord's obligations under Article VI may be located outside the Shopping Center Site but within the Complex. In addition, to the extent that and so long as (but only so long as) parking spaces outside the Complex are used to provide parking to fulfill Landlord's parking obligations under Article VI of this Lease, and so long as said parking spaces outside the Complex have been designated for such purpose by Landlord, the tract of land on which such parking spaces are provided and designated and all improvements thereon shall be considered Common Areas. SECTION 7.2 MAINTENANCE OF COMMON AREAS. Landlord agrees that the Common Areas shall be maintained by Landlord in reasonably good repair and condition throughout the term of this Lease. 24 32 ARTICLE VIII -- CHARGES FOR AND MAINTENANCE OF COMMON AREAS SECTION 8.1 SHOPPING CENTER OPERATING EXPENSE. All costs and expenses ("Shopping Center Operating Expense") of every kind and nature paid or incurred by Landlord (including reasonable reserves) in operating, managing, accounting in connection with, equipping, controlling, lighting, repairing, replacing, enhancing and maintaining all Common Areas (including, but without limitation, all costs and expenses incident to maintaining, replacing due to use, wear and tear, and repairing as reasonably required to maintain the Common Areas in the same condition as existed when originally completed) and the "Mall HVAC Charge" (as defined in Section 8.2 hereof) shall be prorated and Tenant shall share therein in the manner provided in Sections 8.3 and 8.4 of this Lease. Shopping Center Operating Expense shall likewise include (but shall not be limited to) water, sewer and utility charges; premiums for liability, property, worker's compensation, employers' liability and other casualty and/or risk insurance provided by Landlord in connection with the Shopping Center (including all such insurance with respect to parking facilities and for the entire Mall Building); contractor fees, contractor costs and personnel compensation; management expenses of the Shopping Center, including costs of a management office, wages and salaries of management and support personnel situated in the Complex; Landlord's accounting costs; unemployment taxes, social security taxes and personal property taxes; fees for permits and licenses; scheduling and compensation of security personnel, traffic directors and/or parking attendants (if and to the extent provided by Landlord); equipment, operation and repairs of loudspeakers and any equipment supplying music or intercom capability to the Common Areas; all costs and expenses of planting, replanting and replacing flowers and landscaping; repair and rental costs for, and reasonable depreciation of, equipment used in the operation and maintenance of the Common Areas; skylight and vault glass cleaning and replacement; costs and expenses of lighting, heating, ventilating, repairing, replacing and maintaining the Common Areas and their facilities; costs and expenses of cleaning and removal of rubbish, dirt and debris; Shopping Center Parking Facility expense as defined in Section 8.3; and administrative costs equal to [***] of the total costs of Shopping Center Operating Expense; but there shall be excluded (a) *** Confidential treatment requested. 25 33 the depreciation of the original cost of constructing said Common Areas, (b) costs incurred in connection with or directly related to the original construction (as distinguished from maintenance and repair) of the Shopping Center, (c) principal and/or interest payments on any financing for the Shopping Center or the regional retail development or any portion thereof or rental under any ground lease or other underlying lease, (d) the cost of any repairs, alterations, additions or replacements to the structure of the Shopping Center which would be classified (under generally accepted accounting principles) as capital expenditures, to the extent they upgrade or improve the Shopping Center, as opposed to replacement of existing items, (e) the costs of correcting defects in or inadequacies of the initial design or construction of the Shopping Center, or repair and/or replacement of any of the original materials or equipment required as a result of such defects or inadequacies, (f) reserves for anticipated future expenses, (g) legal and other fees, leasing commissions, advertising expenses and other costs incurred in connection with development or leasing of the Shopping Center, or in connection with negotiations or disputes with tenants, occupants or prospective tenants or occupants, or legal fees incurred in connection with this Lease, (h) repairs or other work occasioned by casualty or the exercise of the right of eminent domain; (i) expenses incurred in build out, renovation or other improvement or decoration, painting or redecoration or any leasable area, (j) any items for which Landlord is reimbursed by insurance or otherwise compensated, including direct reimbursement by any tenant or occupant of the Shopping Center, (k) costs incurred due to the violation by Landlord or any tenant or occupant of any term or condition of any lease or rental arrangement covering space in the Shopping Center, (l) expenses in connection with services or other benefits of a type which are not provided Tenant but which are provided to another tenant or occupant of the Shopping Center, (m) any interest or penalties incurred as a result of Landlord's failure to pay any bill as the same shall become due, (n) salaries and bonuses of officers and executives of Landlord and compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord, (o) advertising and promotional expenditures or customer services, (p) costs, fines, or fees incurred by Landlord due to violations of any federal, state or local law, statute or ordinance, or any rule, regulation, judgment or decree of any governmental 26 34 rule or authority, (q) any governmental charges, impositions, penalties or any other costs incurred by Landlord to cleanup, remove, abate or neutralize any Hazardous Materials (as defined in Section 5.2(u) hereof) present at the Shopping Center, unless the cleanup, removal, abatement or neutralization of any Hazardous Materials is required as a result of Tenant, or Tenant's contractors, licensees, agents, servants, or employees bringing or releasing any Hazardous Materials in the Shopping Center, in which event Tenant shall be responsible for the cleanup, removal, abatement or neutralization of same, (r) the cost of any work or services performed for any facility other than the Shopping Center, (s) any costs representing an amount paid to a person, firm, corporation or other entity related to Landlord which is in excess of the amount which would have been paid in the absence of such relationship and (t) any other costs and expenses that are not ordinarily treated as operating or maintenance expenses under generally accepted accounting principles. SECTION 8.2 MALL HVAC CHARGE. The term "Mall HVAC Charge" is hereby defined to mean the Mall Building's pro rata share (as determined by Landlord) of the total cost of providing, operating and maintaining heating and air cooling to the Common Areas in accordance with the system specifications set forth in Exhibit C-1 attached hereto and made a part hereof. If, as a result of an interruption of the services provided by Landlord, due to a reason that is within the control of Landlord, and that is described in this Section 8.2, the Demised Premises becomes untenantable and Tenant cannot operate its business from within the Demised Premises for a period of two (2) days after such interruption of its business, then Tenant's payment of Minimum Rent and all Additional Rent (but not Percentage Rent) shall abate commencing with the first day of such interruption and continuing until the date such services are restored to a condition such that the Demised Premises are tenantable. Tenant shall provide Landlord with written notice of any such interference within two (2) days after such interference occurs. Landlord agrees to provide to Tenant, within sixty (60) days after written notice ("Tenant's Audit Notice") from Tenant to Landlord, an audit (the "Audit") of Shopping Center 27 35 Operating Expense prepared and certified to by an independent accounting firm selected by Landlord. Tenant's Audit Notice shall be given, if at all, only within one hundred twenty (120) days after Tenant receives the annual reconciliation of Shopping Center Operating Expense pursuant to the provisions of Article VIII, Section 8.4. In the event Landlord does not provide the Audit to Tenant within sixty (60) days after Tenant's Audit Notice, and provided that Tenant is not then in default of the terms and conditions of this Lease, then Tenant shall have the right once within twelve (12) months after the end of the calendar year for which Tenant has given Tenant's Audit Notice to cause an audit of the books of account, documents and records of Landlord relating to Shopping Center Operating Expense for such calendar year to be made by an independent certified public accountant selected by Tenant, and Landlord, upon fifteen (15) days prior written notice from Tenant shall make such material available for examination at Landlord's offices. If Tenant's audit reasonably shows that Tenant has been overcharged by more than three percent (3%) during the calendar year subject to the audit, then Landlord shall pay the cost of Tenant's audit of Landlord's records. If the annual Shopping Center Operating Expense previously submitted by Landlord to Tenant shall be determined to be incorrect as a result of such audit, then Landlord shall refund to Tenant any excess payment of Shopping Center Operating Expense made by Tenant to Landlord. SECTION 8.3 TENANT'S SHARE OF PARKING EXPENSE. Tenant's pro rata share of the parking facilities costs included in the Shopping Center Operating Expense shall be computed for each calendar year as follows: (a) The whole of such parking facilities costs and expenses shall be multiplied by the following fraction: (i) the numerator of such fraction shall be determined by multiplying each 1,000 square feet of Floor Space within the Mall Building (including any fraction of 1,000 feet) by 4.6 (or such greater or lesser number of parking spaces per 1,000 square feet of Floor Space of the Mall Building (exclusive of the athletic club) as are required by law, provided such greater or lesser amount of parking is constructed and included in Common Areas); and (ii) the denominator of the fraction shall be determined by multiplying each 1,000 square feet of Floor Space within the office and retail portions of the Complex, (including any fraction of 1,000 square feet), exclusive of areas devoted to hotel use, by the applicable parking requirement factor for retail 28 36 and office-type space set forth in Section 6.1 (a) or (b), (or such greater or lesser amount of parking applicable to such improvements as required by law provided such greater or lesser amount of parking is constructed and included in Common Areas) and adding to such sum the number of bedroom units in hotel, apartment, condominium or other residential units within the Complex (or such greater or lesser number of parking spaces applicable to such improvements as are required by law provided such greater or lesser amount of parking is constructed and included in Common Areas). (b) The product obtained above, the "Retail Portion of Parking Facility Costs", shall be multiplied by the following fraction: (i) the numerator of such fraction shall be the total square footage within the Demised Premises set forth in Section 1.1 of this Lease; and (ii) the denominator of such fraction shall be the Floor Area of the Mall Building. This denominator shall be computed as of the first day of each calendar year during the term of this Lease. To illustrate the foregoing, assuming the following: (i) Floor Area of the Mall Building is 450,000 square feet. (ii) The Demised Premises consists of 2,000 square feet. (iii) Complex square footage totals equal: 450,000 for the Mall Building (exclusive of the athletic club); 900,000 square feet of Office Space; 500,000 square feet of Major Retail Stores; 26,000 square feet of athletic club space that is considered retail for parking space requirements, and 450 hotel bedroom units. (iv) Total Complex Parking Facility Costs of $800,000. then the Tenant's share of Complex Parking Facility Costs would be computed as follows: (a) the numerator of the first fraction would be 2,070; determined by multiplying 450 (the number of 1,000 square foot increments within the Floor Area of the Mall Building) by 4.6; (b) the denominator of the applicable fraction would be determined by adding: (i) the product of 2,070, the number of 1,000 square foot increments of Floor Area of the Mall Building multiplied by 4.6 (the number of parking spaces per 1,000 square feet of retail space), (ii) the product of 3,150, the number of 1,000 square foot increments of Commercial Office Space in the Complex multiplied by 3.5 (the number of parking spaces per 1,000 square feet for Office use), (iii) the product of 2,300, the number of 1,000 square foot increments of Major Retail Stores multiplied by 4.6 (the number of parking spaces per 1,000 square feet of retail space), 29 37 (iv) the product Of 120, the number of 1,000 square foot increments of the athletic club space in the Complex multiplied by 4.6 (the number of parking spaces per 1,000 square feet of retail space), and (v) 450 (the number of hotel bedroom units) (c) This fraction 2,070/8,090 is multiplied by $800,000 (Complex Parking Facility Costs) and would result in $204,697 which is the amount applicable to the Mall Building. (d) This cost of $204,697 applicable to the Mall Building is then multiplied by the fraction of which the numerator is 2,000 (the square footage of the Demised Premises) and the denominator of which is 450,000 (the Floor Area of the Mall Building) which results in the Tenant's share of Complex Parking Facility Costs being $909.76. In further illustration, the mathematical calculation is summarized as follows: 1. Each 1,000 SF of All parking Retail portion of Mall Floor Area X 4.6 X expenses = parking facility costs --------------------- (Each 1,000 SF Retail Floor Area X 4.6 + each 1,000 SF of office X 3.5 + number of hotel bedroom units) SF in DP 2. Retail portion of X -------- = Tenant's share of re parking facility costs Mall Floor Area parking facility costs
SECTION 8.4 TENANT'S SHARE OF SHOPPING CENTER OPERATING EXPENSES. Tenant's pro rata share of all Shopping Center Operating Expense (including all of the Mall HVAC Charge) exclusive of (i) Tenant's pro rata share of the parking facilities costs which are computed in accordance with the provisions of Section 8.3 and (ii) those costs which are allocated by Landlord to other portions of the Shopping Center, shall be computed for each calendar year by multiplying the whole of such costs and expenses by the following fraction: (a) the numerator of such fraction shall be the total square footage within the Demised Premises set forth on the first page of this Lease; and (b) the denominator of such fraction shall be the total square footage of Floor Space of the Mall Building, except there shall be excluded from such denominator (i) any store premises or storage areas which have no direct access to the enclosed portions of the Mall Building and (ii) any area of the Mall Building devoted to hotel use. The denominator specified in this Section 8.4 shall be computed as of the first day of each calendar year during the term of this Lease. 30 38 SECTION 8.5 PAYMENT OF OPERATING EXPENSE. Tenant's pro rata share of the Shopping Center Operating Expense and Mall HVAC Charge shall be paid as Additional Rental and Tenant agrees to pay such Additional Rent in advance in monthly installments on the first (1st) day of each calendar month, based upon Landlord's estimates of the Shopping Center Operating Expense and Mall HVAC Charge as set forth in annual statements during the term of this Lease (or such other periodic intervals as shall be determined by Landlord). Within one hundred twenty (120) days after the end of each calendar year during the term hereof, Landlord shall furnish to Tenant a statement in reasonable detail setting forth the computation of actual Shopping Center Operating Expense and Mall HVAC Charge (as allocated by Landlord for purposes of Sections 8.3 and 8.4 of this Lease) for such calendar year, and thereupon there shall be within thirty (30) days thereafter an adjustment between Landlord and Tenant, with payment to, or repayment by, Landlord, as the case may require, to the end that Landlord shall receive the entire amount of Tenant's pro rata share of said Shopping Center Operating Expense and Mall HVAC Charge for such calendar year, and no more. SECTION 8.6 TENANT'S AUDIT RIGHT. Landlord agrees to provide to Tenant, within sixty (60) days after written notice ("Tenant's Audit Notice") from Tenant to Landlord, an audit (the "Audit") of Shopping Center Operating Expense prepared and certified to by an independent accounting firm selected by Landlord. Tenant's Audit Notice shall be given, if at all, only within one hundred twenty (120) days after Tenant receives the annual reconciliation of Shopping Center Operating Expense pursuant to the provisions of Article VIII, Section 8.4. In the event Landlord does not provide the Audit to Tenant within sixty (60) days after Tenant's Audit Notice, and provided that Tenant is not then in default of the terms and conditions of this Lease, then Tenant shall have the right once within twelve (12) months after the end of the calendar year for which Tenant has given Tenant's Audit Notice to cause an audit of the books of account, documents and records of Landlord relating to Shopping Center Operating Expense for such calendar year to be made by an independent certified public accountant selected by Tenant, and Landlord, upon fifteen (15) days 31 39 prior written notice from Tenant shall make such material available for examination at Landlord's offices. If Tenant's audit reasonably shows that Tenant has been overcharged by more than three percent (3%) during the calendar year subject to the audit, then Landlord shall pay the cost of Tenant's audit of Landlord's records. If the annual Shopping Center Operating Expense previously submitted by Landlord to Tenant shall be determined to be incorrect as a result of such audit, then Landlord shall refund to Tenant any excess payment of Shopping Center Operating Expense made by Tenant to Landlord. ARTICLE IX -- UTILITIES SECTION 9.1 TENANT PAYMENT FOR UTILITIES. Tenant shall pay for all its requirements for utilities, including, but not limited to, gas, steam, water, telephone, electricity, "tap fees" or connection costs charged by the City of Dallas or any utility supplier, sewer charges, and the like, and shall also pay for heating, ventilating and air conditioning the Demised Premises in the manner provided herein, and in no event shall Landlord ever be liable to any suppliers of any such utilities for services contracted for and/or used by Tenant in connection with the Demised Premises. In the event that Landlord shall elect to supply any of such utilities (apart from those for which provision is made in Section 9.2 hereof, Tenant agrees to purchase the same from Landlord at the same rate which Tenant would be charged by a utility company furnishing the same to the Demised Premises. Tenant shall pay for such utilities furnished by Landlord, in advance, on the first day of each calendar month, in the monthly amount estimated by Landlord prior to the beginning of each calendar year. Within a reasonable time following the end of each year, Landlord shall provide Tenant with a statement showing the cost of such utility, Tenant's actual use, any adjustment from the amount paid by Tenant over the previous calendar year and the amount due from Tenant to Landlord or from Landlord to Tenant. In the event any such utilities are not separately metered to the Demised Premises, Tenant's actual use shall be determined in good faith by Landlord's engineers which determination shall be binding except upon a showing of bad faith. 32 40 SECTION 9.2 CENTRAL SYSTEM. As set forth in Exhibits B and D hereto annexed and made a part hereof, Landlord is furnishing a central system to provide chilled water to the Demised Premises as set forth in Exhibit D for air conditioning, and chilled water to the Mall Building for air conditioning the Mall Building (other than the hotel areas of the Mall Building). Tenant agrees to pay for such service Tenant's pro rata share of the Mall HVAC Charge in accordance with Article VIII of this Lease as well as Tenant's ventilating and air conditioning charge as set forth on said Exhibit D attached hereto. ARTICLE X -- MAINTENANCE OF SHOPPING CENTER AND DEMISED PREMISES SECTION 10.1 LANDLORD'S OBLIGATIONS. Landlord agrees to keep in reasonably good order, condition and repair, the roof, foundation and structural portions of the Mall Building and the Demised Premises, except: (a) for repairs thereto necessitated by damage caused by any act or negligence of Tenant, its employees, agents, licensees or contractors, or (b) any structural changes necessary in whole or in part as a result of (i) any alterations made by Tenant, or (ii) any use made of the Demised Premises by the Tenant which is different from or more hazardous than the use thereof permitted by Section 5.1 hereof, or (c) glass and glass windows and the so-called store front of the Demised Premises and other premises leased to tenants of the Shopping Center. Tenant does hereby grant Landlord and its agents access in and upon the Demised Premises, as necessary for the purpose of fulfilling its repair and maintenance obligations provided that Landlord shall give Tenant's store manager twenty-four (24) hours' prior notice to such entry, except in the event of an emergency, in which event no such notice shall be required. Landlord will use good faith efforts to prevent material adverse interference with Tenant's business in the Demised Premises caused by Landlord fulfilling its repair and maintenance obligations pursuant to this Section 10.1. 33 41 Landlord shall not be responsible to make any other improvements or repairs of any kind upon the Demised Premises, but this paragraph is not intended to refer to damage by fire or other insured risk to the Demised Premises which is covered by the insurance policies provided for in Article XIII hereof SECTION 10.2 TENANT'S OBLIGATIONS. Except with respect to Landlord's obligations as set forth in Section 10.1 hereof, Tenant agrees that from and after the date that possession of the Demised Premises is delivered to Tenant, and until the end of the term hereof, it will keep neat and clean and maintain in good order, condition and repair the Demised Premises and every part thereof, including, without limitation, the store front and the exterior and interior portions of all doors, windows, plate glass and showcases surrounding the Demised Premises, all plumbing and sewage facilities within the Demised Premises (including all such facilities outside of the Demised Premises, but exclusively serving the Demised Premises, and assuring the free flow of Tenant's sanitary sewer line to the main line serving the Demised Premises), fixtures and interior walls, floors, ceilings, signs (including exterior signs where permitted), and all wiring, electrical systems, sprinkler systems within the Demised Premises, interior building appliances and similar equipment. In the event of an emergency caused by damage or malfunction of a system, or component thereof, within the Demised Premises, resulting in possible damage to another tenant's demised premises, or the Shopping Center, or affecting Landlord's systems, then Landlord may repair such damage or malfunction without notice to Tenant, and Tenant shall reimburse Landlord the costs thereof within ten (10) days after Landlord invoices Tenant for the costs of such repairs. Tenant shall keep the Demised Premises in a first-class, tenantable, and attractive condition throughout the term of this Lease. There is excepted from this paragraph, however, damage to the portions of the Demised Premises originally constructed by Landlord caused by those hazards which are covered by the policies of fire insurance and extended coverage endorsements carried by Landlord and described in Article XIII hereof Tenant further agrees that the Demised Premises shall be kept in a clean, sanitary and safe condition in accordance with the laws of the State of Texas and ordinances of the City of Dallas, and in accordance with all directions, rules and 34 42 regulations of the Health Officer, Fire Marshall, Building Inspector, and other proper officers of the governmental agencies having jurisdiction thereover and Tenant shall comply with all other federal, state and local laws, orders, rules and regulations applicable to the Demised Premises and their use and occupancy. SECTION 10.3 NO CHANGE TO DEMISED PREMISES. Tenant shall not make any alterations, improvements and/or additions to the Demised Premises (except as initially required by the terms of Exhibit Q hereto annexed or as required pursuant to Section 14.2 hereof) without first obtaining, in each instance, the prior written consent of Landlord. Any such alterations, improvements and/or additions permitted by Landlord (as well as those not requiring Landlord's permission) shall be (a) made in accordance with all applicable laws, (b) completed in a good and first-class workmanlike manner, (c) Promptly paid for by Tenant, and (d) in compliance with Landlord's design and construction criteria set forth in Exhibits C, C-L, and C-2 hereto. Notwithstanding anything contained in this Section 10.3 to the contrary, Tenant may construct up to Twenty-Five Thousand and No/100 Dollars ($25,000.00) per Lease Year, noncumulative, of interior non-structural alterations provided that for any interior, non-structural alterations provided Tenant gives Landlord at least two (2) days prior written notice together with copies of plans for the intended work if plans are required by applicable local code, otherwise, with copies of so-called "sample boards". Such alterations shall be constructed in conformance with Landlord's design and construction criteria set forth in Exhibits C, C-1, and C2 hereto. SECTION 10.4 FIXTURES. Any and all alterations, additions, improvements and fixtures which may be made or installed by either Landlord or Tenant upon the Demised Premises and which in any manner are attached to the floors, walls or ceilings (including, without limitation, any linoleum or other floor or wall covering of similar character which may be cemented or otherwise adhesively afffixed to the floor, or any fixtures, lights or shelving bolted or otherwise affixed to the floor, walls or ceiling) shall remain upon the Demised Premises, and at the termination of this Lease. 35 43 shall be surrendered with the Demised Premises as a part thereof without disturbance, molestation or injury. Tenant's simulators, removable display cases, personal property and furniture which are installed in the Demised Premises prior to or during the term hereof at the cost of the Tenant (except such as may replace any of the same originally installed by or at the cost of Landlord), personal property and simulators may be removed by Tenant from the Demised Premises prior to the termination of this Lease, if, but only if, Tenant is not then in default hereunder. Any and all such property which is not removed after ten (10) days notice to Tenant following the expiration or termination of this Lease shall be deemed abandoned by Tenant and shall thereby become the property of Landlord. Tenant covenants and agrees at its own cost and expense to promptly repair any and all damage to the Demised Premises resulting from or caused by any removal, and it is specifically agreed that Tenant's covenant to repair shall survive the expiration of the term of this Lease. SECTION 10.5 SURRENDER OF DEMISED PREMISES. Upon any surrender of the Demised Premises, the Tenant shall re-deliver the Demised Premises to the Landlord in good order, condition and state of repair, ordinary wear and tear and casualty damage excepted and excepting such items of repair as may be the Landlord's obligation hereunder. ARTICLE XI -- TAXES SECTION 11.1 PAYMENT BEFORE DELINQUENCY. Landlord shall pay, or cause to be paid, before the same become delinquent, all general and special taxes, including assessments for local improvements and other governmental charges which may be lawfully charged, assessed, or imposed upon the Shopping Center Site (exclusive of the component sites therein occupied by Major Retail Stores), any parcel of land within or without the Complex together with all improvements thereon provided or available for parking for the Shopping Center; provided, however, that if authorities having jurisdiction assess real estate taxes, assessments, or other charges on all or any portion of the foregoing which Landlord deems excessive, Landlord may defer compliance therewith to the extent permitted by 36 44 the laws of the State of Texas, so long as the validity or amount thereof is contested by Landlord in good faith and so long as Tenant's occupancy of the Demised Premises is not disturbed. Should the State of Texas or any political subdivision thereof or any governmental authority having jurisdiction thereover, impose a tax and/or assessment (other than an income or franchise tax) upon or against the rentals payable by tenants of the Mall Building to Landlord, either by way of substitution for the taxes and assessments levied or assessed at the commencement of the term of this Lease, or in addition thereto, such tax and/or assessment shall be deemed to constitute a tax and/or assessment upon the Mall Building for purposes of Article XI and this Section 11.1. SECTION 11.2 SEPARATE ASSESSMENTS. Landlord agrees, to the extent feasible, to cause THE taxing authorities to levy taxes and assessments separately on the Mall Building and the land on which the same is located. Landlord agrees, to the extent feasible, to cause the taxing authorities to levy taxes and assessments separately on all parking facilities of the Complex and the land on which the same are located (including driveways, entrances, exits, landscaped areas and parking, if any), the taxes assessed upon such land and parking facilities, being hereinafter collectively referred to as "Parking Facility Taxes". In the event of any such taxes are not assessed separately, Landlord shall make an allocation of the total assessed value between the components of the Shopping Center and such allocation shall be the basis upon which Tenant pays its taxes under this Lease. SECTION 11.3 TENANT RENDERS TENANT IMPROVEMENTS. Each calendar year Tenant shall render all of the Tenant Improvements with local taxing authorities and pay taxes assessed thereon prior to delinquency. The term "Tenant Improvements" is hereby defined to mean all portions of the Demised Premises not originally constructed and provided by Landlord pursuant to Exhibit B attached hereto and made a part hereof. Taxes upon Tenant Improvements shall also include all general and special taxes, including ad valorem taxes, assessments for local improvements and other governmental charges which are lawfully charged, assessed or imposed upon all fixtures and equipment of every type 37 45 and all personal property in said Demised Premises, together with all permit and license fees which may be lawfully imposed upon the business of Tenant conducted within the Demised Premises. Not later than ten (10) days prior to the date on which taxes assessed upon the Tenant Improvements would become delinquent, Tenant shall deliver to Landlord copies of paid tax receipts or other proof satisfactory to Landlord evidencing the payment of all taxes upon the Tenant Improvements. SECTION 11.4 PARKING TAXES. Tenant shall pay its pro rata share of all Parking Facility Taxes for each calendar year during the lease term in the manner specified in Section 11.6 of this Lease. Tenant's pro rata share of Parking Facility Taxes shall be computed by multiplying the whole of such Parking Facility Taxes by the fraction set forth in Section 8.3 of this Lease. SECTION 11.5 OTHER TAXES. Tenant shall pay its pro rata share of all taxes and assessments upon the Mall Building and the land upon which the same is located for each calendar year during the lease term in the manner specified in Section 11.6 of this Lease. Tenant's pro rata share of such taxes shall be computed by multiplying the whole of such taxes by the fraction set forth in Section 8.4 of this Lease. SECTION 11.6 MONTHLY PAYMENTS AND YEAR END ADJUSTMENTS. Tenant's pro rata share of (i) the total of all taxes due from Tenant with respect to any calendar year of the lease term under the provisions of Sections 11.4 and 11.5 of this Lease, plus (ii) Landlord's cost of rendering and contesting all such taxes shall be paid as Additional Rent, and Tenant agrees to pay such Additional Rent in advance in monthly installments, based upon Landlord's estimates of the taxes as set forth in statements or bills therefor submitted by Landlord to Tenant, on or about the first day of each and every calendar year during the term of this Lease (or such other periodic intervals as shall be determined by Landlord). Within one hundred twenty (120) days after the end of each calendar year during the term hereof, Landlord 38 46 shall furnish to Tenant a statement in reasonable detail setting forth the computation of actual taxes billed to Landlord for such calendar year, and there shall be within thirty (30) days thereafter an adjustment between Landlord and Tenant, with payment to, or repayment by, Landlord, as the case may require, to the extent that Landlord shall receive the entire amount of Tenant's pro rata share of said taxes for such calendar year, and no more. Where the applicable tax bills are not available prior to the end of the term of this Lease, then an adjustment for the year for which tax statements are not available shall be made, tentatively, on the basis of the Landlord's estimates of taxes, and a final adjustment shall be made between Landlord and Tenant promptly after Landlord shall have received the tax bill for such period, it being specifically agreed that Landlord's and Tenant's obligations under this Section 11.6 shall survive the expiration of the term of this Lease. SECTION 11.7 PRO RATA ADJUSTMENT FOR PARTIAL YEARS. For the calendar years in which this Lease commences and terminates, Tenant's liability for its proportionate share of any taxes and assessments for such partial calendar years shall be subject to pro rata adjustment for the portion of the total year that the term of this Lease is in effect. ARTICLE XII -- INDEMNITY AND LIABILITY INSURANCE SECTION 12.1 TENANT'S INDEMNITY AND RELEASE AGREEMENT. Tenant shall indemnify, defend, and hold harmless and hereby releases Landlord and its agents, contractors, lenders, employees, partners and its partners' officers, directors, agents and employees (singularly, an "Indemnified Party" and collectively, the "Indemnified Parties") from and against all suits, demands, liabilities, claims, causes of action, costs, fines, losses, damages, and expenses (the "Claims") (i) arising from or caused in any way by any act, omission, or negligence of Tenant or its officers, agents, employees, servants, contractors, or licensees (the "Tenant Responsible Parties"), (ii) arising out of any accident within, or damage to the property of any person (including, without limitation, the Tenant Responsible Parties) located within the Demised Premises, or injury to, or death of, any person, in OR upon the Demised Premises, (iii) arising out of any violation of any applicable law from and after the date that 39 47 possession of the Demised Premises is delivered to Tenant and until the end of the Term or (iv) arising out of any accident, injury or damage occurring outside of the Demised Premises but within the Shopping Center, where such accident, damage or injury results or is claimed to have resulted from all act or omission on the part of one or more of the Tenant Responsible Parties. THE INDEMNITY AND RELEASE SET FORTH IN CLAUSES (ii), (iii) AND (iv) ABOVE SHALL APPLY REGARDLESS OF CAUSATION, INCLUDING, WITHOUT LIMITATION, AN INDEMNIFIED PARTY'S ACTS, OMISSIONS OR NEGLIGENCE (WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, COMPARATIVE, CONTRIBUTORY, OR CONCURRENT), OR BASED ON ANY THEORY OF PREMISES LIABILITY (WHETHER FOUNDED IN WHOLE OR IN PART ON NEGLIGENCE OR STRICT LIABILITY), OR ANY THEORY OF STRICT LIABILITY, INCLUDING, WITHOUT LIMITATION, ANY THEORIES OF PRODUCTS LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THERE IS EXPRESSLY EXCLUDED FROM THE ABOVE INDEMNITY, OBLIGATIONS AND RELEASE OF TENANT, ANY CLAIMS RESULTING FROM THE INTENTIONAL TORTS OR GROSS NEGLIGENCE OF AN INDEMNIFIED PARTY. The foregoing indemnities shall include attorney's fees, court costs, investigation costs and all other costs and expenses incurred by a party from the first notice that any Claim or demand has been made or may be made, and shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable under applicable worker's compensation acts, disability benefit acts or other employee benefit acts. The provisions of this Section 12.1 shall survive the termination or expiration of this Lease with respect to any Claim occurring before such termination or expiration and with respect to any Claim arising after such termination or expiration if same relates back to an event or set of circumstances which occurred before such termination or expiration. Notwithstanding anything contained herein to the contrary, from and after the date of execution of this Lease Landlord agrees to indemnify and save harmless the Tenant from and against all claims for bodily injury or property damage, or proceedings brought thereon, and the defense thereof, on the part of Landlord or Landlord's employees or third parties of whatever nature arising from (i) any act, omission or negligence of Landlord or Landlord's employees arising wholly within and from or out of the use of any portion of the Common Areas by Landlord or Landlord's employees, (ii) any violation of applicable law from and after the date that possession of the Demised Premises is delivered to Tenant and until the end of the term. 40 48 SECTION 12.2 TENANT'S LIABILITY INSURANCE. Tenant agrees to maintain in full force during the Term a policy or policies of commercial general liability insurance under which Landlord, and such other persons as are in privity of estate with Landlord as may be set out in notice from Landlord to Tenant from time to time ("Landlord's Designees"), are named as additional insureds and Tenant is named primary insured, with contractual liability endorsements covering the agreements of Tenant to indemnify the Indemnified Parties from and against all cost, expense and/or liability as contractually undertaken by Tenant under the terms of this Lease (whether in this Article XII or otherwise). Each such policy shall provide that it is primary over any insurance carried by Landlord and/or Landlord's Designees and that it cannot be canceled, amended or modified with respect to the Landlord or Landlord's Designees without fifteen (15) days' prior written notice to Landlord and Landlord's Designees, and a duplicate original or certificate thereof evidencing such coverage shall be delivered to Landlord no less than the date Tenant commences occupancy of the Demised Premises. The minimum limits of liability of such insurance shall be not less than [***] combined single limit for bodily injury (including death) and/or property damage in any one occurrence, or such higher limits as Landlord may from time to time request, provided such higher limits are then customarily required of tenants IN first-class shopping centers. In the event Tenant fails to obtain and maintain the insurance required of Tenant hereunder, upon three (3) days notice and the failure of Tenant to cure within said three (3) day period, Landlord shall have the right, but not the obligation, after written notice to Tenant, to purchase said insurance coverage on Tenant's behalf and the cost thereof shall be denied Additional Rent and paid to Landlord by Tenant within ten (10) days after demand therefor by Landlord. Tenant shall submit any proposed substitution of insurance policies or modification of insurance policies to Landlord for Landlord's written approval not less than thirty (30) days prior to the date on which Tenant desires to substitute or modify insurance policies provided for under the terms of this Lease. SECTION 12.3 TENANT'S WAIVER AND RELEASE OF CLAIMS FOR TENANT'S PROPERTY. Tenant hereby agrees to use and occupy the Demised Premises, and to use such other portions of the Shopping Center as it is herein given the right to use, at its own risk and Tenant hereby waives, and releases the Indemnified Parties from, all Claims, responsibilities or liabilities for any loss of or damage, regardless of cause, to fixtures, inventory or other property *** Confidential treatment requested. 41 49 of Tenant, Tenant's employees or those claiming by, through or under Tenant (including, without limitation for any loss or damage to its or their property from the bursting, stopping or leaking of water, gas, sprinkler, sewer drainage or steam pipes, regardless of cause). THE WAIVER AND RELEASE SET FORTH ABOVE SHALL APPLY REGARDLESS OF CAUSATION, INCLUDING, WITHOUT LIMITATION, AN INDEMNIFIED PARTY'S ACTS, OMISSIONS OR NEGLIGENCE (WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, COMPARATIVE, CONTRIBUTORY, OR CONCURRENT), OR BASED ON ANY THEORY OF PREMISES LIABILITY (WHETHER FOUNDED IN WHOLE OR IN PART ON NEGLIGENCE OR STRICT LIABILITY), OR ANY THEORY OF STRICT LIABILITY, INCLUDING, WITHOUT LIMITATION, ANY THEORIES OF PRODUCTS LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THERE IS EXPRESSLY EXCLUDED FROM THE ABOVE WAIVER AND RELEASE OF TENANT, ANY CLAIMS RESULTING FROM THE INTENTIONAL TORTS OR GROSS NEGLIGENCE OF AN INDEMNIFIED PARTY. The provisions of this Section 12.3 shall apply during the whole of the Term and, in view of the permission given to Tenant to install fixtures prior to the commencement of the Term, shall also apply at all times prior to the Commencement Date. SECTION 12.4 RELEASE OF LANDLORD LIABILITY FOR ACTS OF ADJOINING TENANTS. Tenant hereby waives, and releases the Indemnified Parties from, any claims, losses or damages to Tenant, Tenant's employees, or to those claiming by, through or under Tenant, that may be occasioned by or through the acts or omissions, negligent or otherwise, of persons occupying adjoining premises or any part of the premises adjacent to or connecting with the Demised Premises or any part of the Mall Building, or otherwise. THE WAIVER AND RELEASE SET FORTH ABOVE SHALL APPLY REGARDLESS OF CAUSATION, INCLUDING, WITHOUT LIMITATION, AN INDEMNIFIED PARTY'S ACTS, OMISSIONS OR NEGLIGENCE (WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, COMPARATIVE, CONTRIBUTORY, OR CONCURRENT), OR BASED ON ANY THEORY OF PREMISES LIABILITY (WHETHER FOUNDED IN WHOLE OR IN PART ON NEGLIGENCE OR STRICT LIABILITY), OR ANY THEORY OF STRICT LIABILITY, INCLUDING, WITHOUT LIMITATION, ANY THEORIES OF PRODUCTS LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THERE IS EXPRESSLY EXCLUDED FROM THE ABOVE WAIVER AND RELEASE OF TENANT, 42 50 ANY CLAIMS RESULTING FROM THE INTENTIONAL TORTS OR GROSS NEGLIGENCE OF AN INDEMNIFIED PARTY. SECTION 12.5 WORKER'S COMPENSATION INSURANCE. Throughout the Term, Tenant shall maintain in full force and effect a policy or policies of worker's compensation insurance covering Tenant's employees in the maximum amount required by law, issued by and binding upon a responsible insurance company qualified to do business in the State of Texas. ARTICLE XIII -- CASUALTY INSURANCE SECTION 13.1 LANDLORD'S INSURANCE. Landlord shall keep the Mall Building of which the Demised Premises are a part insured against loss or damage by fire and against loss or damage by other risks now or hereafter embraced by all-risk insurance in amounts not less than [***] of the "full replacement cost" thereof as determined from time to time by Landlord. The term "full replacement cost" as used herein shall mean the cost of replacing the Mall Building, exclusive of the cost of excavations, foundations and footings below the lowest basement floor, and exclusive of Tenant Improvements which it is not Landlord's responsibility to rebuild. SECTION 13.2 TENANT INSURANCE. Tenant shall keep all Tenant Improvements (as defined in Section 11.3 hereof), including, without limitation, its fixtures, merchandise and equipment insured against loss or damage by fire and against loss or damage by other risks now or hereafter embraced by all-risk insurance and including sprinkler leakage and water damage coverage, and Tenant shall maintain in connection with such insurance "replacement cost" and "agreed amount" endorsements. Such insurance shall designate Tenant and Landlord as loss payees as their interests may appear. At least [***] days prior to the projected Commencement Date of this Lease, and at least [***] days prior to the expiration of any such policy, Tenant shall deliver to Landlord a duplicate original, or certificate thereof, evidencing the insurance required of Tenant under this Section 13.2. In addition to the foregoing obligation, Tenant agrees to carry business interruption *** Confidential treatment requested. 43 51 insurance in such an amount as is necessary to protect the Tenant from any interruption of its business operation for a period of at least one (1) year. SECTION 13.3 WAIVER OF SUBROGATION. Anything in this Lease to the contrary notwithstanding, Landlord and Tenant each waive all rights of recovery, claim, action or cause of action against the other, its agents, partners (both general and limited), officers, directors, shareholders or employees, for any loss or damage that may occur to the Demised Premises, or any improvements thereto, to the Shopping Center or to any personal property of such party therein, by reason of fire, the elements, or any other cause which is required to be insured against under the terms of the all-risk insurance policies required to be obtained pursuant to this Lease, regardless of cause or origin, including sole or contributory negligence of the other party hereto, its agents, contractors, partners, officers, directors, shareholders or employees; and each party covenants that no insurer shall hold any right of subrogation against such other parties. Tenant shall advise insurers of the foregoing and such waiver shall be a part of each policy maintained by Tenant which applies to the Demised Premises, any part of the Shopping Center or Tenant's use and occupancy of any part thereof, provided that this waiver shall be null and void if such waiver is unavailable from responsible insurance companies doing business in the State of Texas. SECTION 13.4 PAYMENT OF PREMIUMS. Tenant covenants and agrees that it will not do or permit anything to be done in or upon the Demised Premises or bring in anything or keep anything therein, which shall increase the rate of insurance on the Demised Premises or the building of which the Demised Premises are a part above the standard rate on said Demised Premises being used as permitted under Section 5.1 of this Lease; provided, however, that this Section 13.4 is subject to the right of the Tenant to pay increased premiums in accordance with Section 5.20) above. The right of Tenant to pay such increased premiums shall not be deemed to permit Tenant to use, occupy or maintain the Demised Premises other than as expressly permitted under Section 5.1. 44 52 ARTICLE XIV -- DAMAGE CLAUSE SECTION 14.1 PARTIAL DAMAGE. In the event that during the term hereof the Demised Premises shall be partially damaged (as distinguished from "substantially damaged", as such terms are defined in Section 14.6 hereof) by fire or other casualty, the risk of which is covered by Landlord's insurance, Landlord shall with all reasonable dispatch repair such damage and restore the Demised Premises (excluding Tenant Improvements), or so much thereof as was originally constructed by Landlord, to substantially their condition at the time of such damage, but Landlord shall not be responsible for any delay which may result from force majeure (as defined in Section 16.1 1). Thereafter Tenant shall with all reasonable dispatch repair any damage to the Tenant Improvements and restore the Tenant Improvements to substantially their condition existing at the time of such damage, and promptly reopen for business. SECTION 14.2 SUBSTANTIAL DAMAGE. In the event that during the term hereof the Demised Premises shall be substantially damaged or destroyed by fire or other casualty, the risk of which is covered by Landlord's insurance, this Lease shall, except as hereinafter provided, remain in full force and effect and Landlord shall, with all reasonable dispatch, repair or rebuild the Demised Premises (excluding Tenant Improvements), or so much thereof as was originally constructed by Landlord, to substantially their condition at the time of such damage or destruction (subject, however, to zoning laws and building codes then in existence), but Landlord shall not be responsible for any delay which may result from force majeure (as hereinafter defined in Section 16.11). Thereafter, Tenant shall with all reasonable dispatch repair any damage to the Tenant Improvements and restore the Tenant Improvements to substantially their condition existing at the time of such damage, and promptly reopen for business. In case of substantial damage or destruction, as a result of a risk which is not covered by Landlord's insurance, Landlord shall likewise be obligated to rebuild the Demised Premises, all as aforesaid, unless within one hundred twenty (120) days after the occurrence of such event, Landlord gives written notice to Tenant of its election to terminate this Lease. Notwithstanding the foregoing, in the event the Demised Premises are substantially damaged or destroyed by fire or other casualty and Landlord has failed to restore 45 53 the Demised Premises (excluding Tenant Improvements) in accordance with Landlord's obligations set forth herein within twelve (12) months following such substantial damage or destruction or if Landlord fails to commence such restoration within six (6) months after such substantial damage or destruction, then Tenant shall be permitted to terminate this Lease upon sixty (60) days prior written notice to Landlord. SECTION 14.3 TERMINATION FOR DAMAGE. Notwithstanding the foregoing provisions of this Article XIV, if the Demised Premises shall be substantially damaged or destroyed by fire, windstorm or otherwise within the last three (3) years of the term of this Lease, Landlord shall have the right to terminate this Lease by giving written notice of Landlord's intention to terminate to Tenant not later than ninety (90) days after Landlord first receives written notice from Tenant of such damage or destruction. Further, in the event that such substantial damage to the Demised Premises occurs within the last two (2) years of the term of this Lease, Tenant may terminate this Lease, provided it gives notice to Landlord within sixty (60) days after such substantial damage or destruction and Landlord has not theretofore commenced repairs and rebuilding. In the event this Lease is terminated in accordance with this Section 14.3, Tenant shall, within thirty (30) days thereafter pay to Landlord the amount of insurance proceeds payable to Tenant under the insurance policies held by Tenant pursuant to Section 13.2 above less any such proceeds specifically allocable to Tenant's merchandise. SECTION 14.4 ABATEMENT OF RENT WHEN DAMAGE INTERFERES. In the event the provisions of Section 14.1 or Section 14.2 hereof shall be applicable, Minimum Rent and Additional Rent (but not Percentage Rent or utilities) shall be abated or reduced proportionately during any period in which, by reason of any such damage or destruction, there is substantial interference with the operation of the business of Tenant in the Demised Premises having regard to the extent to which Tenant may be required to discontinue its business in the Demised Premises, and such abatement or reduction shall continue for the period commending with distinction or damage and ending upon THE date such interference is terminated. 46 54 SECTION 14.5 EFFECT OF TERMINATION FOR DAMAGE. In the event of termination of this Lease pursuant to this Article XIV, this Lease and the term hereof shall cease and come to an end as of the date of such damage or destruction as though such date were the date originally fixed for the expiration of the term of this Lease. SECTION 14.6 DEFINITIONS OF "PARTIAL DAMAGE" AND "SUBSTANTIAL DAMAGE". The terms "substantially damaged" and "substantial damage", as used in this Article XIV, shall have reference to damage of such a character as cannot reasonably be expected to be repaired, or the Demised Premises restored, within one hundred twenty (120) days from the time that such repair or restoration work would be commenced. The terms "partially damaged" and "partial damage", as used in this Article XIV, shall have reference to damage of such a character which can reasonably be expected to be repaired, or the Demised Premises restored, within one hundred twenty (120) days from the time such repair or restoration work would be commenced. For purposes of this Section 14.6, the estimated time for repair or restoration shall be determined, in good faith, by Landlord's architect, without assumption of any delays caused by force majeure (as hereinafter defined), but with due regard to the specialized nature of Tenant's improvements and fixturing requirements. SECTION 14.7 OTHER DAMAGE. Notwithstanding any provision contained in this Article XIV to the contrary, in no event shall any fire or other casualty give Tenant the right to require or demand that Landlord repair or restore any part of the Mall Building (other than the Demised Premises, to the extent required elsewhere in this Article XIV), the Shopping Center, or the Complex. Notwithstanding the foregoing, in the event more than sixty percent (60%) of the Mall Building is damaged or destroyed by fire or other casualty and Landlord has not restored such portion of the Mall Building to an architectural whole and substantially similar condition within eighteen (18) months thereafter, Tenant shall have the right to terminate this Lease upon sixty (60) days prior written notice to Landlord. 47 55 ARTICLE XV -- EMINENT DOMAIN SECTION 15.1 EFFECT OF A TAKING. If the Demised Premises, or such portion thereof as to render the balance (when reconstructed) unsuitable for the use set forth in Section 5.1 hereof, shall be taken by condemnation or right of eminent domain or conveyed by Landlord in lieu of condemnation, either party, upon written notice to the other, shall be entitled to terminate this Lease, provided that such notice is given within sixty (60) days after Tenant has been deprived of possession. Should any part of the Demised Premises be so taken or condemned, and should this Lease not be terminated in accordance with the foregoing provision, the Landlord covenants and agrees promptly after such taking or condemnation, and the determination of Landlord's award therefor, to expend so much as may be necessary of the net amount which may be awarded to it in such condemnation proceedings in restoring the Demised Premises to an architectural unit as nearly like their condition prior to such taking as shall be practicable. Should the net amount so awarded to Landlord be insufficient to cover the cost of restoring the Demised Premises, as estimated by Landlord's architect, Landlord may, but shall not be obligated to supply the amount of such insufficiency and restore said Demised Premises as above provided, with all reasonable diligence, or Landlord may terminate this Lease. Where the Tenant has not already exercised any right of termination accorded to it under the foregoing portion of this Section 15.1, Landlord shall notify, Tenant of Landlord's election not later than ninety (90) days after the final determination of the amount of the award. SECTION 15.2 RIGHT TO RECEIVE AWARDS. Out of any award for any taking of the Demised Premises, in condemnation proceedings, or by right of eminent domain, Landlord shall be entitled to receive and retain the amounts awarded for such Demised Premises and for Landlord's business loss. Tenant shall be entitled to receive and retain only the amounts, if any, which may be specifically awarded to it in any such condemnation proceedings because of the taking of its trade furniture or fixtures and the unamortized portion of its leasehold improvements based upon straight LINE amortization over the 48 56 term of the Lease (to the extent, but only to the extent, that funds therefor were not initially furnished by Landlord). SECTION 15.3 ABATEMENT OF RENT. In the event of any such taking of the Demised Premises, Minimum Rent and all other charges to be borne by Tenant under the provisions of this Lease (but not Percentage Rent) shall be abated in a fair and just proportion according to the nature and extent of the damage sustained during any period in which, by reason of any such taking, there is substantial interference with the operation of the business of Tenant in the Demised Premises, having regard to the extent to which Tenant may be required to discontinue its business in the Demised Premises, and such abatement or reduction shall continue for the period such interference continues. SECTION 15.4 TAKING OF OTHER PORTIONS. Notwithstanding any provision contained in this Article XV to the contrary, in no event shall any taking by condemnation or right of eminent domain or conveyances by Landlord in lieu of condemnation give Tenant the right to require or demand that Landlord repair or restore any part of the Mall Building, the Shopping Center or the Complex other than the Demised Premises. ARTICLE XVI -- MISCELLANEOUS COVENANTS OF TENANT SECTION 16.1 LANDLORD'S RIGHT TO INSPECT. Upon twenty-four (24) hours prior notice to Tenant, which notice may be delivered orally to the store manager at the Demised Premises, Landlord and Landlord's agents, contractors and employees shall have the right to enter upon the Demised Premises at all reasonable hours (and at any time and without prior notice in the event of emergency) for the purpose of inspecting or of making any repairs to the same required of Landlord pursuant to Section 10.1 hereinabove, or the building of which they are a part, or for any other entry upon the Demised Premises, by Landlord permitted under the terms of this Lease. No entry by Landlord permitted under the terms of this Lease shall be deemed a breach by Landlord of Tenant's right to 49 57 quiet enjoyment of the Demised Premises, as set forth in Section 17.1 hereinafter. If repairs are required to be made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable dispatch, after such demand, Landlord may (but shall not be required to do so) make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to its stock or business by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will forthwith, on demand, pay to Landlord the cost thereof, plus an amount equal to [***] thereof, as compensation for Landlord's administrative expenses, all of which shall be deemed Additional Rent hereunder. SECTION 16.2 ACCESS TO SHOW PREMISES. For a period commencing one hundred fifty (150) days prior to the expiration of the term of this Lease, Landlord may have reasonable access to the Demised Premises for the purpose of exhibiting the same to prospective tenants. SECTION 16.3 PROMOTIONAL PROGRAMS. Landlord has established an advertising and promotion service for the general benefit of the Shopping Center and its tenants. In connection with such service Landlord shall have the exclusive right to hire a Marketing Director, and staff, to plan and administer such service. A committee composed of Landlord, a representative of each Major Retail Store and representatives of at least four (4) tenants of the Mall Building, selected by Landlord will be formed to discuss the advertising and promotional activities. Tenant agrees to make the following contribution (the "Promotion Charge") into a fund (the "Promotion Fund") to be used for the advertising and promotional service as hereinafter described: Tenant shall pay to Landlord as Additional Rent, in equal monthly installments, on or before the first day of each month of the term hereof, an amount equal to [***] per year (subject to adjustment as provided herein) per square foot of Floor Space in the Demised Premises. *** Confidential treatment requested. 50 58 Promotion Fund payments for any partial calendar year shall be pro-rated based upon the number of days the Lease is in effect during such year. Landlord agrees to contribute annually to the Promotion Fund an amount equal to [***] of the amount paid to the Promotion Fund during such calendar year by tenants of the Shopping Center. The Promotion Fund shall be used by Landlord for professional advertising and sales promotions which, in Landlord's judgment, will benefit the tenants of the Shopping Center. In addition, the Promotion Fund shall reimburse Landlord for all salaries and expenses of the Marketing Director and the marketing staff, including, but not limited to, office rent, utilities, supplies, telephone, accounting charges, and expenses for other equipment used by the Marketing Director and marketing staff. Notwithstanding anything contained herein to the contrary, Landlord shall have the right, effective as of the first day of January of any year, to terminate the promotional and advertising service, in which event Tenant shall have no obligation to pay any Promotion Charge accruing after any such termination date, and Landlord shall no longer be obligated to make the contributions specified in this Section 16.3. In addition, Tenant agrees that any and all advertising undertaken by Tenant in the Dallas-Ft. Worth metropolitan area shall include a reference to Tenant's location in the Shopping Center. SECTION 16.4 COOPERATIVE PROMOTIONAL OPPORTUNITIES. Intentionally deleted. SECTION 16.5 GRAND RE-OPENING PROMOTION. Intentionally deleted. SECTION 16.6 TENANT CERTIFICATES. Recognizing that Landlord may find it necessary to establish to third parties, such as accountants, banks, mortgagees or the like, the then current status of performance hereunder, Tenant, on the written request of the Landlord made from time to time, will promptly furnish a *** Confidential treatment requested. 51 59 written affidavit on the status of this Lease, consisting of statements, if true, (i) that this Lease is in full force and effect, (ii) the date through which rentals have been paid, (iii) the Commencement Date and date of expiration of the Lease, (iv) the nature of any amendments or modifications to this Lease, (v) that no default, or state of facts, which with the passage of time or notice would constitute a default, exists on the part of either party hereto, (vi) the dates on which Percentage Rent payments are due under the terms of this Lease (see Article III), and (vii) such other matters as may reasonably be requested. Without limiting the foregoing, Tenant specifically agrees, upon the Commencement Date or upon receipt of a written request from Landlord after the Commencement Date, to execute a short form written declaration, stating the Commencement Date and expiration date of the Lease, and acknowledging satisfaction of the construction requirements and other matters reasonably requested by Landlord, save and except for such matters as Tenant may wish to set forth specifically in said statement. Such declaration shall not be recorded without written approval of both parties and only at the sole cost of the party requesting recordation. SECTION 16.7 CURING LANDLORD DEFAULTS. After receiving written notice from the holder of a deed of trust that such deed of trust which includes as a part of its mortgaged premises the Demised Premises, Tenant shall, so long as such deed of trust is outstanding, give to such holder the same notice and opportunity to correct any default on the part of the Landlord as is required to be given to Landlord in Section 17.4 hereafter, and shall be given in the manner specified in notice from such holder to Tenant, but such notice may be given by Tenant to Landlord and such holder concurrently. Tenant shall not be liable for failure to give such notice to such holder, but if Tenant fails to notify such holder of a default hereunder, the time within which such holder shall leave the right to cure such default shall not commence to run until such holder shall have been notified of such default on the part of Landlord by Tenant. 52 60 SECTION 16.8 OBLIGATIONS OF A MORTGAGEE. With reference to any assignment of this Lease, and/or the rents payable hereunder, whether as security or absolute, in connection with financing on all or part of the Shopping Center which includes the Demised Premises, Tenant agrees that the holder of any mortgage, deed of trust, or instrument (any of the foregoing being called herein a "Mortgage") so assigning the Landlord's interest in the Lease and/or the rents therefrom in connection with such financing (a "Landlord's Mortgagee") shall never be treated as a mortgagee in possession, or be liable for any obligations of the Landlord, even if such Landlord's Mortgagee shall have commenced collecting rents hereunder, until such time as such Landlord's Mortgagee shall have obtained actual legal title to or actual physical possession of the Demised Premises. Further, no Landlord's Mortgagee or any other person or entity acquiring title to the Demised Premises through foreclosure or transfer by or in lieu of enforcement of the liens of a Mortgagee shall ever be responsible or liable to Tenant for (i) damages or offset for any default by any predecessor Landlord; (ii) any credit against Tenant's obligations under this Lease for rents prepaid to any predecessor landlord more than one month in advance; (iii) any termination or assignment of this Lease except strictly in accordance with the terms of this Lease, or other change to this Lease made without the prior written consent or written joinder of the Landlord's Mortgagee; or (iv) any unperformed construction obligation or other default by any predecessor Landlord, except to cure curable, non-monetary defaults of a continuing nature within a reasonable time following acquiring title to the Demised Premises. SECTION 16.9 DISCHARGE OF MECHANIC'S AND MATERIALMAN'S LIENS. Tenant agrees within thirty (30) days after notice of filing to discharge of record by (i) payment, (ii) filing of the necessary bond, (iii) order of a court of competent jurisdiction, or (V) other means acceptable to Landlord, any mechanic's, materialman's or other lien against the Demised Premises and/or Landlord's or Tenant's interest therein (or any portion of the Shopping Center when such lien arises out of work performed or claimed to have been performed in or on the Demised Premises), which liens may arise out of any payment due for, or purported to be due for, any labor, services, materials, supplies or equipment alleged to have been furnished to or for the Tenant in, upon or about the Demised Premises. In the event Tenant contests any such mechanic's or materialman's liens, Tenant shall, at Landlord's request, (i) deposit with Landlord an amount equal to the claims made by such lien, together with interest thereon as it may from 53 61 time to time become due, as security for the payment and discharge thereof prior to execution or (ii) deliver to Landlord a bond of a recognized surety authorized to write surety bonds in Texas assuring the payment and removal of such lien, together with any interest or penalty thereon, and naming Landlord as a co-obligee. Any judgment or other process issued in such a contest shall be paid and discharged before execution thereof. If Tenant fails to keep this covenant, in addition to all other remedies available to Landlord under this Lease, Landlord may, at its option, purchase a surety bond at twice the amount, of the lien, securing such lien, and Tenant agrees to pay to Landlord, as Additional Rent, one and one-half times the cost thereof, to compensate Landlord for its expenses, attorney's fees and damages. SECTION 16.10 RECORDING PROHIBITED. Tenant agrees not to record this Lease or any other document which sets forth the rental or other charges payable by Tenant under this Lease. SECTION 16.11 FORCE MAJEURE. In the event that either party hereto shall be delayed or hindered in or prevented from doing or performing any act or thing required hereunder (other than, with respect to Tenant the payment of Minimum Rent, Percentage Rent, Additional Rent or any other charge set forth herein) by reason of strikes, lock-outs, breakdown, accident, casualties, acts of God, labor troubles, inability to procure materials, failure of supply, inability by the exercise of reasonable diligence to obtain supplies, parts or employees, necessary services, failure of power, governmental laws, orders or regulations, riots, insurrection, war or other causes beyond the reasonable control of either party, or for any cause due to any act or neglect of the other party or its servants, agents, employees, licensees, or any person claiming by, through or under the other party (referred to in this Lease as "force majeure"), then Landlord or Tenant, as the case may be, shall not be liable or responsible for any such delays and the doing or performing of such act or thing shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. The inability to pay money shall in no event constitute force majeure. For purposes of this Section 16.1 1, force majeure, with respect to Tenant, shall not be deemed to cover any failure by Tenant to open for 54 62 business by the date set forth in Section 2.2 if such failure is a result of Tenant's failure to order equipment, fixtures, supplies or merchandise sufficiently far in advance so as to be able to open for business in the Demised Premises as required by Section 2.2. SECTION 16.12 HOLDING OVER. In the event Tenant remains in possession of the Demised Premises after the expiration of the tenancy created hereunder, and without the execution of a new lease, Tenant shall be deemed to be occupying the Demised Premises as a tenant from month-to-month, at [***] times the Minimum Rent (with Percentage Rent being calculated during such hold-over period as if only Minimum Rent were payable), and subject to all the other conditions, provisions and obligations of this Lease in so far as the same are applicable to a month-to-month tenancy. In no event shall any such holding over and payment of rent be constituted as otherwise extending the term of this Lease. SECTION 16.13 INTEREST ON AMOUNT PAST DUE. If Tenant shall fail to promptly make any payment of the rentals reserved hereunder, or of Percentage Rent, or of Additional Rent, or to pay any other sum which Tenant has agreed to pay to Landlord in accordance with the terms of this Lease when such sums shall be due and payable, Tenant shall pay, in addition to such sums, interest on any amount so unpaid more than ten (10) days from the due date at the prime rate charged from time to time by Chase Manhattan Bank NA, New York, New York, plus [***] per annum plus an administrative fee of [***]; provided, however, the maximum amount payable hereunder shall not exceed the maximum lawful rate. Tenant shall pay to Landlord the sum of [***] for each check paid by Tenant to Landlord and returned unpaid due to insufficient funds, or for any other reason. Further, in the event checks tendered to Landlord by Tenant for any payments due hereunder are returned unpaid due to insufficient funds two (2) times in any consecutive twelve (12) month period, Landlord shall have the right to demand all future payments be made by certified check or money order. *** Confidential treatment requested. 55 63 SECTION 16.14 No TERMINATION. Except as specifically set forth in this Lease, Tenant shall have no right to surrender or terminate this Lease and Tenant shall not be relieved of its liability and obligation to pay Minimum Rent, Percentage Rent, Additional Rent and all other charges payable under this Lease or any of its obligations under this Lease, and Tenant waives any rights now or hereafter conferred upon it by statute or otherwise to terminate or surrender this Lease or the Demised Premises or any part thereof, or to any offset, retention, suspension, diminution, abatement or reduction of rent or other charges payable under this Lease. SECTION 16.15 RATINGS OF INSURANCE COMPANIES. All policies of insurance provided in this Lease to be maintained by Tenant shall be written by insurance companies qualified to do business in the State of Texas acceptable to Landlord, with general policyholders rating not less than A and a financial rating of VIII (or better) as rated in the most current available "Best's Insurance Reports". SECTION 16.16 TENANT RECORDS. For the purpose of ascertaining the amount payable as Percentage Rent, Tenant agrees to prepare and keep available, for a period of not less than thirty-six (36) months following each of the dates upon which Tenant delivers to Landlord each of the written statements required in Section 3.8 of this Lease, adequate records for the period reported upon by such statement which shall show inventories and receipts of merchandise at the Demised premises, and daily receipts from all sales and other transactions on or from the Demised Premises by Tenant and any other persons conducting any business upon or from the Demised Premises. Tenant shall record at the time of sale, in the presence of the customer, all receipts from sales or other transactions whether for cash or credit in a cash register or in cash registers or electronic or computer systems having a cumulative total. Tenant further agrees to keep available for at least three (3) years following the end of each Lease Year the gross income, sales and occupation tax returns with respect to said Lease Year and all pertinent original sales records. Pertinent original sales records shall includes: (a) cash register tapes, if available, including tapes from temporary registers; (b) serially numbered sales slips; (c) the originals of all 56 64 mail orders at and to the Demised Premises; (d) the original records of all telephone orders at and to the Demised Premises; (e) settlement report sheets of transactions with subtenants, concessionaires and licensees; (f) the original records showing that merchandise returned by customers was purchased at the Demised Premises by. such customers; (g) memorandum receipts or other records of merchandise taken out on approval; (h) such other sales records, if any, which would normally be examined by an independent auditor pursuant to accepted auditing standards in performing an audit of Tenant's sales; and (i) the records specified in (a) to (h) above of subtenants, assignees, concessionaires, or licensees. SECTION 16.17 LANDLORD NOT LIABLE FOR INTEREST. Tenant agrees that Landlord shall not be liable or accountable to Tenant for interest on any sum of money deposited by Tenant under the terms of this Lease, including, without limitation, amounts paid to Landlord by Tenant pursuant to Sections 3.3, 8.5 and 11.6 of this Lease. SECTION 16.18 REIMBURSEMENT FOR LEGAL EXPENSES. If Tenant shall request anything of Landlord which shall require preparation of, or review of, documents by Landlord's counsel, and if Landlord accedes to such request, Tenant shall reimburse Landlord on demand any reasonable legal and administrative fees and expenses incurred by Landlord incident thereto, not to exceed [***] per request. ARTICLE XVII -- LANDLORD'S COVENANT OF QUIET ENJOYMENT AND LIMITATIONS OF LIABILITY SECTION 17.1 PEACEFUL ENJOYMENT. Tenant, on payment of the rent and observing, keeping and performing all of the terms and provisions of this Lease on its part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Demised Premises during the term hereof without ejection by any persons lawfully claiming under Landlord; but it is understood and agreed that this covenant and any and all other covenants of Landlord contained in this Lease *** Confidential treatment requested. 57 65 shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownership of the Landlord's interest hereunder. SECTION 17.2 No PERSONAL LIABILITY OF LANDLORD. Tenant specifically agrees to look solely to Landlord's interest in the Mall Building for the recovery of any judgment against Landlord and that in no event shall Landlord, or any partner of Landlord, ever be personally liable for any such judgment. SECTION 17.3 LANDLORD AND TENANT NOT LIABLE FOR SPECIAL DAMAGES. In no event shall Landlord or the interest of Landlord in the Mall Building ever be liable to Tenant, or subject to execution by Tenant, for any indirect, special or consequential damages, whether under the provisions of this Article XVII or otherwise under this Lease. Furthermore, in no event shall Tenant ever be liable to Landlord for any indirect, special or consequential damages. SECTION 17.4 INDEPENDENT OBLIGATIONS/CURING LANDLORD DEFAULTS. The obligation of Tenant to pay all rent and other sums hereunder provided to be paid by Tenant and the obligation of Tenant to perform Tenant's other covenants and duties hereunder constitute independent, unconditional obligations to be performed at all times provided for hereunder, except to the extent an abatement thereof or reduction therein is expressly provided for in this Lease. Tenant waives all rights which Tenant might have to claim any nature of lien against or withhold, deduct from or offset against any rent or other sums provided to be paid Landlord by Tenant, as well as any right to assert, either as a claim or as a defense, that Landlord is bound to perform or is liable for the non-performance of any implied covenant or implied duty of Landlord not expressly herein set forth. To the maximum extent it may lawfully do so, Tenant waives its rights, if any, under the Texas Deceptive Trade Practices Act with respect to this Lease and its rights thereunder. Landlord shall in no event be in default in the performance of any of its obligations hereunder unless and until Landlord shall have failed to commence performance of such obligations within thirty (30) days. and if performance of such obligation is not reasonably capable of being performed within such thirty (30) day period, then 58 66 Landlord is obligated to commence performance of such obligations within said thirty (30) day period and diligently prosecute the performance of such obligations to completion, as soon as reasonably possible thereafter. ARTICLE XVIII -- LANDLORD'S REMEDIES SECTION 18.1 EVENTS OF DEFAULT. The following shall constitute events of default under the terms of this Lease: (i) if Tenant shall neglect or fail to perform or observe any of the covenants, terms, provisions or conditions contained in this Lease on its part to be performed or observed within twenty (20) days after written notice thereof from Landlord, subject to force majeure as defined in Section 16.11, provided, however, failure to cure such non-monetary default shall not constitute an event of default hereunder if such default is, by its nature, incapable of being cured within such twenty (20) days, and Tenant promptly commences and diligently pursues to completion the curing of such default, except for (A) payment of Minimum Rent, Percentage Rent, Additional Rent or any other monetary charges due hereunder, or any other monetary obligations at any time owing from Tenant to Landlord, for which subparagraph (ii) below shall apply, or (B) the circumstances described in subsections (iii) through (x) of this Section 18.1, in which event such subsections shall apply), or (ii) if Tenant shall neglect or fail to pay Minimum Rent, Percentage Rent or any other monetary obligations at any time owing from Tenant to Landlord within ten (10) days after written notice thereof from Landlord, or (iii) if Tenant fails to operate its business from the Demised Premises for (A) ten (10) consecutive days, or (B) fifteen (15) days (whether or not consecutive) during any twelve (12) month period (unless due to a fire or casualty to the Demised Premises, in which event the provisions of Article XIV of the Lease shall apply) or if Tenant abandons the Demised Premises, or (iv) if the 1easehold estate created by this Lease shall be taken on execution or by other process of law, or (v) if Tenant shall be judicially declared bankrupt or insolvent according to law, or (vi) if any assignment shall be made of the property of Tenant for the benefit of creditors, or (vii) if a receiver, guardian, conservator, trustee in involuntary bankruptcy or other similar officer shall be appointed to take charge of all or any substantial part of Tenant's property by a court of competent jurisdiction, or (viii) if a petition shall be filed for the reorganization of Tenant under any, provisions of the Federal Bankruptcy Code now or hereafter enacted and such petition is not dismissed within ninety (90) days after the date of filing, or 59 67 (ix) if Tenant shall file a petition for such reorganization, or for arrangements under any provisions of the Federal Bankruptcy Code now or hereafter enacted and providing a plan for a debtor to settle, satisfy or extend the time for the payment of debts. Nothing contained in this Section 18.1 shall be deemed to waive, limit, reduce or otherwise alter the rights afforded to Landlord pursuant to Subtitle C of the Bankruptcy Amendments and Federal Judgeship Act of 1984. Notwithstanding Section 5.4, if this Lease is assigned pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., the person or entity to whom it is assigned shall be deemed without further act or deed to have assumed all of the obligations arising hereunder on and after the date of such assignment. Any such assignee shall upon demand execute and deliver to Landlord an instrument confirming such assumption. If this Lease is so assigned, any and all monies or other considerations payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord, shall be and remain Landlord's exclusive property and shall not constitute property of Tenant or of Tenant's estate within the meaning of the Bankruptcy Code. Any and all monies or other considerations constituting Landlord's property under the preceding sentence not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and be promptly paid or delivered to Landlord. Any attempted or purported assignment, subletting or conveyance not in conformance herewith shall be void and of no force or effect. Notwithstanding anything to the contrary contained in (ii) above or in any other provision of this Lease, if the same or similar Event of Default of this Lease identified in (ii) above occurs twice during any twelve (12) month period, Landlord shall not thereafter in the twelve (12) month period subsequent to the second (2nd) such breach be obligated to give Tenant written notice thereof and a period of time in which to correct any such Event of Default, it being understood under such circumstances that the occurrence of such further breach shall constitute, without the necessity of any notice or grace period, an Event of Default hereunder. SECTION 18.2 LANDLORD REMEDIES. Upon the occurrence of any event of default, Landlord lawfully may, immediately, or at any time thereafter, upon written notice, (i) terminate this Lease or (ii) enter into and upon said Demised Premises or any part thereof Without terminating this Lease, and expel the Tenant and those claiming through or under it and remove its or their effects (forcibly, 60 68 if necessary) without being deemed guilty of any manner of trespass, and without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach of covenant. Tenant covenants and agrees, notwithstanding any entry or re-entry by Landlord, whether by summary proceedings, termination or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal, to the several installments of rent and other charges reserved as they would, under the terms of this Lease, become due if this Lease had not been terminated or if Landlord had not entered or re-entered, as aforesaid, and whether the Demised Premises be relet or remain vacant in whole or in part or for a period less than the remainder of the term, or for the whole thereof. If Landlord attempts to relet the Demised Premises, the nature and suitability of the proposed tenant and the terms of any new lease shall be in the sole and absolute discretion of Landlord. Notwithstanding anything to the contrary contained in the preceding sentence, Landlord agrees to use reasonable efforts to relet the Demised Premises, however, Landlord shall not be obligated to give preference to the Demised Premises over other space in the Shopping Center. In the event the Demised Premises be relet by Landlord, Tenant shall be entitled to a credit in the net amount of rent received by Landlord ill reletting the Demised Premises after deduction of all reasonable costs incurred by Landlord (i) in reletting the Demised Premises (including, without limitation, remodeling costs, brokerage fees, attorneys' fees and the like) and (ii) in collecting the rent in connection therewith. As an alternative, at the election of Landlord, Tenant will upon termination or upon entry or re-entry by Landlord without termination of this Lease, pay to Landlord, as damages, such a sum as at the time of such termination or re-entry by Landlord represents that amount of the [***]. In connection with Landlord's rights on default as set forth in this Section 18.2, Tenant grants to Landlord the right to undertake any and all credit checks on Tenant deemed necessary by Landlord in collection with the collection by Landlord of damages due Landlord as a result of a default by Tenant. *** Confidential treatment requested. 61 69 SECTION 18.3 PERCENTAGE RENT AFTER ENTRY BY LANDLORD. For the purposes of this Article XVIII, it shall be deemed that the Percentage Rent for any period after any event of default and entry by Landlord would have been at a monthly rate equal to the average monthly Percentage Rent which Tenant was obligated to pay to Landlord under this Lease from the commencement hereof to the date of such default. SECTION 18.4 LEASE GUARANTY. If this Lease shall be guaranteed on behalf of the Tenant, if there is a default by the Guarantor under the Guaranty, such default shall constitute an event of default by Tenant under this Lease without further notice to Tenant. SECTION 18.5 NO WAIVER. Failure on the part of Landlord to complain of any action or non-action on the part of Tenant, no matter how long the same may continue, shall never be deemed to be a waiver by Landlord of any of its rights hereunder. Further, it is covenanted and agreed that no waiver at any time of any of the provisions hereof by Landlord shall be construed as a waiver of any of the other provisions hereof and that waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions. The consent or approval by Landlord to or of any action by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary Landlord's consent or approval to or of any subsequent similar act by Tenant. SECTION 18.6 SECURITY INTEREST. Intentionally deleted. ARTICLE XIX -- NOTICE SECTION 19.1 ADDRESS AND MANNER OF GIVING NOTICE. Any notice, communication, request, reply or advice (herein severally and collectively, for convenience, called "notice") in this Lease provided or permitted to be given, made or accepted by either party to the other must be in writing, and may, unless otherwise in 62 70 this Lease expressly provided, be given or be served by depositing the same in the United States mail, postpaid and certified and addressed to the party to be notified, with return receipt requested, by telecopy, telegram with written confirmation of delivery, or by delivering the same in person to such party. Notice deposited in the mail in the manner hereinabove described shall be effective, unless otherwise stated in this Lease, on the earlier of (i) actual delivery or (ii) the third (3rd) day (exclusive of Saturdays, Sundays, and postal holidays) after it is so deposited. Notice given in any manner other than by deposit in the mail provided for herein shall be effective only if and when received by the party to be notified. Rejection or other refusal to accept, or the inability to deliver because of changed address of which no notice was given pursuant to this Section 19.1 shall be deemed to be receipt of the notice sent. For purposes of notice, the addresses of the parties shall, until changed as herein provided, be as set forth on the cover page of this Lease. In addition Landlord shall use its good faith efforts to send copies of default notices to Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301; Attn: Daniel K. Seubert; provided, however, failure to send such notice shall not render Landlord's notice ineffective. However, the parties hereto and their respective heirs, successors, legal representatives and assigns shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address within the continental United States, by at least fifteen (15) days' written notice to the other party; provided, however, except as set forth in Section 16.7 hereof, if at any one time more than one person or party owns an interest in the Demised Premises, nevertheless such persons or parties may not designate more than one place and address to receive notice, pursuant to the terms hereof ARTICLE XX -- MISCELLANEOUS PROVISIONS REGARDING LEASE SECTION 20.1 GOVERNING LAW. This Lease shall be governed by the laws of the State of Texas. 63 71 SECTION 20.2 REPRESENTATION BY CORPORATE TENANT. In the event Tenant hereunder shall be a corporation, the parties executing this Lease on behalf of Tenant hereby covenant and warrant that Tenant is a duly qualified corporation authorized to do business in the State of Texas, and Tenant covenants and warrants that all franchise and corporate taxes have been paid to date and that all future forms, reports, fees and other documents necessary to comply with applicable laws will be filed when due. SECTION 20.3 No ACCORD AND SATISFACTION. No payment by Tenant, or acceptance by Landlord of a lesser amount than shall be due from Tenant to Landlord, shall be treated otherwise than as a payment on account. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full, shall be given no effect, and Landlord may accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant. SECTION 20.4 HEADINGS AND INDEX. The paragraph headings and the index to this Lease are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease. SECTION 20.5 PARTIAL INVALIDITY. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. SECTION 20.6 SUCCESSORS AND ASSIGNS. Except as herein otherwise expressly provided, the terms hereof shall be binding upon and shall inure to the benefit of the heirs, executor, administrators, successors and assigns, respectively, of the Landlord and the Tenant. Each term and EACH provision of this Lease to be 64 72 performed by the Tenant shall be construed to be both a covenant and a condition. The above reference to successors and assigns of Tenant is not intended to constitute a consent to assignment by Tenant, but has reference only to permitted assignments in accordance with Section 5.4 hereof. SECTION 20.7 WHEN LEASE BECOMES BINDING. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Demised Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Landlord and Tenant. All negotiations, considerations, representations, inducements, oral agreements and understandings between Landlord and Tenant are merged and incorporated herein and this Lease may be amended, modified or altered only by written agreement signed by both Landlord and Tenant. This Lease constitutes the only agreement between the parties hereto, and there are no other representations or warranties between the parties. No employee or agent of Landlord shall have the right or authority to amend, modify or alter any of the provisions of this Lease. SECTION 20.8 OTHER LEASES AND TENANTS. Landlord reserves the absolute right to effect such other tenancies in the Shopping Center or the Complex as Landlord, in the exercise of its sole business judgment, shall determine to best promote the interest of the Shopping Center or the Complex. Notwithstanding anything in this Lease to the contrary, Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or number of tenants shall during the term of this Lease occupy any space or any particular space in the Shopping Center or any other premises within the Shopping Center Site or the Complex; nor does Landlord represent or warrant that any particular space will be used for any particular purpose during the term of this Lease. In the event Landlord in the exercise of its sole discretion shall effect other tenancies in the Shopping Center or the Complex, Tenant shall not be deemed to be a beneficiary of any agreement between Landlord and such other tenants. Tenant shall have no right whatsoever, either express or implied, under any such agreements between Landlord and such 65 73 other tenants or under any of the terms or provisions of such agreements; and Tenant shall have no right to enforce any such agreements, terms or provisions on behalf of itself or any other party including Landlord. SECTION 20.9 ATTORNEYS' FEES. If, on account of a default or breach by Landlord or Tenant in Landlord's or Tenant's obligation under the terms of this Lease after notice and opportunity to cure as required under Sections 17.4 and 18.1 hereof, it shall be necessary for Landlord or Tenant to employ an attorney to enforce or defend any of Landlord's or Tenant's rights or remedies hereunder, then, in such event, any reasonable amounts incurred by Landlord or Tenant as attorneys' fees shall be paid by the party in default. SECTION 20.10 THIRD PARTY CONTRACTS. In the event Landlord shall enter into any contract with third parties in any way connected to the Complex, including specifically without limiting the generality of the foregoing, the provision of security services, Tenant shall not be deemed to be a beneficiary of any such contract. Tenant shall have no right whatsoever, either express or implied, under any such contract or under any of the terms or provisions of such contract; and Tenant shall have no right to enforce any such contract, term or provision on behalf of itself or any other party including Landlord. SECTION 20.11 NO BROKER. Tenant and Landlord warrant and represent that no broker was involved on its behalf in negotiating or consummating this Lease, and Tenant and Landlord agree to indemnify and hold harmless the other from and against any and all claims for brokerage commissions arising out of the breach of this representation. SECTION 20.12 SECURITY DEPOSIT. Intentionally deleted. 66 74 SECTION 20.13 TIME OF THE ESSENCE. Time is of the essence in the performance of each party's obligations under this Lease and all performance due dates, time schedules, and conditions precedent to exercising a right shall be strictly adhered to without delay except where otherwise expressly provided. ARTICLE XXI -- LEASE SUPERIOR OR SUBORDINATE TO MORTGAGES SECTION 21.1 LEASE SUPERIOR OR SUBORDINATE. Tenant agrees with Landlord and with any holder of any first mortgage and/or beneficiary of any first mortgage and/or deed of trust now or hereafter having a lien on the Shopping Center or any portion thereof including the Demised Premises ("Landlord's Mortgagee") that any such Landlord's Mortgagee shall have the right at any time to elect, by a notice in writing given to Tenant, to make this Lease superior to such mortgage and/or deed of trust and, upon the giving of such notice to Tenant, this Lease shall be deemed prior and superior to such mortgage and/or deed of trust in respect of which said notice was given; or any such Landlord's Mortgagee may, by like notice, make this Lease subordinate to such mortgage and/or deed of trust. In the event of either such election, and upon notification by Landlord's Mortgagee to Tenant to that effect, the rights and interests of Tenant under this Lease shall be deemed to be subordinate to, or to have priority over, as the case may be, the lien of said first mortgage or first deed of trust, whether this Lease is dated prior to or subsequent to the date of said mortgage or deed of trust subject to the provisions of Section 17.1, provided that Tenant's use and quiet enjoyment of the Demised Premises are not disturbed thereby and this Lease continues in full force and effect for so long as Tenant is not in default hereunder. Tenant shall execute and deliver whatever instruments may be required for such purposes, if any, and in the event Tenant fails so to do within ten (10) days after demand in writing, Tenant does hereby make, constitute and irrevocably appoint Landlord as its attorney in fact and in its name, place and stead so to do. SECTION 21.2 ATTORNMENT BY TENANT. In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale, under any mortgage or deed of trust made by Landlord covering the 67 75 Demised Premises or in the event of conveyance in lieu of foreclosure, or in the event of termination of any ground lease of premises of which the Demised Premises forms a part; further, provided Tenant is not in default hereunder beyond any applicable notice and cure period, Tenant's quiet possession as set forth in Section 17.1 shall not be disturbed, Tenant shall attorn to the purchaser (including Landlord's Mortgagee) upon any such foreclosure, sale or conveyance in lieu of foreclosure or to any fee owner in the event of termination of such ground lease and recognize such purchaser or fee owner as Tenant's landlord under this Lease. ARTICLE XXII -- ADDITIONAL TERMS SECTION 22.1 "GALLERIA" SERVICEMARK. The Tenant shall not use the term "Galleria" as a part of any trade name, corporate name, or other business name, as a part of any trademark or serviceman, or for any other purpose. However, the Tenant may indicate in a truthful descriptive statement, during the term of this Lease, the fact that the Tenant's shop is located in the Galleria. The Tenant shall not use, register, or apply for the registration of any name or mark which incorporates the term "Galleria" or any other word having a similar sound or appearance. If the Tenant, in violation of this Section, uses the term "Galleria" in any way other than in a truthful descriptive statement regarding the location of Tenant's shop in the Galleria, any such use of the term "Galleria" shall inure to the benefit of the Landlord. The Tenant recognizes the value of the "Galleria" mark to the Landlord, and the Tenant acknowledges that the "Galleria" mark and its associated goodwill belong exclusively to the Landlord. The Tenant acknowledges the validity of the "Galleria" mark. The Tenant shall not at any time represent or claim that the Tenant has any ownership interest in the "Galleria" mark, and the Tenant shall not do or cause to be done, or assist others in doing or causing to be done, any act or thing contesting or in any way impairing the Landlord's rights to the "Galleria" mark. SECTION 22.2 CONSTRUCTION ALLOWANCE. 68 76 Provided Tenant is not in default under the terms of this lease, Landlord shall provide Tenant with a Construction Allowance equal to [***] to construct Tenant's Work (as described in Exhibit C attached hereto) in the Demised Premises, but such Construction Allowance paid by Landlord to Tenant shall in no event exceed [***] per square foot of floor area within the Demised Premises. The Construction Allowance shall be paid as follows: (a) Fifty percent (50%) within thirty (30) days after Tenant has opened for business within the Demised Premises and; (i) Tenant furnishes a certificate signed by an officer certifying that all of Tenant's Work has been completed in accordance with the plans approved by Landlord for Tenant's Work and has been paid for in full; (ii) Tenant's submission of evidence that any and all liens therefor that have been or may be filed have been satisfied of record or waived; and (iii) Tenant provides evidence reasonably satisfactory to Landlord that the actual cost to construct Tenant's Work in the Demised Premises exceeded [***] per square foot of floor area within the Demised Premises. Landlord agrees that a certified statement from Tenant's general contractor that the cost of Tenant's Work exceeded [***] per square foot of floor area within the Demised Premises shall be deemed to satisfy the requirements of this subc1ause (iii). (b) Twenty-five percent (25%) within nine (9) months after Tenant has opened for business within the Demised Premises and; (c) Twenty-five percent (25%) within eighteen (18) months after Tenant has opened for business within the Demised Premises. SECTION 22.3. REPAYMENT OF CONSTRUCTION ALLOWANCE. Reference is herein made to Section 22.2 hereinabove. Tenant and Landlord hereby agree that should Tenant default in its obligations under this Lease subsequent to the Commencement Date but prior to the expiration date hereof, and should the Lease, or Tenant's right of possession thereunder, be terminated as a result of such uncured default in accordance with the terms of this Lease, then Tenant shall repay to Landlord, in addition to all other rights and remedies of Landlord, within thirty (30) days after any such termination the unamortized portion (the "Construction Allowance Balance") of the Construction Allowance, amortized on a straight-line basis over the term of the Lease. *** Confidential treatment requested. 69 77 SECTION 22.4 SATELLITE DISH. Tenant shall have the right to enter into a license agreement with Landlord for the installation of a satellite dish substantially in the same form as is attached hereto as Exhibit "S". This Lease is hereby executed and delivered in multiple original counterparts, each of which shall have the force and effect of an original, effective as of the date and year first above written on the first page of this Lease. "LANDLORD" DALLAS GALLERIA LIMITED, A Texas Limited Partnership By: HDG, Limited A Texas Limited Partnership General Partner By: Hines Consolidated Investments, Inc. A Delaware Corporation General Partner By: [ILLEGIBLE] -------------------------------- [ILLEGIBLE] -------------------------------- Vice President "TENANT" LBE TECHNOLOGIES, INC. D/B/A NASCAR SILICON MOTOR SPEEDWAY By: JANET L. WOODS -------------------------------- Janet L. Woods -------------------------------- (Name Printed) (Title)
70 78 EXHIBIT A DALLAS GALLERIA "NASCAR SILICON MOTOR SPEEDWAY" 79 EXHIBIT A-1 GALLERIA 80 EXHIBIT A-2 DALLAS GALLERIA SHOPPING CENTER SITE BEING a tract of land situated in the Joe Badgley Survey, Abstract No. 76, the Mary Brown Survey, Abstract No. 159, and the Elisha Fike Survey, Abstract No. 478, City Block Nos. 7001 and 7002, City of Dallas, Dallas County, Texas and being more particularly described by metes and bounds as follows: COMMENCING at a cross-cut in concrete paving at the intersection of the South line of Alpha Road (a 64' R.O.W.) and the West line of Noel Road (a 55' R.O.W.); thence North 89 deg. 55 min. 37 sec. West a distance of 272.33 feet along said South line of Alpha Road to the POINT OF BEGINNING; THENCE South 00 deg. 00 min. 16 sec. West a distance of 2138.50 feet to a point for corner; said point being in the North line of L.B.J. Freeway (I.H. 635); THENCE the following bearings and distances along the said North line of L.B.J. Freeway (I.H. 635); North 53 deg. 26 min. 12 sec. West a distance of 332.26 feet to a monument for an angle point; thence North 66 deg. 02 min. 45 sec. West a distance of 205.07 feet to a monument for a corner on the Northeast line of Dallas Power & Light Co., a 100 foot R.O.W.; THENCE North 17 deg. 03 min. 45 sec. West a distance of 570.77 feet along the said Northeast line of Dallas Power & Light Co. R.O.W. to an iron rod for a corner on the East line of Dallas Parkway (a 100' R.O.W.); THENCE North 06 deg. 16 min. 12 sec. East a distance of 42.30 feet along the said East line of Dallas Parkway to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 200.03 feet to a point for comer; THENCE North 00 deg. 00 min. 16 sec. East a distance of 20.83 feet to a point for corner; THENCE North 44 deg. 59 min. 44 sec. East a distance of 111.96 feet to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 51.00 feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 282.67 feet to a point for corner; THENCE North 89 deg. 59 min. 44 sec. West a distance of 51.00 feet to a point for corner; THENCE North 44 deg. 59 min. 44 sec. West a distance of 111.96 feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 20.83 feet to a point for corner; THENCE North 89 deg. 59 min. 44 sec. West a distance of 260.39 feet to a point for corner; said point being in the East line of Dallas Parkway; THENCE North 17 deg. 01 min. 20 sec. West a distance of 519.01 feet along the said East line of Dallas Parkway to an iron rod for the beginning of a curve to the right having a central angle of 14 deg. 56 min. 17 sec. and a radius of 1095.92 feet; A-2 (1) 81 THENCE along said curve to the right and along said East line of Dallas Parkway a distance of 285.73 feet to a cross cut in concrete paving on the said South line of Alpha Road; THENCE South 89 deg. 55 min. 37 sec. East a distance of 551.83 feet to a point for corner; THENCE South 00 deg. 00 min. 16 sec. West a distance of 166.71 feet to a point for corner; THENCE South 44 deg. 59 min. 44 sec. East a distance of 387.76 feet to a point for corner; THENCE North 45 deg. 00 min. 16 sec. East a distance of 20.00 feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 426.41 feet to a point for corner, said point being in the South line of Alpha Road; THENCE South 89 deg. 55 min. 37 sec. East a distance of 40.00 feet along said South line of Alpha Road to the POINT OF BEGINNING and containing 24.563 acres of land. PLUS A tract of land situated in the Joe Badgley Survey, Abstract No. 76, City Block No. 7002, City of Dallas, Dallas County, Texas and being part of the HGD Addition as recorded in Volume 81141, Page 2666 of the Deed Records of Dallas County, Texas and being more particularly described as follows: COMMENCING at a cross cut in concrete paving at the intersection of the South line of Alpha Road (a 64' R.O.W.) and the West line of Noel Road (a 55' R.O.W.); thence South 00 deg. 02 min. 30 sec. East a distance of 765.75 feet to the POINT OF BEGINNING; THENCE South 00 deg. 02 min. 30 sec. East a distance of 411.50 feet to a point for corner; THENCE North 89 deg. 59 min. 44 sec. West a distance of 273.28 feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 411.50 feet to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 272.95 feet to the POINT OF BEGINNING and containing 112,385 square feet or 2.5800 acres of land. A-2 (2) 82 EXHIBIT A-3 DALLAS GALLERIA COMPLEX SITE BEING a tract of land situated in the Joe Badgley Survey, Abstract No. 76, the Mary Brown Survey, Abstract No. 159, and the Elisha Fike Survey, Abstract No. 478, City Block Nos. 7001 and 7002, City of Dallas, Dallas County, Texas and being more particularly described by metes and bounds as follows: COMMENCING at a cross cut in concrete paving at the intersection of the South line of Alpha Road (a 64' R.O.W.) and the West line of Noel Road (a 55' R.O.W.); thence North 89 deg. 55 min. 37 sec. West a distance of 272.33 feet along said South line of Alpha Road to the POINT OF BEGINNING; THENCE south 00 deg. 00 min. 16 sec. West a distance of 1171.5 8 feet to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 273.27 feet to a point for corner, said point being in the West line of Noel Road; THENCE South 00 deg. 02 min. 30 sec. East a distance of 87.31 feet along the said West line of Noel Road to an iron pipe for angle point; THENCE South 00 deg. 03 min. 41 sec. West a distance of 112.77 feet along the said West line of Noel Road to a point for corner; THENCE North 89 deg. 59 min. 44 sec. West a distance of 145.90 feet to a point for corner; THENCE South 00 deg. 00 min. 16 sec. West a distance of 483.33 feet to a point for corner; THENCE North 89 deg. 59 min. 44 sec. West a distance of 127.33 feet to a point for corner; THENCE South 00 deg. 00 min. 16 sec. West a distance of 283.50 feet to a point for corner; said point being in the North line of L.B.J. Freeway (I.H. 635); THENCE the following bearings and distances along the said North line of L.B.J. Freeway (I.H. 635); North 53 deg. 26 min. 12 sec. West a distance of 332.26 feet to a monument for an angle point; thence North 66 deg. 02 min. 45 sec. West a distance of 205.07 feet to a monument for a corner on the Northeast line of Dallas Power & Light Co., a 100-foot R.O.W.; THENCE North 17 deg. 03 min. 45 sec. West a distance of 570.77 feet along the said Northeast line of Dallas Power & Light Co. R.O.W. to an iron rod for a corner on the East line of Dallas Parkway (a 100' R.O.W.); THENCE North 06 deg. 16 min. 12 sec. East a distance of 51.67 feet along the said East line of Dallas Parkway to an iron rod for corner; THENCE North 89 deg. 49 min. 46 sec. West a distance of 3.66 feet along the said East line of Dallas Parkway to an iron rod for corner; THENCE North 05 deg. 32 min. 1 1 sec. East a distance of 64.04 feet along the said East line of Dallas Parkway to an iron rod for the beginning of a curve to the left having a central angle of 22 deg. 36 min. 00 sec. and a radius of 766.20 feet; A-3 (1) 83 THENCE along said curve to the left and along said East line of Dallas Parkway a distance of 302.22 feet to the end of said curve, an iron rod for point; THENCE North 17 deg. 0 1 min. 20 sec. West a distance of 646.25 feet along the said East line of Dallas Parkway to AN iron rod for the beginning of a curve to the right having a central angle of 14 deg. 56 min. 17 sec. and a radius of 1095.92 feet; THENCE along said curve to the right and along said East line of Dallas Parkway a distance of 285.73 feet to a cross cut in concrete paving on the said South line of Alpha Road; THENCE South 89 deg. 55 min. 37 sec. East a distance of 551.83 feet along the said South line of Alpha Road to a point for corner; THENCE South 00 deg. 00 min. 16 sec. West a distance of 166.71 feet to a point for corner; THENCE South 44 deg. 59 min. 44 sec. East a distance of 387.76 feet to a point for corner; THENCE North 45 deg. 00 min. 16 sec. East a distance of 20.00 feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 426.41 feet to a point for corner; said point being in the South line of Alpha Road; THENCE South 89 deg. 55 min. 37 sec. East a distance of 40.00 feet along said South line of Alpha Road to the POINT OF BEGINNING and containing 30.554 acres of land. PLUS A tract of land situated in the Joe Badgley Survey, Abstract No. 76, City Block No. 7002, City of Dallas, Dallas County, Texas and also being part of the HGD Addition as recorded in Volume 81141, Page 2666 of the Deed Records of Dallas County, Texas and being more particularly described as follows: COMMENCING at a cross cut in pavement at the intersection of the South line of Alpha Road (a 64' R.O.W.) and the West line of Noel Road (a 55' R.O.W.), said cross cut also being the Northeast corner of said HGD Addition; thence South 00 deg. 02 min. 30 sec. East a distance of 571.50 feet along said West line of Noel Road to the POINT OF BEGINNING. THENCE continuing along said West line of Noel Road South 00 deg. 02 min. 30 sec. East a distance of 194.25 feet to a point for corner; THENCE North 89 deg. 59 min. 44 sec. West a distance of 272.95, feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 644.50 feet to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 127.42 feet to a point for corner; THENCE South 00 deg. 00 min. 16 sec. West a distance of 450.25 feet to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 145.37 feet to the POINT OF BEGINNING and containing 110,376 square feet or 2,5339 acres of land. A-3 (2) 84 PLUS A tract of land situated in the Joe Badgley Survey, Abstract No. 76, City Block No. 7001, City of Dallas, Dallas County, Texas and being part of the HGD Addition as recorded in Volume 81141, Page 2666 of the Deed Records of Dallas County, Texas and being More particularly described as follows: BEGINNING at an "X" cut in concrete pavement at the Southeast corner of said HGD Addition, said point also being the intersection of the North right-of-way line of L.B.J. Freeway (I.H. 635) and the West right-of-way line of Noel Road (a variable width R.O.W.); THENCE North 65 deg. 05 min. 00 sec. West a distance of 240.27 feet along the North line of L.B.J. Freeway (I.H. 635) to an iron rod for. corner; THENCE continuing along said North line of LBJ Freeway North 53 deg. 26 min. 12 sec. West a distance of 67.74 feet to an iron rod for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 283.50 feet to and iron rod for corner; for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 127.33 feet to an iron rod for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 483.33 feet; to an iron rod for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 145.90 feet to an "X" cut in concrete pavement, said point being in the West line of Noel Road; THENCE along said West line of Noel Road South 00 deg. 03 min. 41 sec. West a distance of 908.40 feet to the POINT OF BEGINNING and containing 168,613 square feet or 3.871 0 acres of land. PLUS A tract of land situated in the Joe Badgley Survey, Abstract No. 76, City Block No. 7002, City of Dallas, Dallas County, Texas and being part of the HGD Addition as recorded in Volume 81141, Page 2666 of the Deed Records of Dallas County, Texas and being more particularly described as follows: COMMENCING at a cross cut in concrete paving at the intersection of the South line of Alpha Road (a 64' R.O.W.) and the West line of Noel Road (a 55' R.O.W.); thence South 00 deg. 02 min. 30 sec. East a distance of 765.75 feet to the POINT OF BEGINNING; THENCE South 00 deg. 02 min. 30 sec. East a distance of 411.50 feet to a point for corner; THENCE North 89 deg. 59 Min. 44 sec. West a distance of 273.28 feet to a point for corner; THENCE North 00 deg. 00 min. 16 sec. East a distance of 411.50 feet to a point for corner; THENCE South 89 deg. 59 min. 44 sec. East a distance of 272.95 feet to the POINT OF BEGINNING and containing 112,385 square feet or 2.5800 acres of land. A-3 (3) 85 EXHIBIT A-4 [COMPLEX SITE PLAN] A-3 (4) 86 License, provided Licensee has paid to Licensor all of its obligations payable under this License and further provided that Licensee has given Licensor written notice of Licensee's forwarding address. 9. COMPLIANCE WITH ALL APPLICABLE LAWS. Throughout the term, Licensee shall obtain and maintain, at its sole cost and expense, all approvals, permits or licenses required by any governmental authority which are necessary for Licensee's permitted use of the Premises and occupancy of the Premises; further, Licensee shall, at its sole cost and expense, at all times during the term hereof comply with all applicable laws, ordinances, rules, regulations and requirements of any governmental authority having jurisdiction over Licensee's business operations at, use and/or occupancy of the Premises. 10. LICENSEE'S RELEASE, WAIVER AND INDEMNITY. Notwithstanding anything to the contrary contained in this License, at all times from and after the date that possession of the Premises is delivered to Licensee and continuing throughout the term, Licensee shall indemnify, defend, and hold harmless Licensor and its agents, employees, and partners and the partners' officers, directors, agents, and employees (the "Indemnified Parties") from and against and hereby releases and waives all suits, demands, liabilities, claims, causes of action, costs, losses, damages and expenses ("Claims") (i) arising from or caused in any way by any act, omission, or negligence of Licensee or its officers, agents, employees, servants, contractors, or licensees or (ii) arising out of any accident within, or damage to the property of any person (including, without limitation, Licensee and its officers, agents, employees, servants, contractors, or licensees) located within tile Premises, or injury to or death of any person in or upon the Premises, or Licensee's use of the Premises, whether caused in whole or in part by the acts, omissions, negligence or strict liability of an Indemnified Party, and (iii) arising out of any violation of any applicable law. THE RELEASE, WAIVER INDEMNITY SET FORTH IN CLAUSE (II) ABOVE SHALL APPLY REGARDLESS OF CAUSATION, INCLUDING, WITHOUT LIMITATION, THE ACTS, OMISSIONS OR NEGLIGENCE OF AN INDEMNIFIED PARTY, (WHETHER SUCH NEGLIGENCE IS SOLE, JOINT, COMPARATIVE, CONTRIBUTORY, OR CONCURRENT), OR BASED ON ANY THEORY OF STRICT LIABILITY, INCLUDING, WITHOUT LIMITATION, PRODUCTS LIABILITY OR PREMISES LIABILITY,- (WHETHER FOUNDED IN WHOLE OR IN PART ON NEGLIGENCE OR STRICT LIABILITY) BUT EXCLUDING LICENSOR'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The foregoing indemnities shall include attorneys' fees, court costs, investigation costs, and all other costs and expenses incurred by an Indemnified Party from tile first notice that any Claim or demand has been made or may be made, and shall not be limited in any way by any limitation on the amount or type of damages, compensation, or benefits payable under 3 87 applicable worker's compensation acts, disability benefit acts, or other employee benefit acts. The provisions of this paragraph shall survive the expiration or termination of this License with respect to any Claim occurring before such expiration or termination. 11. INSURANCE. Licensee agrees to maintain in full force during the term of this License a policy or policies of comprehensive general liability insurance in the amount of at least [***] combined single limit for bodily injury (including death) and/or property damage in any one occurrence. All insurance policies required hereunder shall name Licensor as an additional insured, contain contractual liability endorsements covering the agreement of Licensee to indemnify the Indemnified Parties pursuant to the terms and provisions of this License, shall be primary to any insurance carried by Licensor or an Indemnified Party, and shall contain a waiver of subrogation provision covering the releases, waivers and indemnities of Licensee referred to in the following sentence. Licensee hereby further agrees that its insurance company shall have no right of subrogation against Licensor and/or the Indemnified Parties on account of any Claims for which Licensee has released or waived or indemnified the Indemnified Parties for under this License. Licensee shall furnish Licensor with a certificate of such insurance coverage prior to the commencement of this License. Licensee hereby agrees to use and occupy the Premises at Licensee's own risk and that the Indemnified Parties shall not be liable for and Licensee hereby releases and waives all Claims against the Indemnified Parties for any loss of or damage to Licensee's property (including inventory) caused in any manner whatsoever, including, without limitation, any loss or damage caused by the negligence of an Indemnified Party, whether or not such negligence is sole, joint, comparative, contributory or concurrent. Licensee shall insure its property (including inventory) against damage or loss by any cause, including theft. 12. NO PERSONAL LIABILITY OF AN INDEMNIFIED PARTY. Licensee specifically agrees to look solely to an Indemnified Party's interest in the Shopping Center for the recovery of any judgment from an Indemnified Party, and that in no event shall an Indemnified Party ever be personally liable for any such judgment. 13. NO INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES. In no event shall an Indemnified Party or the interest of an Indemnified Party ever be liable to Licensee or subject to execution by Licensee for any indirect, special or consequential damages under the provisions of this License or otherwise. *** Confidential treatment requested. 4 88 GALLERIA Dallas, Texas EXHIBIT B DESCRIPTION OF LANDLORD'S WORK The following work ("Landlord's Work") shall be, or has been, done for or by the Landlord except as otherwise specified: A. STRUCTURE 1. Frame: A structural frame of concrete and/or masonry construction, or any combination of these, with a mall designed to carry a live load of 100 pounds per square foot in accordance with applicable building codes and a floor and roof designed to carry an air handling unit of 1500 lbs. per tenant (any loads exceeding 1500 lbs. must be reviewed by Landlord's structural engineer); provided, however, roof top units are not permitted. 2. Roof, Deck of structure above. 3. Exterior Walls: Exterior walls shall be of non-combustible construction and of finish as designed by Landlord. 4. Partitions Separating Leased Premises: The partition shall be centered upon the lease line between demised premises and shall be constructed of steel studs with one layer of 5/8" gypboard taped and floated on either side of the steel stud. The walls will extend from the floor to the underside of the deck above and will be constructed in a manner which will provide a 1 hour U.L. fire rating as per Dallas City Code (the "Code"). 5. Floors: Floors shall be of metal-trowel finished topping over structural pre-cast concrete or poured-in-place concrete. B. COMMON AREAS AND SERVICES 1. Malls: The public areas of the Mall Building shall be lighted, surfaced, heated and cooled. 2. Vertical Transportation: Landlord shall provide any vertical transportation necessary in Landlord's judgment by means of stairs, escalators, or elevators as are appropriate in Landlord's judgment. 3. Service Corridors: Service corridors, as Landlord shall determine, shall be provided. C. UTILITIES 1. Electrical Service: The Landlord shall provide electrical service (feeders) as follows: a. Wire and conduit from T. U. Electric Co. function box in meter room terminating into wireway mounted on the interior side of rear wall of B (1) 89 Demised Premises. Tenant's electrical installation begins at this point, as shown on Exhibit E. b. Service Description: 460 volts/ 3 Phase/ 5 wire. C. Service Size and Capacity: Size and capacity of electrical service shall be provided in accordance with Tenant's requirements up to the maximum capacities listed below. Any additional service capacity required shall be at Tenant's expense and installed by Landlord:
Floor Area Capacity Capacity ---------- -------- -------- (sq. ft.) (amperes) (amp, cont. duty) up to 7,000 60 48 over 7,000 to 12,000 100 80 over 12,000 to 25,000 200 160
d. Landlord's and Tenant's electrical construction criteria are shown on Exhibit E attached hereto. 2. Water and Sanitary Sewer Service: Water, sewer, and plumbing vent piping are available within the structure of which the Demised Premises are a part, at chases located at points within the Galleria such that the distance of connecting from the rear wall of the Demised Premises is a maximum of 60 feet in a horizontal direction. This piping is available for Tenant's use and the Tenant may make connection from the Demised Premises to these lines at the Tenant's expense only after receiving the Landlord's written approval. 3. Heating, Ventilating and Air Conditioning: The Tenant shall contract with a Landlord-approved mechanical engineer to design the Tenant's HVAC system at Tenant's expense. Upon receiving the design of the Tenant's HVAC system from Tenant, the Landlord shall review and either approve in writing or return to Tenant for modifications so as to conform to Landlord's design criteria set forth in Exhibit C-1. Upon approval by Landlord, Landlord will authorize Tenant to have constructed at Tenant's cost a heating, ventilating and air conditioning system within the Tenant's Demised Premises by a Landlord-approved contractor. Electrical connection for such system to be provided by Tenant. Landlord shall provide a central heating and cooling plant from which hot and chilled water lines shall be run to a point at least within sixty (60) feet from the Demised Premises according to the specifications set forth in Exhibit C-1. Landlord may require Tenant to install chilled water and/or hot water metering devices on such lines. These meters will be required for food service operations and restaurants. For all other tenants Landlord will have option either to require a meter or to calculate Tenant's HVAC usage in accordance with the provisions of Exhibit D hereof. 4. Gas: Gas service shall not be allowed except by special prior written approval of the Landlord. In the event Landlord permits Tenant to install gas service in and to the Demised Premises, installation of pipe lines, meters, valves, etc., shall be by the Tenant's contractor at the Tenant's expense. If Landlord permits Tenant to use gas service, Tenant shall have a gas leak detector installed at Tenant's expense. Such gas leak detector shall have a loud audible alarm, connected to the Mall Building's intercom system and capable of being heard in the Common Area of the mall. This detector shall be located and installed in accordance with the manufacturer's specifications. B (2) 90 D. FIRE PROTECTION The Landlord will provide fire protection at the mall public areas. Prior to Tenant's Work the Landlord will install a fire sprinkler grid distribution system inside the Tenant's Demised Premises at Tenant's cost. This sprinkler grid distribution system will have the capacity to provide a maximum sprinkler coverage of one head per 100 square feet. The Tenant shall install in the Demised Premises at Tenant's cost, and with a contractor and materials, all of which are subject to Landlord's prior approval, a working finished fire protection system (including fire hose cabinets, additional sprinkler heads, and relocation of sprinkler heads, if required) which shall be compatible with Landlord's system and shall be in accordance with applicable codes. E. GENERAL Landlord shall have the right to run roof drainage lines, utility lines, pipes, vertical chases, conduits, duct work and/or component parts of all mechanical and electrical systems, where necessary, through attic space, alongside columns or other parts of the Demised Premises, to repair, alter, replace or remove the same, and to require Tenant to install and maintain proper access panels thereto. 1. Utility Services - Water and Electricity: Landlord agrees to cause the necessary mains, conduits and other facilities to be available to supply domestic cold water and electricity in accordance with and subject to Section C of Exhibit B and Exhibit E. Tenant shall pay for all water and electricity used in the Demised Premises and for meters, meter installation costs, and for all water connections. If Landlord shall elect to supply any one or more or all of said services, Tenant shall purchase the use of such services as are tendered by Landlord and shall pay the rates (including any established minimum charges) established by Landlord at Landlord's option. If such services are furnished, the rate charged for such services shall not be more than those which would be charged to Tenant by the public utility furnishing such services in the area if separately metered to Tenant. The charges for such services as are so furnished shall be additional rent due on the first day of the calendar month following rendition of a bill therefor. Landlord may discontinue furnishing such services if the same are not so paid for, upon not less than fifteen (15) days written notice, and no such discontinuation shall be deemed an eviction or render Landlord liable to Tenant for damages or relieve Tenant from performance of its obligations hereunder. If Landlord shall elect to furnish one or more of such services, from time to time, Landlord shall not be liable to Tenant IN damages or otherwise if any one or more of said services is interrupted or terminated because of necessary repairs, installation, improvements or any cause beyond the control of Landlord. Landlord may cease to furnish any one or more of said services without responsibility to Tenant except to connect the service facilities with such other sources of supply as may be available for the services so discontinued. If the Landlord permits a Tenant not to install a water meter for the Tenant's use, the Tenant shall pay a monthly minimum charge equal to the City utility company's standard monthly rate as changed from time to time. If Tenant wants cooled drinking water, then Tenant, at its own cost and expense and with its own equipment, shall install a water cooler to meet Tenant's requirements in accordance with Exhibit C and the Design Criteria set forth in Exhibit C-1. 2. Public Toilets and Washroom Facilities: The Landlord shall provide public toilet and washroom facilities necessary in Landlord's judgment. B (3) 91 F. REVISION COSTS The design for some portions of Landlord's Work, as specified in this and other exhibits to the Lease may be derived from Tenant's Construction Drawings as submitted to and approved by the Landlord, in accordance with Section IV of Exhibit C-2 - Tenant Submission Requirements. If any revisions to Tenant's Construction Drawings are required after they are submitted to the Landlord by Tenant and approved by Landlord, Tenant must bear all costs that may result from possible resulting revisions in any portion of Landlord's Work that is dependent upon Tenant's design, including the cost of revising the drawings. Revision costs, as referred to above, will be based upon actual costs to the Landlord, plus a 15% coordination fee. In the event the Tenant makes any revisions after Landlord's construction work actually begins, Tenant will be responsible for any additional construction costs incurred, including the cost of revising the drawings, plus the 15% coordination fee. G. WORK EXECUTED BY LANDLORD FOR ACCOUNT OF TENANT: If Tenant's Demised Premises are adjacent to, and can have access to, a rear service corridor, Landlord will provide and install, at Tenant's expense, a metal rear exit service door, as per City Code specifications, complete with frame and door closure, standard commercial hardware. The frame and door shall bear Underwriters' "B" label and the hardware shall be Sargent or Russwin. Tenant shall be furnished lock cylinder for his keying and installation. The cost for this service door is $1,250.00. Should a double rear service door be required, the cost will be additional. B (4) 92 GALLERIA DALLAS, TEXAS EXHIBIT C DESCRIPTION OF TENANT'S WORK All work (the "Tenant's Work") required to complete and place the Demised Premises in finished condition for opening for business (except what is identified as Landlord's Work in Exhibit B) is to be done by Tenant, at Tenant's expense, and in accordance with Exhibits C, C-1 series, C-2 and E. Whenever the term "Landlord's written approval" appears in these Exhibits to the Lease, then the written approval of Landlord's property manager shall be deemed to be written approval of the Landlord. Tenant's Work includes, but is not limited to, the following: A. Store Fronts and Show Windows: The storefront and mall walls and all show window work, show windows, show window backs, floors and ceilings, and show window lighting installations. B. Ceilings: All finished ceilings and coves, the height of which shall not exceed twelve feet on a] I levels without written permission of the Landlord or Landlord's architect. C. Interior Walls: All interior walls (including partitions and curtain walls other than partitions separating leased premises) shall be framed with metal studs covered with at least 5/8" gypsum board. The Tenant shall not construct any concrete block walls. D. Interior Painting: All interior painting and decorating including taping, floating, and speckling of all partitions where required, except Landlord's taping and floating of the dry-wall demising walls. E. Mezzanines/Safes Etc: The Tenant shall not construct mezzanines within the Demised Premises or install safes or other excessively heavy objects such as freezers, etc., without the written approval of the Landlord's structural engineer. Any mezzanines shall be floor supported. F. Attics: No combustible material shall be installed or stored above the ceiling. G. Floors: Tenant is permitted no depressions from the established floor level. Floor coverings shall be limited to a maximum dead weight of 10 pounds per square foot. H. Furniture, Fixtures and Signs: All furnishings, trade fixtures, signs and related parts, shall be new or like-new and of first quality, including installation. Location and design of all signs shall be subject to prior written consent of Landlord as provided in Exhibit C-2. I. Changes and Alterations: Landlord reserves the right to require changes in Tenant's Work when necessary by reason of Code requirements or directives of governmental authorities having jurisdiction over the Demised Premises or deviations from construction criteria stated in this Lease. Any such changes will be at Tenant's expense. J. Charges for Tenant's Consultants: Charges for Tenant's consultants shall be paid by Tenant. K. Attachments to the Structure: The method and manner of attaching the various mechanical and plumbing, etc., chases, ducts, piping, etc., shall be approved in writing by the Landlord's structural engineer. The criteria are shown ON Exhibits C-1 (KI) and C-1 (K2). C (1) 93 L. Floor Penetrations and Water Proofing: The floor shall not be penetrated without prior written approval of the Landlord. All penetrations of the floor shall be sleeved, fireproofed and caulked water tight as specified by the Landlord's Architect as per Lease Exhibit C-1 (a). Restaurants have special criteria. Other tenants (such as pet stores and photo processing stores) having above typical liquids in the Demised Premises may also have special criteria. M. Wall Openings: Wall penetrations, if required by Tenant's Work, must have prior written approval of Landlord or Landlord's architect. Any approved penetration of exterior walls shall be constructed by Landlord's contractor, at Tenant's expense. N. Support of Equipment: HVAC, electrical, mechanical equipment, etc. shall be ceiling hung as approved in writing by the Landlord's structural engineer as shown on Exhibits C-1 (K-1) and C-1 (K2). O. Water Heater/Water Treatment: Domestic water heater, where required, shall be electric, automatic and less than 100 gallon capacity. Location of any water treatment equipment must have prior written approval of Landlord. P. Plumbing: Tenant shall be responsible for all plumbing installation, including the cost of installation of lines from the Demised Premises to existing chases. Cutting and patching and drilling shall not be done without prior written approval of the Landlord and the Landlord's structural engineer. The criteria are shown on Exhibits C-1 (a), C-1 (P1) and C-1 (P2). Q. Electrical work: Tenant shall furnish and install all rough and finished electric work from the service termination pull box at the rear of the Demised Premises. Tenant shall be responsible for providing electrical conduits, wiring and boxes in the concrete floor topping prior to placing of concrete floor by Landlord. Tenant shall furnish all electrical fixtures, including lighting fixtures, exit lights, emergency lighting system, lamps and equipment and installation thereof. Tenant shall furnish and install all systems, where required, for telephone conduit to the space from the telephone/meter room; inter-communication, music, antenna, material handling or conveyor, burglar alarm, vault wiring, fire alarm and communication, time switches, contractors and all necessary disconnect switches for all motors required by Tenant. The criteria are shown on Exhibits C-1 (U2), C-1 (Y) and E. R. Gas: Gas service shall not be available except by exception, and only with the prior written approval of Landlord. See Exhibit B, Section C.4 concerning additional requirements in connection with any such gas service. S. Heating, Ventilating and Air Conditioning: The Tenant, at Tenant's cost, shall contract with a Landlord-approved mechanical engineer to design the Tenant's HVAC system. Such systems shall be subject to Landlord's prior written approval. Tenant, at Tenant's cost, shall construct with a Landlord-approved contractor Tenant's HVAC system in accordance with the criteria set forth in Exhibits C and the C-1 series. All such HVAC equipment shall become Landlord's property upon termination of this Lease. Tenant shall connect at Tenant's cost its HVAC system to the hot and chilled water lines brought by Landlord to within sixty (60) feet of Tenant's Demised Premises. Restaurants (and other tenants with special make up air and exhaust fans) shall electrically interlock the HVAC and exhaust systems. T. Fire Protection: 1. The Tenant, at Tenant's cost, shall install in the Demised Premises a finished fire protection system which shall be connected to Landlord's grid distribution system in accordance with the State fire codes and applicable City Building Codes. All sprinkler heads shall be Viking type (micromatic), or other brand approved by C (2) 94 Landlord. The Tenant shall use a Landlord-approved sprinkler contractor, who shall abide by any rules related to working in the Mall Building established by the Landlord from time to time. The Tenant shall have the fire protection system for the Demised Premises designed by Landlord's approved sprinkler contractor at Tenant's cost in accordance with the Tenant's Construction Drawings, (which must include the reflected ceiling plan), which are subject to Landlord's prior written approval. 2. In addition to City Code requirements for fire extinguishing systems in kitchen hoods for restaurants or other food facility operations, Tenant must install a dry type extinguishing system in the ductwork above kitchen hoods. 3. Specifications shall be subject to approval by Landlord. Tenant must also keep and maintain in the Demised Premises a hand held fire extinguisher of a type approved by Landlord. Tenant shall maintain minimum clearances between Tenant's improvements within the Demised Premises and the sprinkler heads within the Demised Premises as required by governing agencies. Failure to promptly respond after receiving a notice of violation shall result in the Landlord's taking whatever remedial action is required by the governing agencies, at Tenant's expense. U. Tenant's Mechanical, Plumbing, Electrical, Fire Protection, Fire Detection and Fire Communication Design: Tenant's mechanical, plumbing, electrical, fire protection, fire detection, and fire communication systems must be technically compatible with Landlord's systems to ensure the proper functioning of the entire system. The criteria are shown on Exhibit C-1 series. Therefore, Landlord may contract with a consulting engineering firm (Landlord's Engineer) to review the design of the systems. The cost of reviewing the Tenant's systems shall be borne by Tenant. After Landlord receives the billing from Landlord's Engineer for the review of Tenant's systems, Landlord shall rebill Tenant for the cost of the design review. Tenant shall pay Landlord within thirty (30) days of receipt of said billing. V. Special Charge to Maintain Restaurant or Above Standard Ventilation and Grease Traps: 1. Exhaust and Makeup Air Systems: The Tenant is responsible for maintaining any exhaust and makeup air systems for a restaurant or food service area or other above normal ventilation systems. If Tenant does not clean such systems within thirty (30) days after Landlord's request to Tenant to clean such systems, then Landlord may perform such cleaning, and Tenant shall pay the cost of such cleaning within thirty (30) days after Landlord invoices Tenant the cost thereof. If Tenant requests Landlord to maintain Tenant's ventilation systems, and Landlord agrees to do so, then Landlord shall commence maintaining such systems only after Landlord and Tenant enter into a mutually satisfactory maintenance contract. 2. Grease Traps: The Tenant is responsible for the cost to maintain any grease traps serving the Demised Premises. In addition, the Tenant agrees to reimburse the Landlord for the prorated share of the cost of cleaning and maintaining the main sanitary sewer outside the Demised Premises. W. Temporary Services During Construction: 1. Electricity: Tenant shall obtain temporary power from the local utility company during construction. C (3) 95 HVAC: Should Tenant's HVAC system be operable prior to Tenant's opening for business, Tenant may request the equipment be turned on. Should Landlord agree, Tenant shall pay for the use of the chilled and heated water at the rate specified in Exhibit D from the date of the requested turn-on, and Tenant shall cause its contractor to clean the HVAC system prior to Tenant opening for business. X. Fire Detection and Fire Communication: The Tenant shall at Tenant's cost install in the Demised Premises a finished fire detection and fire communication system which shall be connected to the Landlord's system in accordance with applicable codes, and Landlord's criteria contained in Exhibits C-1 (U1), C-1 (U2), C-1 (Y) and E. y Building Control System: The Tenant at Tenant's expense shall furnish necessary interface devices and wiring between the Tenant air handling units and fans in accordance with Exhibits C-1 (S1), C-1 (S2) and C-1 (Y) to allow the remote control of such units from the Landlord's Building Control System to ensure the proper operation of the central plant and to comply with certain Code life safety requirements. Z. General Provisions: All work done by Tenant shall be subject to Landlord's prior review and written approval and governed in all respects by, and be subject to, the following: 1. Within a reasonable time after the execution of the Lease, the Landlord shall send to Tenant's architect a "Construction Information Packet." Within fifteen (15) days after execution of this Lease Tenant shall submit to Landlord Preliminary Design Drawings (as more fully described in Section IV C of Exhibit C-2) for storefront design, elevation or rendering, and reflected ceiling plan (with electrical load requirements in watts), and location of rear door, if required by Code (specifying single or double), and the location of Tenant's sign. Within thirty (30) days after execution of this Lease Tenant shall submit to Landlord Preliminary MEP Drawings (as more fully described in Section IV D of Exhibit C-2). 2. If Landlord disapproves the Preliminary Drawings (whether Design or MEP) and requests revisions, Tenant shall revise said Preliminary Drawings and shall resubmit for Landlord's approval revised Preliminary Drawings incorporating Landlord's requirements within ten (10) days after receipt of Landlord's comments, and the foregoing procedure with respect to approval and resubmission shall be followed until complete agreement of Landlord has been given to Tenant's Preliminary Drawings. After the Tenant's Preliminary Drawings have been approved by the Landlord, the Tenant will prepare Construction Drawings (as more fully described in Section IV E of Exhibit C-2) which shall be subject to written approval by Landlord prior to the Tenant's commencing Tenant's Work in the Demised Premises. 3. Tenant's Work shall be coordinated with the work being done by the Landlord and/or other tenants of Landlord to such a degree that such work will not interfere with or delay the completion of work by Landlord and/or other tenants of Landlord. The performance of Tenant's Work shall cause no interference whatsoever with the completion of Landlord's Work in the Demised Premises or in the remainder of the Galleria. 4. At any time during the Lease term if construction or repairs are needed, or for initial construction of Tenant's Work, Landlord shall provide Tenant a list of Landlord approved contractors (general and sub-contractors). If Tenant wishes to use nonlisted contractors or sub-contractors Tenant shall submit to Landlord such names at least 30 days prior to the start of Tenant's Work. Tenant agrees not to commence Tenant's Work until Tenant has secured Landlord's written approval of all such contractors and sub-contractors to be used in performing Tenant's Work. In any C (4) 96 event Tenant shall use Landlord's contractors for all work related to fire alarm control and building management systems. Tenant's contractors and sub-contractors shall not commence construction of Tenant's Work without a set of Construction Drawings (as defined in Exhibit C-2, Section IV, Paragraph E hereof) signed as approved by Landlord and located on the construction site. 5. During construction and upon completion Landlord may inspect Tenant's Work for conformance to Landlord's specifications set forth in this Lease. Landlord shall notify Tenant of any discrepancies in the construction of Tenant's Work and Tenant shall immediately correct such discrepancies. Tenant may not operate its HVAC system or open for business until Landlord has approved in writing Tenant's Work. Prior to Tenant's commencement of operating its business from the Demised Premises, Tenant shall cause its contractor to submit to Landlord "HVAC system proof of performance tests" to verify that the HVAC system meets design criteria in these Exhibits. Failure of Landlord to notify Tenant that Tenant's Work is not in compliance with (i) Landlord's criteria contained in these Exhibits, or (ii) City Code, whether or not Landlord has inspected Tenant's Work, shall not constitute a waiver by Landlord to so notify Tenant at a subsequent time. Failure of Tenant to correct its work so as to conform with Exhibits C, C-1 series or E within thirty (30) days of notice of discrepancies shall give Landlord the right to terminate this Lease. 6. Tenant shall cause Tenant's contractor to furnish electricity, water and toilet facilities required during the construction and fixturing of Tenant's Demised Premises, and to arrange with the general contractor for any needed vertical transportation. 7. During initial construction, texturing, and stocking of the Demised Premises, Landlord will provide a trash removal service from the truck docks. It shall be Tenant's responsibility to break down its boxes and each day place its trash in the containers provided at a designated collection point. Trash accumulation will not be permitted overnight in the Demised Premises, malls or service corridors. For this service, a single charge of $.40 per square foot of floor area in the Demised Premises, or $500.00, whichever is greater, will be due upon opening the Demised Premises for business. Tenant shall be charged for this service whether used or not. Tenant is cautioned against having trash accumulate within its area or in the corridor, mall, or arcade adjacent to its Demised Premises. Should this situation develop and Landlord be forced to remove Tenant's or Tenant's contractor's trash, the charge for this service will be 1.5 times Landlord's cost. 8. Tenant is aware of the fact that Landlord will require a high grade, first class operation to be conducted by Tenant in the Demised Premises. To this end, Tenant shall do the interior fixturing and exterior displays in a manner consistent with such an operation. Tenant agrees to install in the Demised Premises only such trade fixtures, lighting fixtures, carpeting, wall treatment, interior decor and the like as shall first have been approved in writing by Landlord. Only such improvements and texturing as shall have been approved by Landlord shall ever be installed in the Demised Premises. 9. Tenant's Work shall be performed in a first-class workman-like manner and shall be in good and useable condition at the date of completion thereof. Tenant shall require any party performing any such work to guarantee the same to be free from any and all defects in workmanship and materials for one (1) year from the date of completion thereof. Tenant shall also require any such party to be responsible for the replacement or repair without additional charge of any and all work done or furnished by or through such party which shall become defective within one (1) year after substantial completion of the work. The correction of such work shall include, without additional charge, all expenses and damages in connection with such C (5) 97 removal, replacement, or repair of any part of the work which may be damaged or disturbed thereby. All warranties or guarantees as to materials or workmanship on or with respect to Tenant's Work shall be contained in the contract or subcontract with shall be so written that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests appear, and can be directly enforced by either. Tenant covenants and agrees to give Landlord any assignment or other assurances necessary to effect the same. 10. Landlord shall have the right (but shall not be obligated) at Tenant's expense to perform by Landlord's own contractor or subcontractor, on behalf of and for the account of Tenant, any Tenant's Work which Landlord determines should be so performed. Generally, such work shall be work which affects any structural components of, or the general utility systems for, the building in which the Demised Premises are located. 11. Compliance with Laws: All Tenant's Work shall conform to all applicable statutes, ordinances, regulations, codes and the requirements of Landlord's insurance underwriter. Tenant shall obtain and convey to Landlord all approvals with respect to electrical, gas, water, heating and cooling, and telephone work all as may be required by the utility company supplying the service. 12. Approvals: No approval by Landlord shall be deemed valid unless the same shall be in writing signed by Landlord or Landlord's architect. 13. Insurance: Prior to commencement of Tenant's Work and until completion thereof, or Commencement Date of the Lease, whichever is the last to occur, Tenant shall effect and maintain, and provide certificates to the Landlord for insurance policies set forth in Articles XII and XIII of the Lease. Tenant shall effect and maintain, and provide certificates to the Landlord, for Builder's Risk Insurance covering Landlord, Landlord's general contractor, Tenant and Tenant's contractors, as their interests may appear, against loss or damage by fire, vandalism and malicious mischief, and such other risks as are customarily covered by a so-called "extended coverage endorsement" upon all Tenant's Work in place and all materials stored at the site of Tenant's Work and all materials, equipment, supplies and temporary structures of all kinds incident to Tenant's Work and builder's machinery, tools and equipment; all while forming a part, or contained in, such improvements or temporary structures while on the Demised Premises or within 100 feet thereof, or when adjacent thereto while on malls, drives, sidewalks, streets, or alleys, all to the full insurable value thereof at all times. In addition, Tenant agrees to require all contractors and subcontractors engaged in the performance of Tenant's Work to effect and maintain and deliver to Tenant (and Tenant shall provide copies to the Landlord) copies of certificates naming Dallas Galleria Limited and Hines Interests Limited Partnership as Additional Insureds which certificates shall evidence the existence of, prior to the commencement of Tenant's Work and until completion thereof, the following insurance coverages: a) Worker's Compensation Insurance in accordance with the laws of the State of Texas, including Employer's Liability Insurance, to the limit of [***]; b) Commercial General Liability Insurance, with limits of not less than [***] per occurrence combined single limit bodily injury and property damage. c) Automobile Insurance, including owned, non-owned and hired automobiles, with limits of not less than [***] per occurrence combined single limit bodily injury and property damage. *** Confidential treatment requested. C (6) 98 14. Tenant will abide by and cause its contractor, subcontractors, agents and employees to abide by rules and regulations published by Landlord, including those pertaining to parking, toilet facilities, safety conduct, delivery of materials and supplies, trash storage, collection and removal, and cooperation with Landlord's General Contractor. 15. Tenant shall cause its General Contractor to provide Landlord with releases of liens in a form satisfactory to Landlord for all work done by Tenant's Contractor, subcontractors, and material suppliers within or about the Demised Premises prior to Tenant opening for business in the Demised Premises. C (7) 99 Symbols Legend for Dallas Galleria Series of Exhibits 100 GALLERIA VERTICAL PENETRATIONS EXHIBIT C-1(A) 101 GALLERIA MALL EXHIBIT C-1 (K2) 102 GALLERIA MALL EXHIBIT C-1 (K-1) 103 GALLERIA MALL EXHIBIT C-1 P-1 104 GALLERIA MALL EXHIBIT C-1 (P2) 105 GALLERIA MALL EXHIBIT C-1 S-1 106 GALLERIA MALL EXHIBIT C-1 S-2 107 Parts used for tenant leases.
Item Part No. Description - ---- -------- ----------- 1 540-160 Unit Vent Controller (LGP) 540-168 Pneumatic Output Module (LGP) 2 265-1002 3-way pneumatic switch, 120V (LGP) 3 VP658 ANSI 250 N.C. 9-13# Powertop (valve sized for GPM requirements) (LGP) 4 540-122 Room Sensor (LGP) 5 540-244 Discharge Air Sensor (LGP) 6 251-0002 Pressure Electric Switch (used as run status) (LGP) 7 D1-83/AD-3R1 Duct Smoke Detector (Furnished by fire alarm contractor) 8 24VAC 3PDT Start/Stop Relay (Cube Type) (Mall coordinated for tenant) 9 Disconnect Motor starter w/120VAC control transformer, HOA, pilot light 2 N.O. Aux. contacts (Normally provided by electrical subcontractor) 10 SPDT 24VDC AHU shutdown relay (Furnished by fire alarm contractor) 11 VP658 ANSI 250 N.O. 3-6# Powertop valve, sized for GPM requirements) (LGP) 12 R-Controller Outside Air Constant Volume Boxes (Sized for each suite) (LGP)
Note: Size control valves at 5 PSI drop at design GPM. All valves to be ANSI Class 250 EXHIBIT C-1 S-2A 108 GALLERIA MALL EXHIBIT C-1 S-3 109 GALLERIA MALL EXHIBIT C-1 U-1 110 GALLERIA MALL EXHIBIT C-1 U-2 111 GALLERIA MALL EXHIBIT C-1 Y 112 GALLERIA DALLAS, TEXAS EXHIBIT C-1 DESIGN CRITERIA FOR TENANT'S MECHANICAL AND ELECTRICAL WORK Mechanical and Electrical Design, whether work be performed by Tenant or Landlord shall conform to the following: A. HEATING, VENTILATING AND COOLING 1. Design Conditions - Heating of Demised Premises a) Inside dry bulb temperature (Minimum) 70 deg F b) Outside dry bulb temperature (Maximum) 22 deg F 2. Design Conditions - Cooling of Demised Premises a) Inside dry bulb temperature - Maximum 76 deg F b) Inside relative humidity - Maximum 55% c) Outside dry bulb temperature - Minimum 100 deg F d) Outside wet bulb temperature - Minimum 75 deg F e) If Tenant requires special temperature or humidity conditions different from those specified above, Tenant shall notify Landlord before the Lease is signed and shall note these special design requirements on the mechanical plan submitted to the Landlord for its consulting engineer's use in reviewing the design of the system. Any additional costs required by these special design conditions shall be borne by Tenant. 3. Design Conditions - Ventilating of Demised Premises a) Total air circulated based on internal sensible heat load at peak requirements, but not less than Code requirements. b) Recirculated air equal to 100% of air circulated, less design outside air quantity. c) Exhaust systems based on Code and space use special requirements. Only mechanical exhaust permitted. Exhaust to be routed to exhaust risers. All exhaust discharges must be a minimum distance of 20 feet from all fresh air intakes. Restaurants may require separate make up and exhaust systems to be designed and installed. d) Toilet exhaust shall be tied to base building system. C-1(1) 113 4. Central Plant Data a) Peak load temperature of chilled water supply: 44 deg F. Use 42 deg F for design factor. b) Cooling service available during mall hours. c) Minimum working pressure of all equipment - 300 PSIG, chilled and heating hot water side. d) Maximum allowable pressure drop through Tenant equipment (booster pumping not permitted for chilled water and heating hot water) - 30 feet of water. e) Temperature of chilled water from Tenant's equipment - greater than 60 deg F. Chill water coils must be selected to provide a 18 deg F chill water differential between supply and return at design and actual operating conditions. Additional criteria are contained in Exhibits C-1 series and E. f) Peak heating hot water from Central Plant - 160 deg F from Tenant's equipment - 120 deg F. Heating hot water from central plant available only during those project hours of occupancy where the outside conditions require heating to maintain inside design conditions. g) Design - specify chilled water coil for an 18 degrees F. minimum rise in water temperature between supply and return. 5. Diffusers, Registers, Grilles: Shall be of adjustable type for volume and direction, Titus or equal quality. 6. Air Handling Unit: Ceiling hung horizontal or vertical type, multi or single zone, with squirrel cage fans, belt driven, separate heating source and cooling coils (500 FPM max.), throw-away filters, outside air and return air dampers and adequate vibration isolating devices. No roof mounted air-handling units will be permitted. Only Carrier 39 NX, LaSalle or York IAQ units will be permitted. Chill water coils must be selected to provide a 18 deg F chill water differential between supply and return at design and actual operating conditions. 7. Tenant Equipment Loads: Tenant air conditioning equipment shall be ceiling hung unless otherwise approved in writing by Landlord's structural engineer. The equipment shall impose a total floor load no greater than 1500 lbs. If greater than 1500 lbs. Landlord's structural engineer must review and approve. The review shall be at Tenant's cost. 8. Location of Equipment: All Tenant components shall be located within Tenant's Demised Premises, and so installed and located as to provide for ease of removal or maintenance. 9. Electric Motors: Motors shall be designed for fan duty, continuous operation, and shall leave NEMA rating and service factor of 1.15 minimum. All motors shall have copper windings and class "A" or "B" insulation. Motors shall be manufactured by Westinghouse, Louis-Allis, Reliance, Siemans-Allis, Century/Gould, or General Electric. C-1(2) 114 10. Heating: a) Space Heating: The Demised Premises shall be heated by finned hot water heating coils in the air handling system. b) Water Heating: Each Tenant requiring hot water for domestic use shall heat water electrically. 11. Piping: Shall be in accordance with ASTM and ASA standards. Piping and equipment shall be 300# rated for hot and chilled water lines. Di-electric fittings required wherever dissimilar metals are joined to reduce electrolysis failures. 12. Insulation: Outside air ductwork shall be externally insulated with one inch thick one-half pound density fiberglass duct liner. All supply air ductwork, including round duct and flexible duct shall be externally insulated with a minimum one and one-half inch thick 0.6 pound density fiberglass flexible blanket with foil vapor barrier. Chilled and heating hot water piping shall be insulated with one and one-half inch (1-1/2") glass fiber pipe insulation as manufactured by Johns-Manville "Micro-Lok 650", Armstrong "Accotherm" or approved equal, with AP non-combustible vapor barrier jacket. During the term of the Lease, Tenant shall be responsible to maintain the HVAC ductwork. 13. Temperature Control - Automatic Temperature Control: Shall conform to and operate in conjunction with the central plant and life safety systems. Chilled and heating hot water control valves shall be straight pattern type with equal percentage flow characteristics, maximum 2% leakage rate, and rated for the system pressure. The control valves shall be capable of tight shut-off at the system differential pressure conditions. The control valves shall automatically close when the air handling unit fan is off. See Exhibit C-1 series. 14. Ceiling Access Panels: Tenant shall provide for access panels for Landlord's accessibility to common facilities and MEP equipment. 15. Tenant shall furnish Landlord the following information for approval and acceptance in writing before ordering any work done. a) Complete information covering any special ventilation system requirements. b) Complete lighting plan layout showing location and wattage of all lighting fixtures together with a detailed interior layout plan showing merchandising fixtures and lighting thereof to enable the Landlord to review and approve same for coordination with space conditioning and common facilities. c) Complete plans showing all halls, partitions and encroachments with spaces designated as sales, live storage, offices, fitting rooms, alteration rooms, toilets, docks, rest rooms, etc., complete with maximum people occupancy. d) Complete Mechanical, Electrical, Plumbing, Fire Protection and Life Safety Drawings and Specifications. See Exhibit C-2 Section IV for criteria. 16. Ductwork: Ductwork shall be constructed and installed in accordance with SMACNA Manual, Current Edition. C-1(3) 115 B. ELECTRIC WIRING: 1. Electric Service: a) 265/460 Volt, 5 wire, 3 phase, 60 cycle, A.C. b) Electric meter to be provided by T. U. Electric Company and to be located within meter rooms or service areas. c) Tenant's connected load shall not exceed 7.0 watts per square foot of floor area within the Demised Premises. Any additional wattage required by Tenant must be approved by Landlord, and any additional costs resulting from this additional load will be at Tenant's expense. Tenant shall pay for the electrical capacity in excess of that provided by Landlord in Exhibit B, Paragraph C1(c). 2. Tenant's Electrical Construction: a) Material- General: All electrical materials shall be new, shall be National Electrical Code standard unless better grade is mentioned herein, and shall bear the Underwriter's Laboratories label. b) Codes and Ordinances: All work shall be performed in full accordance with the latest National Electrical Code and any or all State and local codes or ordinances having jurisdiction over same. c) Power Distribution Panelboards: Shall be arranged for 265/460 volt, 3 phase, 4 wire, wye service. General Electric Type QMR and CCB or approved equal as manufactured by: Square D or Westinghouse. Busbars shall be either 55" conductivity aluminum or 98% conductivity cooper. Aluminum bus plating shall be Alston-70 or approved equal. Type CCB panelboards shall be provided with molded case bolted-in circuit breakers. Type QNR panelboards shall be provided with Type QMR quickmake, quick-break, fusible switches and Bussman Type LPS-RK fuses. d) Lighting Panelboards: Shall be GE Type NLAB 120/ 208 volt, 4 wire, 3 phase: GE Type NAB 265/460 volt, 4 wire, 3 phase or approved equal as manufactured by Westinghouse or Square D. Busbars shall be either 55% conductivity aluminum or 98% conductivity copper. Aluminum bus plating shall be Alston-70 or approved equal. Panelboards shall be provided with molded case bolted-in circuit breakers. All breakers shall be quick-make, quickbreak type. Twenty percent additional space breaker capacity shall be provided. Lighting branch circuit breakers shall be 20 amp loaded not to exceed 1600 watts at 120 volts. Two and three pole breakers shall be common trip. Handle ties are not acceptable. e) Bussing: Shall be arranged by Tenant so that odd numbered breakers are on the left side and even numbered breakers are on the right side. Circuits 1, 2, 3, 4, 5, 6, etc., shall be on Phase A, B, or C respectively. With this sequence maintained, the inside of the cabinet door shall have a typewritten directory in frame under clear plastic. f) Contractors: Contractors for control of show window lighting and signs shall be ASCO Bulletin, 920 Series, enclosed, electrically operated and mechanically held, with fuse adapter for control line fuse. C-1(4) 116 g) Time Switches/Time Clocks: Time switches for control of Show window lighting shall be synchronous motor type with by-pass and omitting devices as manufactured by Sangamo, Tork or Landlord approved equal. Time clock shall be Sangamo, Tork or Landlord approved equal. h) Conduit: Rigid conduit shall be hot dipped galvanized or sheradized. Electric metallic tubing shall be hot dipped galvanized or electrogalvanized. Only rigid conduit shall be used in concrete or below grade. i) Outlet Boxes: Outlet boxes and covers therefor, in general, shall be galvanized or sheradized one piece knockout type. For outlet boxes in damp or exposed locations, Tenant shall confirm with Landlord the type of box required. Lighting fixtures are outlets shall be provided with 3/8" fixture studs and plaster rings. Outlet boxes for wiring devices, i.e., switches, receptacles, etc. shall be 4" square minimum, fitted with device cover to suit. Outlet boxes shall be fastened by means of screws or shall be supported by means of approved hangers. j) Wire and Cable: Wire and cable shall be insulated copper wire. It shall be properly coded with white neutral, according to N.E.C. Code. All copper conductors except #12 branch circuits, shall be standard code type "THW", 71-12,N" or "THWN" insulated wire. Branch circuit conductors (#12) shall be type "TW", "THW", "THNN", "THWN" insulated wire. Tenant shall use no wire smaller than No. 12 "AWG" for lighting and/or power. k) Toggle Switches: 120/277 volt switches shall be minimum 15 amp. rating Slater No. 2770 Series toggle or approved equal. 1) Duplex Receptacles: 120 volt standard duplex receptacles shall be minimum 15 amp. Slater 62645 or approved equal. m) Electrical Grounding: Electrical safety grounding for transformers and other devices must be connected to common ground cable located in the Mall common meter rooms. No grounding to water piping shall be permitted. n) Floor Outlets: Floor outlets shall be round, adjustable and water tight as follows, or equal: Russell and Stoll No. 2503 with No. 3070 cover and Hubbell No. 562 duplex receptacles for outlets in slab or grade. Outlets in floor slabs above grade shall be similar except with No. 2503 HD boxes. o) Weatherproof Receptacles: Shall be Slater 3780 single with gasket and threaded metal cover and plate or approved equal. p) Telephone System: All telephones with services thereto shall be provided by Tenant. All telephone charges shall be paid by Tenant directly to the telephone utility company furnishing the service. All interior facilities within the Demised Premises required by the telephone company to provide service shall be furnished by Tenant. Tenant must cause conduit to be run from the telephone equipment rooms or panel boxes within the structure to the Demised Premises, and this must be done in accordance with the telephone company's requirements. q) Disconnect Switches: Shall be type HD (Heavy Duty) NEMA type, manufactured by General Electric or Landlord approved equal, in enclosure suitable for the application. C-1 (5) 117 r) Motor Starters: Manual motor starters with overload protection may be used for fractional horsepower motors. Single phase starters shall be Allen Bradley Bul. 709SP or Landlord approved equal. Three phase starters shall be General Electric with overload relay for each phase, Cutler Hammer, or Square D equivalent. See Exhibits C-1 (S1), C-1 (S2) and C-1 (Y). s) Installation of Conduit: All conduit shall be concealed where possible. t) Lighting Fixtures: Lighting fixtures shall bear Underwriter's label and be of a type approved by City Inspection authorities. Recessed fixtures installed in furred spaces shall be connected by means of flexible conduit and "AF" wire run to a branch circuit outlet box which is independent of the fixture. u) Nameplates: Equipment following shall be identified with engraved bakelite nameplates. 1) Distribution panels 2) Lighting panels 3) Motor starters 4) Push button stations v) Motors: Motors shall be designed to latest NEMA standards. Motors rated 3/4 horsepower and larger shall be 3 phase, 460 volts. Motors rated less than 3/4 horsepower shall be single phase, 120 volts. w) Light and Convenience Outlet Above Ceiling: Tenant shall provide a light and convenience outlet near all mechanical equipment above fixed suspended ceilings. Switch to light shall be located near access panel to ceiling space and shall have continuous lighted pilot for ease of location. Where "lift-out" ceiling suspension systems are used, the light and convenience outlet above the ceiling is not required. x) Transformers: Dry type transformers shall be equal to G.E. type Q.L. Transformers must be multi-tap so that they may be adjusted as needed to deliver 117 volts AC plus or minus 5%. 3. Approval of Design: Complete plans and specifications covering the electric work, adequate for permit and construction purposes, shall be furnished by the Tenant for approval by Landlord before Tenant's Work is commenced. C. TENANT'S PLUMBING AND GASFITTING: 1. Plumbing and Drainage: Water closets, urinals, lavatories, janitor sinks and drinking fountains shall be Landlord approved Standard manufacture. 2. Fixtures: Fixtures shall be American Standard, Crane, Kohler: medium quality or better. 3. Insulation: All domestic hot water piping shall be insulated the same as chilled water piping except insulation thickness shall be one-half inch thickness. 4. Valve Tags: All valves and controls to be tagged and a schedule of valves turned over to Landlord. 5. Gas: Gas shall not be provided except by special prior written approval of Landlord. Tenant shall provide and pay for this service through the local gas C-1 (6) 118 company facilities. See Exhibit B, Section C.A concerning additional requirements with respect to gas service. 6. Approval of Designs: Complete Construction Drawings covering the plumbing work, adequate for permit and construction, shall be furnished by the Tenant for approval by Landlord before Tenant's Work is commenced. See Exhibit C-2. D. Fire Detection and Fire Communication: 1. Installation Responsibility: The Tenant shall install in the Demised Premises a finished fire detection and fire communication system which shall be connected to the Landlord's system. 2. Approval of Designs: Complete Construction Drawings covering the fire detection and fire communication systems adequate for permit and construction, shall be furnished by the Tenant for approval by Landlord before Tenant's Work is commenced. See Exhibits C-1 (U1), C-1 (U2), C-1 (Y) and E. E. Building Control System: The Tenant at Tenant's expense shall furnish necessary interface devices between the tenant air handling units and fans to allow remote control of such units from the Landlord's building control system to ensure the proper operation of the central plant and to comply with certain life safety code requirements. See Exhibits C-1 (SI), C-1 (S2), and C-1 (Y). F. FLOOR PENETRATIONS, ATTACHMENTS & WATERPROOFING: All penetrations of the structure or attachments to it shall require prior written approval by the Landlord, and shall be sleeved and sealed as per Landlord's Architect's specifications as shown on Exhibit C-1 (a). In rest rooms, food preparation and dispensing areas or other areas where water on the floor is likely, Tenant shall provide a membrane waterproofing acceptable to the Landlord. All floor drains, cleanouts, etc. shall be provided with flashing flanges with flashing extending out 12" minimum in all directions from the device. Any floor penetrations shall be properly waterproofed with the membrane system properly interconnected to provide a watertight seal. C-1 (7) 119 GALLERIA Dallas, Texas EXHIBIT C-2 DESIGN CRITERIA FOR TENANT'S ARCHITECTURAL STANDARDS AND TENANT'S SIGNS Note: This Exhibit shall govern the design and installation of Tenant's architectural finishes and Tenant's signs in the Demised Premises. 1. TENANTS ARCHITECTURAL STANDARDS A. Store fronts of the Demised Premises shall have as much open or glass areas as possible. Solid or opaque portions of said Premises shall not exceed thirty (30) linear feet in any one continuous block. All materials employed in the construction of store fronts shall be non-combustible as defined by applicable building codes. A distance of seven and one-half inches (7 1/2") along the store front at each end of the store front shall be reserved for a gray colored divider panel which Landlord shall install at Tenant's expense. These panels provide separation between store fronts and assure a harmonious design relationship throughout the Mall. If the store front is recessed, the panels shall remain at the lease line of the Mall. Within fifteen (15) days after the execution of this Lease Tenant shall submit to Landlord for Landlord's approval the proposed design of Tenant's store front and the materials to be utilized. B. Tenant ceilings shall be non-combustible concealed spline acoustic tile suspended by adequate non-combustible suspension systems to conform to final requirement of governing authorities. The space above the ceiling line, which is not occupied or allotted to Landlord's Work (structural members, duct work, piping, etc.) may be used for the installation of suspended ceiling, recessed lighting fixtures and duct work. All materials above the ceiling line shall be non-combustible. Exposed grid support systems for ceilings are not acceptable. C. Finishing of partitions enclosing the Demised Premises must be of noncombustible materials with a gypsum board finish or equivalent. D. Tenant may use only flooring approved by Landlord. No vinyl asbestos tile will be approved. E. All swinging entrance doors must be recessed in such a manner that the door, when open, will not project beyond the line of the Demised Premises. F. Rolling or sliding metal type security grilles are not permitted. G. Incandescent lighting or fluorescent lighting with a grid beneath it only in public sales areas. Plastic lenses are not permitted. C-2 (1) 120 II. TENANTS' SIGNS A. Mirror Sign Band Intentionally deleted. B. STORE FRONT IDENTIFICATION Tenants are encouraged to have storefront identification. The material shall be paint or applied materials. 1) Tenant's lettering on doors or show windows may not be illuminated. Symbols, crests or coats of arms must not exceed 1/4" in depth and must be approved. A single line of letters, and/or symbol, crest or coats of arms may be applied or painted to a panel above the door entrance, but below the bulkhead, must not exceed 1/4" in depth and shall not exceed the width of the door entrance. C. Tenant shall not employ paper signs to be applied to the interior or exterior faces of the storefront. D. Tenant shall not employ any illuminated, moving action or audible signs. E. All interior signs visible from outside the Demised Premises must be Landlord approved. F. All signs and identification drawings will be submitted and shall require Landlord's approval. G. The storefronts shall remain illuminated while the Mall remains open to the public. This requires that storefront windows are tied into time switches coordinated with the hours the Mall remains open to the public. III. GENERAL STORE DESIGN CRITERIA The following includes a list of base building materials, store and storefront criteria and signing criteria. Essentially there are three design control elements within which Tenant's designers must operate. These are: materials control; facade control (including the area between the lease line and the closure/base building control line); and signage control. These controls are explained in the drawings included in this Exhibit C-2. A. Base Building Materials 1) Mirrored Bulkhead: Bronze Mirror - 1/4" PPG No. 9 Bronze. 2) Divider panel: 15" wide aluminum channel painted a gray color. 3) Floor Covering: Tile pavers or carpet. a) The Tenant shall use the mall floor covering at the entrance to the Tenant's Demised Premises from the lease line to the closure line. B. Storefront C-2 (2) 121 Solid or opaque portions of the storefront shall not exceed a continuous 30'0" or 50% of the storefront if less than 30'0". 1) Glass - mullion-less clear plate or tempered where required by Code. Minimum 1/2 inch thickness on storefront tempered glass. 2) Solid color plastic laminates. 3) Paint to back of glass. 4) Wood, smooth finished with high gloss lacquer, paint or clear lacquer. 5) Natural metals - chrome, copper, etc., or gray painted PPG UC51649 aluminum. 6) Polished marble. 7) Clear glass and bronze mirror to match mirror sign band. 8) Mall tile pavers on Ice Rink Level and Level 1. All other materials must be behind the closure line. C. Partitions 1) Finishing of Partitions enclosing the Demised Premises must be of non-combustible materials with a gypsum board finish or equal. D. Ceilings 1) Tenant ceilings shall be non-combustible concealed spline acoustical tile. All other ceilings must be approved in writing by the Landlord. Lay-in acoustical ceilings will not be approved. E. Doors 1) Center pivoted glass doors: 3'0" single, or 6'0" double leaf, 8'0" high clear tempered glass. Top and bottom stiles shall be clear anodized, stainless steel, or chrome. 2) Sliding Glass Doors: Clear frameless tempered glass. 3) Butt Hinged Doors: Width - not greater than 3'0" per leaf and not less then 2'8" height; - no greater than 8'0". Constructed in accordance with Landlord approved design, material finish and color. 4) General: a) Design: The following are subject to the Landlord's approval: 1) Size 2) Material 3) Finish 4) Color 5) Panel Design 6) Lites and Sidelites 7) Hardware C-2 (3) 122 8) Frame 9) Graphics 10) Threshold b) Suggested Materials: 1) Tempered Glass - Clear. 2) Wood - Natural finish - painted (subject to Landlord's approval). 3) Plastic laminates in solid colors only (subject to Landlord's approval). 4) Metal - polished, plated or painted (subject to Landlord's approval). c) Location: Only center pivoted tempered glass doors which swing into shops of occupancies less than fifty people (as calculated by the Dallas City Code) will be permitted at the lease line. All others will be at or behind the base building control line. d) Prohibited Doors: Rolling or sliding metal security type grilles are prohibited. F. Divider Panel The Tenant's storefront(s) shall be separated by a 15" wide aluminum divider panel painted gray installed by Landlord at Tenant's expense. Each tenant will pay for half of the cost of the panel on either side of Tenant's premises. TV. TENANT SUBMISSION REQUIREMENTS A. In any deviation between criteria drawings and the working drawings of the Landlord's shopping center architect, the latter will have precedence. Landlord shall have the right to review and approve all Tenant improvements. B. After receiving an executed lease and the Construction Information Packet and prior to starting construction, Tenant shall provide Preliminary Drawings, then complete Construction Drawings for the construction of the Demised Premises for Landlord's written approval. All submissions must include six (6) sets of prints, plus one (1) set of reproducibles. C. Preliminary Design Drawings to be submitted within fifteen (15) days after the execution of the Lease, and shall contain the following: 1) Floor Plan - scale 1/4" = 1'0", 2) Storefront elevation - 1/2" = 1'0" 3) Reflected ceiling plan - 1/4" = 1'0" (Include ceiling materials, height and light fixtures) 4) Electrical requirements with voltage and wattage. 5) Rear service door location and size (if Tenant adjoins a service corridor-single or double). The rear door's secondary use is that of an exit and the C-2 (4) 123 door must swing towards the service corridor. Door can be on surface of corridor as long as door does not project into the corridor more than 1/2 the width of the corridor. 6) Preliminary design and location of the Tenant's sign - Scale 1/2" = 1'0". D. Preliminary MEP Drawing to be submitted within thirty (30) days after the execution of the Lease and shall contain the following: 1) Any requirements for plumbing with dimensioned locations. 2) Any requirements for combustion venting, exhaust venting, outside air, grease traps, etc. 3) Samples of proposed storefront materials, colors and finishes. 4) All revisions to previous submissions for written approval by Landlord. 5) Interior layouts and elevations. 6) Drawings must indicate weight of heavy equipment such as safes, refrigeration equipment, cases, etc., as well as masonry facing materials. 7) Electrical drawings, complete, to include riser diagram, fixture schedule, total connected load and load analysis. 8) Plumbing drawing, complete, to include fixture schedule, waste riser diagram and specifications. 9) HVAC drawings and specifications including total design load calculations. 10) Fire protection drawings and specifications. 11) Fire detection and fire communication drawings and specifications. E. Construction Drawings Construction Drawings should be developed after the Landlord has approved Tenant's Preliminary Design and MEP Drawings. Tenant shall submit Construction Drawings for Landlord's approval within fifteen (15) days after Landlord approves Tenant's Preliminary Design and MEP Drawings. 1) Contents a) Drawings: Complete for construction with job name, date, Tenant's name, architect's name, sheet number, title or drawing description and the designation "Galleria". 1) Plot Plan 2) Plan(s) - 1/4" = 1'0" 3) Reflected ceiling plan(s) - 1/4" = 1'0" 4) Interior elevations - 1/4' = 1'0" 5) Details of partitions, millwork, etc. 6) Store front elevation - 1/2" = 1'0" 7) Store front details - 3" = l'0" 8) Finish schedules C-2 (5) 124 9) Electrical 10) Plumbing 11) Sign detail 12) HVAC 13) Fire protection 14) Fire detection and fire communication b) Specifications 2) All under-floor services and openings through floor must be indicated and dimensioned on drawings recognizing and avoiding structural beams, tee stems, and any other obstructions which may be base building construction or the construction of a Tenant space on another level. C-2 (6) 125 GALLERIA STOREFRONT CRITERIA EXHIBIT C-2 126 GALLERIA STOREFRONT CRITERIA EXHIBIT C-2 127 GALLERIA STOREFRONT TENANT/LANDLORD CONSTRUCTION EXHIBIT C-2 128 GALLERIA STOREFRONT EXAMPLES EXHIBIT C-2 129 GALLERIA STOREFRONT EXAMPLES EXHIBIT C-2 130 GALLERIA STOREFRONT EXAMPLES EXHIBIT C-2 131 GALLERIA STOREFRONT EXAMPLES EXHIBIT C-2 132 GALLERIA STOREFRONT DETAILS EXHIBIT C-2 133 GALLERIA STOREFRONT THRESHOLD DETAILS EXHIBIT C-2 134 GALLERIA STOREFRONT THRESHOLD DETAILS EXHIBIT C-2 135 GALLERIA DIAGRAM OF VERTICAL CLEARANCES EXHIBIT C-2 136 GALLERIA SIGNAGE CRITERIA EXHIBIT C-2 137 GALLERIA SIGNAGE CRITERIA EXHIBIT C-2 138 GALLERIA SIGNAGE CRITERIA EXHIBIT C-2 139 EXHIBIT D CENTRAL HEATING AND COOLING RATE SCHEDULE FOR DEMISED PREMISES Landlord agrees to construct, operate and maintain a central heating and cooling plant "Central Plant", and a common heating and cooling service distribution system, to heat, ventilate and cool the Demised Premises. Tenant shall install at Tenant's expense, an individual tenant HVAC system sufficient for tenant occupancy with toilet exhaust and outside air make-up systems as may be required. Additionally, Landlord reserves the right to require such extra-ordinary exhaust and outside air systems, constructed at Tenant's expense, to be constructed as an integral portion of "Common" exhaust and outside air systems - -- the purpose of which is to group similar systems within areas to provide the tenants with such cost and space benefits as may accrue to common systems. Tenant shall pay for such service, as additional rent for each calendar year during the term hereof, A "Heating and Cooling Service Charge" equal to the Base Unit Charge (hereinafter defined) for such year multiplied by Tenant's consumption for such year. The Heating and Cooling Service Charge shall be payable in monthly installments on the first day of each month during the term. Said monthly installments shall be based on Landlord's estimate of the Base Unit Charge for such year multiplied by Tenant's consumption for the period of consumption covered by such installment, as set forth in statements or billings therefor submitted to Tenant by Landlord. "Tenant's Consumption" as used herein, means HVAC energy consumption in ton-hours with respect to the period in question, as determined by either of the following two methods as selected by Landlord at its sole option: (i) by use of flow and temperature valves metered automatically and continuously on Tenant's chill water line serving the Demised Premises; or, (ii) as estimated by an independent engineering company (the "Consultant") selected by Landlord, using accepted engineering principles. If Landlord elects to use a Consultant to estimate Tenant's Consumption, then Tenant agrees to make the Demised Premises available to the Consultant from time to time during Tenant's normal business hours to permit the Consultant to make an HVAC survey of the Demised Premises. Tenant further agrees to supply Landlord within fifteen (15) days after written request therefor, additional information, as Consultant reasonably deems necessary to estimate Tenant's Consumption, including Tenant's days and hours of operation and specifications of heat producing equipment. The Consultant's estimate of Tenant's Consumption shall be binding upon Landlord and Tenant. Estimates of the Base Unit Charge with respect to each calendar year during the term hereof shall be provided by Landlord to Tenant as more fully set forth in Section B of this Exhibit. Following the conclusion of each calendar year, adjustments shall be made between Landlord and Tenant, with respect to the Heating and Cooling Service Charge for such year, as set forth in Section B below, on the basis of the actual Base Unit Charge for such year. A. BASE UNIT CHARGE The Base Unit Charge is estimated to be $.2749 per ton-hour of consumption. For this charge Tenant shall be provided with: 1. Hot and chilled water to the design criteria detailed in Exhibit C-1 2. "Maintenance Services", which shall consist of the following: D(1) 140 a. Landlord agrees to maintain the Tenant's Cooling, Heating and Ventilating equipment in Tenant's space, as defined below, in good working order as follows: 1. Air Handling Units a. Periodically lubricate motor and fan shaft bearings. b. Replace defective motors, sheaves, bearings, V-belts and shafts as these items become defective through normal wear and tear. c. Replace the air filters and furnish new materials as needed. 2. Temperature Controls a. Adjust, inspect and repair temperature control equipment, including thermostats, automatic control valves, and automatic damper motors. b. Furnish and install new control devices if such equipment cannot be adjusted or repaired. 3. Ventilating Fans a. Periodically lubricate motor and fan shaft bearings. b. Replace defective motors, sheaves, bearings, V-belts and shafts as these items become defective through normal wear and tear. 4. Electric Motor Starters, Contractors and Relays b. Where Tenant's design criteria requires special duty or grease filters, Tenant shall furnish, maintain, clean and/or replace as needed any special duty or grease filters at the expense of Tenant. If in Landlord's opinion, grease filters are not maintained and cleaned adequately by Tenant, then Landlord shall have the right to perform needed maintenance and cleaning at the expense of Tenant. c. Tenant shall be responsible to maintain the ductwork in the Demised Premises at Tenant's expense. d. Definition of "Maintain" shall be construed to mean furnishing of parts, materials, labor supervision, and tools to accomplish the preventative measures and to effect the repairs set out above, but not to include damage caused by Tenant in which the Tenant shall reimburse Landlord for the cost of repairing such damage. 3. The "Base Unit Charge" has three components as follows: a. "Basic Costs" equal to $.1331 per ton-hour. Basic Costs cover operating expenses of the Central Plant as hereinafter defined in greater detail. b. "Maintenance Services Expenses" (hereinafter defined) equal to $.0105 per ton-hour. c. Amortization of capital costs equal to (and hereby conclusively deemed to be) $.1313 per ton-hour. This component is for amortization of the retail D(2) 141 mall's proportionate share of the capital costs of building the Central Plant. Also included in this component is a 2%/year reserve for replacement of capital equipment and a 10%/year administrative fee. B. BASE UNIT CHARGE ADJUSTMENT The Base Unit Charge adjustment shall be calculated in accordance with the following: 1. Tenant's Base Unit Charge includes two components which may escalate. These two components are Basic Costs amounting to $.1331 per ton-hour and Maintenance Services Expenses amounting to $.0105 per ton-hour. These amounts are estimates of Basic Costs and Maintenance Services Expenses as if the Central Plant and Tenant's Cooling, Heating and Ventilating equipment were in operation in 1981. 2. Prior to Tenant's occupancy of the Demised Premises, Landlord will provide an updated estimate of Basic Costs and Maintenance Services Expenses for the year in which occupancy occurs. If this estimate exceeds $.1331 per ton-hour for Basic Costs or $.0105 per ton-hour for Maintenance Services Expenses, then Tenant's Base Unit Charge shall be adjusted upward by the amount of this excess. 3. Prior to the commencement of each calendar year of Tenant's occupancy, Landlord shall provide to Tenant an estimate of the Base Unit Charge (based on estimates of Basic Costs and Maintenance Services Expenses) for said calendar year. 4. Within 90 days or as soon thereafter as possible following the conclusion of each calendar year of the lease term, Landlord shall furnish to Tenant a statement of the actual Heating and Cooling Service Charge for such calendar year (based on the actual Base Unit Charge, for said calendar year.) Such statement may be audited at request of Tenant at Tenant's expense. A lump sum payment will be made from Landlord to Tenant or from Tenant to Landlord, as appropriate, promptly after the delivery of such statement equal to the difference in actual Basic Costs and Maintenance Services Expenses and estimated Basic Costs and Maintenance Services Expenses multiplied by Tenant's actual metered consumption for the just completed year. The effect of this reconciliation payment is that Tenant will pay or receive annually over the lease term its share of the charges adjusted from the original estimate of $.1331 per ton/hour for Basic Costs and $.0105 per ton-hour for Maintenance Service Expenses. Notwithstanding the adjusting procedure described above, in no event shall charges for Basic Costs be less than $.1331 per ton-hour and charges for Maintenance Services Expenses be less than $.0105 per ton-hour. 5. An example of the adjustment described in Section B.4 is as follows: Assume the time is early 1982. Tenant's estimated Base Unit Charge for 1981 is $.2749 per ton-hour, which includes $.1331 per ton-hour for Basic Costs and $.0105 per ton-hour for Maintenance Services Expenses. Tenant's metered consumption for 1981 is 15,459 ton-hours. Landlord provides a statement to Tenant within the first 90 days of 1982 stating that the actual Base Unit Charge if $.2801 per ton-hour. The reconciliation payment would be a payment from Tenant to Landlord of $80.39 calculated as follows: ($.2801/ton-hour - $.2749/ton-hour) x 15,459 ton-hours = $80.39 6. If it should become necessary to convert the units of energy, production in BTU's shall be converted to ton-hours by dividing by 12,000 BTU's per ton-hour. D(3) 142 C. BASIC COSTS DEFINED "Basic Costs", as said term is used herein, shall be a dollar amount per ton-hour, determined by dividing the total operating expenses for the Central Plant by the total cooling ton-hours produced by the Central Plant, computed as of the last day of each calendar year during the term. Operating expenses of the Central Plant shall be computed on the accrual basis and shall include all expenditures by Landlord to maintain and operate facilities of the Central Plant in operation from the beginning of the lease term and such additional facilities in subsequent years as may be determined by Landlord to be necessary. Replacement of capital equipment is provided for in the 2%/year reserve referred to in Section A.3.c of this Exhibit and is not a Basic Cost. All operating expenses shall be determined in accordance with generally accepted accounting principles which shall be consistently applied. The term "operating expenses" as used herein shall mean all expenses, costs and disbursements (but not replacement of capital investment items nor specific costs especially billed to and paid by specific tenants) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership and operation of the Central Plant, including but not limited to, the following: 1. Wages, salaries and all related expenses and benefits, of all employees engaged in operation and maintenance of the Central Plant. All taxes, insurance and benefits relating to employees providing these services shall be included. 2. Cost of all supplies and materials and equipment rented or used in operation and maintenance of the Central Plant. 3. Cost of all utilities for the Central Plant including the cost of water and power, heating, lighting, air conditioning and ventilating for the Central Plant. 4. Management costs and the cost of all maintenance and service agreements for the Central Plant and the equipment therein including, but not limited to alarm service and security service. 5. Cost of all insurance relating to the Central Plant, including, but not limited to the cost of fire, rental abatement, casualty and liability insurance applicable to the Central Plant and Landlord's personal property used in connection therewith. 6. All taxes and assessments and governmental charges whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing the Central Plant or by others subsequently created or otherwise, and any other taxes and assessments attributable to the Central Plant or its operation. 7. Cost of repairs and general maintenance of the Central Plant (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other third parties, and alterations attributable solely to tenants of the building other than Tenant). 8. Amortization of the cost of installation of capital investment items which are primarily for the purpose of reducing operating costs or which may be required by governmental authority. All such costs shall be amortized over the reasonable life of the capital investment items by including in Basic Costs annually the applicable amortization schedule being determined in accordance with generally accepted accounting principles and in no event to extend beyond the reasonable life of the Mall Building. 9. Landlord's central accounting costs applicable to the Central Plant. D(4) 143 10. Any allocation of expenditures for service or operation of the Complex attributable to the Central Plant, determined in accordance with generally accepted accounting principles. As used herein, the term "Complex" shall mean the Central Plant and other parts of a larger development bounded by Dallas Parkway, Alpha Road, Noel Road, and LBJ Freeway which from time to time are subject to reciprocal easement arrangements for common use of certain areas as an integrated mixed-use Complex. D. MAINTENANCE SERVICES EXPENSES DEFINED "Maintenance Services Expenses", as said term is used herein, shall be a dollar amount per ton-hour, determined by dividing all operating expenses associated with performance of the Maintenance Services defined in Section A-2 of this Exhibit by the total cooling ton-hours consumed by the Mall tenants and the Mall common area computed as of the last day of each calendar year during the term of this lease. All operating expenses associated with the performance of the Maintenance Services defined in Section A-2 shall be determined in accordance with generally accepted accounting principles which shall be consistently applied. The term "operating expenses" as used herein shall mean expenses, costs and disbursement (but not replacement of capital investment items nor specific costs especially billed to and paid by specific tenants) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the performance of Maintenance Services, including but not limited to, the following: 1. Wages, salaries and all related expenses and benefits, of all employees engaged in performing Maintenance Services. All taxes, insurance and benefits relating to employees providing these services shall be included. 2. Cost of all supplies and materials and equipment rented or used in performing Maintenance Services. 3. Management costs and the cost of all maintenance and service agreements engaged in the performance of Maintenance Services and the equipment therein. 4. Cost of repairs and general maintenance as called for under the definition of Maintenance Services. E. HOURS OF OPERATION The normal operating hours during which Landlord agrees to operate the Central Plant to heat, ventilate, and cool the Demised Premises to the design criteria detailed in Exhibit C-1 are as follows: Monday-Saturday 7:00 a.m. - 12:00 midnight Sunday 11:00 a.m. - 12:00 midnight Tenant shall have the right to request the Central Plant to heat, ventilate and cool the Demised Premises from 12:00 midnight until 2:00 a.m. each day for an hourly charge equal to Thirty-Five and No/100 Dollars ($35.00). D(5) 144 [LANDLORD/TENANT ELECTRICAL WORK DIAGRAM] EXHIBIT E 145 EXHIBIT F FINANCING STATEMENT (Real Property Records) Intentionally deleted. E(1) 146 EXHIBIT S SATELLITE DISH AGREEMENT LICENSE AGREEMENT This License Agreement (this "License") is entered into and effective this __________ day of _______________, 1998, (the "Effective Date") by and between Dallas Galleria Limited, a Texas limited partnership (hereinafter referred to as "Licensor") acting through Hines Interests Limited Partnership, its agent, and LBE TECHNOLOGIES, INC., a corporation duly organized and existing according to the laws of the State of California (hereinafter referred to as "Licensee"). WHEREAS Licensor is the owner of an enclosed shopping mall known as the Dallas Galleria (the "Mall") located in the City of Dallas, Dallas County, Texas on the land described in Exhibit "A" attached hereto: and WHEREAS Licensee desires to install a satellite dish on the roof of the Mall with the wiring thereto and Licensor agrees to permit Licensee to install a satellite dish on the roof of the Mall with the wiring thereto under the terms and conditions contained herein. NOW THEREFORE, for and in consideration of ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Licensor and Licensee hereby agree as follows: 1. By this License, Licensor hereby grants to Licensee the right to install and maintain at Licensee's sole cost and expense one satellite dish not to exceed seventy-two inches (72 inches) in diameter (the "Satellite Dish") at a location approved in writing by Licensor on the roof of the Mall building, subject to the terms and conditions contained herein. 2. The term of this License shall be month-to-month. Either Licensor or Licensee shall have the right to terminate this License, with or without cause, upon thirty (30) days prior written notice to the other party. 3. Throughout the term of this License, Licensee shall pay to Licensor monthly in advance, without prior notice or demand, a License Fee of One Hundred Twenty-Five and No/100 Dollars ($125.00) per month and proportionately for any partial first or last month. 4. Installation of the wiring to the Satellite Dish will be on the roof of the Mall building in an area approved by Licensor. Licensee and its contractor shall make no roof penetrations, but the wiring shall be run at the inside of the parapet wall to a location near the Satellite Dish in a manner approved by Licensor. From the parapet wall to the Satellite Dish any fastening to the roof shall be done by Licensor's roofing contractor at Licensee's expense. 5. Licensee shall install and maintain the wiring to the Satellite Dish at Licensee's expense, and at the expiration or termination of the term of this License, Licensee shall remove all wiring from the Demised Premises to the A(a) (1 of 3) 147 Satellite Dish, all at the Licensee's sole cost and expense. If Licensee fails to remove such wiring within thirty (30) days after the expiration or termination of this License, then Licensor shall have the right to remove such wiring at Licensee's expense, plus an administrative fee equal to fifteen percent (15%) of the costs of removal. 6. Prior to the installation of the Satellite Dish, Licensee shall obtain, at Licensee's sole cost and expense, all legal and regulatory permits and licenses, whether Federal, State or Local, necessary for the construction, maintenance and use of the Satellite Dish. 7. Licensee agrees to install and operate the Satellite Dish in a manner which does not cause interference with existing satellite installations, or the transmissions therefrom or the receipt of transmissions thereto. Licensee shall be responsible to verify prior to installation that its Satellite Dish does not interfere with other satellite dishes installed on the roof of the Mall building. 8. Licensor shall have no liability for interference caused by transmissions to or from other satellite dishes affecting receipt of transmissions by Licensee. 9. Licensee shall hold Licensor harmless and indemnify Licensor from any and all claims or proceedings brought thereon, and the defense thereof, on the part of Licensee, Licensee's agents or employees or third parties of whatever nature (i) arising from any act, omission or negligence of Licensee or Licensee's contractors, agents, servants or employees, or (ii) arising from any accident, injury or damage whatsoever caused to any person, or any damage to the party of any person, including that of Licensee or Licensee's agents or employees, occurring during term hereof or from the installation or maintenance of the wiring, whether due solely or in part to negligence of Licensor, its officers, employees or agents. Notwithstanding anything to the contrary contained herein, there is expressly excluded from the above indemnity, any claims resulting from the intentional torts or gross negligence of Licensor, its officers, employees or agents. This indemnity and hold harmless agreement shall include indemnity against all costs, expenses and liabilities incurred in or in connection with any such claim or proceeding brought thereon, and in the defense thereof. Throughout the term of this License, Licensee shall continuously maintain general liability insurance under which Licensor and Licensee are named as insureds with contractual liability endorsements covering the indemnity contained herein and with limits of at lease one million and no/100 dollars ($1,000,000.00) combined single limit coverage for personal injury and property damage in any one occurrence. Each such policy shall provide that it is primary over any insurance carried by Licensor. 10. If during the term of the License, Licensor installs a common satellite system for the Mall (and which may include other buildings), then this License shall terminate upon thirty (30) days written notice from Licensor to Licensee, after which Licensee may, at its option, connect with such common satellite dish at its cost and receive transmissions through such common satellite system at the rates then charged by Licensor under the rules and regulations established by Licensor. A(a) (2 of 3) 148 This License is hereby executed and delivered in multiple counterparts, each of which shall have the force and effect of an original, effective as of the date first written hereinabove. DALLAS GALLERIA LIMITED By: Hines Interests Limited Partnership Authorized Agent By: ------------------------------------- LICENSOR LBE TECHNOLOGIES, INC. d/b/a Nascar Silicon Motor Speedway By: ------------------------------------- ------------------------------------- Name Printed Title LICENSEE A(a) (3 of 3) 149 VIA AIRBORNE EXPRESS August 11, 1998 Ms. Janet Woods Silicon Entertainment, Inc. 10401 Bubb Rd. Cupertino, CA 95014 (408) 777-8082 RE: First Amendment of Lease Hines Tenant: Silicon Entertainment, Inc. d/b/a Nascar Silicon Motor Speedway Landlord: Dallas Galleria Limited Location: Dallas Galleria Dear Ms. Woods: Enclosed please find one (1) fully executed original(s) of the above referenced document(s) for your files. If you have any further questions, please let me know. Sincerely, /s/ PAULA KYZAR/kae --------------------------------- Paula Kyzar Legal Assistant to Marcela Chennisi Retail Development Group /kae cc: Jennifer Brown Lou Ann Kelley Safe Deposit Invoice File 150 LICENSE AGREEMENT THIS LICENSE AGREEMENT (The "License"), is entered into this 20th day of July, 1998, by and between SILICON ENTERTAINMENT, INC., a corporation duly organized and existing according to the laws of the State of California (the "Licensor") and DALLAS GALLERIA LIMITED, a Texas limited partnership (the "Licensee") d/b/a Nascar Silicon Motor Speedway. WITNESSETH: IN CONSIDERATION of the payments provided for herein, and the covenants and conditions hereinafter set forth, Licensor and Licensee hereby covenant and agree as follows: 1. PREMISES AND TERM. Licensor hereby grants to Licensee the revocable license and right to operate a temporary exhibit in the Common Area on level 3 of the Shopping Center (as defined below) shown as "Exhibit Area" on Exhibit "A" attached hereto (the "Premises"), within the Dallas Galleria Shopping Center (the "Shopping Center") located in Dallas, Dallas County, Texas, commencing on September 1, 1998 and continuing on a month-to-month basis (the "term"), subject to Licensor's right to terminate on thirty (30) days prior written notice as contained hereinbelow. 2. CONDITION OF PREMISES. Licensee hereby acknowledges and agrees that Licensee has inspected the Premises and found them to be suitable for Licensee's permitted use as set forth in Section 3, and Licensee further agrees that Licensee is accepting the Premises in an "AS-IS" condition without any representations or warranties (expressed or implied) of any kind whatsoever, including, without limitation, fitness for a particular purpose, tenantability or habitability, and without recourse to Licensor. 3. USE. Licensee shall operate its business in the Premises solely for the display of a platform based full-size NASCAR racing vehicle and sign as shown on Exhibit "S" attached hereto (collectively, the "Installation"). Licensee hereby agrees that the Premises shall be used for no other purpose or purposes whatsoever. 4. LICENSE FEE AND ADDITIONAL LICENSE FEE. Intentionally deleted. 1 151 5. HVAC AND UTILITIES. In the event Licensee requires the use of electricity, water, sewer or gas (the "Utilities") for the Premises, Licensee shall cause the Utilities to be metered in the name of Licensee and shall pay the Utility bills for the Premises directly to the company providing any such Utilities. In the event that Licensor elects to provide any of the Utilities to the Premises, Licensee shall reimburse Licensor for the cost of providing any such Utilities, which reimbursement shall be due within five (5) days after Licensee's receipt of demand, invoice or statement therefor from Licensor. 6. MAINTENANCE AND REPAIR OF PREMISES. Licensee shall, at its sole costs and expense, keep and maintain the Premises and the Installation in "like new" condition as determined by Landlord's sole judgment. Licensor hereby reserves and retains the right to enter the Premises at any time to fulfill its repair and maintenance obligations to the common areas and other premises. Licensor shall use reasonable efforts to minimize interference with Licensee's permitted business operations in the Premises. 7. ALTERATIONS, IMPROVEMENTS AND ADDITIONS. Other than the Installation described on Exhibit "S" attached hereto, Licensee shall not make any alterations, improvements or additions (including, without limitation, the installation of any fixtures) to the Premises without, in each instance, first obtaining the prior written consent of Licensor. Licensee hereby agrees that any alterations, improvements or additions (including, without limitation, the installation of any fixtures) to the Premises shall be (i) completed in a good and workman like manner, (ii) performed and completed by a contractor approved by Landlord so as not to create a lien against the Premises, the building of which the Premises are a part, or the Shopping Center, (iii) performed and completed pursuant to Licensor's then current rules, regulations, specifications and design criteria (including, without limitation, the submission of plans and specifications), (iv) the property of Licensor upon the completion thereof, (v) performed and completed in such a manner as not to interfere with or cause a nuisance to Licensor's operation of the Shopping Center, the use of the common areas of the Shopping Center or the other occupants of the Shopping Center, (vi) performed and completed in compliance with all applicable laws, ordinances, rules and regulations of any governmental authority leaving jurisdiction thereover and (vii) performed after Shopping Center business hours unless otherwise approved in writing by Licensor. 8. SECURITY DEPOSIT. Licensee shall deposit with Licensor, upon Licensee's execution of this License, a deposit of [***] as security for Licensee's performance hereunder. Licensor shall return to Licensee such security deposit within thirty (30) days after the expiration or termination of this *** Confidential treatment requested. 2 152 14. EXTENSION OF TERM, LICENSOR'S RIGHT TO TERMINATE AND SURRENDER OF PREMISES. Licensor hereby reserves and retains, during the term of this License, the right to terminate this License, with or without cause, upon thirty (30) days prior written notice to Licensee, provided, however, that Licensor may not revoke the license granted hereunder with respect to the sign described on Exhibit "S" except upon a default by Licensee or the early termination or expiration of the term of Licensee's lease of retail space within the Shopping Center. Licensee hereby agrees upon the expiration or termination of this License to (i) vacate the Premises and re-deliver the Premises to Licensor in good order, condition and repair (ordinary wear and tear excepted), (ii) leave all improvements which are in place at the time Licensor delivers possession of the Premises to Licensee, and (iii) leave all alterations, improvements, additions and fixtures which may be made or installed by either Licensor or Licensee upon the Premises and which in any manner are attached to the Premises (including, without limitation, being cemented, glued, nailed, bolted or otherwise affixed to the floor, walls, storefront, or ceiling of the Premises). 15. HOLDOVER. In the event of any unauthorized holding over, Licensee shall indemnify and hold harmless Licensor against any and all claims for damages by any other licensee or tenant to whom Licensor may have leased the Premises for any date commencing after the termination date of this License, unless licensee is granted the right, in writing and signed by the Licensor, to hold over beyond the termination date. 16. EVENTS OF DEFAULT AND REMEDIES OF LICENSOR. In the event that Licensee fails to comply with, perform or fulfill any of the terms, conditions or obligations herein which are to be complied with, or performed or fulfilled by Licensee ("Event of Default"), Licensor lawfully may, immediately or at any time thereafter, without further demand or notice, elect either to (i) receive as liquidated damages, in addition to all rentals and other charges provided for in this License, the sum of One Hundred Dollars ($100.00) per day that Licensee fails to cure any such Event of Default, or (ii) terminate this License upon five (5) days notice to Licensee, or (iii) pursue any other remedies available to Licensor at law or in equity. The failure of Licensor to complain of any action or non-action on the part of Licensee, no matter how long the same may continue, shall never be deemed to be a waiver by Licensor of its rights under this License. Further, it is covenanted and agreed that no waiver at any time of any of the other provisions of this License by Licensor shall be construed as either a waiver of any of the other provisions of this License or a waiver of at any subsequent time of the same provisions. If on account of a default or breach by Licensee of any term, 5 153 provision, condition or obligation under this License, it shall be necessary for Licensor to employ an attorney to enforce or defend any of Licensor's rights or remedies hereunder or to evict Licensee, then Licensee shall pay to Licensor any reasonable amounts incurred by Licensor as attorney's fees. 17. RELOCATION. In the event the Licensor requires the use of the Premises for any special event, Licensor shall have the right, upon ten (10) days notice to Licensee, to temporarily relocate the Premises to another location on level 3 of the Shopping Center. Such relocation shall be at Licensee's sole cost and expense. Licensor shall have the right to relocate the sign to another location on level 3 of the Shopping Center at any time during the term of this License which relocation shall be at Licensee's sole cost and expense. 18. ADDITIONAL COVENANTS OF LICENSEE. Licensee shall at all times keep and maintain the Premises and Installation in a safe and clean manner. Licensee shall not permit any rubbish or refuse emanating from the Premises to accumulate in the common areas of the Shopping Center and shall be responsible for a neat and clean appearance of the Premises. Unless otherwise specifically permitted herein, Licensee shall not permit consumption of food or beverages as a part of the conduct of business in the Premises. Licensee shall provide Licensor with both a local emergency telephone number and address and permanent forwarding address. All notices in connection with this License shall be given by Certified U.S. Mail, return receipt requested or, in the case of notices from Licensor, personally delivered to the Premises with written confirmation of receipt. Licensee shall be responsible at all times for the security of the Premises. Licensee shall at all times abide by the rules and regulations established by Licensor (and/or the Shopping Center Manager) from time to time, with respect to the common areas, parking facilities, employee parking and Shopping Center. Except as shown on Exhibit "S", Licensee shall not, without Licensor's prior written approval, erect or install any signs, window or door lettering placards, or advertising media of any type which can be viewed from the exterior of the Premises, or erect or install any of the foregoing which are suspended from the ceiling of the Premises. Licensee shall not use any neon, flashing or rotating lights or signs at the Premises. Licensee shall not conduct solicitation of any kind from the Premises without the Licensor's prior written approval. 6 154 Licensee shall not interrupt or disturb customers or patrons in the Common Area. 18. MISCELLANEOUS PROVISIONS. This License shall be governed exclusively by the provisions hereof and by the laws of the State of Texas, as the same may exist from time to time, without regard to any theory or principal of the conflict of laws, and venue shall be in Harris County, Texas. If any term or provision of this License or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this License (including the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable) shall not be affected thereby, and each term and provision of this License shall be valid and be enforced to the fullest extent permitted by law. The submission of this document for examination and negotiation does not constitute an offer to lease, a reservation of, or an option for the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Licensor and Licensee. All negotiations, considerations, representations, inducements, oral agreements and understandings between Licensor and Licensee are merged and incorporated herein and this License may be amended, modified or altered only by written agreement signed by both Licensor and Licensee. This License constitutes the only agreement between the parties hereto, and there are no other representations or warranties between the parties. No employee or agent of Licensor shall have the right or authority to amend, modify or alter any of the provisions of this License. 7 155 IN WITNESS WHEREOF, Licensor and Licensee have caused this License to be executed as of the date set forth above. LICENSEE: SILICON ENTERTAINMENT, INC. d/b/a Nascar Silicon Motor Speedway By: /s/ JANET WOODS ---------------------------------------- Janet Woods - Vice President Real Estate Licensee's Permanent Address: LBE Technologies, Inc. 10401 Bubb Road Cupertino, CA 95014 LICENSOR: DALLAS GALLERIA LIMITED, A Texas Limited Partnership By: HDG, Limited A Texas Limited Partnership General Partner By: Hines Consolidated Investments, Inc. A Delaware Corporation General Partner By: /s/ DON B. MCCRORY ------------------------------------- Don B. McCrory Vice President 8 156 GALLERIA SITE LAYOUT - LEVEL 3 EXHIBIT A 157 SHOW CAR PLAN VIEW DALLAS GALLERIA 158 SHOW CAR SIDE ELEVATION DALLAS GALLERIA EX-10.12 14 LEASE BY AND BETWEEN MALL OF AMERICA 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.12 LEASE BY AND BETWEEN MALL OF AMERICA COMPANY, a Minnesota General Partnership AND LBE TECHNOLOGIES, INC. 2 MALL OF AMERICA LEASE THIS LEASE made this 12th day of August, 1997 by and between MALL OF AMERICA COMPANY, a Minnesota General Partnership, ("Landlord"), and LBE TECHNOLOGIES, INC., ("Tenant"): WITNESSETH THAT, inconsideration of the rents, covenants and agreements hereafter set forth, such parties enter into the following agreement: ARTICLE I EXHIBITS The exhibits listed below and attached to this Lease are incorporated herein by this reference: EXHIBIT "A" Legal description of real estate to be developed by the Landlord as a mixed use project, consisting of a retail mall and entertainment center ("Retail Space") and a hotel ("Hotel Space"), as well as a parking deck ("Parking Space") (hereinafter called "Total tract"). The Total Tract with existing and future improvements being hereinafter called the "Center". EXHIBIT "B" Plot Plan of that area of the Retail Space upon which is located the space herein leased to Tenant. This Exhibit is provided for informational purposes only, and shall not be deemed to be a warranty, representation or agreement by Landlord that the Center or buildings and/or any stores will be exactly as indicated on the Exhibit or that the other tenants which may be drawn on said Exhibit will be occupants in the Center. Landlord reserves unto itself the unlimited right to modify the configuration of Total Tract at any time for the purpose of incorporating additional department stores and other buildings within the Center. EXHIBIT "C" Description of Tenant's Work. EXHIBIT "D" Rules and Regulations applicable to Tenant. EXHIBIT "E" Sign Criteria applicable to Tenant. EXHIBIT "F" INTENTIONALLY DELETED. Notwithstanding Exhibits A or B or anything else in this Lease contained, Landlord reserves the right to change or modify and add to or subtract from the size and dimensions of the Center or any part thereof, the number, location and dimensions of buildings and stores, the size and configuration of the parking areas, entrances exits and parking aisle alignments, dimensions of hallways, malls and corridors, the number of floors in any building, the location, size and number of tenants' spaces and kiosks which may be erected in or fronting on any mall or otherwise, the identity, type and location of other stores and tenants, and the size, shape, location and arrangement of Common areas (hereinafter defined), and to design and decorate any portion of the Center as it desires, but the general character of the Center, the approximate location of the Premises (as hereinafter defined) in relation to the major department stores shall not be substantially changed. LANDLORD SHALL NOT MODIFY THE COMMON AREAS IN ANY MANNER THAT WOULD HAVE A MATERIAL ADVERSE EFFECT ON PEDESTRIAN AND VEHICULAR TRAFFIC WITHIN THE CENTER OR THAT WOULD REDUCE THE NUMBER OF PARKING SPACES SERVING THE CENTER BELOW APPLICABLE CODE REQUIREMENTS. FURTHER, EXCEPT AS SHOWN ON EXHIBIT "B" AND EXCEPT AS IN EXISTENCE ON THE DATE OF THIS LEASE, LANDLORD SHALL NOT LEASE OR OTHERWISE PERMIT TENANTS OR CONCESSIONAIRES TO OCCUPY THAT PORTION OF THE COMMON AREAS FRONTING ON THE PREMISES CROSS-HATCHED ON PAGE 2 OF EXHIBIT "B". THE FOREGOING SHALL NOT, HOWEVER, LIMIT LANDLORD'S RIGHT TO MAKE NECESSARY REPAIRS, TO TAKE SUCH ACTIONS AS ARE REQUIRED IN AN EMERGENCY SITUATION OR FOR SECURITY PURPOSES, OR TO COMPLY WITH GOVERNMENTAL REQUIREMENTS. ARTICLE II LEASED PREMISES AND TERM Section 2.1. Leased Premises. Landlord hereby leases to Tenant and Tenant hereby rents from Landlord the space (in the Center) designated as Space S-352 outlined in red on Exhibit "B" (hereinafter called "the Premises"), irregularly shaped, but measured to the center line of all party or common walls, to the exterior faces of all other walls and to the building line where there is no wall, containing approximately 5,899 square feet. When the Premises are completed, Landlord shall deliver to Tenant a certificate stating Landlord's determination of the actual number of square feet in the Premises (hereinafter called the "Store Floor Area"), and the parties agree that, unless Tenant reasonably disputes the same within sixty (60) days after the receipt of Landlord's certificate, Landlord's determination shall be final, binding and conclusive. In the event of a dispute as to the tore Floor Area in the Premises, Landlord and Tenant agree to mutually field measure the Premises. If, after such field measurement of the Premises, the parties still dispute the Store Floor Area, then the parties shall employ the services of a reputable, independent, third-party architect or engineer to measure the Premises and, absent manifest error, such architect's or engineer's determination of the Store Floor Area shall be final, binding and conclusive. The fee for such architect or engineer shall be shared equally by the parties. Section 2.2. Roof and Walls. Landlord shall have the exclusive right to use all or any part of the exterior of the roof, side and rear walls of the Premises for any purpose, including but not limited to erecting signs or other structures on or over all or any part of the same, erecting scaffolds and other aids to the construction and installation of the same, and installing, maintaining, using, repairing and replacing pipes, ducts, conduits and wires leading through, to or from the Premises and serving other parts of the Center in locations which do not materially interfere with Tenant's use of the Premises. Tenant shall have no right whatsoever in the exterior of exterior walls or the roof of the Premises. Section 2.3. Lease Term. The term of this Lease (hereinafter called "Lease Term") shall commence upon the earlier of (a) the day following the last day allowed herein to Tenant for completion of Tenant's Work (hereinafter defined) hereinafter called "Required Completion Date" or (b) the day on which Tenant opens for business, the applicable date being hereinafter called "Commencement Date." The term of this Lease shall end on the last day of the fifth (5th) Lease Year (hereinafter defined) after the Commencement Date unless sooner terminated as herein provided. SUBJECT TO SECTION 3.2 HEREOF, TENANT IS REQUIRED TO OPEN FOR BUSINESS TO THE PUBLIC IN THE PREMISES ON OR BEFORE NOVEMBER 30,1997. Section 2.4. Lease Year Defined. "Lease Year," as used herein, means a period of twelve (12) consecutive months during the Lease Term commencing on February 1 of any calendar year, the first Lease Year commencing on the first day of the first February occurring on or after the Commencement Date. "Partial Lease Year" means that portion of the Lease Term prior to the first Lease Year. Section 2.5. Relocation of Premises. INTENTIONALLY DELETED. ARTICLE III TENANT'S WORK Section 3.1. Tenant's Work. Tenant agrees to accept delivery of the Premises in its present "AS IS, WHERE IS" condition except that Tenant is to completely remodel the Premises [***] (subject to Section 24.20 below) not later than the Required Completion Date (hereinafter defined) in accordance with plans and specifications submitted by Tenant and approved by Landlord (hereinafter referred to as "Tenant's Plans") which plans shall become a part hereof by this reference as Exhibit "C-2". Further alterations to the Premises, if any, shall be performed by Tenant (hereinafter called "Tenant's Work") including but not limited to all work designated as Tenant's Work in Exhibit "C", and Tenant shall do and perform at its expense all of Tenant's Work diligently and promptly and in accordance with the following provisions. Section 3.2. Tenant's Obligations Before Commencement Date. The parties acknowledge that Landlord has delivered to Tenant a drawing of the Premises and a copy of the Tenant Handbook prepared by Landlord's architect (hereinafter referred to as "Tenant Handbook"). Within forty-five (45) days after the date of this Lease, Tenant will submit to Landlord one (1) reproducible set (sepia) and 4 copies of Tenant's Plans and specifications, prepared by a registered architect or engineer, of all Tenant's Work to be done within the Premises, prepared in conformity with Exhibit "C" and the Tenant Handbook. Within fifteen (15) days after receipt of Tenant's Plans, Landlord shall notify Tenant of any failures of Tenant's Plans to conform to Exhibit "C," the Tenant Handbook or otherwise to meet with Landlord's reasonable approval. Tenant shall within fifteen (15) days after receipt of any such notice cause Tenant's Plans to be revised to the extent necessary to obtain Landlord's reasonable approval and resubmitted for Landlord's approval. When Landlord has approved the original or revised Tenant's Plans, Landlord shall initial and return one (1) set of approved Tenant's Plans to Tenant and the same shall become a part hereof by this reference as Exhibit "C-2." Approval of plans and specifications by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy or sufficiency, or compliance with applicable codes and Tenant shall be solely responsible for such plans and specifications. Landlord shall not unreasonably withhold or delay approval of Tenant's Plans. If Landlord objects to Tenant's Plans, Landlord shall specify in writing the basis for such objections and the changes Landlord requires to be made to Tenant's Plans. Tenant shall not commence any of Tenant's Work until Landlord has approved Exhibit "C-2," unless prior Landlord approval has been obtained in writing. Tenant shall commence Tenant's Work following the approval by Landlord of the Tenant's Plans at a time reasonably acceptable to both parties and Tenant shall complete the same in strict accordance with Exhibits "C" and "C-2," install all store and trade fixtures, equipment, stock in trade, merchandise and inventory, and open for business therein not later than November 30, 1997, which day shall be the Required Completion Date. Tenant hereby releases Landlord and its contractors from any claim whatsoever for damages against Landlord or its contractors *** Confidential treatment requested. 2 3 for any delay in the date on which the Premises shall be ready for delivery to Tenant or for any delay in commencing or completing any work Landlord is to perform or is authorized by Tenant to perform under Exhibit "C". Landlord hereby grants Tenant the right to enter upon the Premises and to have access through the Center for the purpose of completing the Tenant's Plans, conducting review and analysis of Tenant's build-out and fixturing requirements, and completion of the Tenant's Work. Notwithstanding any provision of this Lease to the contrary, the Required Completion Date and the Commencement Date shall not be deemed to have occurred if the Tenant's Work is not completed and the Premises are not suitable for the opening of business to the extent that any of the following occurs (collectively referred to as "Unavoidable Delays"): (a) Landlord has unreasonably delayed approving the Tenant's Plans within the time periods specified herein; (b) Landlord has failed to provide Tenant and Tenant's architect, contractors and subcontractors with reasonable access to the Premises to permit the completion of the Tenant's Work; (c) the occurrence of a fire or other casualty; (d) delays in obtaining approvals from any governmental entity or authority whose permission or approval is required as a condition to the lawful construction of the Tenant's Work or the use or occupancy of the Premises for the use of the Premises contemplated by Tenant, provided Tenant promptly applied for such permits and approvals and diligently pursues the same for approval; (e) any default or breach of Landlord that causes a delay in completion of the Tenant's Work; or (e) the occurrence of any event described in Section 24.5 of this Lease or other event not within the reasonable control of Tenant or its contractor or subcontractors. To the extent an Unavoidable Delay occurs and is continuing, Tenant's obligation to complete the Tenant's Work and the Required Completion Date shall be extended by a like number of days. Section 3.3. Failure of Tenant to Perform. Because of the difficulty or impossibility of determining Landlord's damages resulting from Tenant's failure to open for business fully fixtured, stocked and staffed on the Commencement Date, including, but not limited to, damages from loss of Percentage Rent (hereinafter defined) from Tenant and other tenants, diminished saleability, leasability, mortgageability or economic value of the Center, if Tenant fails to diligently complete Tenant's Work, or to open for business fully fixtured, stocked and staffed on or before the Commencement Date Landlord may, if such failure is not cured within twenty (20) days after notice to Tenant, collect rent from the Commencement Date in an amount equal to the Minimum Annual Rent (hereinafter defined) and other additional rent and other amounts payable by Tenant hereunder, and, in addition thereto, an amount equal to [***] of 1/365ths of the Minimum Annual Rent for each day that Tenant has failed to open for business on and after the Commencement Date, which later amount shall be in lieu of Percentage Rent that might have earned had Tenant opened in timely fashion. In addition, Landlord may, upon ninety (90) days prior written notice to Tenant and Tenant's subsequent failure to open for business in the Premises within such ninety (90) day period, terminate this Lease. All remedies in this Lease or at law provided shall be cumulative and not exclusive and shall survive the expiration of the Lease Term or the earlier termination of this Lease. Section 3.4. Condition of Premises. Tenant's taken possession of the Premises shall be conclusive evidence of Tenant's acceptance thereof in good order and satisfactory condition. Tenant agrees that no representations respecting the condition of the Premises or the existence or non-existence of Hazardous Materials (hereinafter defined) in, on or about the Premises, no warranties or guarantees, expressed or implied, with respect to workmanship or any defects in material, and no promise to decorate, alter, repair or improve the Premises either before or after the execution hereof, have been made by Landlord or its agents to Tenant unless the same are contained herein. ARTICLE IV RENT Section 4.1. Minimum and Percentage Rent. Tenant covenants and agrees to pay to Landlord, without notice or demand, at Landlord's address for notice (Landlord's and Tenant's notice addresses being the addresses specified in Section 24.7 hereof), as rent for the Premises: (i) A "Minimum Annual Rent" of [***] per square foot of Store Floor Area, or [***] per annum (based upon the approximated Store Floor Area set forth in Section 2.1 hereof), payable in equal monthly installments, in advance upon the first day of each and every month of the Lease Term commencing upon the Commencement Date (such monthly installment being hereinafter called "Minimum Monthly Rent"); and *** Confidential treatment requested. 3 4 (ii) [***] of Gross Sales (hereinafter defined) during each Lease Year or Partial Lease Year to the extent such Gross Sales exceed $[***] (the "Simulator Breakpoint") (pro rated accordingly for a Partial Lease Year) for such period for all Gross Sales generated by Tenant's Simulators and [***] of Gross Sales during each Lease Year or Partial Lease Year to the extent such Gross Sales exceed [***] (the "Merchandise Breakpoint") (pro rated accordingly for a Partial Lease Year) for such period for all Gross Sales generated by the sale of merchandise (hereinafter called "Percentage Rent"). When Store Floor Area is determined in accordance with Section 2.1, the Minimum Annual Rent and Minimum Monthly Rent shall be deemed automatically increased or decreased based upon the Store Floor Area as thus determined, and any overpayments or underpayments of Minimum Monthly Rent to Landlord shall be adjusted accordingly. Section 4.2. Miscellaneous Rent Provisions. Any rent or other amounts to be paid by Tenant which are not paid when due and which remain unpaid for seven (7) days after Tenant's receipt of written notice specifying such failure shall bear interest as of the first day of the month on which any sum is due and owing at a rate equal to [***] over the prime rate announced by Citibank, N.A. If the Commencement Date is other than the first day of a month, Tenant shall pay on the Commencement Date a prorated partial Minimum Monthly Rent for the period prior to the first day of the next calendar month, and thereafter Minimum Monthly Rent payments shall be made not later than the first day of each calendar month. For the purposes of this Lease, a "Major Tenant" is herein defined as a single tenant occupying at least 40,000 contiguous square feet of floor area. Section 4.3. Percentage Rent. Tenant shall (i) not later than the twenty-first (21st) day after the close of each calendar month, deliver to Landlord a written statement certified by an officer of Tenant to the best knowledge of such officer, showing Gross Sales made in such calendar month; and (ii) not later than 30 days after the end of each Lease Year or Partial Lease Year, deliver to Landlord a statement of Gross Sales for such Lease Year or Partial Lease Year the correctness of which is certified to by an independent certified public accountant. If Tenant fails to prepare and deliver any statement of Gross Sales required hereunder, within the time or times specified above, then Landlord shall have the right, in addition to the other rights and remedies set forth in this Lease, (a) to collect from Tenant a sum which shall be [***] per calendar day for each day that Gross Sales reports are not so submitted, and (b) to estimate Tenant's Gross Sales for any non-reported period (which estimate shall be based upon prior Lease Years' Gross Sales, if available, and reasonable extrapolations which may be derived therefrom) and bill Tenant's Percentage Rent accordingly. Landlord reserves the right, at Landlord's option, to adjust Percentage Rent billings when actual Gross Sales reports are received. On or before the twenty-first (21st) day of each May, August, November and February, Tenant shall pay Landlord [***] of Gross Sales of Tenant generated by Tenant's Simulators during the three (3) months (or less in a Partial Lease Year) ending on the last day of the month preceding such payment date to the extent such Gross Sales exceed [***] (pro rated accordingly for a period of less than three [3] months) for such period and [***] of Gross Sales of Tenant generated by the sale of merchandise during the three (3) months (or less in a Partial Lease Year) ending on the last day of the month preceding such payment date to the extent such Gross Sales exceed [***] (pro rated accordingly for a period of less than three [3] months) for such period. Within thirty (30) days after the later of (i) the due date for Tenant's annual report of Gross Sales, or (ii) the date of Landlord's receipt of such annual report, if Tenant has paid Landlord for such Lease Year or Partial Lease Year Percentage Rent greater than Tenant is obligated to pay for such period, Landlord shall refund such excess, and if Tenant has paid less than the Percentage Rent required to be paid for such period, Tenant shall pay Landlord such difference. The parties acknowledge that Gross Sales may fluctuate substantially during different months of any annual period, and the parties agree that Percentage Rent payable for a Partial Lease Year shall be determined in a manner that approximates the monthly Percentage Rent that would be payable if the Percentage Rent were determined on an annual basis. Accordingly, for purposes of prorating Percentage Rent for a Partial Lease Year pursuant to Section 4.1 and this Section 4.3, the Percentage Rent shall be determined as follows: The Simulator Breakpoint and the Merchandise Breakpoint, as the case may be shall be prorated by multiplying such breakpoints by a fraction, the numerator of which is the number of days in the Partial Lease Year and the denominator of which is 365 days (such fraction herein called the "Partial Lease Year Fraction"). As initially determined, the Percentage Rent shall be [***] of Gross Sales during the Partial Lease Year to the extent Gross Sales exceed the Simulator Breakpoint and shall be [***] of Gross Sales during the Partial Lease Year to the extent Gross Sales exceed the Merchandise Breakpoint, respectively, calculated in accordance with the immediately preceding sentence. The Percentage Rent as determined in accordance with this paragraph is referred to as the "Estimated Partial Lease Year Percentage Rent" and shall be payable as provided in Section 4.3 of this Lease, subject to adjustment as provided in the immediately following paragraph. The Percentage Rent for a Partial Lease Year thereafter shall be adjusted based on the actual Gross Sales for the annual period starting on the Commencement Date and ending on the 365th day after the Commencement Date. The Percentage Rent attributable to Gross Sales during such annual period shall be computed based on the Simulator Breakpoint and Merchandise Breakpoint (each computed without proration) in accordance with Section 4.1 (ii) above. The Percentage Rent for the Partial Lease Year then shall be recalculated by multiplying the Percentage Rent (as determined in accordance with the immediately preceding sentence) by the Partial Lease Year Fraction. Any underpayments of Percentage Rent by Tenant promptly shall be paid by Tenant and overpayments of Percentage Rent shall be credited to the *** Confidential treatment requested. 4 5 next installment or installments of Percentage Rent then coming due. The foregoing shall not affect the provisions of this Lease relating to the computation of Percentage Rent for the first or any subsequent full Lease Year. Tenant will preserve for at least three (3) years at Tenant's notice address (or at the Premises, at Tenant's discretion) all original books and records disclosing information pertaining to Gross Sales, including, but not limited to, cash register tapes, sales slips, sales checks, gross income and sales tax returns, bank deposit records, sales journals and other supporting data. Landlord and its agents shall have the right during business hours, following not less than fifteen (15) days prior written notice, to examine and audit such books and records preserved by Tenant, Tenant reserving the right to be present during any such examination or audit. If such examination or audit discloses a liability for Percentage Rent [***] or more in excess of the Percentage Rent paid by Tenant for any period or if Tenant's Gross Sales cannot be verified due to the insufficiency or inadequacy of Tenant's records, Tenant shall promptly reimburse Landlord for Landlord's actual out-of pocket costs (not to exceed customary and reasonable amounts) for said audit. Tenant shall, in any event, pay to Landlord the amount of any deficiency in rents which is disclosed by such audit. Landlord shall not disclose any information relating to any examination performed by or for Landlord to other parties, except to Landlord's lenders, accountants, attorneys and other employees (who shall be allowed access to such information on a "need to know basis" and who in any event likewise shall be obligated not to disclose such information to other parties) or to any governmental agency or in accordance with any legal proceeding pursuant to a duly issued subpoena. Section 4.4. Gross Sales Defined. As used herein, Gross Sales means the sale prices of all goods, wares and merchandise sold and the charges for all services performed by Tenant or any other person or entity in, at, or from the Premises for cash, credit or otherwise, without reserve or deduction for uncollected amounts except as hereinafter specifically provided, including but not limited to sales and services (i) where the orders originate in, at or from the Premises, regardless from whence delivery or performance is made, (ii) pursuant to mail, telephone, telegraph or otherwise received or filled at the Premises, (iii) resulting form transactions originating in, at or from the Premises, and deposits not refunded to customers. Excluded from Gross Sales shall be: (i) exchanges of merchandise between Tenant's stores made only for the convenient operation of Tenant's business and not to consummate a sale made in, at or from the Premises, (ii) returns to manufacturers, (iii) refunds to customers (but only to the extent included in Gross Sales), (iv) sales of fixtures, machinery and equipment after use in Tenant's business in the Premises, (v) sales of merchandise or services at a discount to Tenant's employees, not to exceed [***] of annual Gross Sales, (vi) amounts that are determined by Tenant to be uncollectible from customers, including checks returned for lack of sufficient funds and credit card chargebacks, not to exceed [***] of annual Gross Sales, provided such amounts were originally included in Gross Sales when made and provided, further, any subsequent collection or recover thereof shall be included in Gross Sales in the Lease Year of collection or recovery, (vii) discounts given for promotional coupons that are redeemed from time to time, not to exceed [***] of annual Gross Sales, (viii) gift certificates until such time as the gift certificates are redeemed, (ix) fees charged by credit card companies for transactions originating in, at or from the Premises not to exceed [***] of annual Gross Sales, and (x) sales, excise or similar tax imposed by governmental authority and collected from customers and paid out by Tenant. No other taxes shall be deducted from Gross Sales. Section 4.5 Real Estate Taxes. A. Definition. Landlord shall pay or cause to be paid all Real Estate Taxes (as hereinafter defined) assessed or imposed upon the Center and the Total Tract which become due or payable during the Lease Term. As used in this Section 4.5 the term Real Estate Taxes shall mean and include all real estate taxes, public and governmental charges and assessments, including all extraordinary or special assessments applicable to the Center, or assessments against any of Landlord's personal property now or hereafter located in the Center, all reasonable costs, expenses and attorneys' fees incurred by Landlord in contesting or negotiating with public authorities (Landlord having the sole authority to conduct such a contest or enter into such negotiations) as to any of the same and all sewer and other taxes and charges, but shall not include taxes on Tenant's business in the Premises, machinery, equipment, inventory or other personal property or assets of Tenant, Tenant agreeing to pay, before delinquency, all taxes upon or attributable to such excluded items without apportionment. With respect to any special assessments made by governmental authorities for street improvement, traffic mitigation or similar physical improvements, Landlord may, at its option, pay any such special assessments in one lump sum when due or, if permitted by law, Landlord may elect to pay such special assessments in installments. In the event Landlord shall pay any special assessment in full when due, Tenant shall nevertheless reimburse Landlord for its share thereof based upon the installment payments including principal and interest which Landlord would have been obligated to pay had Landlord elected to pay the special installment in the maximum number of installments permitted. Tenant's installment payments for such special assessment shall be due and payable on the same dates that they would have been payable to the taxing authority had Landlord elected to pay the special assessment in installments. B. Tenant's Share. Tenant shall pay to Landlord, as Additional Rent, its proportionate share of all Real Estate Taxes upon the Center and the Total Tract which become due or payable during the Lease Term, such proportionate share to be prorated for periods at the beginning and end of the Lease Term which do not constitute full calendar months or years. Landlord shall endeavor to have the Retail Space and Hotel Space separately assessed. If this cannot be accomplished then Landlord, in its sole discretion, shall allocate Real Estate Taxes among the Retail Space and Hotel Space based on its determination of the assessed value of each such Space. This determination shall control except in case of manifest error. Real Estate Taxes allocated by Landlord to the Retail Space are referred to herein as "Retail Space Real Estate Taxes". Tenant's proportionate share of any such Retail Space Real Estate Taxes shall be that portion of such Retail Space Real Estate Taxes *** Confidential treatment requested. 5 6 which bears the same ratio to the total Retail Space Real Estate Taxes as the Store Floor Area bears to the Rentable Floor Area rented or occupied in the Retail Space (hereinafter called "Retail Rentable Floor Area") as of the Commencement Date or the first day of the calendar year in which such taxes are due or payable. The floor area of (i) a Major Tenant, (ii) any tenant in a free standing Premises who is obligated to pay real estate taxes specifically upon specific improvements or specific parcel of land, and (iii) Common Areas, as hereinafter defined, shall not be included in the Retail Rentable Floor Area, and any contributions to Real Estate Taxes received by Landlord from such tenants shall be deducted from Retail Space Real Estate Taxes prior to the calculation of Tenant's proportionate share. C. Payment by Tenant. Tenant's proportionate share of Retail Space Real Estate Taxes shall be paid in monthly installments commencing with the Commencement Date, in amounts initially estimated by Landlord, one (1) such installment being due on the first day of each full or partial month of each full or partial calendar year during the Lease Term. Such monthly installments shall increase or decrease upon notice from Landlord given after the actual or anticipated amounts of Real Estate Taxes due or payable in a particular calendar year are determined PROVIDED SUCH ADJUSTMENTS SHALL BE MADE NOT MORE THAN ONCE ANNUALLY. Following the close of each full or partial calendar year during the Lease Term, the actual amount of Retail Space Real Estate Taxes due or payable shall be computed by Landlord and any excess paid by Tenant during such calendar year over the actual amount Tenant is obligated to pay hereunder shall be credited to Tenant, and within thirty (30) days after written notice from Landlord any deficiency owed shall be paid in full by Tenant. Tenant acknowledges and stipulates that Landlord has made no agreement of any kind as to the total dollar amount of such real estate taxes or Tenant's dollar share thereof. LANDLORD DOES, HOWEVER, REPRESENT THAT IT IS CURRENTLY ESCROWING REAL ESTATE TAXES FOR CALENDAR YEAR 1997 AT A RATE OF $17.75 PER SQUARE FOOT OF STORE FLOOR AREA. THE FOREGOING SHALL NOT BE DEEMED, CONSTRUED OR INTERPRETED AS AN AGREEMENT OF ANY KIND THAT TENANT'S ACTUAL SHARE OF REAL ESTATE TAXES FOR CALENDAR YEAR 1997 WILL BE $17.75 PER SQUARE FOOT OF STORE FLOOR AREA. D. Other Taxes. Tenant's proportionate share of any governmental tax or charge (other than income tax) levied, assessed, or imposed on account of the payment by Tenant or receipt by Landlord, or based in whole or in part upon, the rents in this Lease reserved or upon the Center or the value thereof shall be paid by Tenant. E. Larger parcel. If the land under the Center is a part of a larger parcel of land for assessment purposes (the "Larger Parcel"), the taxes and assessments allocable to the land in the Center for the purpose of determining Real Estate Taxes under this Section shall be deemed a fractional portion of the taxes and assessments levied against the Larger Parcel, the numerator of which is the acreage in the Center and the denominator of which is the acreage in the Larger Parcel. Section 4.6. SPRINKLER SYSTEM. Landlord has installed and will maintain a sprinkler system in the Premises and Tenant shall pay to Landlord as additional rent twenty-five cents (25c) per square foot of Store Floor Area per Lease Year, prorated for Partial Lease Years, in equal monthly installments in advance on the first day of each full calendar month during the Lease Term. Section 4.7. ADDITIONAL RENT. All amounts required or provided to be paid by Tenant under this Lease other than Minimum Annual Rent and Percentage Rent shall be deemed additional rent and Minimum Annual Rent, Percentage Rent and additional rent shall in all events be deemed rent. Section 4.8. LANDLORD'S EXPENSES. TO THE EXTENT THAT LANDLORD HAS THE RIGHT UNDER THIS LEASE AND TO THE EXTENT THAT Landlord pays any monies or incurs any expense to correct a breach of this Lease by Tenant or to do anything in this Lease required to be done by Tenant, or incurs any expense (including, but not limited to, attorneys' fees and court costs), as a result of Tenant's failure to perform any of Tenant's obligations under this Lease, all REASONABLE amounts so paid or incurred shall, on notice to Tenant, be considered additional rent payable in full by Tenant with the first Minimum Monthly Rent installment thereafter becoming due and payable, and may be collected as by law provided in the case of rent. NOTHING HEREIN SHALL BE DEEMED TO AUTHORIZE LANDLORD TO TAKE ANY SUCH ACTIONS EXCEPT AS OTHERWISE SPECIFIED HEREIN. ARTICLE V PARKING AND COMMON AREAS AND FACILITIES Section 5.1. COMMON AREAS. All parking areas, access roads and facilities furnished, made available or maintained by landlord in or near the Center, including employee parking areas, truck ways, driveways, loading docks and areas, delivery areas, multi-story parking facilities, package pickup stations, elevators, escalators, pedestrian sidewalks, malls, including the Enclosed Mall (as indicated for identification purposes on Exhibit "B"), courts and ramps, landscaped areas, retaining walls, stairways, bus stops, first-aid and comfort stations, lighting facilities, COMMON AREA PLUMBING AND sanitary systems, utility lines, COMMON AREA HVAC SYSTEMS AND EQUIPMENT, water filtration and treatment facilities and other areas and improvements provided by Landlord for the general use in common of tenants and their customers and department stores in the Center (all herein called "Common Areas") shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right, from time to time, to establish, modify and enforce reasonable rules and regulations with respect to all Common Areas. Tenant agrees to comply with all rules and regulations set forth in Exhibit "D" attached hereto and all reasonable amendments thereto. ANY MODIFICATIONS TO THE RULES AND REGULATIONS THAT ARE ADOPTED BY LANDLORD SHALL BE NON-DISCRIMINATORY WITH RESPECT TO ALL TENANTS OF THE CENTER AND SHALL BECOME EFFECTIVE ONLY AFTER NOT LESS THAN THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO TENANT. IN THE EVENT OF ANY INCONSISTENCY BETWEEN ANY SUCH RULES AND REGULATIONS AND THE PROVISIONS OF THIS LEASE (INCLUDING ANY INCONSISTENCY BETWEEN RIGHTS GRANTED UNDER THIS LEASE AND RESTRICTIONS CREATED UNDER THE RULES AND REGULATIONS), THE TERMS OF THIS LEASE SHALL PREVAIL. Landlord shall have the right from time to time IN ITS REASONABLE DISCRETION to: change or modify and add to or subtract from the sizes, locations, shapes and arrangements of parking areas, entrances, exits, parking aisle alignments and 6 7 other Common Areas; restrict parking by Tenant's employees to designated areas, construct surface, sub-surface or elevated parking areas and facilities; establish and from time to time change the level or grade of parking surfaces; enforce parking charges (by meters or otherwise); add to or subtract from the buildings in the Center; and do and perform such other costs in and to said Common Areas as Landlord in its reasonable discretion deems advisable for the use thereof by tenants and their customers. Section 5.2. Use of Common Areas. Tenant and its business invitees, employees and customers shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has granted or may hereafter grant rights, to use the Common Areas subject to such reasonable regulations as Landlord may from time to time impose and the rights of Landlord set forth above. Tenant shall use its best efforts to ensure that all concessionaires, employees and agents of Tenant shall use the areas designated by Landlord for employee parking. After the first such violation of Landlord's employee parking regulations in a Lease Year, Tenant shall pay Landlord, upon demand, $10.00 for each day thereafter during such Lease Year on which a car of Tenant, a concessionaire, employee or agent of Tenant is parked outside any area designated by Landlord for employee parking. Tenant authorizes Landlord to cause any such car to be towed from the Center and Tenant shall reimburse Landlord for the cost thereof upon demand. Tenant shall abide by all rules and regulations adopted by Landlord in accordance with Section 5.1 and cause its concessionaires, officers, employees, agents, customers and invitees to abide thereby. Landlord may at any time close temporarily any Common Areas to make repairs or changes, prevent the acquisition of public rights therein, discourage noncustomer parking, or for other reasonable purposes. Tenant shall furnish Landlord license numbers and descriptions of cars used by Tenant and its concessionaires, officers and employees. Tenant shall not interfere with Landlord's or other tenants' rights to use any part of the Common Areas. ARTICLE VI COST AND MAINTENANCE OF COMMON AREAS Section 6.1. Expense of Operating and Maintaining the Common Facilities. Landlord will operate, manage, maintain and repair or cause to be operated, managed, maintained or repaired, the Common Areas of the Center to the extent the same is not done by any Major Tenant so as to maintain the Center in good condition and repair. "Landlord's Common Area Costs" shall mean all costs of operating and maintaining the Common Areas in a manner deemed by landlord appropriate for the best interests of tenants and other occupants in the Center. Included among the costs and expenses which constitute Landlord's Common Area Costs, but not limited thereto, shall be, at the option of Landlord, all costs and expenses of protecting, operating, managing the Center (including attorney's fees and other professional fees), repairing, repaving, lighting, cleaning, painting, striping, insuring (including but not limited to fire and extended coverage insurance on Common Areas, insurance protecting landlord against liability for personal injury, death and property damage and workers' compensation insurance), removing of snow, ice and debris, police protection, security and security patrol, fire protection, regulating traffic, inspecting, repairing and maintaining of machinery and equipment used in the operation of the Common Areas, including heating, ventilating and air conditioning machinery and equipment, depreciation of machinery and equipment used in the operation or maintenance of the Center, providing heating, ventilating and air conditioning for the interior Common Areas initially determined and thereafter adjusted in the manner described in Section 7.2 herein, cost and expense of inspecting, maintaining, repairing and replacing storm and sanitary drainage systems, sprinkler and other fire protection systems, electrical, gas, water, telephone and irrigation systems, cost and expense of maintaining, repairing and replacing the Enclosed Mall and the exterior of the buildings in the Center (except as otherwise specifically provided to the contrary in the following paragraph), including, but not limited to floors, roofs, skylights, escalators, elevators, walls, stairs and signs, cost and expense of installing, maintaining and repairing burglar or fire alarm systems on the Retail Space, if installed, cost and expense of installing, maintaining and repairing burglar or fire alarm systems on the Retail Space, if installed, cost and expense of landscaping and shrubbery, expenses of utilities, and administrative and overhead costs equal to [***] of all of the foregoing and all other of Landlord's Common Area Costs, exclusive of real estate taxes and insurance. Notwithstanding any other provision herein to the contrary, Tenant shall not be responsible for payment of any of the following as a Common Area Costs, whether or not otherwise included in the definition of "Landlord's Common Area Costs": 1. Interest, loan fees, ground lease rental and other carrying costs related to any mortgage or indebtedness secured by the Center. 2. Premiums or deductibles to the extent any other tenant in the Center causes Landlord's insurance premiums relating to the Premises to increase or obligates Landlord to purchase additional insurance, or any damage resulting from the negligent or willful acts or omissions or breach of any other tenant of the Center. 3. New buildings or other improvements constructed on or within the Center. 4. Expenses that under generally accepted accounting principles are treated as capital expenditures to the extent they improve the Common Areas to beyond their original condition or utility (other than those capital expenditures reasonably required for maintenance, repair and replacement of existing capital items which costs Landlord shall amortize over a period of years as reasonably determined by Landlord and which amortized amount may be included in Landlord's Common Area Costs). 5. Leasing fees, commissions or other brokerage commissions of any kind, or advertising or promotional expenditures (including costs incurred in leasing or procuring new tenants with allowances, concessions, or inducements provided by Landlord, such as the cost of leasehold improvements), attorney's fee, or other comparable expenses incurred in connection with attracting any prospective tenant to the Center or with respect to disputes or litigation with such tenants. *** Confidential treatment requested. 7 8 6. Costs incurred due to a violation by Landlord or any tenant (other than Tenant) of the Center of the terms of this Lease or any other lease or condition, covenant or restriction affecting the Center, or any laws, rules, regulations or ordinances applicable to the Center. 7. Costs of repairs, replacements or other work occasioned by fire, windstorm, earthquake or other casualty, or the exercise by governmental authorities of the right of eminent domain. 8. Costs and expenses reimbursed by Tenant or any other third party, except for reimbursements of Common Area Costs. 9. The cost of repair necessitated by the negligence, willful misconduct or breach of any written agreement by Landlord or Landlord's agents or any other tenant of the Center. 10. Cost of repairs, replacements, alterations or improvements necessary to make the Center comply with applicable past, present of future laws, except to the extent compliance with such laws is required as the result of Tenant's particular use of the Premises or alterations or additions made or requested to be made by Tenant. 11. The cost incurred in performing work or furnishing services for individual tenants in the Center to the extent such work or services are in excess of the work and services required to be provided to Tenant under the Lease, and costs incurred for the benefit of particular tenants and not generally beneficial to the tenants of the Center. 12. Expenses for repair or replacement paid by proceeds of insurance, condemnation awards, warranties or guarantees, or reimbursed by tenants of the Center. 13. Costs and expenses incurred in connection with the investigation, remediation, or clean up of Hazardous Materials existing on or under the Center prior to the Commencement Date, or Hazardous Materials thereafter introduced thereon or thereunder, except to the extent such investigation, remediation or clean up is required as the result of the acts of Tenant and Tenant's agents, contractors or employees. 14. Costs of salaries, wages and other employment benefits, except to the extent such costs are fairly allocable to the Center and not to other shopping centers or projects. 15. Amounts that are payable or reimbursable by Landlord to Tenant with respect to any tenant improvement allowance or contribution provided by Landlord to Tenant in connection with Tenant's construction of leasehold improvements at the Premises. 16. Costs and expenses (including maintenance, repair, replacement, insurance or taxes) that are for the sole benefit of the Hotel Space or for other buildings not comprising part of the Retail Space. Section 6.2. Tenant to Bear Pro Rata Share of Expenses. Tenant will pay Landlord, in addition to all other amounts in this Lease provided, such portion of Landlord's Common Area Costs for each calendar year during the Lease Term which bears the same ratio to the total of Landlord's Common Area Costs as the Store Floor Area at the Commencement of such calendar year bears to all Rentable Floor Area rented or occupied by tenants in the Retail Space. The floor area of (i) a Major Tenant, (ii) any tenant in a freestanding Premises who is obligated to maintain specific areas or a specific parcel of land, and (iii) Common Areas shall not be included in Rentable Floor Area, and subject to Section 6.1 above any contributions to Landlord's Common Area Costs received by Landlord from such tenants shall be deducted from Landlord's Common Area Costs received by Landlord from such tenants shall be deducted from Landlord's Common Area Costs prior to the calculation of Tenant's proportionate share. Tenant's share of Landlord's Common Area Costs shall be paid in monthly installments in amounts estimated from time to time by Landlord (provided any such adjustment shall not be made more than once annually), one (1) such installment being due on the first day of each month of each calendar year. After the end of each calendar year the total Landlord's Common Area Costs for such year (and at the end of the Lease Term, the total Landlord's Common Area Costs for the period since the end of the immediately next preceding calendar year) shall be determined by Landlord and Tenant's share paid for such period shall immediately, upon such determination, be adjusted by credit of any excess or payment of any deficiency. Tenant may audit Landlord's Common Area Costs for such year in order to verify the accuracy thereof, provided that: (a) Tenant specifically designates the year Tenant intends to audit, which shall be a year during t he Lease Term that is also within three (3) years of the date of the audit; (b) such audit is conducted only during regular business hours at the office where Landlord maintains expense records of Landlord's Common Area Costs; (c) Tenant gives Landlord fifteen (15) days prior written notice of Tenant's request to audit and Tenant shall deliver to Landlord a copy of the results of such audit within ten (10) days of its receipt by Tenant; (d) such audit must be conducted by Tenant's employees or an independent nationally recognized accounting firm that is not being compensated on a contingency fee basis; (e) no audit shall be conducted if Tenant has previously conducted an audit for the same time period; (f) such audit shall be at Tenant's sole cost and expense; and (g) any financial or other information provided by Landlord or obtained by Tenant as a result of such audit shall only be pursuant to duly executed confidentiality agreements between Landlord, Tenant and Tenant's agents and employees to whom disclosure is made. Tenant acknowledges that the Landlord considers its financial and other operating information to be confidential and will not disclose such information to any third party without Landlord's prior written consent except to prospective buyers or lenders, Tenant's accountants and attorneys, or in the case of compliance with a subpoena or other legal process provided Tenant gives Landlord at least ten (10) days prior written notice of Tenant's receipt of such subpoena or legal process and Tenant's intent to disclose pursuant thereto. If the audit discloses that Tenant 8 9 has underpaid, Tenant shall promptly reimburse Landlord any amount owed. If the audit accurately discloses that Tenant has overpaid, Landlord shall promptly refund such excess. ARTICLE VII UTILITIES AND SERVICES Section 7.1. Utilities Tenant shall not install any equipment which can exceed the capacity of any utility facilities serving the Center and if any equipment installed by Tenant requires additional utility facilities, the same shall be installed at Tenant's expense in compliance with all code requirements and plans and specifications which must be approved in writing by Landlord (such approval not to be unreasonably withheld). Tenant shall be solely responsible for and promptly pay all charges for use or consumption of sewer, gas, electricity, water and all other utility services delivered to the Premises. Landlord may make electrical service available to the Premises as provided in Exhibit "C," and so long as Landlord continues to provide such electrical service Tenant agrees to purchase the same from Landlord and pay Landlord for the electrical service (based upon Landlord's determination from time to time of Tenant's consumption of electricity), as additional rent, on the first day of each month in advance (and prorated for partial months), commencing on the Commencement Date at the same cost as would be charged to Tenant from time to time by the utility company which otherwise would furnish such services to the Premises if it provided such services and metered the same directly to the Premises, but in no event at a cost which is less than the cost Landlord must pay in providing such electrical service. Landlord may supply water and other utilities to the Premises, and so long as Landlord continues to provide water or such other utilities Tenant shall pay Landlord for same at the same cost as would be charged to Tenant by the utility company which otherwise would furnish such service to the Premises if it provided such service and metered the same directly to the Premises, but in no event at a cost which is less than the cost Landlord must pay in providing such service, and in no event less than the minimum monthly charge which would have been charged by the utility company in providing such service. Landlord may make additional services, including but not limited to, pest control, trash compactor/trash removal, cleaning, and security, available to the Premises and, in such event, Tenant shall utilize such services, at Tenant's expense. Tenant shall operate its heating and air conditioning so that the temperature in the Premises will be approximately the same as that in the adjoining mall, and set Tenant's thermostat at the same temperature as that thermostat in the mall which is nearest the Premises. Tenant shall be responsible for the installation, maintenance, repair and replacement of air conditioning, heating and ventilation systems within and specifically for the Premises, including all components such as air handling units, air distribution systems, motors, controls, grilles, thermostats, filters and other components. Tenant shall operate ventilation so that the relative air pressure in the Premises will be the same as or less than that in the adjoining mall as reasonably required by the Landlord. In the event Tenant requires the use of telecommunication services, including, but not limited to, credit card verification and/or other data transmission, then Tenant shall contract for such services with one of the service providers available at the Center. In addition to any rental abatement to which Tenant otherwise is entitled, if Tenant is prevented from using the Premises or any portion thereof for five (5) consecutive days or ten (10) days in any twelve (12) consecutive month period (the "Eligibility Period") as a result of Landlord's failure to provide utilities or services to the Premises, then Tenant's rent shall be abated after the expiration of the eligibility period for such time that Tenant continues to be so prevented from using the Premises or portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using bears to the total rentable area of the Premises. However, in the event that Tenant is prevented from so conducting its business in any portion of the Premises for a period in excess of the Eligibility Period, and the remaining portion of the premises is not sufficient to allow Tenant to effectively conduct its business therein, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date such business operations commence. Notwithstanding anything herein in this paragraph which may be to the contrary, Tenant shall not be permitted to abate rent as hereinabove otherwise provided if the failure to provide any such utilities or services to the Premises is as a result of Tenant's failure to pay for the same or due to the negligence or willful misconduct of Tenant, its employees, agents or contractors. Section 7.2. Air Conditioning of Premises. Landlord will provide and maintain a central plant and a system of chilled media to the Premises installed at a point determined by Landlord for the effective cooling of the Premises. Tenant agrees to purchase the chilled media services from Landlord and pay Landlord annually therefor as additional rent, in equal monthly installments, in advance on the first day of each month the current Adjusted HVAC Plant Charge (which shall consist of Minimum Charge of $2.00 per square foot of Store Floor Area per year, increased in the manner hereinafter provided). 9 10 The Adjusted HVAC Plant Charge shall be recalculated from time to time on dates selected by the Landlord (but no more often than annually, each time the Landlord's utility costs are changed and/or each time field verification indicates that Tenant's use of the system has changed.) The current Adjusted HVAC Plant Charge shall be calculated by multiplying the Minimum Charge by a series of adjusting multipliers as follows: Adjusted HVAC Plant Charge = Minimum Charge x M1 x M2 x M3 x M4 (a) M1 = Capacity Multiplier The capacity multiplier shall be the greater of 1 or the multiplier arrived at by applying the following formula: M1 = 1 + [0.6[BTUH/33 - 1] The factor "BTUH" shall mean BTUH/per Sq. Ft. of Store Floor Area and shall be the calculated peak design total heat gain as determined in accordance with ASHRAE procedures. Tenant's outdoor air or exhaust that is derived via the Landlord's system, and total heat gain from the roof, lights, fan motors and other items, shall be included in calculating the BTUH/per Sq. Ft. factor of this section for purposes of determining the capacity multiplier. The peak total heat gain shall be calculated using the same sun time hour as is used by Landlord in determining the peak building heat gain. (Typically 1600 hours). (b) M2 = Hours Multiplier The hours multiplier shall be the greater of 1 or the multiplier arrived at by applying the following formula: M2 = 1 = [Extra Hours/Regular Hours] The term "Extra Hours" shall mean Tenant's hours use of system during times other than the originally established regular weekly hours of the Center. The term "Regular Hours" shall mean originally established regular weekly hours of the Center. (c) M3 = Utility Cost Multiplier The utility cost multiplier shall be the multiplier arrived at by applying the following formula: M3 = 1 + [0.5[Current Cost/Original Cost - 1]] The term "Current Cost" shall mean "Utility Cost" based on rates in effect on the selected date. The term "Original Cost" shall mean Utility Cost based on rates in effect on March 31, 1994. The term "Utility Cost" shall mean the cost to Landlord of the utilities necessary for furnishing chilled media to the Premises, including all charges made to Landlord by the public utilities furnishing the same and based on the original consumption and demands estimated for the Central HVAC System and building. (d) M4 = Maintenance Cost Multiplier The Maintenance Cost Multiplier shall be the greater of 1 or the multiplier arrived at by applying the following formula: M4 = 1 + [0.1 [Current CPI/Original CPI - 1]] The term "Current CPI" shall mean the "Consumer Price Index" on the selected date. The term "Original CPI" shall mean the "Consumer Price Index" for February 1, 1996. The term "Consumer Price index" as used in this Section 7.2 and in Section 14.1 herein shall mean the Consumer Price Index All Items for All Urban Consumers (CPI-U, 1982-4=100)" published by the Bureau of Labor Statistics of the U.S. Department of Labor. If the publication of the Consumer Price Index of the U.S. Bureau of Labor Statistics is discontinued, comparable statistics on the purchasing power of the consumer dollar published by a responsible financial periodical selected by Landlord shall be used for making such computations. Section 7.3. Enforcement and Termination. In the event of any material default by Tenant (as defined in Section 18.1 below), Landlord reserves the right, in addition to all other rights and remedies available to Landlord, to cut off and discontinue, without notice or liability to Tenant, any utilities or services provided in accordance with the provisions of this Article VII. Except as otherwise provided herein to the contrary, Landlord shall not be liable to Tenant in damages or otherwise if any utilities or services, whether or not furnished by Landlord hereunder, are interrupted or terminated because of repairs, installation or improvements, or any cause beyond Landlord's reasonable control, nor shall any such termination relieve Tenant of any of its obligations under this Lease. Tenant shall operate the Premises in such a way as shall not unreasonably waste fuel, energy, and natural resources. If Landlord provides any utilities or services under Section 7.1 or 7.2 of this Lease to tenants, Landlord may, upon written direction, require Tenant to obtain such services from a third party provider without liability for the same. No discontinuance of any utilities or services shall constitute a constructive eviction. 10 11 ARTICLE VIII CONDUCT OF BUSINESS BY TENANT Section 8.1. Use of Premises. The Premises shall be occupied and used by Tenant for the purpose of conducting therein the business of an auto racing entertainment center and other related retail uses. The entertainment facility may include a combination of driving simulators, but shall not include coin operated machines as typically found in conventional video arcade game room type operations. Tenant shall be permitted to use the Premises for the display and retail sale of auto racing and other auto racing themed or related entertainment merchandise. Tenant shall be permitted to sell some concessions from the Premises as mutually agreed to from time to time by Landlord and Tenant. Tenant shall not use or permit or suffer the use of the Premises for any other business or purpose. Tenant is hereby specifically prohibited from selling, offering for sale, giving away or displaying Mall of America merchandise or any other merchandise or items that bear the Mall of America name, trademark, service mark or logo thereon without Landlord's prior written consent thereto which consent may be given or withheld by Landlord in Landlord's sole and absolute discretion and Landlord's failure to give such consent shall not be deemed unreasonable. Section 8.2. Prompt Occupancy and Use. Tenant will occupy the Premises upon the Commencement Date and thereafter continuously operate and conduct in one hundred percent (100%) of the Premises during each hour of the entire Lease Term when Tenant is required under this Lease to be open for business the business permitted under Section 8.1 hereof, with a full staff and full stock of merchandise, using only such minor portions of the Premises for storage and office purposes as are reasonably required. The parties agree that: Landlord has relied upon Tenant's occupancy and operation in accordance with the foregoing provisions; because of the difficulty or impossibility of determining Landlord's damages which would result from Tenant's violation of such provisions, including but not limited to damages from loss of Percentage Rent from Tenant and other tenants, and diminished saleability, mortgageability and economic value, Landlord shall be entitled to liquidated damages if it elects to pursue such remedy; therefore for any day that Tenant does not fully comply with the provisions of this Section 8.2 the Minimum Annual Rent, prorated on a daily basis, shall be increased by ten percent (10%), such increased sum representing the damages which the parties agree Landlord will suffer by Tenant's noncompliance. In addition to all other remedies, Landlord shall have the right to obtain specific performance by Tenant upon Tenant's failure to comply with the provisions of this Section 8.2. Notwithstanding the foregoing, Tenant may temporarily cease operating its business in the Premises for reasonable periods in which: (i) Tenant is carrying on remodeling activities, provided Tenant gives Landlord's Center manager at least ten (10) days prior notice of the anticipated dates Tenant will be closed and provided such remodeling activities have Landlord's prior approval; (ii) Tenant is closed for the taking of inventory not to exceed three (3) non-consecutive days in any period of twelve (12) consecutive months provided Tenant has given Landlord's Center manager notification of the anticipated date Tenant intends to close for inventory purposes at least five (5) days in advance; (iii) Tenant is unable or reasonably unwilling to operate as a result of casualty or natural disaster, condemnation, interruption of utilities or services, extremely inclement weather, civil unrest, operation of the business would expose Tenant's employees, agents or invitees to an unreasonable risk of physical injury or property damage, or other force majeure events of the type of described in Section 24.5 hereof. Section 8.3. Conduct of Business. Such business shall be conducted (a) under the name NASCAR(R) SILICON MOTOR SPEEDWAY or SILICON MOTOR SPEEDWAY unless another name is previously approved in writing by the Landlord which approval shall not be unreasonably withheld provided: (i) Tenant gives Landlord at least thirty (30) days prior written notice of such new trade name; (ii) Tenant provides Landlord with sign plans for Landlord's review and approval prior to the fabrication and installation thereof; and (iii) such new trends name is not the same as or confusingly similar to the trade name of any other tenant or occupant in the Center; and (b) in such manner as shall promote the transaction of a maximum volume of business in and at the Premises. Tenant's store shall be and remain open from 10:00 A.M. until 9:00 P.M. each day of the week except Sunday, on Sunday from 12:00 P.M. until 6:00 P.M. Tenant shall have the right (but not be obligated to) operate during such other hours as any other tenant in the Retail Store remains open for business. Section 8.4. Operation by Tenant. Tenant covenants and agrees that it will: not place or maintain any merchandise, vending machines or other articles in any vestibule or entry of the Premises or outside the Premises; store garbage, trash, rubbish and other refuse in rat-proof and insect-proof containers inside the Premises, and remove the same frequently and regularly and, if directed by Landlord, by such means and methods and at such times and intervals as are designated by Landlord, all at Tenant's expense; not permit any sound system audible, or reasonably objectionable advertising medium visible, outside the Premises; keep all mechanical equipment free of vibration and noise that has an adverse effect on the operation of the Center or interferes with any other tenant's quiet enjoyment of its premises, and in good working order and condition; not commit or permit waste or a nuisance upon the Premises; not permit or cause odors to emanate or be dispelled from the Premises; not solicit business in the Common Areas nor distribute advertising matter to, in or upon any Common Areas; not permit the loading or unloading or the parking or standing of delivery vehicles outside any area designated therefor, nor permit any use of vehicles which will interfere with the use of any Common Areas; comply with all laws, recommendations, ordinances, rules and regulations of governmental, public, private and other authorities and agencies, including those with authority over insurance rates, with respect to Tenant's particular use or occupancy of the Premises, and including but not limited to the Williams-Steiger Occupational Safety and Health Act but excluding any structural portions of the Premises maintained by Landlord except as arises out of Tenant's particular use of the Premises and except for Tenant's compliance with the Americans With Disabilities Act ("ADA") within the Premises; light the show windows of the Premises and all signs each night of the year for not less than one (1) hour after the Premises is permitted to be closed; not permit any noxious, toxic or corrosive fuel or gas, dust, dirt or fly ash on the Premises; not place a load on any floor in the Center which exceeds the floor load per square foot which such floor was designed to carry. Landlord acknowledges that Tenant will place and operate within the Premises racing automobile 11 12 simulators that, among other things will create sound emissions and visual effects incidental to Tenant's activities from the Premises. Landlord hereby approves of the installation of the simulators and related equipment and systems, as shown on Tenant's Plans as approved by Landlord. The foregoing shall not, however, relieve Tenant of compliance with applicable code requirements or other provisions of this Section 8.4. Section 8.5. Storage. Tenant shall store in the Premises only merchandise which Tenant intends to sell at, in or from the Premises, within a reasonable time after receipt thereof. Section 8.6. Painting, Decorating, Displays, Alterations. Tenant will not paint (other than touch-up paint from time to time), decorate or change the architectural treatment of any part of the exterior of the Premises nor any part of the interior of the Premises visible from the exterior nor make any structural alterations, additions or changes in the Premises without Landlord's written approval thereto, which approval shall not be unreasonably withheld or delayed, and will promptly remove any paint, decoration, alteration, addition or changes applied or installed without Landlord's approval and restore the Premises to an acceptable condition or take such other action with respect thereto as Landlord directs. Notwithstanding the foregoing, Tenant shall be permitted to make interior, non-storefront, non-structural, non-mechanical and non-utility alterations and improvements to the Premises without Landlord's prior consent thereto so long as the cost of such work does not exceed Ten Thousand and no/100 Dollars ($10,000.00) in any period of twelve (12) consecutive months. Tenant will install and maintain at all times, subject to the other provisions of this Section 8.6, merchandise displays in any show windows on the Premises; the arrangement, style, color and general appearance thereof and of displays in the interior of the Premises which are visible from the exterior, including, but not limited to, window displays, advertising matter, signs, merchandise and store fixtures, shall be maintained in keeping with the character and standards of the Center. Section 8.7. Other Operations. If during the Lease Term Tenant directly operates or manages in any other store or business operated for a purpose of business in direct competition with all or part of the business permitted under Section 8.1 hereof within a radius of ten (10) miles of the Center, it will injure Landlord's ability and right to receive Percentage Rent (such ability and right being a major consideration for this Lease and the construction of the Center). Accordingly, if Tenant operates, manages or has such interest in any such store or business within such radius, 100% of all sales made from any such other store or business shall be included in the computation of Gross Sales for the purpose of determining Percentage Rent under this Lease as though said Gross Sales had actually been made at, in or from the Premises. Landlord shall have all rights of inspection of books and records with respect to such stores or businesses as it has with respect to the Premises; and Tenant shall furnish to Landlord such reports with respect to Gross Sales from such other store or business as it is herein required to furnish with respect to the Premises. Section 8.8. Emissions and Hazardous Materials. Tenant shall not, without the prior written consent of Landlord, cause or permit, any Hazardous Material (hereinafter defined) to be brought or remain upon, kept, used, discharged, leaked, or emitted in or about, or treated at the Premises or the Center. As used in this Lease, "Hazardous Material(s)" shall mean any hazardous, toxic or radioactive substance, material, matter or waste which is or becomes regulated by any federal, state or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement, and shall include asbestos, petroleum products and the terms "hazardous Substance: and Hazardous Waste" as defined in the Comprehensive Environmental Response. Compensation and Liability Act ("CERCLA"), as amended, 42 U.S.C. Section 9601 et seq., and the Resource Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et seq. To obtain Landlord's consent, Tenant shall prepare an "Environmental Audit" for Landlord's review. Such Environmental Audit shall list: (1) the name(s) of each Hazardous Material and a Material Safety Data Sheet (MSDS) as required by the Occupational Safety and Health Act (but only if an MSDS is required for the use or storage of such Hazardous Materials); (2) the volume proposed to be used, stored and/or treated at the Premises (monthly); (3) the purpose of such Hazardous Material; (4) the proposed on-premises storage location(s); (5) the name(s) of the proposed off-premises disposal entity; and (6) an emergency preparedness plan in the event of a release. Additionally, the Environmental Audit shall include copies of all required federal, state, and local permits (if required) concerning or related to the proposed use, storage, or treatment by Tenant, its employees, agents or contractors of any Hazardous Material(s) at the Premises. Tenant shall submit a new Environmental Audit whenever it proposes to use, store, or treat a new Hazardous Material at the Premises or when the volume of existing Hazardous Materials to be used, stored, or treated at the Premises expands by ten percent (10%) during any thirty (30) day period. If Landlord in its reasonable judgment finds the Environmental Audit acceptable, then Landlord shall deliver to Tenant Landlord's written consent. Notwithstanding such consent, Landlord may revoke its consent upon: (1) Tenant's failure to remain in full compliance with applicable environmental permits and/or any other requirements under any federal, state, or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement (including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), as amended, 42 U.S.C. Section 9601 et seq., and the Resource Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et seq.) related to environmental safety, human health, or employee safety; (2) the Tenant's use of Hazardous Materials poses a human health risk to other Tenants: or (3) the Tenant expands its use, storage, or treatment of any Hazardous Material(s) in a manner inconsistent with the safe operation of a shopping center. Should Landlord consent in writing to Tenant bringing, using storing or treating any Hazardous Material(s) in or upon the Premises or the Center, Tenant shall strictly obey and adhere to any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions of ("CERCLA"), as amended, 42 U.S.C. Section 9601 et seq., and the Resource Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et seq.) which in any way regulate, govern or impact Tenant's possession, use, storage, treatment or disposal of said Hazardous Material(s). In addition, Tenant represents and warrants to Landlord that (1) Tenant shall apply 12 13 for and remain in compliance with any and all federal, state or local permits in regard to Hazardous Materials used or stored by Tenant: (2) Tenant shall report to any and all applicable governmental authorities any release by Tenant, its employees, agents or contractors of reportable quantities of any Hazardous Material(s) as required by any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements; (3) Tenant, within five (5) days of receipt, shall send to Landlord a copy of any notice, order, inspection report, or other document issued by any governmental authority relevant to the Tenant's compliance status with environmental or health and safety laws; and, (4) Tenant shall remove from the Premises all Hazardous Materials brought, placed or installed on the Premises by Tenant, its employees, agents or contractors at the termination of this Lease. In addition to, and in no way limiting, Tenant's duties and obligations as set forth in Section 11.6 of this Lease, should Tenant breach any of its duties and obligations as set forth in this Section 8.8 of this Lease, or if the release of any Hazardous Material(s) brought, placed or installed on the Premises by Tenant, its employees, agents or contractors results in contamination of the Premises, the Center, any land other than the Center, the atmosphere, or any water or waterway (including groundwater), or if contamination of the Premises or of the Center by any Hazardous Material(s) otherwise occurs for which Tenant is otherwise legally liable to Landlord for damages resulting therefrom, Tenant shall indemnify, save harmless and, at Landlord's option and with attorneys approved in writing by Landlord, defend Landlord, and its contractors, agents, employees, partners, officers, directors and mortgagees, if any, from any and all claims, demands, damages, expenses, fees, costs, fines, penalties, suits, proceedings, actions, causes of action, and losses as a result of such contamination. This includes, without limitation, costs and expenses, incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence of Hazardous Material(s) on or about the Premises or the Center, or because of the presence of Hazardous Material(s) anywhere else which came or otherwise emanated from Tenant or the Premises. Without limiting the foregoing, if the presence of any Hazardous Material(s) on or about the Premises or the Center caused or permitted by Tenant results in any contamination of the Premises or the Center, Tenant shall, at its sole expense, promptly take all actions and expense as are necessary to return the Premises and/or the Center to the condition existing prior to the introduction of any such Hazardous Material(s) to the Premises or the Center; provided, however, the Landlord's approval of such actions shall first be obtained in writing. Notwithstanding any provision hereof to the contrary, Landlord hereby consents to Tenant's use of hydraulic oil in connection with the operation of the simulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled, stored and disposed of in accordance with applicable laws. Landlord hereby acknowledges that such materials are approved and satisfy the Environmental Audit requirements otherwise applicable to such materials. Section 8.9. Sales and Dignified Use. No public or private auction or any fire, "going out of business," bankruptcy or similar sales or auctions shall be conducted in or from the Premises and the Premises shall not be used except in a dignified and ethical manner consistent with the general high standards of merchandising in the Center and not in a disreputable or immoral manner or in violation of national, state or local laws. ARTICLE IX MAINTENANCE OF LEASED PREMISES Section 9.1. Maintenance by Landlord Landlord shall keep or cause to be kept the foundations, roof and structural portions of the walls of the Premises in good order, repair and condition except for damage thereto due to the acts or omissions of Tenant, its agents, employees or invitees. Landlord shall commence required repairs as soon as reasonably practicable after receiving written notice from Tenant thereof or upon Landlord's obtaining actual knowledge that repair is warranted. This Section 9.1 shall not apply in case of damage or destruction by fire or other casualty or condemnation or eminent domain, in which events the obligations of Landlord shall be controlled by Article XVI and XVII. Except as provided in this Section 9.1 Landlord shall not be obligated to make repairs, replacements or improvements of any kind upon the Premises, or to any equipment, merchandise, stock in trade, facilities or fixtures therein, all of which shall be Tenant's responsibility, but Tenant shall give Landlord prompt written notice of any accident, casualty, damage or other similar occurrence in or to the Premises or the Common Areas of which Tenant has knowledge. Section 9.3. Maintenance by Tenant. Tenant shall at all times keep the Premises (including all entrances and vestibules) and all partitions, window and window frames and mouldings, glass, store fronts, doors, door openers, fixtures, equipment and appurtenances thereof (including lighting, heating, electrical, plumbing, ventilating and air conditioning fixtures and systems and other mechanical equipment and appurtenances located within the Premises or exclusively servicing the Premises) and all parts of the Premises, and parts of Tenant's Work not on the Premises, not required herein to be maintained by Landlord, in good order, condition and repair and clean, orderly, sanitary and safe, damage by casualty and ordinary wear and tear excepted. Tenant shall be responsible for compliance with applicable laws relating to Tenant's particular use of the Premises and the completion of Tenant's Work, including the Williams-Steiger 13 14 Occupational and Safety Health Acts and the Americans With Disabilities Act ("ADA"); provided, however, that Landlord shall be responsible for completing, at Landlord's sole cost and expense, any structural changes to the Premises arising from any failure of the structural components of the Premises to comply with applicable laws unless such failure arises out of or is as a result of Tenant's particular use of the Premises or compliance with ADA requirements. If replacement of equipment, fixtures and appurtenances required to be maintained by Tenant is necessary, Tenant shall replace the same with new or completely reconditioned equipment, fixtures and appurtenances, and repair all damages done in or by such replacement. If Tenant fails to perform its obligations hereunder, and if such failure continues for thirty (30) days after written notice to Tenant, Landlord may, but shall not be obligated to, perform Tenant's obligations or perform work resulting from Tenant's acts, actions or omissions and add the cost of the same to the next installment of Minimum Monthly Rent due hereunder to be repaid in full. Section 9.3. Surrender of Premises At the expiration or earlier termination of the Lease Term, Tenant shall surrender the Premises in the same condition as they were required to be in on the Required Completion Date, reasonable wear and tear alterations and improvements approved by Landlord and damage by casualty excepted, and deliver all keys for, and all combinations on locks, safes and vaults in, the Premises to Landlord at Landlord's notice address as specified in Section 24.7 or, at Landlord's option, to the office of the Center's general manager. ARTICLE X SIGNS, AWNINGS, CANOPIES, FIXTURES, ALTERATIONS Section 10.1. Fixtures. All fixtures installed by Tenant shall be new or reconditioned and in good repair. Section 10.2. Removal and Restoration by Tenant. All alterations, changes and additions and all improvements, including leasehold improvements, made by Tenant, or made by Landlord on Tenant's behalf, whether part of Tenant's Work or not and whether or not paid for wholly or in part by Landlord, shall remain Tenant's property for the Lease Term. Any alterations, changes, additions and improvements shall immediately upon the termination of this Lease become Landlord's property, be considered part of the Premises, and not be removed at or prior to the end of the Lease Term without Landlord's written consent. If Tenant fails to remove any shelving, decorations, equipment, trade fixtures or personal property from the Premises prior to the end of the Lease Term, they shall become Landlord's property and Tenant shall repair or pay for the repair of any damage done to the Premises resulting from removing same but not for painting or redecorating the Premises. Upon expiration of the Lease Term or prior termination of this Lease, Tenant shall have the right to remove any simulators or fixtures, whether or not attached to the Premises, (but not permanently affixed leasehold improvements) provided Tenant repairs any damage resulting from such removal. Section 10.3. Tenant's Liens. A. Tenant shall not suffer any mechanics' or materialmen's lien to be filed against the Premises or the Center by reason of work, labor, services or materials performed or furnished to Tenant or anyone holding any part of the Premises under Tenant. If any such lien shall at any time be filed as aforesaid, Tenant may contest the same in good faith, but, notwithstanding such contest, Tenant shall, within 15 days after the filing thereof, cause such lien to be released of record by payment, bond, order of a court of competent jurisdiction, or otherwise in a manner satisfactory to Landlord and its mortgagee. In the event of Tenant's failure to release of record any such lien within the aforesaid period, Landlord, any affiliate of Landlord or any party who delivered a guaranty with respect to any financing of the Center or the Premises may remove said lien by paying the full amount thereof or by bonding or in any other manner Landlord, any affiliate of Landlord or any party who delivered a guaranty with respect to any financing of the Center or the Premises deems appropriate, without investigating the validity thereof, and irrespective of the fact that Tenant may contest the propriety or the amount thereof, and Tenant, upon demand, shall pay Landlord the amount so paid out by Landlord in connection with the discharge of said lien, together with interest thereon at the rate set forth in Section 4.2 herein and reasonable expenses incurred in connection therewith, including reasonable attorneys' fees, which amounts are due and payable in full to Landlord as additional rent on the first day of the next following month. Nothing contained in this Lease shall be construed as a consent on the part of Landlord to subject Landlord's estate in the Premises to any lien or liability under the lien laws of the State of Minnesota. Tenant's obligation to observe and perform any of the provisions of this Section 10.3 shall survive the expiration of the Lease Term or the earlier termination of this Lease. B. Tenant shall not create or suffer to be created a security interest or other lien against any permanently affixed leasehold improvements, additions or other construction made by Tenant in or to the Premises or against any equipment or fixtures installed by Tenant (other than Tenant's personal property, trade fixtures, equipment, furniture, inventory and simulators), and should any security interest be created in breach of the foregoing, Landlord, any affiliate of Landlord or any party who delivered a guaranty with respect to any financing of the Center or the Premises shall be entitled to discharge the same by exercising the rights and remedies afforded it under paragraph A of this Section. 14 15 Section 10.4. Signs, Awnings and Canopies Tenant will not place or permit on any exterior door or window or any wall of the Premises or otherwise, any sign, awning, canopy, advertising matter, decoration, lettering or other thing of any kind which does not comply with the Sign Criteria set forth in Exhibit "E" attached hereto. ARTICLE XI INSURANCE Section 11.1. By Landlord. Landlord shall carry public liability insurance on those portions of the Common Areas included in the Total Tract providing coverage of not less than [***] against liability for bodily injury including death and personal injury for any one (1) occurrence and [***] property damage insurance, or combined single limit insurance in the amount of [***]. Landlord shall also carry insurance for fire, extended coverage, vandalism, malicious mischief and other endorsements deemed advisable by Landlord, insuring all improvements on the Total Tract, including the Premises and all leasehold improvements thereon and appurtenances thereto (excluding Tenant's merchandise, trade fixtures, furnishings, equipment, personal property and excluding plate glass) for the full insurable value thereof, with such deductibles as Landlord deems advisable, such insurance coverage to include improvements provided by Tenant as set forth in Exhibit "C" and "C-2" as Tenant's Work (excluding wall covering, floor covering, carpeting and drapes) and Landlord's Work as defined in Exhibit "C"; Tenant agrees to pay Landlord, as additional rent, 25 cents per year for each square foot of Store Floor Area payable in equal installments on the first day of every calendar month during the Lease Term, as Tenant's share of the cost of the premiums for such insurance described above in this sentence. At the end of the first Partial Lease Year and each Lease Year thereafter, the amount thus to be paid by Tenant shall be adjusted upward or downward (but shall never be less than the above amount) in direct ratio to the increase or decrease in the cost of the premiums paid by Landlord for such insurance coverage. Section 11.2. By Tenant. Tenant agrees to carry public liability insurance on the Premises during the Lease Term, covering the Tenant and naming the Landlord, Simon DeBartolo Group, Inc. and M.S. Management Associates, Inc., as additional named insured, with terms and companies satisfactory to Landlord, for limits of not less than [***] for bodily injury, including death, and personal injury for any one (1) occurrence, [***] property damage insurance or a combined single limit of [***]. Tenant's insurance will include contractual liability coverage recognizing this Lease, products and completed operations liability and providing that Landlord and Tenant shall be given a minimum of thirty (30) days written notice by the insurance company prior to cancellation or termination of such insurance. Tenant also agrees to carry insurance against fire and such other risks as are from time to time required by Landlord, including, but not limited to, a standard "All Risk" policy of property insurance protecting against all risk of physical loss or damage, including without limitation, sprinkler leakage coverage and plate glass insurance covering all plate glass in the Premises (including store fronts), in amounts not less than the actual replacement cost, covering all of Tenant's merchandise, trade fixtures, furnishing, wall covering, floor covering, carpeting, drapes, equipment and all items of personal property of Tenant located on or within the Premises. Tenant shall provide Landlord with certificates or, at Landlord's request, copies of the policies, evidencing that such insurance is in full force and effect and stating the terms thereof. The minimum limits of the comprehensive general liability policy of insurance shall in no way limit or diminish Tenant's liability under Section 11.6 hereof and shall be subject to increase at any time, and from time to time. Within ten (10) days after demand therefor by Landlord, Tenant shall furnish Landlord with evidence that it has complied with such demand. Section 11.3. Mutual Waiver of Subrogation Rights. Landlord and Tenant and all parties claiming under them mutually release and discharge each other from all claims and liabilities arising from or caused by any casualty or hazard covered or required hereunder to be covered in whole or in part by insurance on the Premises or in connection with property on or activities conducted on the Premises, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof and evidence such waiver by endorsement to the required insurance policies, provided that such release shall not operate in any case where the effect is to invalidate or increase the cost of such insurance coverage (provided, that in the case of increased cost, the other party shall have the right, within thirty (30) days following written notice, to pay such increased cost, thereby keeping such release and waiver in full force and effect). Section 11.4. Waiver. Except to the extent resulting from the Landlord's breach of this Lease or the negligence or misconduct of Landlord or its agents or employees, Landlord, its agents and employees, shall not be liable for, and Tenant waives all claims for, damage, including but not limited to consequential damages, to person, property or otherwise, sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon any part of the Center including, but not limited to, claims for damage resulting from: (a) any equipment or appurtenances becoming out of repair; (b) Landlord's failure to keep any part of the Center in repair unless Landlord shall have had prior actual knowledge of the need for such repair and subsequently failed to make such repair within a reasonable period of time thereafter; (c) injury done or caused by wind, water, or other natural element; (d) any defect in or failure of plumbing, heating or air conditioning equipment, electric wiring or installation thereof, gas, water, and steam pipes, stairs, porches, railings or walks; (e) broken glass; (f) the backing up of any sewer pipe or downspout; (g) the bursting, leaking or running of any tank, tub, washstand, water closet, waste pipe, drain or any other pipe or tank in, upon or about the Premises; (h) the escape of steam or hot water; (i) water, snow or ice upon the Premises; (j) the falling of any fixture, plaster or stucco; (k) damage to or loss by theft or otherwise of property of Tenant or others; (l) acts or omissions of persons in the Premises, other tenants in the Center, occupants of nearby properties, or any other persons; and (m) any act or omission of owners of adjacent or contiguous property. *** Confidential treatment requested. 15 16 All property of Tenant kept in the Premises shall be so kept at Tenant's risk only and Tenant shall save Landlord harmless from claims arising out of damage to the same, including subrogation claims by Tenant's insurance carrier. Section 11.5. Insurance - Tenant's Operation. Tenant will not do or knowingly suffer to be done anything which will contravene Landlord's insurance policies or prevent Landlord from procuring such policies, amounts and companies selected by Landlord. If anything done, omitted to be done or suffered to be done by Tenant in, upon or about the Premises shall cause the rates of any insurance effected or carried by Landlord on the Premises or other property to be increased beyond the regular rate from time to time applicable to the Premises for use for the purpose permitted under this Lease, or such other property for the use or uses made thereof, Tenant will pay the amount of such increase promptly upon Landlord's demand and Landlord shall have the right to correct any such condition at Tenant's expense. In the event that this Lease so permits and Tenant engages in the preparation of food or packaged foods or engages in the use, sale or storage of inflammable or combustible material, Tenant shall install chemical extinguishing devices (such as ansul) approved by Underwriters Laboratories and Factory Mutual and the installation thereof must be approved by the appropriate local authority. Tenant shall keep such devices under service as required by such organizations. If gas is used in the Premises, Tenant shall install gas cut-off devices (manual and automatic). Section 11.6. Indemnification. Tenant shall save harmless, indemnify, and at Landlord's option, defend Landlord, its agents and employees, and mortgagee, if any, from and against any and all liability, liens, claims, demands, damages, expenses, fees (including attorneys' fees), costs, fines, penalties, suits, proceedings, actions and causes of action of any and every kind and nature arising or growing out of or in any way connected with Tenant's use of the Premises or Tenant's operations, conduct or activities in the Center. Landlord shall indemnify, defend, protect and hold harmless Tenant and its agents and employees from any loss, damage, expense, suit, proceeding, penalty, liability or claim arising from the breach of this Lease by Landlord or the negligence or misconduct of Landlord or its agents or employees. ARTICLE XII OFFSET STATEMENT, ATTORNMENT, SUBORDINATION Section 12.1. Offset Statement. Within ten (10) days after receipt of written request by either party, the other party shall deliver, executed in recordable form a declaration to any person designated by Landlord (a) ratifying this Lease; (b) stating the commencement and termination dates; and (c) certifying (i) that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended (except by such writings as shall be stated), (ii) that all conditions under this Lease to be performed by the other party have been satisfied (stating exceptions, if any), (iii) that no defenses or offsets against the enforcement of this Lease by the other party (or stating those claimed): (iv) as to advance rent, if any, paid by Tenant, (v) the date to which rent has been paid, (vi) as to the amount of security deposited with Landlord, and such other information as the requesting party reasonably requires. Persons receiving such statements shall be entitled to rely upon them. Section 12.2. Attornment. Tenant shall, in the event of a sale or assignment of Landlord's interest in the Premises or the building in which the Premises is located or this Lease or the Total Tract, or if the Premises or such building comes into the hands of a mortgagee, ground lessor or any other person whether because of a mortgage foreclosure, exercise of a power of sale under a mortgage, termination of the ground lease, or otherwise, attorn to the purchaser or such mortgagee or other person and recognize the same as Landlord hereunder, provided such purchaser, mortgagee or other person recognizes Tenant's possession of the Premises and rights under this Lease. Tenant shall execute, at Landlord's request, any reasonable attornment agreement required by any mortgagee, ground lessor or other such person to be executed, containing such provisions as such mortgagee, ground lessor or other person requires, provided that such mortgagee, purchaser or other person, if requested by Tenant, executes a non-disturbance agreement in favor of Tenant. Section 12.3. Subordination. A. Mortgage. This Lease shall be secondary, junior and inferior at all times to the lien of any mortgage and to the lien of any deed of trust or other method of financing or refinancing (hereinafter collectively referred to as "mortgage") now or hereafter existing against all or a part of the Total Tract, and to all renewals, modifications, replacements, consolidations and extensions thereof, and Tenant shall execute and deliver all reasonable documents requested by any mortgagee or security holder to effect such subordination, provided the mortgagee or security holder agrees in writing that if Landlord defaults under the mortgage, said mortgagee or security holder shall not disturb Tenant's possession of the Premises and rights under this Lease while Tenant is not in default hereunder. Landlord represents that as of the date of this lease, there is no mortgagee with an interest superior to Tenant's interest in the Premises. B. Construction, Operation and Reciprocal Easement Agreements. This Lease is subject and subordinate to one (1) or more construction, operation, reciprocal easement or similar agreements (hereinafter referred to as "Operating Agreements") entered into or hereafter to be entered into between Landlord and other owners or lessees of real estate (including but not limited to owners and operators of department stores) within or near the Center (which Operating Agreements have been or will be recorded in the official records of the County wherein the Center is located) and to any and all easements and easement agreements which may be or have been entered into with or granted to any persons heretofore or 16 17 hereafter, whether such persons are located within or upon the Center or not ?? Tenant shall execute such instruments as Landlord requests to evidence such subordination. Section 12.4. Failure to Execute Instruments. Tenant's failure to execute instruments or certificates provided for in this Article XII within fifteen (15) days after Tenant's receipt from Landlord of a written request shall be a default under this Lease. ARTICLE XIII ASSIGNMENT, SUBLETTING AND CONCESSIONS Section 13.1. Consent Required. Tenant shall not sell, assign, mortgage, pledge or in any manner transfer this Lease or any interest therein, nor sublet all or any part of the Premises, nor license concessions nor lease departments therein, without Landlord's prior written consent in each instance, which shall not be unreasonably withheld or delayed provided Tenant and its proposed assignee, sublessee or other transferee comply with and otherwise satisfy the terms and conditions of subparagraphs #1 through #6 below. Consent by Landlord to any assignment or subletting shall not waive the necessity for consent to any subsequent assignment or subletting. This prohibition shall include a prohibition against any subletting or assignment by operation of law other than as provided in section 13.3 below. If this Lease is assigned or the Premises or any part sublet or occupied by anybody other than Tenant, Landlord may collect rent from the assignee, subtenant or occupant and apply the same to the rent herein reserved, but no such assignment, subletting, occupancy or collection of rent shall be deemed a waiver of any restrictive covenant contained in this Section 13.1 or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the performance by Tenant of any covenants on the part of Tenant herein contained. Any assignment (a) as to which Landlord has consented; or (b) which is required by reason of a final nonappealable order of a court of competent jurisdiction; or (c) which is made by reason of and in accordance with the provisions of any law or statute, including, without limitation, the laws governing bankruptcy, insolvency or receivership shall be subject to all terms and conditions of this Lease, and shall not be effective or deemed valid unless, at the time of such assignment: 1. Each assignee or sublessee shall agree, in a written agreement satisfactory to Landlord, to assume and abide by all of the terms and provisions of this Lease, including those which govern the permitted uses of the Premises described in Article VIII herein; and 2. Each assignee or sublessee has submitted a current financial statement, audited by a certified public accountant, showing a net worth of not less than Tenant's net worth existing as of the Commencement Date or the date immediately prior to the date of such transfer, whichever is greater; and 3. Each assignee or sublessee has submitted, in writing, evidence satisfactory to Landlord of substantial retailing experience in shopping centers of comparable size to the Center and in the sale of merchandise and services permitted under Article VIII of this Lease; and 4. 5. The use of the Premises by each assignee or sublessee shall not violate, or create any potential violation of applicable laws, codes or ordinances, nor violate any other agreements affecting the Premises, Landlord or other tenants in the Center. 6. Tenant shall pay Landlord an Assignment Fee as reimbursement for administrative and legal expenses incurred by Landlord in connection with any assignment or subletting. The Assignment Fee initially will be One Thousand and 00/100 Dollars ($1,000.00) and shall increase by One Hundred and 00/100 Dollars ($100.00) at the end of each full Lease Year of the Lease Term. In the event of any assignment or subletting as provided above, there shall be paid to Landlord, in addition to the Minimum Annual Rent and other charges due Landlord pursuant to this Lease, such additional consideration as shall be attributable to the right of use and occupancy of the Premises, whenever the same is receivable by Tenant, together with, as additional rent, the excess, if any, of the rent and other charges payable by the assignee or sublessee over the Minimum Annual Rent and other charges payable under the Lease to Landlord by Tenant pursuant to this Lease, after first deducting the reasonable and documented out-of-pocket costs and expenses actually incurred by Tenant to procure such assignment or subletting including, without limitation, legal fees and costs, brokerage commissions, and inducements and concessions to the subtenant or assignee related to such subletting or assignment. Such additional rent shall be paid to Landlord concurrently with the payments of Minimum Annual Rent required under this Lease, and Tenant shall remain primarily liable for such payments. Notwithstanding any assignment or subletting, Tenant shall remain fully liable on this Lease and for the performance of all terms, covenants and provisions of this Lease. Anything contained in the foregoing provisions of this Section to the contrary notwithstanding, neither Tenant nor any other person having an interest in the possession, use, occupancy or utilization of the Premises shall enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the Premises which provides for 17 18 rental or other payment for such use, occupancy or utilization based, in whole or part, on the net income or profits derived by any person from the Premises leased, used, occupied, or utilized (other than an amount based on a fixed percentage or percentages of receipts or sales), and any such purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the Premises. Section 13.2. Change in Ownership. INTENTIONALLY DELETED. Section 13.3. Permitted Transfers. Anything in this Lease to the contrary notwithstanding, Tenant shall have the right to assign this Lease or sublet the Premises without Landlord's consent to: (i) any parent, affiliate or operating subsidiary of Tenant; or (ii) to a corporation with which Tenant may merge, consolidate or sell substantially all of its assets. Tenant agrees that it shall notify Landlord in advance of its intention to transfer this Lease pursuant to this Section 13.3. Further, the transferee shall remain subject to all of the terms, covenants, conditions and provisions of this Lease on Tenant's part to be performed hereunder including, but not limited to, the permitted use of the Premises. Notwithstanding any assignment or subletting made pursuant to this Section 13.3, Tenant shall remain fully liable on this Lease and for the performance of all of the terms, covenants, conditions and provisions of this Lease on Tenant's part to be performed hereunder. ARTICLE XIV MARKETING FUND AND ADVERTISING Section 14.1. Provisions Relating to Marketing Fund. Landlord may, at its option, create and maintain a marketing fund (hereinafter referred to as the "Fund"), the primary purpose of which is to provide sums necessary for professional marketing services which benefit the tenants in the Center. In the event Landlord does create and maintain the Fund, Tenant agrees to contribute to such Fund, beginning upon the later to occur of (a) the Commencement Date, or (b) the date the Fund is created, [***] per square foot of Store Floor Area, during each calendar year of the Lease Term (hereinafter referred to as "Fixed Contribution") payable in equal monthly installments , in advance, on the first day of each and every month (pro rated for partial months). Landlord shall contribute an amount equal to [***] of the monies collected from all tenants in the Center during each calendar year, which sum may be paid in whole or in part by Landlord, at its option, by providing the services of a Marketing Director or other person or persons under Landlord's exclusive control to help organize and implement marketing programs using assets from the Fund. Any overpayment or underpayment of such amount by Landlord shall be adjusted annually. The Fixed Contribution shall be adjusted annually commencing with the creation of the Fund based upon the increase or decrease of the Consumer Price Index (as defined in Section 7.2 above) during the preceding twelve (12) month period but shall never be less than the above-stated amount. In addition to its other obligations contained herein, Tenant agrees that it shall participate and cooperate in all special sales and promotions sponsored by the Fund. The failure of any other tenant or any department store to contribute to the Fund shall not affect Tenant's obligations hereunder. Section 14.2. Advertising. Tenant shall furnish to Landlord an annual statement at the end of each Lease Year showing the amounts spent by Tenant on white space advertising or other advertising media. Each such annual statement shall be made a part of the Gross Sales annual report required to be furnished by Tenant under Section 4.3. If Tenant's annual statement shows that Tenant has expended for such advertising, during the preceding Lease Year, less than [***] of its Gross Sales for said period, Tenant shall within thirty (30) days after the required delivery date of its annual statement contribute to the Marketing Fund referred to in Section 14.1 above the difference between the amount actually expended for such advertising and [***] of such Gross Sales. Contributions or other payments payable by Tenant to the said Marketing Fund shall not be deemed an amount expended for advertising within the meaning of this Section 14.2. All expenditures made by Tenant for advertising in connection with Tenant's other stores, if any, within a fifteen (15) mile radius from the nearest perimeter boundary of the whole Center, may be included by Tenant to comply with this Section 14.2, provided such advertising in all instances includes the Premises and encompasses or is distributed to the geographical trade area in which the whole Center is located. Section 14.3. Media Fund. Landlord may, at its option, create and maintain a Media Fund, the exclusive purpose of which shall be to pay all costs and expenses associated with the purchase of electronic, print or outdoor advertising for the promotion of the Center. In the event Landlord does create and maintain the Media Fund, Tenant agrees to contribute to such Fund, beginning upon the later to occur of (a) the Commencement Date or (b) the date the Media Fund is created, a sum equal to [***] per square foot of Store Floor Area during each calendar year of the Lease Term (hereinafter referred to as "Media Fund Charge"), payable in equal monthly installments, in advance, on the first day of each and every month (pro rated for partial months). The Media Fund Charge shall be adjusted annually by a percentage equal to the percentage increase or decrease in the electronic, print and outdoor advertising rates of the media used for advertising and promotions in the preceding calendar year in the media market in which the Center is located, provided, however that said charge shall not be less than as originally set forth herein. Within ninety (90) days following the close of each calendar year, Landlord shall furnish Tenant a statement for the preceding calendar year showing the amounts expended by Landlord for media advertising. Tenant hereby authorizes Landlord to use Tenant's trade name and a brief description of Tenant's business in connection with any media advertising purchased pursuant to this Section. Notwithstanding anything herein in this Section 14.3 which may be to the contrary, Tenant shall have the right to negotiate with Landlord's Center marketing representative with respect to performing certain promotional activities as may be mutually agreed upon by the parties with Tenant's cost for such promotional activities credited, in whole or in part, to Tenant's Media Fund Charge Obligation under this Section 14.3. The foregoing shall not, however, require Landlord and/or Landlord's Center marketing representative to agree to Tenant's proposed promotional activity and/or to any credit to Tenant's Media Fund Charge obligation payable hereunder unless otherwise specified to the contrary in a separate written agreement between Landlord and Tenant. *** Confidential treatment requested. 18 19 Section 14.4. Merchants' Association. Landlord may, at its option, create and maintain a Merchants' Association (the "Association") in lieu of the Fund and the Media Fund. In that event, Tenant agrees to contribute to the Association, beginning upon the later to occur of (a) the Commencement Date or (b) the date the Association is created, the sum of the amounts Tenant would be obligated to contribute to the Fund and the Media Fund under Sections 14.1 and 14.3 had Landlord create and maintained the Fund and the Media Fund. Such amount shall be payable by Tenant to the Association in equal monthly installments, in advance, on the first day of each and every month (prorated for partial months). Landlord shall contribute to the Association during each calendar year an amount equal to the amount Landlord would otherwise be required to contribute to the Fund in accordance with Section 14.1 above. Any overpayment or underpayment of such amount by Landlord shall be adjusted annually. ARTICLE XV SECURITY DEPOSIT Section 15.1. Amount of Deposit. INTENTIONALLY DELETED. ARTICLE XVI DAMAGE AND DESTRUCTION If the Premises are hereafter damaged or destroyed or rendered partially untenantable for their accustomed use by fire or other casualty insured under the coverage which Landlord is obligated to carry pursuant to Section 11.1 hereof, Landlord shall promptly repair the same to substantially the condition which they were in immediately prior to the happening of such casualty (excluding stock in trade, fixtures, furniture, furnishings, carpeting, floor covering, wall covering, drapes, ceiling and equipment). From the date of any casualty (whether or not insured or required to be insured) until the Premises are so repaired and restored, the Minimum Monthly Rent payments and all other rent payments payable hereunder, except Real Estate Taxes, shall abate in such proportion as the part of said Premises thus destroyed or rendered untenantable bears to the total Premises; provided, however, that Landlord shall not be obligated to repair and restore if such casualty is not covered by the insurance which Landlord is obligated to carry pursuant to Section 11.1 hereof or is caused directly by the negligence of Tenant, its agents or employees and provided, further, that Landlord shall not be obligated to expend for any repair or restoration an amount in excess of the insurance proceeds recovered by Landlord therefor (other than applicable deductibles), and provided, further, that if the Premises be damaged, destroyed or rendered untenantable for their accustomed uses by fire or other casualty to the extent of more than fifty percent (50%) of the cost to replace the Premises during the last three (3) years of the Lease Term, then Landlord or Tenant shall have the right to terminate this Lease effective as of the date of such casualty by giving to the other party, within thirty (30) days after the happening of such casualty, written notice of such termination. If such notice be given, this Lease shall terminate and Landlord shall promptly repay to Tenant any rent theretofore paid in advance which was not earned at the date of such casualty. Any time that Landlord repairs or restores the Premises after damage or destruction, then Tenant shall promptly repair or replace its stock in trade, fixtures, furnishings, furniture, carpeting, wall covering, floor covering, drapes, ceiling and equipment to the same condition as they were in immediately prior to the casualty, and if Tenant has closed its business, Tenant shall promptly reopen for business upon the completion of such repairs. Notwithstanding anything to the contrary set forth herein, in the event all or any portion of the Center shall be damaged or destroyed by fire or other cause (notwithstanding that the Premises may be unaffected thereby), to the extent the cost of restoration thereof would exceed fifteen percent (15%) of the amount it would have cost to replace the Center in its entirety at the time such damage or destruction occurred, then Landlord may terminate this Lease by giving Tenant thirty (30) days prior notice of Landlord's election to do so, which notice shall be given, if at all, within sixty (60) days following the date of such occurrence. In the event of the termination of this Lease as aforesaid, this Lease shall cease thirty (30) days after such notice is given, and the rent and other charges hereunder shall be adjusted as of that date. If the Premises are damaged and the reasonably estimated time to repair the damage will exceed one hundred eighty (180) days, then either party shall have the right to terminate this Lease by delivering written notice tot he other party within thirty (30) days after the estimated time for rebuilding is determined. ARTICLE XVII EMINENT DOMAIN Section 17.1. Condemnation. If ten percent (10%) or more of the Store Floor Area or fifteen percent (15%) or more of the Center shall be acquired or condemned by right of eminent domain for any public or quasi public use or purpose, or if an Operating Agreement is terminated as a result of such an acquisition or condemnation, then Landlord at its election may terminate this Lease by giving notice to Tenant of its election, and in such event rentals shall be apportioned and adjusted as of the date of termination. If the lease shall not be terminated as aforesaid, then shall continue in full force and effect, and Landlord shall within a reasonable time after possession is physically taken (subject to delays due to shortage of labor, materials or equipment, labor difficulties, breakdown of equipment, government restriction fires, other casualties or other causes beyond the reasonable control of Landlord) repair or rebuild what remains of the Premises for Tenant's occupancy; and a just proportion of the Minimum Annual Rent shall be abated, according to the nature and extent of the injury to the Premises until such repairs and rebuilding are completed, and thereafter for the balance of the Lease Term. 19 20 Section 17.2. Damages. Landlord reserves, and Tenant assigns to Landlord, all rights to damages on account of any taking or condemnation or any act of any public or quasi public authority for which damages are payable. Tenant shall execute such instruments of assignments as Landlord requires, join with Landlord in any action for the recovery of damages, if requested by Landlord, and turn over to Landlord any damages recovered in any proceeding. If Tenant fails to execute instruments required by Landlord, or undertake such other steps as requested, Landlord shall be deemed the duly authorized irrevocable agent and attorney-in-fact of Tenant to execute such instruments and undertake such steps on behalf of Tenant. However, Landlord does not reserve any damages payable for trade fixtures installed by Tenant at its own cost which are not part of the realty nor for any other damages Tenant may be entitled to recover by law as a result of such taking or condemnation provided Tenant's claim therefor is made against the condemning authority and not against the Landlord or Landlord's mortgagee, if any, and provided, further, Tenant's damage award does not reduce or diminish any damage award payable to Landlord or Landlord's mortgagee. ARTICLE XVIII DEFAULT BY TENANT Section 18.1. Rights to Re-Enter. The following shall be considered for all purposes to be defaults under and breaches of this Lease: (a) any failure of Tenant to pay any rent or other amount within ten (10) days after receipt of written notice from Landlord that such amount is past due hereunder; (b) any failure by Tenant to perform or observe any other of the terms, provisions, conditions and covenants of this Lease and the continuance of such failure for more than thirty (30) days after written notice of such failure provided, however, if such failure cannot reasonably be cured within such thirty (30) day period, Tenant shall be allowed such longer period as reasonably may be required so long as Tenant promptly commences and diligently completes such cure; (c) a determination by Landlord that Tenant has submitted any false report required to be furnished hereunder; (d) anything done by Tenant upon or in connection with the Premises or the construction of any part thereof which interferes in any way with, or results in a work stoppage in connection with, construction of any part of the Center or any other tenant's space and the failure of such interruption to be cured within five (5) days after written notice to Tenant and Tenant shall immediately, upon oral or written direction from Landlord or Landlord's authorized representative, take such action as Landlord shall specify in order to promptly prevent, avoid or terminate such interference or work stoppage in connection with construction of any part of the Center or any other tenant's space; (e) the bankruptcy or insolvency of Tenant or the filing by or against Tenant of a petition in bankruptcy or for reorganization or arrangement or for the appointment of a receiver or trustee of all or a portion of Tenant's property, or Tenant's assignment for the benefit of creditors; (f) if Tenant abandons or vacates or does not do business in the Premises when required to do so under this Lease and Tenant subsequently fails to reopen for business in the Premises within five (5) days after Tenant's receipt of Landlord's written demand therefor; or (g) this Lease or Tenant's interest herein or in the Premises or any improvements thereon or any property of Tenant are executed upon or attached; or (h) the Premises come into the hands of any person other than expressly permitted under this lease (i) repetition or continuation of any failure to pay rent or other sums due hereunder where such failure shall continue or be repeated for two consecutive months or a total of four months in any period of twelve consecutive months. In any such event, Landlord, in addition to all other rights or remedies it may have, shall have the right thereupon or at any time thereafter to terminate this Lease by giving notice to Tenant stating the date upon which such termination shall be effective, and shall have the right, either before or after any such termination, to re-enter and take possession of the Premises, remove all persons and property from the Premises, store such property at Tenant's expense, and sell such property if necessary to satisfy any deficiency in payments by Tenant as required hereunder. Section 18.2. Right to Relet. If Landlord re-enters the Premises as above provided, or if it takes possession pursuant to legal proceedings or otherwise, it may either terminate this Lease or it may, from time to time, without terminating this Lease, make such alterations and repairs as it deems advisable to relet the Premises, and relet the Premises or any part thereof for such term or terms (which may extend beyond the Lease Term) and at such rentals and upon such other terms and conditions as Landlord in its sole discretion deems advisable; upon each such reletting all rentals received by Landlord therefrom shall be applied, first, to any indebtedness other than rent due hereunder from Tenant to Landlord; second, to pay any costs and expenses of reletting, including without limitation, brokers and attorneys' fees and costs of advertising, alterations and repairs; third, to rent due hereunder, and the residue, if any, shall be held by Landlord and applied in payment of future rent as it becomes due hereunder. Landlord shall use reasonable efforts to mitigate any damages resulting from Tenant's default including reasonable efforts to relet the Premises upon commercially reasonable terms in accordance with then currently market conditions. Landlord shall not, however, be required to give the Premises preference over other space in the Center in attempting to re-let the same. If rentals received from such reletting during any month are less than that to be paid during that month by Tenant hereunder, Tenant shall immediately pay any such deficiency to Landlord. No re-entry or taking possession of the Premises by Landlord shall be construed as an election to terminate this Lease unless a written notice of such termination is given by Landlord. 20 21 ARTICLE XXI ACCESS BY LANDLORD Section 21.1. Right of Entry. Landlord, its agents and employees shall have the right to enter the Premises from time to time following not less than forty-eight (48) hours prior notice, oral or written, to Tenant or Tenant's store manager (except in an emergency, no notice shall be required) at reasonable times to examine the same, show them to prospective purchasers and other persons, and make such repairs, alterations, improvements or additions as Landlord deems necessary. Rent shall not abate while any such repairs, alterations, improvements, or additions are being made. During the last six (6) months of the Lease Term, Landlord may exhibit the Premises to prospective tenants. In addition, during any apparent emergency, Landlord or its agents may enter the Premises forcibly without liability therefor and without in any manner affecting Tenant's obligations under this Lease. ARTICLE XXII HOLDING OVER. SUCCESSORS Section 22.1. Holding Over. If Tenant holds over or occupies the Premises beyond the Lease Term (it being agreed there shall be no such holding over or occupancy without Landlord's written consent), Tenant shall pay Landlord for each day of such holding over a sum equal to [***] of the Minimum Monthly Rent prorated for the number of days of such holding over, plus a prorata portion of all other amounts which Tenant would have been required to pay hereunder had this Lease been in effect. If Tenant holds over with or without Landlord's written consent Tenant shall occupy the Premises on a tenancy at sufferance but all other terms and provisions of this Lease shall be applicable to such period. Section 22.2. Successors. All rights and liabilities herein given to or imposed upon the respective parties hereto shall bind and inure to the several respective heirs, successors, administrators, executors and assigns of the parties and if Tenant is more than one (1) person, they shall be bound jointly and severally by this Lease except that no rights shall inure to the benefit of any assignee or subtenant of Tenant unless the assignment or sublease was approved by Landlord in writing as provided in Section 13.1 hereof. Landlord, at any time and from time to time, may make an assignment of its interest in this Lease and, in the event of such assignment, Landlord and its successors and assigns (other than the assignee of Landlord's interest in this Lease) shall be released from any and all liability thereafter accruing hereunder. ARTICLE XXIII QUIET ENJOYMENT Section 23.1. Landlord's Covenant. So long as Tenant is not in default under this Lease, Tenant shall peaceably and quietly hold and enjoy the Premises for the Lease Term without interruption by Landlord or any person or persons claiming by, through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease. ARTICLE XXIV MISCELLANEOUS Section 24.1. Waiver. No waiver by Landlord or Tenant of any breach of any term, covenant or condition hereof shall be deemed a waiver of the same or any subsequent breach of the same or any other term, covenant or condition. The acceptance of rent by Landlord shall not be deemed a waiver of any earlier breach by Tenant of any term, covenant or condition hereof, regardless of Landlord's knowledge of such breach when such rent is accepted. No covenant, term or condition of this Lease shall be deemed waived by Landlord or Tenant unless waived in writing. Section 24.2. Accord and Satisfaction. Landlord is entitled to accept, receive and cash or deposit any payment made by Tenant for any reason or purpose or in any amount whatsoever, and apply the same at Landlord's option to any obligation of Tenant and the same shall not constitute payment of any amount owed except that to which Landlord has applied the same. No endorsement or statement on any check or letter of Tenant shall be deemed an accord and satisfaction or otherwise recognized for any purpose whatsoever. The acceptance of any such check or payment shall be without prejudice to Landlord's right to recover any and all amounts owed by Tenant hereunder and Landlord's right to pursue any other available remedy. Section 24.3. Entire Agreement. There are no representations, covenants, warranties, promises, agreements, conditions or undertakings, oral or written, between Landlord and Tenant other than herein set forth. Except as herein otherwise provided, no subsequent alteration, *** Confidential treatment requested. 23 22 amendment, change or additions to this Lease shall be binding upon Landlord or Tenant unless in writing, signed by them and approved by Landlord's mortgagee. Section 24.4. No Partnership. Landlord does not, by virtue of this Lease or the performance of the parties under this Lease, become a partner, employee, principal, master, agent or joint venturer of or with Tenant. Section 24.5. Force Majeure. If either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, labor troubles, inability to procure material, failure of power, restrictive governmental laws or regulations, riots, insurrection, war or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under this Lease, the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. Notwithstanding the foregoing, the provisions of this Section 24.5 shall at no time after the Commencement Date operate to excuse Tenant from any obligations for payment of Minimum Annual Rent, Percentage Rent, additional rent or any other payments required by the terms of this Lease when the same are due, and all such amounts shall be paid when due. Section 24.6. Submission of Lease. Submission of this Lease to Tenant does not constitute an offer to lease; this Lease shall become effective upon execution and delivery thereof by Landlord and Tenant. The effective date of this Lease shall be the date filled in on Page 1 hereof by Landlord, which shall be the date of execution by the last of the parties to execute the Lease. Section 24.7. Notices. All notices from Tenant to Landlord required or permitted by any provision of this agreement shall be directed to Landlord as follows: MALL OF AMERICA COMPANY c/o M.S. Management Associates Inc. National City Center 115 W. Washington Street Indianapolis, IN 46204 Prior to the Commencement Date such notices shall only be effective if given to Landlord at the address shown above and to Landlord at the address shown below: MALL OF AMERICA COMPANY c/o M.S. Management Associates Inc. Construction Department National City Center 115 W. Washington Street Indianapolis, IN 46204 All notices from Landlord to Tenant required or permitted hereunder shall be sent to the Premises and also directed as follows, namely: LBE Technologies, Inc. with a copy of Gray, Cary, Ware & Freidenrich 10401 Bubb Road default notices to: 400 Hamilton Avenue Cupertino, California 95014 Palo Alto, California 94301 Attn.: James Koshland
All notices to be given hereunder by either party shall be written and sent by registered or certified mail, return receipt requested, postage pre-paid or by an express mail delivery service, addressed to the party intended to be notified at the address set forth above. Either party may, at any time, or from time to time, notify the other in writing of a substitute address for that above set forth, and thereafter notices shall be directed to such substitute address. Notice given as aforesaid shall be sufficient service thereof and shall be deemed given as of the date received, as evidenced by the return receipt of the registered or certified mail or the express mail delivery receipt, as the case may be. A duplicate copy of all notices from Tenant shall be sent to any mortgagee whose address has been furnished to Tenant as provided for in Section 19.2. Section 24.8. Captions and Section Numbers. This Lease shall be construed without reference to titles of Article and Sections, which are inserted only for convenience of reference. Section 24.9. Number and Gender. The use herein of a singular term shall include the plural and use of the masculine, feminine or neuter genders shall include all others. Section 24.10. Objection to Statements. INTENTIONALLY DELETED. 24 23 Section 24.11 Representation, Corporate Tenant. If Tenant is or will be a corporation, the persons executing this Lease on behalf of Tenant hereby covenant and warrant that Tenant is a duly qualified corporation authorized to do business in the State of Minnesota, that all franchise and corporate taxes have been paid to date and all future forms, reports, fees and other documents necessary to comply with applicable laws will be filed when due, and the person signing this Lease on behalf of the corporation is an officer of Tenant, and is duly authorized to sign and execute this Lease. Section 24.12. Joint and Several Liability. If Tenant is a partnership or other business organization the members of which are subject to personal liability, the liability of each such member shall be deemed to be joint and several. Section 24.13. Limitation of Liability. Anything to the contrary herein contained, notwithstanding, there shall be absolutely no personal liability on persons, firms or entities who constitute Landlord with respect to any of the terms, covenants, conditions and provisions of this Lease, and Tenant shall, subject to the rights of any first mortgagee, look solely to the interest of Landlord, its successors and assigns, in Landlord's Tract for the satisfaction of each and every remedy of Tenant in the event of default by Landlord hereunder: such exculpation of personal liability is absolute and without any exception whatsoever. Section 24.14. Broker's Commission. Each party represents and warrants that it has caused or incurred no claims for brokerage commissions or finder's fees in connection with the execution of this Lease, and each party shall indemnify and hold the other harmless against and from all liabilities arising from any such claims caused or incurred by it (including without limitation, the cost of attorneys' fees in connection therewith). Section 24.15. Partial Invalidity. If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby and each provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. Section 24.16. Recording. The parties agree not to place this Lease of record but each party shall, at the request of the other, execute and acknowledge so that the same may be recorded a Short Form Lease or Memorandum of Lease, indicating the Lease Term, but omitting rent and other terms and an Agreement specifying the date of commencement and termination of the Lease Term; provided, however, that the failure to record said Short Form Lease, Memorandum of Lease or Agreement shall not affect or impair the validity and effectiveness of this Lease. The party requesting recording shall pay all costs, taxes, fees and other expenses in connection with or prerequisite to recording. Section 24.17. Applicable Law. This Lease shall be construed under the laws of the State of Minnesota. Section 24.18. Mortgagee's Approval. INTENTIONALLY DELETED. Section 24.19. Reservation of Air Rights. There has been no representation or warranty by the Landlord and Tenant acknowledges that there is no inducement or reliance to lease the Premises on the basis that the existing access to light, air and views from the Premises would continue unabated. Tenant acknowledges and understands that it shall have no rights to the airspace above the Retail Space and those rights shall be the sole property of Landlord. Section 24.20. Landlord's Contribution Toward Tenant's Work. When Tenant has completed all of Tenant's Work in strict accordance with Exhibit "C" and "C-2" by the Required Completion Date, and furnishes evidence satisfactory to Landlord of such completion including the total cost thereof as certified by Tenant's architect in a form acceptable to Landlord, and that all of Tenant's Work has been paid for in full and no liens have attached or may attach as the result thereof, and no default in, breach of, or failure to perform this Lease exists and Tenant has paid or reimbursed Landlord all amounts owed to Landlord pursuant to Sections 3.4 and 4.1 hereof or otherwise and has opened its store for business and accepted the Premises in writing in a form prescribed by Landlord or its mortgagee, and executed and delivered to Landlord the certificate provided for in Section 2.1 hereof and has executed such other instruments and documents as are required by Landlord's mortgagee to be executed, Landlord shall pay to Tenant as Landlord's contribution toward Tenant's Work the sum of $35.00 per square foot of Store Floor Area, determined as provided for in Section 2.1 hereof and nor more, provided if Tenant fails to open for business on the required Commencement Date as set out in Section 2.3 of this Lease herein, then Landlord shall have the right, in addition to its other rights and remedies as provided herein, to reduce Landlord's Contribution Toward Tenant's Work (as defined herein) by one-half (1/2) of the total amount of Landlord's contribution. Provided Tenant satisfies the terms, conditions and provisions of this Section 24.20 by the tenth (10th) day of a month, Landlord's Contribution shall be paid to Tenant by the fifteenth (15th) day of the following month. Section 24.21. Unrelated Business Taxable Income. A. If at any time and from time to time during the term of this Lease Landlord receives a written opinion from its counsel or counsel to an exempt partner of Landlord or of the managing partner of Landlord (an "Exempt Partner") that any provision of this Lease, including without limitation the provisions relating to the payment of rent and additional rent, or the absence of any provision might give rise to unrelated business taxable income within the meaning of section 512 of the Internal Revenue Code of 1986, as amended, or the regulations issued thereunder, or may jeopardize the ability of an Exempt Partner to obtain or retain its tax-exempt status, then this Lease may be unilaterally amended by Landlord 25 24 in such manner as shall meet the requirements reasonably specified by such counsel and Tenant agrees that it will execute all documents or instruments reasonable necessary to effect such amendment or amendments, provided that no such amendment shall result on an estimated basis in Tenant having to pay in the aggregate more money on account of its occupancy of the Premises than it would be required to pay under the terms of this Lease, or having to receive fewer services or services of a lesser quality than it is presently entitled to receive under this Lease. B. Any services which Landlord is required to furnish pursuant to the provisions of this Lease may, at Landlord's option, be furnished from time to time, in whole or in part, by employees of Landlord or the managing agent of the Project or its employees or by one or more third persons hired by Landlord or the managing agent of the Project. Tenant agrees that upon Landlord's written request it will enter into direct agreements with the managing agent of the Project or other parties designated by Landlord for the furnishing of any such services required to be furnished by Landlord hereunder, in form and content approved by Landlord, provided however that no such contract shall result on an estimated basis in Tenant having to pay in the aggregate more money on account of its occupancy of the Premises under the terms of this Lease, or having to receive fewer services or services of a lesser quality than it is presently entitled to receive under this Lease. Section 24.22. Option to Renew. Landlord hereby grants to Tenant the option to renew this Lease for one (1) additional term of five (5) years, which shall commence upon the expiration of the original term. Such option, with respect to the Renewal Term, shall only be exercised by Tenant mailing to Landlord (ATTN: Executive Vice President -- Leasing), at Landlord's Notice Address, by United States mail, postage prepaid, certified or registered, return receipt requested, with a copy to the attention of Managing Attorney -- Legal Leasing, notice of the exercise of such option, not later than one hundred eighty (180) days prior to the expiration of the original term. No exercise of any option herein granted shall be effective if any default under or breach of this Lease (a) exists either at the time of exercise or on the expiration of the term during which it was exercised. In the event such option is effectively exercised with respect to the Renewal Term, all terms and conditions of this Lease shall be applicable to such Renewal Term except that: (i) The Minimum Annual Rent due and payable by Tenant to Landlord for each Lease Year of the Renewal Term shall be [***] per square foot of Store Floor Area, or [***] per annum (based on the approximated Store Floor Area set forth in Section 2.1 hereof), payable in equal monthly installments, in advance upon the first day of each and every month during the renewal term; and (ii) Tenant shall have no further renewal options after the expiration or sooner termination of the option hereinabove set forth. Notwithstanding anything to the contrary in this Lease contained, the term "Lease Term" whenever used in this Lease, shall be defined to include the original term and all renewals and extensions thereof. IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this Lease as of the day and year first above written. (LANDLORD) MALL OF AMERICA COMPANY, a Minnesota General Partnership By: MOAC LIMITED PARTNERSHIP, a Minnesota Limited Partnership, its General Partner By: MALL OF AMERICA ASSOCIATES, a Minnesota General Partnership, its General Partner By: SI-MINN DEVELOPERS LIMITED PARTNERSHIP, an Indiana Limited Partnership, its General Partner By: SI-MINN, INC., an Indiana Corporation, its General Partner By: /s/ HERBERT SIMON ---------------------------------------------- Herbert Simon, President (TENANT) If Corporation LBE TECHNOLOGIES, INC. By: /s/ JANET SET CAVAGE ---------------------------------------------- Janet Set Cavage WITNESS: /s/ PAUL A. PORT ----------------------------------------- Paul A. Port *** Confidential treatment requested. 26 25 LEGAL DESCRIPTION MALL OF AMERICA Lots 1 through 5, Block 1, Mall of America - 3rd Addition according to the plat thereof on file as of record as Document No. 2211073 in the office of the Registrar of Titles for Hennepin County, Minnesota. That part of Lot 1, Block 1, Mall of America 4th Addition except that part embraced within that part of the Northwest Quarter of the Southeast Quarter of Section 1, Township 27, Range 24 described as follows: Beginning at the Northeast corner of said Northwest Quarter of the Southeast Quarter of said Section 1, thence West along the North line of said Northwest Quarter, 660 feet; thence South 330 feet, thence East and parallel with the North line of said Northwest Quarter of Southeast Quarter 660 feet to the East line of Northwest Quarter of Southeast Quarter of said Section 1, thence North to the point of beginning, according to the plat thereof on file or of record in the office of the Registrar of Titles in and for said County. That part of Lot 1, Block 1, Mall of America 4th Addition embraced within that part of the Northwest Quarter of the Southeast Quarter of Section 1, Township 27, Range 24 described as follows: Beginning at the Northeast comer of said Northwest Quarter of the Southeast Quarter of said Section 1, thence West along the North line of said Northwest Quarter, 660 feet; thence South 330 feet, thence East and parallel with the North line of said Northwest Quarter of Southeast Quarter 660 feet to the East line of Northwest Quarter of Southeast Quarter of said Section 1, thence North to the point of beginning, according to the plat thereof on file or of record in the office of the Registrar of Titles in and for said County. EXHIBIT "A" Page 1 26 EXHIBIT "B" Level 3 Page 1 27 Restricted Area per Article I cross-hatched. EXHIBIT "B" Page 2 28 DESCRIPTION OF TENANT'S WORK TENANT'S WORK - Tile following work required to complete and place the premises in finished condition ready to open for business is to be performed by the Tenant at the Tenant's own expense and shall be in addition to any work described in the Tenant Handbook and Tenant Contractor's Handbook. In the event there is any conflict between the provisions of this Exhibit "C" and the Tenant Handbook or the Tenant Contractor's Handbook, the provisions of the Tenant Handbook and Tenant Contractor's Handbook shall control. Tenant's Work includes, but is not limited to, the following: A. GENERAL PROVISIONS All work done by Tenant shall be governed in all respects by, and be subject to, the following: 1. Landlord shall have the right to require Tenant to furnish payment and performance bonds or other security in form satisfactory to Landlord for the prompt and faithful performance of Tenant's Work, assuring completion of Tenant's Work and conditioned that Landlord will be held harmless from payment of any claim either by way of damages or liens on account of bills for labor or material in connection with Tenant's Work. Tenant's Work shall at all times be conducted consistent with the Project Labor Agreement for the Center and in such manner so that Tenant shall not be in violation of Section 18.1 of the Lease. 2. It is understood and agreed between Landlord and Tenant that costs incurred by Landlord, if any, as a result of Tenant's failure or delay in providing the information as required in this Exhibit and in the Lease to which this Exhibit is attached, shall be the sole responsibility of Tenant and he will pay such costs, if any, promptly upon Landlord's demand. 3. All Tenant's Work shall conform to applicable statutes, ordinances, regulations and codes and the requirements of Factory Mutual and all rating bureaus and the Tenant Handbook which contains the basic architectural, electrical and mechanical information necessary for the preparation of Tenant's Plans, and which by this reference is incorporated into and made a part of this Lease. Tenant shall obtain and convey to Landlord all approvals with respect to electrical, water, sewer, heating, cooling and telephone work, all as may be required by any agency or utility company. 4. No approval by Landlord shall be deemed valid unless in writing and signed by Landlord. 5. Prior to commencement of Tenant's Work and until completion thereof, or commencement of the Lease Term, whichever is the last to occur, Tenant shall effect and maintain Builder's Risk Insurance covering Landlord, Tenant, Tenant's contractors and Tenant's subcontractors, as their interest may appear, against loss or damage by fire, vandalism and malicious mischief and such other risks as are customarily covered by a standard "All Risk" policy of insurance protecting against all risk of physical loss or damage to all Tenant's Work in place and all materials stored at the site of Tenant's Work, and all materials, equipment, supplies and temporary structures of all kinds incidental to Tenant's Work, and equipment, all while forming a part of or contained in such improvements or temporary structures, or while on the premises or within the Total Tract, all to the actual replacement cost thereof at all times on a completed value basis. In addition, Tenant agrees to indemnify and hold Landlord harmless against any and all claims for injury to persons or damage to property by reason of the use of the premises for the performance of Tenant's Work, and claims, fines, and penalties arising out of any failure of Tenant or its agents, contractors and employees to comply with any law, ordinance, code requirement, regulations or other requirement applicable to Tenant's Work and Tenant agrees to require all contractors and subcontractors engaged in the performance of Tenant's Work to effect and maintain and deliver to Tenant and Landlord, certificates evidencing the existence of, and covering Landlord, City of Bloomington, Minnesota, Port Authority of the City of Bloomington, Simon DeBartolo Group, Inc., M.S. Management Associates. Inc., Tenant and Tenant's contractors, prior to commencement of Tenant's Work and until completion thereof, the following insurance coverages: a. Workmen's Compensation and Occupational Disease Insurance in accordance with the laws of the State in which the property is located, including Employer's Insurance to the limit of [***]. b. Comprehensive or Commercial General Liability insurance affording limits of not less than [***] per occurrence for bodily injury, personal injury and death, and for not less than [***] per occurrence for property damage, or not less than [***] per occurrence, Combined Single Limit. Such insurance shall include protection arising from contractual liability completed operations, independent contractors, as well as for the hazards of underground. collapse and explosion. C. Comprehensive Automobile Insurance, including "non-owned" automobiles, against bodily injury including death resulting therefrom, in the limits of [***] for any one occurrence and [***] property damage or a combined single limit of [***]. d. Owners and contractors protective liability coverage for an amount not less than [***]. *** Confidential treatment requested. EXHIBIT "C" Page I 29 6. Tenant agrees that the contract of every contractor, subcontractor, mechanic, journeyman, laborer, material supplier or other person or entity performing labor upon, or furnishing materials or equipment to, the Premises in connection with Tenant's Work shall contain the following provision: "Contractor acknowledges that this provision is required under Tenant's lease of the premises to be improved under this Contract (Lease Premises) from Mall of America Company (Lease). In consideration of Tenant's engagement of Contractor to perform the work hereunder, and as an inducement to Tenant to enter into this Contract with Contractor. Contractor acknowledges, covenants and agrees that any mechanic's lien which it may hereafter file, claim, hold or assert with respect to the work hereunder (i) shall attach only to Tenant's interest in the Lease Premises under the Lease and (ii) shall be subject, subordinate and inferior to the lien of any mortgage(s) now or hereafter held upon and against the Mall of America by any lender(s) now or hereafter providing funds for the financing for the Mall of America, notwithstanding that any such mortgage(s) may be recorded after the commencement of the work hereunder and that Contractor's mechanic's lien otherwise might be entitled to priority over any such mortgage(s). For such purposes, Contractor also shall execute, acknowledge and deliver a separate subordination agreement upon request by Tenant, Mall of America Company, or any such lender(s), prior to making any application or request for payment hereunder and as a condition precedent to Contractor's right to receive any payment hereunder. Contractor likewise shall cause the liens and lien rights of all subcontractors, sub-subcontractors, materialmen, suppliers, laborers and all other persons furnishing work, labor, materials, equipment and services on or in connection with the Lease Premises to be limited to the Tenant's interest in the Lease Premises under the Lease and to be subordinated to such mortgage(s), and Contractor shall obtain and deliver to Tenant a similar subordination agreement duly executed and acknowledged by each such subcontractor, sub-subcontractor, materialman, supplier, laborer and other person prior to making any application or request for payment hereunder and as a condition precedent to Contractor's right to receive any payment hereunder. Contractor shall indemnify, defend and hold harmless Tenant, Mall of America Company, and such lender(s) from and against any and all loss, costs, damage, expense (including, without limitation, reasonable attorney fees), liability, suits, actions and judgments arising or resulting from Contractor's failure to cause all such mechanic's and materialmen's liens to be limited to Tenant's interest in the Lease Premises under the Lease and to be subordinated to said mortgage(s) as herein provided, in addition to all other indemnities contained herein with respect to such liens." Tenant shall indemnify, defend and hold harmless Landlord and such lender(s) from and against any and all loss, costs, damage, expense (including, without limitation, reasonable attorney fees), liability, suits, action and judgments arising or resulting from Tenant's failure to cause all such mechanic's and materialmen's liens to be limited to Tenant's interest in the Premises under this Lease and to be subordinated to said mortgage(s) as herein provided, in addition to all other indemnities contained herein with respect to such liens. From the commencement of Tenant's Work through the date Tenant obtains its certificate of occupancy, Tenant shall submit and Landlord shall receive lien waivers no later than the fifth (5th) day of each month for all work, material, services or machinery furnished by Tenant's general contractor, subcontractors, materialmen or suppliers in connection with Tenant's Work during the preceding month. The failure of Tenant to submit such lien waivers in accordance with this provision shall constitute a default under Section 18.1 of this Lease. B. FLOOR SLAB No penetrations shall be allowed for electrical outlets in floor slabs. All tenants with restroom facilities or food preparation areas shall install a floor slab waterproofing membrane in the Premises. All floor penetrations must be sleeved and waterproofed. C. SECURITY SCREEN OR MALL FRONTAGE 1. Mall frontages shall be designed and constructed in accordance with the requirements outlined in the Tenant Handbook. Security for "open fronts" shall be by means of anodized aluminum roll up grilles or anodized aluminum sliding and/or sliding glass doors. No mall frontage shall be constructed without the written approval of Landlord. 2. All materials employed in the construction of mall frontage shall be as approved by Landlord and as defined by applicable building codes. 3. Mall Frontage Colors - It is the desire of the Landlord to give Tenant the greatest practicable freedom in the choice of mall frontage colors; but: a. Colors must harmonize with the color scheme of the Center itself. b. Colors must harmonize with the color scheme of the surrounding stores. To assist Tenant, a general color range will be developed, with a sufficiently large selection to permit a reasonable latitude for individual expression. EXHIBIT "C" Page 2 30 4. All sliding entrance doors must be recessed in such manner that the door, when open, will not project beyond the lease line. 5. Tenants with exterior glazing must install show window or display. D. CEILING 1. All ceilings and coves shall not exceed 12'0" above the finished floor. 2. Tenant's ceilings shall be suspended by adequate suspension systems to conform to final requirements of governing authorities and Landlord. 3. The space above the ceiling line, which is not occupied or allotted to Landlord's Work (structural members, duct work, piping, etc.) may be used for the installation of suspended ceiling, recessed lighting fixtures and duct work. Under no circumstances will Tenant's Work be hung or suspended from non-structural construction. Any Tenant Work involving the hanging or suspension of construction shall be accomplished only by methods, in locations and by use of assemblies approved by Landlord. 4. Tenant shall provide ceiling access panels in the ceiling of the Premises as required by Landlord to service Landlord equipment. E. WALLS All interior walls and curtain walls within the premises, including all interior lath and plastering and gypsum board thereon, and including lath and plastering, and/or dry wall on Landlord's exposed masonry or stud party wall partitions. Dividing wall between premises shall meet Code requirements and be continuous from floor to the underside of the roof or floor deck. Tenant shall provide and install bracing and/or studs and/or blocking as necessary to support wall mounted fixtures. Cracks, joints and openings in walls to be filled with appropriate fire resistant materials. Return air openings shall be provided in the dividing walls between premises as required for proper air movement. Tenant shall install insulation on the exterior walls of the Premises. F. DOORS Doors and vestibules to Service Courts and Corridors - where required, a vestibule and a door 3'0" in width, with hardware, shall be provided and installed by Tenant at Tenant's expense, between the Premises and the service courts or between the Premises and a public corridor or mall leading to the service courts. G. INTERIOR PAINTING All interior painting and decoration. H. FLOOR COVERINGS All floor coverings and floor finishes including recesses for special floor finishes. It is Tenant's responsibility to join neatly to the mall finish. Floor Tile and Base - Tenant will install floor tile and base in accordance with the materials and applications specified in the Tenant Handbook along the storefront of the Premises, the width of which shall be determined by Landlord. I. SHOW WINDOW BACKGROUNDS All show window backgrounds, show windows, show window floors and ceilings, and show window lighting installations. All show windows shall be adequately ventilated. J. FURNITURE, FIXTURES AND SIGNS All furnishings, trade fixtures, signs, and related parts, including installation. Location and design of all signs subject to prior written consent of Landlord. K. PLUMBING All plumbing and plumbing fixtures as required by applicable codes except utility service to the area, including a properly sized water meter if the same is required by Landlord, in which latter event Tenant shall make any required utility deposits. L. HOT WATER HEATER Domestic electric hot water heater, where required, including final connections. EXHIBIT "C" Page 3 31 M. TOILET ROOM FIXTURES Furnishing and installation of wiring, lighting fixtures, mechanical toilet exhaust systems, towel cabinets, soap dishes, hand dryers, deodorizers, mirrors and other similar items in toilet rooms within the premises or as additionally required by code. N. HEATING, VENTILATING AND AIR CONDITIONING 1. Complete HVAC Systems shall be designed, furnished and installed within the premises by the Tenant. The HVAC systems, calculations, designs and installations shall be as recommended in ASHRAE Publications and the Landlord's Tenant Finish Mechanical Criteria. Tenant's systems and ventilation shall meet all codes and ASHRAE standards. Tenant shall furnish Landlord with complete load calculations including information as to Tenant's lighting load in watts and Tenant's estimated store population (employees and customers). 2. Tenant's cooling system shall be adequate for cooling the premises to 75 degrees F DB and 50% RH based on the latest ASHRAE guide outdoor design dry bulb and design wet bulb temperatures for the area as tabulated in the 2-1/2% columns, with a rise of not more than 3 degrees F DB during peak periods. 3. Tenant's heating method shall be adequate for heating the premises to 55 degrees F DB during times other than regular business hours based on the latest ASHRAE guide outdoor design temperature for the area as tabulated in the 99% column. The Tenant's heating method shall be independent of the central cooling system. The Tenant's lighting system shall be used to heat the sales area during regular business hours in the heating season. The Tenant's lighting system may be used to maintain the required sales area minimum temperature level during other then regular business hours in the heating season. 4. Tenant's exhaust systems shall provide the required exhaust air capacities and shall be independent of the central cooling system. The Tenant's exhaust systems shall be inoperative during other than regular business hours. Replacement air for the Tenant's exhaust will be provided through the Tenant's air supply system up to the design air supply quantity. Any additional replacement air required will be drawn from the mall. Independent air make-up air systems shall not be installed by the Tenant. 5. Tenant's HVAC systems shall be complete with air distribution systems, ventilating systems, control systems, insulation and all other components required to make a complete system. Tenant's systems shall be specifically designed to coordinate with variable air volume cooling temperature control. Tenant's HVAC system components shall be installed in locations as designated by the Landlord. 6. Tenant shall provide and install fire dampers, in accordance with all codes, in the right hand side (as viewed when facing the rear of the Premises) demising partition of its Premises if its Premises adjoin another tenant space. Tenant shall also provide and install fire dampers where the Tenant's ductwork passes through service corridor walls or other fire separations. Tenant's installation shall include complete access and access panels to all valves, dampers and similar service devices (including the Landlord's) required for testing, balancing and servicing. Tenant shall utilize only fire damper products as specified by the Tenant Handbook. 7. Tenant shall connect to Landlord's central cooling system and shall use Landlord's Design Criteria in designing systems and controls. Alterations to the Landlord's central system required due to Tenant's design shall be done by Landlord at Tenant's sole expense. 8. If directed to do so by Landlord, Tenant shall paint and/or screen from ground level view by parapet walls or other appropriate screening, all of Tenant's outdoor equipment. Any such painting or screening must be done at Tenant's sole expense and approved in advance by Landlord. O. MECHANICAL EQUIPMENT All mechanical equipment including dumb-waiters, elevators, escalators, freight elevators, conveyors, and their shafts and doors, located within the premises, including electrical work for these items. Locations, size and design of roof vents, HVAC equipment, units, hoods and caps shall be approved by Landlord. Landlord reserves the right of disapproval of any equipment to be placed on the roof. Tenant shall install equipment at locations where structural reinforcements are provided. All changes in structural design caused by Tenant's equipment shall be made by Landlord and paid for by Tenant. Any roof cuts or openings required to be made pursuant to Tenant's Plans shall be performed by a contractor designated by Landlord at Tenant's expense. In addition, all strips, base furnishings and other work necessary to complete permanent weather proofing of Landlord's roof as a result of roof cuts or openings required by Tenant shall be performed by a contractor designated by Landlord at Tenant's expense. EXHIBIT "C" Page 4 32 P. ELECTRICAL All interior distribution panels, lighting panels, power panels, conduits, outlet boxes, switches, outlets and wires within the premises. Tenant shall provide electric conduit and boxes in the ceiling and walls, including all electrical service panels, pull boxes and equipment. 2. All electrical fixtures, including lighting fixtures and equipment, and installation thereof. Lighting systems (except security and emergency lighting) must be controlled by lighting contractors. The lighting contractors will be inter-locked with the Landlord's Energy Management System for automatic control during other than regular business hours. 3. All systems, where required for intercommunication, music antenna, material handling or conveyor, burglar alarm, vault wiring, fire protection alarm, time clock and demand control. 4. All conduit for necessary telephone wires in the premises. 5. Feeder conductors from Landlord's facilities to the Premises, including the connections to Tenant's equipment. 6. Final connection to the Landlord's switch gear shall be done by a contractor designated by Landlord at Tenant's expense. Tenant's contractor will be responsible for the feeder conductors and connections to tenant's equipment and for supplying proper fuses to Landlord's designated contractor at the time of final connection. Q. TEMPORARY SERVICES Any temporary services required by Tenant during its construction period, including heat, water or electrical service shall be secured by the Tenant, at Tenant's sole cost and expense. R. SUBSEQUENT REPAIRS AND ALTERATIONS Landlord reserves the right to require changes in Tenant's Work when necessary by reason of code requirements. S. SIGNS In order to assure orderly and aesthetically coordinated signing, plans for all Tenant's signs must conform to Exhibit "E" hereto attached and the applicable Mall criteria and before installation must be approved by Landlord. No permission is granted, expressed or implied to permit Tenant to erect an exterior sign of any type. T. DOORS AND EXITING REQUIREMENTS 1. Tenant will be responsible for adherence to exiting codes. 2. Tenant will maintain a clear exiting path through the stockroom to Tenant's rear door for those premises that contain a rear door. U. CONSTRUCTION ACTIVITIES 1. During premises interior construction, Tenant shall use rear opening to premises for moving in/out of materials, for those premises that contain a rear door. 2. If any roof cuts or penetrations are required by Tenant, all curbs, supports, blocking, temporary flashing, counterflashing or other work necessary for installation shall be provided and installed by Tenant at its expense. Tenant shall promptly notify, Landlord, in advance, of the need for such cuts or penetrations and shall utilize Landlord's designated roofing contractor for this work. Tenant's contractor shall be responsible for contracting with Landlord's roofing contractor to perform this work. 3. During construction, Tenant's use of the service elevators shall be at Tenant's expense. 4. Landlord shall be responsible for the installation of the temporary store front or barricade shielding the interior of the Premises from the Mall, at Tenant's expense. 5. Tenant acknowledges that its construction activities in the Premises and the Center are subject to a certain Project Labor Agreement for Construction of the Mall of America executed on or about the 19th day of November, 1985, by and among Triple Five Corporation, ??? Construction Services, Inc., and The Minneapolis Building and Construction Trades Council. Such Project Labor Agreement is fully incorporated herein by reference. As a material consideration of Landlord entering into and executing this Lease with Tenant. Tenant agrees to abide by the terms, conditions and provisions of the Project Labor Agreement as such Project Labor Agreement effects Tenant's construction activities EXHIBIT "C" Page 5 33 in the Premises and the Center. Tenant's failure to abide by the same may be deemed a default of this Lease if such failure results, either directly or indirectly, in a work stoppage or interference or the threat of the same in the construction activities in the Center or any other tenant's space. Landlord or Landlord's authorized representative may take such action as Landlord or its authorized representative deems necessary in order to immediately enforce the terms of the Project Labor Agreement and in order to prevent, avoid or terminate any interference or work stoppage (or the threat thereof) in connection with the construction of any part of the Center or any other tenant's space. Such action may include, but shall not be limited to, the issuance of a cease and desist directive to Tenant. Tenant shall reimburse Landlord or any other tenant in the Center for any losses, fees, expenses or damages suffered or incurred by Landlord or such other tenant in the Center as a result of Tenant's failure to comply with the Project Labor Agreement. EXHIBIT "C" Page 6 34 RULES AND REGULATIONS 1. Tenant shall advise and cause its vendors to deliver all merchandise before noon on Mondays through Fridays, not at other times. 2. All deliveries are to be made to designated service or receiving areas and Tenant shall request delivery trucks to approach their service or receiving areas by designated service routes and drives. 3. Tractor trailers which must be unhooked or parked must use steel plates under dolly wheels to prevent damage to the asphalt paving surface. In addition, wheel blocking must be available for use. Tractor trailers are to be removed from the loading areas after unloading. No parking or storing of such trailers will be permitted in the Center. 4. Except for small parcel packages, no deliveries will be permitted through the malls unless Tenant does not have a rear service door. In such event, prior arrangements must be made with the Resident Mall Supervisor for delivery. Merchandise being received shall immediately, be moved into Tenant's Premises and not be left in the service or receiving areas. 5. Tenant is responsible for storage and removal of its trash, refuse and garbage. Tenant shall not dispose of the following items in drains, sinks or commodes: plastic products (plastic bags, straws, boxes); sanitary napkins; tea bags; cooking fats; cooking oils; any meat scraps or cutting residue; petroleum products (gasoline, naptha, kerosene, lubricating oils); paint products (thinner, brushes); or any other item which the same are not designed to receive. All Store Floor Area of Tenant, including vestibules, entrances and returns, doors, fixtures, windows and plate glass, shall be maintained in a safe, neat and clean condition. 6. Other than as permitted under the provisions of Section 10.4 or Exhibit "E," Tenant shall not permit or suffer any advertising medium to be placed on mall walls, on Tenant's mall or exterior windows, on standards in the mall, on the sidewalks or on the parking lot areas or light poles. No permission, expressed or implied, is granted to exhibit or display any banner, pennant, sign, and trade or seasonal decoration of any size, style or material within the Center, outside the Premises. 7. Tenant shall not permit or suffer the use of any advertising medium which can be heard or experienced outside of the Premises, including, without limiting the generality of the foregoing, flashing lights, searchlights, loud speakers, phonographs, radios or television. No radio, television, or other communication antenna equipment or device is to be mounted, attached, or secured to any part of the roof, exterior surface. or anywhere outside the Premises, unless Landlord has previously given its written consent. Notwithstanding the foregoing but provided the same have been approved by Landlord on Tenant's Plans, Tenant shall be allowed to place a full size race car within the Premises in the area immediately fronting on Tenant's entrance to the Premises. Landlord acknowledges that the race car may be fitted with operating lights, including flashing lights, a "fogging" device to simulate exhaust emissions and race car sound effects. However, Tenant's operation of such race car shall remain subject to the terms and conditions of the Lease (including, but not limited to, Section 8.4 thereof) and shall not cause an adverse effect on the Center or activities conducted in or from the Common Areas or interfere with any other tenant's quiet enjoyment of its premises. 8. Tenant shall not permit or suffer merchandise of any kind at any time to be placed, exhibited or displayed outside its Premises, nor shall Tenant use the exterior sidewalks or exterior walkways of its Premises to display, store or place any merchandise. No sale of merchandise by tent sale, truck load sale or the like, shall be permitted on the parking lot or other common areas. 9. Tenant shall not permit or suffer any portion of the Premises to be used for lodging purposes, nor conduct or permit any unusual firing, explosion or other damaging or dangerous hazard within the Premises or the Common Area. 10. Tenant shall not permit or suffer any portion of the Premises to be used for any warehouse operation, or any assembling, manufacturing, distilling, refining, smelting, industrial, agricultural, drilling or mining operation, adult bookstore or cinema, peepshow, entertainment or sale of products of an obscene or pornographic nature or predominately sexual nature. 11. Tenant shall not, in or on any part of the Common Area: (a) Vend, peddle or solicit orders for sale or distribution of any merchandise, device, service, periodical, book, pamphlet or other matter whatsoever. (b) Exhibit any sign, placard, banner, notice or other written material, except for activities as approved in writing by Landlord. (c) Distribute any circular, booklet, handbill, placard or other material, except for activities as approved in writing by Landlord. (d) Solicit membership in any organization, group or association or contribution for any purpose. (e) Create a nuisance. EXHIBIT "D" Page 1 35 (f) Use any Common Areas (including the Enclosed Mall) for any purpose when none of the other retail establishments within the Center is open for business or employment, except for activities as approved in writing by Landlord. (g) Throw, discard, or deposit any paper, glass or extraneous matter of any kind except in designated receptacles, or create litter or hazards of any kind. (h) Deface, damage or demolish any sign, light standard or fixture, landscaping materials or other improvement within the Center, or the property of customers, business invitees or employees situated within the Center. EXHIBIT "D" Page 2 36 SIGN CRITERIA Tenant will not erect any signs except in conformity with the following policy: (a) Wording on storefront signs shall be limited to store or trade name only. Each party's customary signature or logo, hallmark insignia or other trade identification will be respected. (b) Signs of the flashing, blinking, rotating, moving, or animated types or audible type signs are not permitted except for portions of East Broadway. (c) The size of all Tenant's signs shall be limited. The scale and concept of the enclosed mall requires the use of signs which are not larger than necessary to be legible from within the mall. Thus, except for department store signs, Tenant's signs shall be located within the limits of its storefront and shall not project more than 6 inches beyond the storefront and shall conform to the following proportionate height criteria: (1) 30' storefront: 18" capitals 12" body (2) 30' to 60' storefront: 24" capital 18" body (3) 60' and over storefront: 30" capital 24" body In addition to complying with the above criteria, signs in the enclosed malls shall be limited in length to 70% of Tenant's frontage on the mall, and shall in no case exceed a length of 30 feet. (d) Secondary blade signs may be installed at right angles to the mall storefront(s) provided they are adjacent to the Tenant's premises and otherwise conform to the provisions of the Tenant Handbook Criteria. (e) Signs on the building's exterior are strictly prohibited. (f) Public safety decals or artwork on glass in minimum sizes to comply with applicable Code, subject to the approval of Landlord, may be used, as required by building codes or other governmental regulations. (g) Paper signs, stickers, banners or flags are prohibited. (h) No exposed raceways, ballast boxes or electrical transformers will be permitted except as required by Code. (i) Sign company names or stamps shall be concealed (Code permitting). (j) Except as otherwise approved in writing by Landlord and by a Major Tenant with respect to stores within one hundred fifty feet (150') of the entrance of such Major Tenant's Building, only one (1) primary sign and one (1) secondary blade sign for a Tenant's location will be permitted within the Enclosed Mall areas; provided, however, that if a Tenant has (a) more than sixty feet (60') of storefront and (b) more than one (1) entrance, such Tenant will be permitted one (1) primary sign and one (1) secondary blade sign for each of its entrances. Corner Tenants may have one (1) primary sign and one (1) secondary blade sign on each side of the corner Tenant's location fronting the Mall. (k) Signs and identifying marks shall be placed entirely within the boundaries of Tenant's Premises except blade signs as specified in paragraph (d) above with no part higher than 13 feet above the finished floor line, or lower than 8 feet to the finished floor line. (1) Sign letters may be back-lighted with lamps or tubes entirely concealed within the depth of the letter or may be opaque or translucent plastic face with no visible openings. Maximum brightness allowed for interior (enclosed mall) signs will be 100 foot lamberts taken at the letter face and must comply with all building and electrical codes. (m) Exposed sign illumination or illuminated sign cabinets or modules are not permitted. (n) Tenant shall not install any roof top signs. (o) Tenant shall not install any pylon signs. (p) All signs shall be subject to the Landlord's written approval before fabrication. (q) Three (3) complete sets of sign drawings must be submitted to the Landlord for written approval before fabrication. Tenant's sign drawings must include the following: 1. Elevation view of storefront showing sign (drawn to accurate scale) with dimensions of height of letters and length of sign. 2. Color sample of sign panel. 3. Color sample of sign letters. EXHIBIT "E" Page 1 37 4. Cross section view through sign letter and sign panel showing location of sign relative to the storefront line and showing the dimensioned projection of the face of the letter from the storefront face. The Landlord shall not be responsible for the cost of refabrication of signs fabricated, ordered or construed, that do not conform to the Tenant Handbook Signage Criteria. EXHIBIT "E" Page 2 EX-10.13 15 IRVINE RETAIL PROPERTIES COMPANY RETAIL SPACE 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.13 IRVINE RETAIL PROPERTIES COMPANY RETAIL SPACE LEASE LBE TECHNOLOGIES, INC., a California corporation, dba "NASCAR Silicon Motor Speedway" TENANT IRVINE SPECTRUM CENTER 2 RETAIL SPACE LEASE THIS LEASE ("Lease") is entered into as of the date set forth in Section 1.1 by and between Landlord and Tenant. ARTICLE 1 BASIC LEASE PROVISIONS 1.1 Date of April 22, 1998 Lease: 1.2 Landlord: IRVINE RETAIL PROPERTIES COMPANY, a division of The Irvine Company, a Delaware corporation 1.3 Tenant: LBE TECHNOLOGIES, INC., a California corporation 1.4 Tenant's NASCAR Silicon Motor Speedway (Article 11) Trade Name: 1.5 Shopping Irvine Spectrum Center; located in the City of Irvine, County (Article 2) Center: of Orange, State of California. Premises: Address: 71 Fortune Drive, Space 31, Irvine Spectrum (Article 3) Center, Phase II, Irvine, CA 92618, the approximate location of which is shown on Exhibit B. 1.7 Floor Area: Approximately five thousand two hundred eighteen (5,218) (Article 3) square feet. 1.8 Term: eighty four (84) months. (Article 4) 1.9 Opening N/A (Article 4) Date: OR 1.10 Time to [***] days following Substantial Completion of the (Article 4) Complete Premises and delivery of possession of the Premises to Tenant's Tenant; provided, however, in the event that Tenant is Work: delayed in submitting plans, or receiving from the City of Irvine its use permit as a result of Landlord's failure to comply with the terms of this Lease, then the Time To Complete Tenant's Work shall be extended one (1) day for each day of delay caused by Landlord's failure to comply with the terms of this Lease. 1.11 Delayed If Tenant fails to open for business within the Premises within (Article 6) Opening [***] days following the Commencement Date as set forth Rental: forth in Section 4.1, Tenant shall pay to Landlord, as Additional Rental, and in addition to Minimum Annual Rental, the sum of [***] per month for each month Tenant is not open for business. Tenant shall pay such amount to Landlord as of the thirty-first (31st) day that Tenant is not open for business. 1.12 Minimum (Article 7) Annual Rental:
Dollars Per Square Foot Months Following Per Annum Dollars Per Annum Dollars Per Month Commencement Date [***] [***] [***] 1-24 [***] [***] [***] 25-60 [***] [***] [***] 61-84
*** Confidential treatment requested. 3
3 Percentage [***] on automobile racing simulators; (Article 7) Rate: [***] on sale of all merchandise and other items. 1.14 Use of The Premises shall be used for the primary (Article 11) Premises: purpose of conducting a simulated interactive automobile entertainment center, including, the operation of automobile racing simulators (operated by the use of coins, tokens or otherwise), and the incidental retail sale of high quality auto racing and entertainment accessories. In addition, Tenant shall have the right to sell, on an incidental basis (from not more than five percent (5%) of the Floor Area of the Premises) non-alcoholic beverages and the snack items shown on the menu attached hereto as Exhibit I. The Premises shall be used solely for the use stated above and for no other use or purpose. 1.15 Initial [***] per square foot of Floor Area within the (Article 15) Promotional Premises (one time charge). Assessment: 1.16 Promotional [***] per square foot of Floor Area within (Article 15) Charge: the Premises per annum. 1.17 Insurance [***]. (Article 16) Limits: 1.18 Architectural [***] (one time charge). (Exhibit C) Review Fee: 1.19 Security [***] (Article 22) Deposit: 1.20 Guarantor(s): None. (Exhibit E) 1.21 Broker(s): Corti-Gilchrist Partnership, Inc. (Article 27) 1.22 Addresses for Notices and Payments: (Article 24)
LANDLORD TENANT Notices To: Notices To: Irvine Retail Properties Company LBE Technologies, Inc. 8001 Irvine Center Drive, Suite 1130 71 Fortune Drive, Suites 29 and 31 Irvine, California 92618 Irvine Spectrum Center, Phase II Irvine, California 92618 with copy to: In the event of default: Irvine Retail Properties Company Gray Cary Ware & Freidenrich 550 Newport Center Drive 400 Hamilton Avenue P.O. Box 6370 Palo Alto, California 94301 Newport Beach, California 92660 Attention: James Koshland Attn: General Counsel Landlord's Address for Payment and Reports: with copy to: Irvine Retail Properties Company LBE Technologies, Inc. c/o Hollis & Associates 10401 Bubb Road Department #65044-280 Cupertino, California 95014 El Monte, California 91735 Attn: Ms. Janet Setcavage Woods Tenant's Address for Statements and Billings: LBE Technologies, Inc. 10401 Bubb Road Cupertino, California 95014 Attn: Ms. Janet Setcavage Woods
1.23 Electrical [***] per square foot of Floor Area of the (Article 10) Facility Premises per annum. Contribution Rate:
*** Confidential treatment requested. 4 4 Electrical Meter [***] (one-time charge). Reimbursement: (Article 10) 1.25 VAC Equipment [***] per square foot of the (Article H) Contribution Rate: Floor Area of the Premises per annum. This Article I is intended to supplement and/or summarize the provisions set forth in the balance of this Lease. If there is any conflict between any provisions contained in this Article I and the balance of this Lease, the balance of this Lease shall control. ARTICLE 2 EXHIBITS The following Exhibits are attached to this Lease and, by this reference, made a part of this Lease: EXHIBIT A - Site plan of a retail shopping center and/or commercial development constructed or to be constructed on real property located in the city, county and state specified in Article I ("Shopping Center"). For all purposes of this Lease (i) the term "Irvine Center" shall mean the area bounded by Fortune Drive, the Santa Ana (1-5) Freeway, and the San Diego (1-405) Freeway, and (ii) the term "Shopping Center" shall mean only the "Entertainment Center" portion (as designated on Exhibit A) of Irvine Center. Landlord, at any time, may change the shape, size, location, number and extent of the improvements shown on Exhibit A and eliminate, add or relocate any improvements to any portion of the Shopping Center including, without limitation, buildings, parking areas (including parking structures), roadways, curb cuts, temporary or permanent kiosks, displays or stands, and may add land to and/or withdraw land from the Shopping Center. Tenant acknowledges that (i) Landlord intends to develop the remainder of Irvine Center (excluding the Shopping Center) as a regional retail shopping center (the "Adjacent Center") which will be contiguous with the Shopping Center, and which will enjoy mutual reciprocal access and parking rights with the Shopping Center, and (ii) Landlord, at any time may cause one or more separate legal parcels to be created on the land constituting the Shopping Center and the Adjacent Center. The notations and designations found on Exhibit A are intended only for the convenience of Landlord and are not intended to define, limit or otherwise alter the intent or scope of this Lease or of any other lease to which Landlord may be a party, nor as a representation or warranty as to current occupancy or future occupancy of any particular tenant in the Shopping Center. EXHIBIT B - Premises. EXHIBIT C - Construction Provisions. EXHIBIT D - Tenant's Statement of Gross Sales. EXHIBIT E - Intentionally Omitted. EXHIBIT F - Tenant's Certificate EXHIBIT G - Tenant's Estoppel EXHIBIT H - Tenant Ventilating and Air-Conditioning Exhibit EXHIBIT I - Menu ADDENDUM TO LEASE - The terms and conditions set forth in the Addendum to Lease attached hereto are, by this reference, made a part of this Lease. Where, and to the extent that, any provision contained in the Addendum to Lease is contrary to or inconsistent with any provision contained in the printed portion of this Lease, the provision contained in the Addendum to Lease shall control. ARTICLE 3 PREMISES 3.1 PREMISES. Landlord leases to Tenant and Tenant leases from Landlord, for the "Term" (as defined in Article 4) and upon the covenants and conditions set forth in this Lease, the premises described in Section 1.6 ("Premises"). 3.2 RESERVATION. Landlord reserves the right to use the exterior walls, floor, roof and plenum in, above and below the Premises for the installation, maintenance, use and replacement of pipes, ducts, utility lines and systems, structural elements serving the Shopping Center and for such other purposes as Landlord deems necessary. In exercising its rights reserved herein, Landlord shall not materially and unreasonably interfere with the operation of Tenant's business on the Premises. 3.3 FLOOR AREA. The term "Floor Area", as used in this Lease, shall mean all areas designated by Landlord for the exclusive use of a tenant measured from the exterior surface of exterior walls (and extensions, *** Confidential treatment requested. -3- 5 in the case of openings) and from the center of interior demising walls, and shall include, but not be limited to, restrooms, mezzanines, patios, Warehouse or storage areas, clerical or office areas and employee areas. The Premises contain approximately the number of square feet of Floor Area specified in Section 1.7. Landlord shall have the right during the Term to remeasure the Floor Area of the Premises for accuracy. If an error is found, Landlord shall so certify to Tenant and this Lease shall be amended so as to reflect the actual Floor Area and corresponding "Minimum Annual Rental" (as defined in Section 7.2) and "Additional Rental" (as defined in Section 7.4) based on such actual Floor Area. 3.4 RELOCATION. Landlord shall have the right, at any time and from time to time upon ninety (90) days' prior written notice to Tenant, to relocate Tenant to other premises ("New Premises") within the Shopping Center; subject, however, to the following terms and conditions: (a) The New Premises shall have approximately the same Floor Area as is contained in the Premises, (b) the New Premises shall be leased to Tenant on the same terms and conditions as provided in this Lease, except that there shall be a proportionate adjustment of Minimum Annual Rental and Additional Rental based upon the Floor Area in the New Premises, (c) Landlord shall pay to Tenant, within thirty (30) days following the date Tenant initially opens for business in the New Premises, those expenses reasonably incurred by Tenant in connection with the relocation of Tenant's personal property; provided. however, Tenant has first provided Landlord with an itemized list of these expenses (accompanied with copies of invoices and proofs of payment of same), and (d) Landlord shall pay all costs of the leasehold improvements to be constructed at the New Premises and such leasehold improvements shall be substantially similar to the leasehold improvements in the Premises. In its notice to Tenant, Landlord shall set forth a timetable for completion of the leasehold improvements in the New Premises. If the New Premises is unacceptable to Tenant for any reason, Tenant shall have the right as its sole remedy hereunder, upon written notice to Landlord to be given within thirty (30) days after Landlord's notice of relocation to Tenant, to terminate this Lease on thirty (30) days' written notice to Landlord. Landlord shall pay to Tenant, within sixty (60) days after said notice is given and upon vacation of the Premises by Tenant, the unamortized book value of Tenant's leasehold improvements, excluding items removable by Tenant at the expiration of the Term pursuant to Section 27.24 (to the extent said leasehold improvements were paid for by Tenant, as evidenced by invoices and proofs of payment of same), depreciated on a straight-line basis over the Term, and Tenant shall provide Landlord with a bill of sale for said leasehold improvements. ARTICLE 4 TERM 4.1 TERM. This Lease shall be effective from and after the date specified in Section 1. I ("Date of Lease"). The term of this Lease ("Term") shall commence on that date (the "Commencement Date") which is the earliest of: (a) the date Tenant initially opens for business to the public in the Premises, (b) the date set forth in Section 1.9 as the "Opening Date", or (c) the date immediately following the expiration of the period set forth in Section 1.10 as the "Time to Complete Tenant's Work". The Term shall continue, unless sooner terminated in accordance with the provisions of this Lease, for the number of months specified in Section 1.8 from the first day of the month following the Commencement Date. ARTICLE 5 POSSESSION 5.1 SUBSTANTIAL COMPLETION. The term "Substantial Completion of the Premises", as used in this Lease, shall mean the date Landlord notifies Tenant in writing that "Landlord's Work" (as specified in Exhibit C) is substantially complete to the point that Tenant's contractor may commence the construction of "Tenant's Work" (as specified in Exhibit C. 5.2 DELIVERY OF POSSESSION. Tenant shall accept possession of the Premises from Landlord upon Substantial Completion of the Premises. Tenant shall deliver each of the following to Landlord prior to Substantial Completion of the Premises: (a) "Security Deposit", "Architectural Review Fee", "Initial Promotional Assessment", the first monthly installment of the "Promotional Charge", the first monthly installment of Tenant's estimated share of "Common Area Expenses" and the first monthly installment of "Minimum Annual Rental" (as each is defined in this Lease); (b) executed copies of policies of insurance or certificates thereof (as required under Article 16); (c) copies of governmental permits and authorizations (as required under this Lease); (d) "Final Plans" (as defined in Exhibit C) and (e) a copy of Tenant's building permit. Tenant shall pay to Landlord, upon its execution of this Lease, the sums specified in subparagraph (a) above. Landlord shall not be obligated to deliver possession of the Premises to Tenant until such items are delivered, but the date of Substantial Completion of the Premises shall not be affected by Tenant's failure to deliver any of such items. ARTICLE 6 CONSTRUCTION AND DELAYED OPENING 6.1 CONSTRUCTION. Tenant shall commence construction of Tenant's Work upon Substantial Completion of the Premises and delivery of possession of the Premises to Tenant, and shall diligently prosecute same to completion. -4- 6 6.2 DELAYED OPENING RENTAL. If Tenant fails to open for business to the public in the Premises on or before the Commencement Date, Tenant shall pay to Landlord, as Additional Rental, and in addition to Minimum Annual Rental specified in Section 7.2, the amount set forth in Section 1.11, in arrears, on the last day of the month for each month or partial month Tenant is not open for business in the Premises following the Commencement Date ("Delayed Opening Rental"). Delayed Opening Rental for any partial month shall be prorated on the basis of thirty (30) days. 6.3 CERTIFICATES. Within ten (10) days after Tenant initially opens for business to the public in the Premises, Tenant shall (a) execute and deliver to Landlord a certificate substantially in accordance with the criteria set forth in Section 21.3 of this Lease ("Tenant's Certificate"), and (b) deliver to Landlord the certificate of occupancy for the Premises issued by the appropriate governmental agency. ARTICLE 7 RENTAL 7.1 MINIMUM ANNUAL RENTAL. Tenant shall pay the sum specified in Section 1. 12 ("Minimum Annual Rental") in the monthly installments specified, in advance, on or before the first (1st) day of each month, without prior demand and without offset or deduction, commencing on the Commencement Date. Should the Commencement Date be a day other than the first (1st) day of a calendar month, then the monthly installment of Minimum Annual Rental for the first partial month shall be equal to one-thirtieth (1/30th) of the monthly installment of Minimum Annual Rental for each day from the Commencement Date to the end of the partial month. 7.2 ADJUSTMENT TO MINIMUM ANNUAL RENTAL. The Minimum Annual Rental payable under Section 1.12 and this Article 7 shall be adjusted on each anniversary date of the Commencement Date of this Lease ("Adjustment Date") to reflect any increases in the cost of living in accordance with the "Index" (as defined in Section 27.21 of this Lease), using as the base month ("Base Month") the month ninety (90) days prior to the Commencement Date, and using as the comparison month ("Comparison Month") the month ninety (90) days prior to the Adjustment Date. 7.3 PERCENTAGE RENTAL. (a) During the Term, Tenant shall pay to Landlord, as provided below, the dollar amount by which the percent specified in Section 1.13 ("Percentage Rate") of Tenant's "Gross Sales" (as defined in subparagraph (b) below) exceeds the Minimum Annual Rental paid by Tenant to Landlord during each calendar year, or at Landlord's option, its fiscal year, of the Term ("Percentage Rental"). On or before the tenth (10th) day of each month during the Term following the Commencement Date, Tenant shall pay to Landlord the amount by which the Percentage Rate of Gross Sales during the preceding month exceeds the installment of Minimum Annual Rental paid by Tenant for that month. For the purpose of computing Percentage Rental, Gross Sales made during the first partial month, if any, following the Commencement Date shall be added to the Gross Sales made during tile first full calendar month (provided the first partial month is within the same calendar (or fiscal) year as the first full month) and Tenant shall pay to Landlord the amount by which the Percentage Rate of Gross Sales during this entire period exceeds the monthly installments of Minimum Annual Rental which were paid by Tenant during this period. Tenant shall furnish to Landlord a certified statement of Gross Sales within ten (10) days after the close of each calendar month and a certified annual statement, including a monthly breakdown of Gross Sales, on or before the twentieth (20th) day after the end of each year. Statements shall be in the form and certified in the manner shown in Exhibit D attached to this Lease, which form Landlord may revise from time to time. Statements shall include the Gross Sales of all subtenants, licensees and concessionaires of Tenant. Following receipt by Landlord of Tenant's certified annual statement, Landlord shall determine the Gross Sales of Tenant for the preceding year and the amounts paid to Landlord as Minimum Annual Rental and Percentage Rental and shall make an adjustment as follows: If Tenant paid to Landlord an amount greater than the Percentage Rental required to be paid for said year, Tenant shall be entitled to a credit against Tenant's next payment(s) of Percentage Rental for the amount of the overpayment. If Tenant paid an amount less than the Percentage Rental required to be paid, the difference shall be paid to Landlord with the submission of said certified annual statement. Percentage Rental shall be computed separately with respect to each year. For the purpose of computing Percentage Rental, Tenant's Gross Sales for any period during which Tenant does not continuously and uninterruptedly conduct its business, as required by Article 11, shall be deemed to be Tenant's Gross Sales for the corresponding period during the last year in which Tenant operated continuously and uninterruptedly. (b) The term "Gross Sales", as used in this Lease, shall mean the gross selling price of all merchandise or services sold or rented in or from the Premises by Tenant, its subtenants, licensees and concessionaires, whether for cash or on credit and whether made by store personnel or by machine as well as any business interruption or loss of income insurance proceeds attributable to lost sales revenue receive by Tenant with respect to the Premises, excluding therefrom the following: (i) The selling price of all merchandise returned by customers and accepted for full credit; (ii) interest or other charges paid by customers for extension of credit; (iii) receipts from vending machines used solely by Tenant's employees; (iv) sales taxes, excise taxes or gross receipts taxes imposed by governmental entities upon the sale of merchandise or services, but only if collected from customers separately from tile selling price and paid directly to the respective governmental entities; and (v) proceeds from the sale of fixtures, equipment or property which are not stock in trade. The exclusions listed in this subparagraph (b) shall be referred to as "Exclusions from Gross Sales". All sales originating at the Premises shall be deemed made and completed from the Premises even though bookkeeping or payment of the account is -5- 7 transferred to another location for collection or filling of the sale or service order and actual delivery of the merchandise is made from a location other than the Premises. Each installment sale, credit sale or layaway sale shall be treated as a sale for the full cash price at the time of such sale or deposit. 7.4 ADDITIONAL RENTAL. Tenant shall pay, as "Additional Rental", all sums required to be paid by Tenant to Landlord pursuant to this Lease in addition to Minimum Annual Rental and Percentage Rental (including, without limitation, interest, late charges, Service Charges, reimbursement for attorneys' fees and expenses and auditing costs). Landlord shall have the same rights and remedies for the nonpayment of Additional Rental as it has with respect to the nonpayment of Minimum Annual Rental. It is the intention of Landlord and Tenant that the Minimum Annual Rental, Percentage Rental and Additional Rental to be paid hereunder shall be paid to Landlord absolutely net without deduction of any amount of any nature whatsoever, except as otherwise expressly provided in this Lease. 7.5 PLACE OF PAYMENT. Tenant shall pay Minimum Annual Rental, Percentage Rental and Additional Rental to Landlord at Landlord's Address for Payments and Reports specified in Section 1.22, or to such other address and/or person as Landlord may from time to time designate in writing to Tenant. 7.6 LATE PAYMENTS. If Tenant fails to pay when the same is due any Minimum Annual Rental, Percentage Rental or Additional Rental, the unpaid amounts shall bear interest at the maximum lawful rate from the date due to and including the date of payment. In addition, Tenant acknowledges that the late payment of any installment of Minimum Annual Rental, Percentage Rental or Additional Rental will cause Landlord to incur certain costs and expenses, the exact amount of which are extremely difficult or impractical to fix. These costs and expenses may include, without limitation, administrative and collection costs and processing and accounting expenses. Therefore, if any installment of Minimum Annual Rental, Percentage Rental or Additional Rental is not received by Landlord from Tenant within five (5) days after such installment is due, Tenant shall immediately pay to Landlord a late charge equal to [***] for any installment of Minimum Annual Rental due, and [***] for any installment of Percentage Rental or Additional Rental due. Landlord and Tenant agree that this late charge represents a reasonable estimate of the costs and expenses Landlord will incur and is fair compensation to Landlord for its loss suffered by reason of late payment by Tenant. Upon accrual, all such late charges shall be deemed Additional Rental. ARTICLE 8 TENANT FINANCIAL DATA 8.1 RECORDATION OF SALES. At the time of a sale or other transaction, Tenant shall record the sale or other transaction either in a cash register or computer with sealed continuous tape or by using any other method of recording sequentially numbered purchases and keeping a cumulative total. 8.2 BOOKS AND RECORDS. For a period of three (3) years following the submittal of its certified annual statement for each calendar or fiscal year, Tenant shall keep and maintain full and accurate books of account and records relative to transactions from the Premises in accordance with generally accepted accounting principles consistently applied. The books of account and records kept and maintained by Tenant for audit purposes shall include all records, receipts, journals, ledgers and documents reasonably necessary to enable Landlord or its auditors to perform a complete and accurate audit of Tenant's Gross Sales and Exclusions from Gross Sales in accordance with generally accepted accounting principles. 8.3 AUDITS. Landlord, at any time within three (3) years after receipt of any certified annual statement and upon not less than fifteen (15) days' prior written notice to Tenant, may cause an audit to be made of Tenant's Gross Sales and Exclusions from Gross Sales and all of Tenant's records and books necessary to audit such items. Tenant shall make all such books and records available for the audit at the Premises or at Tenant's offices in the state in which the Premises are situated. If the audit discloses an underpayment of Percentage Rental, Tenant shall immediately pay to Landlord the amount of the underpayment, with interest at the "Interest Rate", as defined in Section 27.18, from the date the payment should have been made through and including the date of payment. If the audit discloses an underreporting of Gross Sales in excess of two percent (2%) of the reported Gross Sales, whether or not additional Percentage Rental is due, then Tenant shall also immediately pay to Landlord all reasonable costs and expenses incurred in the audit and in collecting the underpayment, including auditing costs and attorneys' fees. If the audit discloses an overpayment of Percentage Rental, Tenant shall be entitled to a credit in the amount of the overpayment against the next payment(s) of Percentage Rental due. 8.4 FINANCIAL STATEMENTS. Within fifteen (15) days after Landlord's written request, Tenant shall furnish Landlord with financial statements including, but not limited to, balance sheets, profit and loss statements, income statements and statements of changes in financial condition reflecting Tenant's current financial condition, certified by Tenant or its financial officer. If Tenant is a publicly-traded corporation, delivery of Tenant's last published financial information shall be satisfactory for purposes of this Section 8.4. Any information obtained from Tenant's financial statements shall be confidential and shall not be disclosed other than to carry out the purposes of this Lease; provided, however, Landlord shall incur no liability for the inadvertent disclosure of any such information. Landlord may divulge the contents of any financial statements in connection with any financing arrangement or sale of Landlord's interest in the Premises or Shopping Center or in connection with any administrative or judicial proceedings. *** Confidential treatment requested. -6- 8 ARTICLE 9 TAXES 9.1 REAL PROPERTY TAXES. (a) As used in this Lease, the term "Taxes" shall include any form of tax or assessment, license fee, license tax, tax or excise on rental, or any other levy, charge, expense or imposition imposed by any Federal, state, county or city authority having jurisdiction, or any political subdivision thereof, or any school, agricultural, lighting, drainage or other improvement or special assessment district (individually and collectively, "Governmental Agencies") on any interest of Landlord or Tenant (including any legal or equitable interest of Landlord or its mortgagee, if any) in the Premises, the remainder of the Shopping Center or the underlying realty including, but not limited to: (i) Any impositions (whether or not such impositions constitute tax receipts to Governmental Agencies) in substitution, partially or totally, of any impositions now or previously included within the definition of real property taxes including, without limitation, those imposed or required by Governmental Agencies to increase tax increments to Governmental Agencies and for services such as fire protection, street, sidewalk and road maintenance, refuse removal or other governmental services formerly provided without charge to property owners or occupants; (ii) any impositions allocable to or measured by the area of the Premises, the sales generated from the Premises or any rental payable under this Lease; and (iii) any impositions upon this Lease transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. The term "Taxes" shall not include Landlord's general income taxes, inheritance, estate or gift taxes. (b) From and after the Commencement Date, Tenant shall pay to Landlord, as Additional Rental, a share of the Taxes pursuant to subparagraph (c) below. Taxes for any partial year shall be prorated. Landlord, at its option, may collect Tenant's payment of its share of Taxes after the actual amount of Taxes are ascertained or in advance, monthly or quarterly, based upon estimated Taxes. If Landlord elects to collect Tenant's share of Taxes based upon estimates, Tenant shall pay to Landlord from and after the Commencement Date, and thereafter on the first (1st) day of each month or quarter during the Term (as determined by Landlord), an amount estimated by Landlord to be the monthly or quarterly Taxes payable by Tenant. Landlord may periodically adjust the estimated amount. If Landlord collects Taxes based upon estimated amounts, then following the end of each calendar year or, at Landlord's option, its fiscal year, Landlord shall furnish Tenant with a statement covering the year just expired showing the total Taxes payable by Tenant for that year and the payments made by Tenant with respect to that year, as set forth above. If the actual Taxes payable for that year exceed Tenant's payments for that year, Tenant shall pay to Landlord the deficiency within ten (10) days after its receipt of the statement. If Tenant's payments exceed the actual Taxes payable for that year, Tenant shall be entitled to offset the excess against the next payment(s) of Taxes that become due to Landlord. (c) If the Premises and underlying realty are part of a larger parcel for assessment purposes or are within a multi-level building ("larger parcel"), Tenant's share of the Taxes shall be determined by multiplying all of the Taxes on the larger parcel, excluding Taxes on the "Common Area" (as defined in Section 13.1), by a fraction, the numerator of which shall be the Floor Area of the Premises and the denominator of which shall be the Floor Area in the larger parcel which is occupied as of the commencement of the applicable calendar or fiscal year, exclusive of the Common Facilities. 9.2 OTHER PROPERTY TAXES. Tenant shall pay, prior to delinquency, all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operation, trade fixtures, leasehold improvements, merchandise and other personal property in, on or upon the Premises. If any such items of property are assessed with property of Landlord, then the assessment shall be equitably divided between Landlord and Tenant. Landlord shall reasonably determine the basis of prorating and dividing any of these assessments. No taxes, assessments, fees or charges referred to in this Section 9.2 shall be considered Taxes under the provisions of Section 9.1. 9.3 CONTESTING TAXES. If Landlord contests any Taxes levied or assessed during the Term, Tenant shall pay to Landlord that portion of all costs incurred by Landlord in connection with such contest, pursuant to the formula set forth in Section 9.1(c) for the allocation of Taxes. If Landlord receives a refund pursuant to its contest of any Taxes, then, provided Tenant has paid its share of the total Taxes and its share of the costs incurred by Landlord in connection with such contest as required by this Article 9, Landlord shall reimburse Tenant that portion of the total refund prorated in the same manner as set forth in Section 9.1(c). ARTICLE 10 UTILITIES 10.1 TENANT'S PAYMENT OF UTILITY CHARGES. Tenant agrees to pay directly to the appropriate utility company all charges for utility services supplied to Tenant for which there is a separate meter and/or submeter to the Premises. Tenant agrees to pay to Landlord its share of all charges for utility services supplied to the Premises for which there is no separate meter or submeter upon billing by Landlord of Tenant's share based on the reasonable estimates of Landlord's consultant or engineer, or at Landlord's election Tenant shall pay Landlord's cost for installing separate meters and shall thereafter pay based upon such meters. If no such charges are established by Landlord, then the costs of such utilities shall be included as part of Common Area Expenses. Landlord shall have the right at any time and from time to time during the Term to either continue to -7- 9 contract with the existing provider of any utility service for the Premises or to contract with a different company to provide such service. 10.2 LANDLORD'S OPTION TO PROVIDE UTILITIES. (a) Landlord shall have the option from time to time to supply any and all utilities to the Premises. If Landlord shall elect to supply any utilities to the Premises, Tenant will pay all charges, as Additional Rental, for its requirements for such service tendered by Landlord. Tenant shall pay Landlord, or Landlord's designated third party service provider, within (10) days after delivery to Tenant of statements therefor at the applicable rates determined by Landlord from time to time. Landlord agrees that such applicable rates shall not exceed the "all-inclusive" rate which the Tenant would be charged directly for the same service by the public utility company serving the general area in which the Premises is located, but in no event shall the applicable rate be less than Landlord's actual "all-inclusive" cost of providing such service. (b) Without limitation on the foregoing provisions of this Section 10.2, Landlord may discontinue providing any utilities then being provided by Landlord upon thirty (30) days' prior written notice to Tenant, in which event Tenant shall obtain such utilities directly from the applicable utility company, and be responsible for all of the costs therefor. (c) If Landlord supplies any utilities to the Premises, Landlord will require that Tenant at Tenant's expense maintain, repair and replace any portion of the systems and equipment therefor exclusively serving the Premises. Tenant acknowledges that the cost for maintenance and operation of the systems and equipment required to deliver the utilities to the Premises (and not maintained, repaired and replaced by Tenant pursuant to the immediately preceding sentence) is a component of Common Area Expenses, as defined in Section 13.5, and subject to reimbursement under Section 13.6. (d) Tenant acknowledges that Landlord currently has elected to supply electricity to the Premises. With respect to such utility service, in each calendar or fiscal year, Tenant shall pay Landlord, as Additional Rental (a) an annual amount in twelve (12) equal monthly installments together with Minimum Annual Rental (the "Electrical Facility Contribution"), determined by multiplying the amount set forth in Section 1.23 by the Floor Area of the Premises, to reimburse Landlord for the cost of providing the electrical systems necessary to supply electricity to the Premises, and (b) a one-time charge upon execution of this Lease equal to the amount set forth in Section 1.24, as a reimbursement to Landlord for the cost of the electrical meter servicing the Premises ("Electrical Meter Reimbursement"). 10.3 VENTILATING AND AIR-CONDITIONING. Exhibit "H" specifies the obligations of Landlord and Tenant (other than those obligations set forth in Article 13) regarding the ventilating and air-conditioning equipment and system serving the Premises or the Shopping Center. Tenant covenants and agrees to pay to Landlord, as Additional Rental and in the same manner as Minimum Annual Rental is payable, all charges as the same may be adjusted from time to time, and as more particularly set forth in said Exhibit H. Landlord, in its sole discretion, shall have the right, from time to time, to alter the ventilating and air conditioning systems and equipment serving the Shopping Center, or any part thereof, and Tenant agrees to execute and deliver to Landlord such documentation as may be required to effect such alteration. 10.4 NO LIABILITY OF LANDLORD. Landlord shall not be liable in damages for any failure or interruption of any utility or service. No failure or interruption of any utility or service shall entitle Tenant to terminate this Lease or to discontinue making payment of Minimum Annual Rental, Percentage Rental or Additional Rental. If Tenant fails to pay when due any charges referred to in this Article 10, Landlord may pay the charge and Tenant shall reimburse Landlord, as Additional Rental, for any amounts so paid by Landlord within ten (10) days after demand therefor. ARTICLE 11 TENANT'S CONDUCT OF BUSINESS 11.1 PERMITTED TRADE NAME AND USE. Tenant shall use the Premises solely under the trade name specified in Section 1.4 and shall not use the Premises under a different trade name without Landlord's prior written consent, which consent shall not be unreasonably withheld. Tenant shall use the Premises solely for the use specified in Section 1.14. Tenant acknowledges that Tenant's agreement to use the Premises solely for the use specified in Section 1.14 is a material inducement to Landlord to enter into this Lease, and that Tenant shall not be permitted to change the use of the Premises without the prior written consent of Landlord, which consent Landlord may grant or withhold in its sole and absolute discretion. Tenant agrees that the foregoing provision is reasonable in light of Landlord's legitimate interest in determining the mix of uses which will be present in the Shopping Center. 11.2 COVENANT TO OPEN AND OPERATE. Tenant covenants to open for business to the public in the Premises fully fixturized and stocked with merchandise and inventory, on or before the Commencement Date. From and after the Commencement Date, but subject to temporary closures necessitated by casualty, condemnation or permitted remodeling, Tenant shall operate continuously and uninterruptedly in the entire Premises the business which it is permitted to operate under the provisions of this Lease and, at all times, shall keep and maintain within -8- 10 the Premises an adequate stock of merchandise and trade fixtures to service and supply the usual and ordinary requirements of its customers. 11.3 HOURS OF BUSINESS. From and after the Commencement Date, Tenant shall keep the entire Premises continuously open for business during the days and hours established by Landlord from time to time for the Shopping Center generally, including, but not limited to, all holidays except Thanksgiving Day, Christmas Day, New Year's Day and Easter Day. Subject to Article 17 and Section 27.25, Tenant shall pay to Landlord a Two Hundred Fifty Dollar ($250.00) per day penalty for each day that Tenant fails to continuously remain open for business during the hours previously established by Landlord. Tenant shall have its window displays, exterior signs and exterior advertising displays adequately illuminated continuously during those hours and days that the Premises are required to be open for business to the public. 11.4 HOURS FOR DELIVERIES. Tenant shall use its best efforts to require all deliveries, (exclusive of United Parcel Service and U.S. Postal Service), loading, unloading and services to the Premises to be completed between 7:00 a.m. and 10:00 a.m. each day. All deliveries, loading, unloading and services to the Premises shall be accomplished within the service areas of the Shopping Center. 11.5 RULES AND REGULATIONS. Tenant shall keep the Premises in a neat and clean condition, free from any objectionable noises, odors or nuisances, shall operate its business without unreasonable noise or vibration emanating from the Premises, and shall comply with all applicable health, safety and police laws, ordinances and regulations of any governmental authority having jurisdiction over the Premises or the Shopping Center. Tenant shall not sell merchandise from vending machines or allow any coin or token operated vending machine on the Premises, except those exclusively used by employees and pay telephones provided for the convenience of its customers. Tenant shall deposit trash and rubbish only within receptacles approved by Landlord Tenant shall cause trash receptacles to be emptied at Tenant's cost and expense; provided, however, at Landlord's option, Landlord may provide trash removal services, the cost of which shall be paid for by Tenant either (a) as a Common Area Expense, or (b) pursuant to an equitable proration of said costs by Landlord. Tenant shall not display or sell merchandise or allow carts, signs or any other object to be stored or to remain outside the Premises. Tenant shall not erect any aerial or antenna on the roof, exterior walls or any other portion of the Premises. Tenant shall not solicit or distribute materials in the Common Area. Landlord, from time to time, may establish further reasonable and non-discriminatory rules and regulations for the Shopping Center, and Tenant shall abide by same, Tenant shall neither conduct on the Premises, nor advertise with respect to the Premises, any liquidation, "going out of business", distress, "lost our lease" or similar sale. 11.6 ADVERTISING MEDIA. Tenant shall not affix upon the Premises any sign, advertising placard, name, insignia, trademark, descriptive material or other like item unless approved by Landlord in writing, in advance, in accordance with Exhibit C. No advertising medium shall be utilized by Tenant which can be heard or seen outside the Premises including, without limitation, flashing lights, searchlights, loudspeakers, phonographs, radios or televisions. Tenant shall not display, paint or place any handbill, bumper sticker or other advertising device on any vehicle parked in the Common Area. Tenant shall not distribute any handbills or other advertising matter in the Shopping Center. Notwithstanding the above, Tenant shall erect signs at its own expense in accordance with (a) the sign criteria established by Landlord, (b) the Final Plans, and (c) all applicable laws, ordinances and regulations, and shall maintain these signs in good condition and repair during the Term. 11.7 RADIUS RESTRICTION. During the Term, neither Tenant nor any entity owned by or controlled directly or indirectly by or under common control with Tenant, nor any shareholder or partner holding more than fifty percent (50%) of the shares or partnership interest, as the case may be, of Tenant shall own, operate or have any financial interest in any business similar to the business of Tenant, as set forth in Section 1. 14, if such other business is opened after the Date of Lease specified in Section 1.1 and its front door or storefront opening is located within three (3) miles of the front door or storefront opening of the Premises. Without limiting Landlord's remedies if Tenant violates this covenant, Landlord, for so long as Tenant is operating the other business, may include the gross sales (as the term Gross Sales is defined in this Lease) of the other business in the Gross Sales made from the Premises for the purpose of computing Percentage Rental. Landlord or its authorized representative, at all reasonable times during the Term and for a period of at least three (3) years after expiration or earlier termination of this Lease, shall have the right to inspect, audit, copy and make extracts of the books, records and accounts pertaining to such other business, in the manner set forth in Section 8.3, for the purpose of determining and verifying the additional Percentage Rental due to Landlord pursuant to this Section 11.7. 11.8 SHOPPING CENTER NAME. Tenant shall use the name of the Shopping Center in its advertising as the address reference for the Premises. Tenant shall not use the name of the Shopping Center for any other purpose. Landlord reserves the right, in its sole discretion, to change the name and logo of the Shopping Center at any time. ARTICLE 12 MAINTENANCE, REPAIRS AND ALTERATIONS 12.1 LANDLORD'S MAINTENANCE OBLIGATIONS. Landlord shall maintain in good condition and repair the foundations, roofs and exterior surfaces of the exterior walls of all buildings (exclusive of doors, door frames, door checks, windows, window frames and, unless Landlord elects to include cleaning of the storefronts and storefront awnings of tenants of the Shopping Center as part of Common Area maintenance pursuant to Section -9- 11 13.2 below, storefronts and storefront awnings); provided, however, if any repairs or replacements are necessitated by the negligence or willful acts of Tenant or anyone claiming under Tenant or by reason of Tenant's failure to observe or perform any conditions or agreements contained in this Lease, or caused by alterations, additions or improvements made by Tenant or anyone claiming under Tenant, the cost of same shall be the sole responsibility of Tenant. It is acknowledged by Tenant that the cost of some of Landlord's maintenance obligations referenced in the preceding sentence shall be prorated and paid as Common Area Expenses. Notwithstanding anything to the contrary contained in this Lease, Landlord shall not be liable for failure to make repairs required to be made by Landlord under the provisions of this Lease unless Tenant has previously notified Landlord in writing of the need for such repairs and Landlord has failed to commence and complete the repairs within a reasonable period of time following receipt of Tenant's written notification. Tenant waives the provisions of Sections 1941 and 1942 of the Civil Code of the State of California, or any superseding statute, and of any other law permitting Tenant to make repairs at Landlord's expense. 12.2 LANDLORD'S RIGHT OF ENTRY. Landlord, its agents, contractors, servants and employees may enter the Premises following reasonable notice to Tenant and Landlord's good faith efforts to coordinate such entry with Tenant's on-site management so as to minimize interference with Tenant's business operations (except in a case of emergency): (a) to examine the Premises; (b) to perform any obligation or exercise any right or remedy of Landlord under this Lease; (c) to make repairs, alterations, improvements or additions to the Premises or to other portions of the Shopping Center as Landlord deems necessary or desirable; (d) to perform work necessary to comply with laws, ordinances, rules or regulations of any public authority or of any insurance underwriter; and (e) to perform work that Landlord deems necessary to prevent waste or deterioration in connection with the Premises should Tenant fail to commence such repairs or, after commencing same, fail to diligently pursue such repairs to completion within three (3) days after written demand by Landlord. If Landlord makes any repairs which Tenant is obligated to make pursuant to the terms of this Lease, Tenant shall pay the cost of such repairs to Landlord, as Additional Rental, promptly upon receipt of a bill from Landlord for same. In exercising its right of entry herein provided, Landlord shall not materially and unreasonably interfere with the operation of Tenant's business on the Premises. 12.3 TENANT'S MAINTENANCE OBLIGATIONS. Tenant, at its expense, shall keep the Premises and all utility facilities and systems exclusively serving the Premises ("Tenant Utility Facilities") in first-class order, condition and repair and shall make replacements necessary to keep the Premises and Tenant Utility Facilities in such condition. All replacements shall be of a quality equal to or exceeding that of the original. At the option of Landlord, (i) Tenant shall contract with a service company approved by Landlord for the regular (but not less frequently than quarterly) maintenance, repair and/or replacement (when necessary) of the heating, ventilating and air conditioning equipment serving the Premises and shall provide Landlord with a copy of any service contract within ten (10) days following its execution, or (ii) Landlord may contract with a service company of its own choosing (or provide such service itself) for the maintenance, repair and/or replacement of the heating, ventilating and air conditioning equipment serving the Premises and collect a reserve or bill Tenant for the cost of same, as Additional Rental. The sum so billed to Tenant shall become immediately due to Landlord. In either event, Landlord may elect to be responsible for the replacement, as necessary, of the heating, ventilating and air conditioning equipment or any elements, components or portions thereof, in which event Landlord shall have the right to establish and collect from Tenant, as Additional Rental, a reasonable reserve to be maintained by Landlord and used for the purpose of paying the cost of such replacement. Such reserve may, at Landlord's option, either be collected as part of Common Area Expenses or billed to Tenant separately. 12.4 ALTERATIONS. After initially opening the Premises for business, without first obtaining the written approval of Landlord in accordance with the provisions of Exhibit C, Tenant shall not make or cause to be made to the Premises or the Tenant Utility Facilities any addition, renovation, alteration, reconstruction or change (collectively, "Alterations") (i) costing in excess of [***], (ii) involving structural changes or additions, (iii) affecting the exterior storefront, mechanical systems, fire sprinkler systems, exterior walls, floors, ceilings or roof of the Premises, (iv) erecting or increasing the size of an existing mezzanine, or (v) requiring or resulting in any penetration of the roof, demising walls or floor of the Premises. All Alterations shall be constructed in accordance with the provisions of Exhibit C. ARTICLE 13 COMMON AREA 13.1 DEFINITION OF COMMON AREA. The term "Common Area", as used in this Lease, shall mean all areas within the exterior boundaries of the Shopping Center and adjacent streets, now or later made available for the general use of Landlord and other persons entitled to occupy Floor Area in the Shopping Center (including all landscaping, parking areas, parking structures, if any, and other improvements and facilities), accordingly, without limiting the generality of the foregoing, Landlord may include in the Common Area those portions of the Shopping Center presently or later sold or leased to purchasers or tenants, as the case may be, until the commencement of construction of the building(s) thereon, at which time there shall be withdrawn from the Common Area those areas not provided by the owner or tenant for common use. At Landlord's election, Common Area also may include similar areas located within the exterior boundaries of the Adjacent Center and adjacent streets (whether or not the same is located on land constituting a separate legal parcel) and any "Shared Parking Areas" (as defined in Section 13.5) designated by Landlord. *** Confidential treatment requested. -10- 12 13.2 MAINTENANCE AND USE OF COMMON AREA. Landlord shall maintain the Shopping Center in a first-class condition similar to other shopping centers in Orange County, California, however, the manner in which the Shopping Center shall be managed shall be determined by Landlord in its sole discretion. If any owner or tenant of any portion of the Shopping Center maintains its own Common Area (Landlord shall have the right to allow any purchaser or tenant to so maintain its own Common Area and to exclude such purchaser or tenant from participation in the payment of Common Area Expenses, as provided for in Sections 13.5 and 13.6), then Landlord shall not have responsibility for the maintenance of that portion of the Common Area. The use and occupancy by Tenant of the Premises shall include the non-exclusive use of the Common Area (except those portions of the Common Area on which have been constructed or placed permanent or temporary kiosks, displays, carts and stands and except areas used in the maintenance or operation of the Shopping Center) in common with Landlord and the other tenants of the Shopping Center and their customers and invitees, subject to rules and regulations concerning the use of the Common Area established by Landlord from time to time. 13.3 CONTROL OF AND CHANGES TO COMMON AREA. Landlord shall have the sole and exclusive control of the Common Area, and the right to make changes to the Common Area. Landlord's rights shall include, but not be limited to, the right to (a) restrain the use of the Common Area by unauthorized persons; (b) utilize from time to time any portion of the Common Area for promotional, entertainment and related matters; (c) place permanent or temporary kiosks, displays, carts and stands in the Common Area and to lease same to tenants; (d) temporarily close any portion of the Common Area for repairs, improvements or Alterations, to discourage noncustomer use, to prevent dedication or an easement by prescription or for any other reason deemed sufficient in Landlord's reasonable judgment; and (e) renovate, upgrade or change the shape and size of the Common Area or add, eliminate or change the location of improvements to the Common Area including, without limitation, buildings, parking areas, roadways and curb cuts, and to construct buildings on the Common Area. Landlord may determine the nature, size and extent of the Common Area and whether portions of same shall be surface, underground or multiple-deck, as well as make changes to the Common Area from time to time which, in its opinion, are deemed desirable for the Shopping Center. 13.4 PARKING. Tenant and its employees shall park their vehicles only in the parking areas from time to time designated for that purpose by Landlord. Without limiting the generality of the foregoing, if Landlord implements any program related to parking, parking facilities or transportation facilities including, but not limited to, any program of parking validation, employee shuttle transportation during peak traffic periods or other program to limit, control, enhance, regulate or assist parking by customers of the Shopping Center, Tenant agrees to participate in the program and to pay its proportionate share of the costs of the program under reasonable and nondiscriminatory rules and regulations from time to time established by Landlord. Tenant shall furnish Landlord with a list of its and its employees' vehicle license numbers at any time during the Term within ten (10) days after Landlord's written request. Tenant authorizes Landlord to tow, at Tenant's expense, any vehicle belonging to Tenant or Tenant's employees parked in violation of these provisions and/or to attach violation stickers or notices to any such vehicle. Tenant agrees to assume responsibility for compliance by its employees with these parking provisions and to indemnify and defend Landlord and its agents from and against all cost, expense and liability arising from Landlord's reasonable enforcement efforts. Tenant acknowledges that Tenant's customers shall use, in addition to the on-grade parking within the Shopping Center, the off-site parking areas of certain of the office parcels adjacent to the Shopping Center as designated from time to time by Landlord ("Shared Parking Areas"). Tenant agrees to pay its reasonably allocated share of the cost of the maintenance and operation of the Shared Parking Areas, billed by Landlord as part of Common Area expenses or as separately billed by the owners of such office parcels. 13.5 COMMON AREA EXPENSES. The term "Common Area Expenses", as used in this Lease, shall mean all costs and expenses incurred by Landlord in (a) operating, managing, policing, insuring, repairing and maintaining the Common Area and the onsite management and/or security offices, merchants' association offices, postal services, parking structures, if any, nonprofit community buildings and child care centers located in the Shopping Center from time to time ("Common Facilities"), (b) maintaining, repairing and replacing the exterior surface of exterior walls (and storefronts and storefront awnings if Landlord has elected to include the cleaning of same as part of Common Area maintenance) and maintaining, repairing and replacing roofs of the buildings from time to time constituting the Shopping Center, and (c) operating, insuring (including reasonable reserves for deductibles and any self-insured retention), repairing, replacing and maintaining all utility facilities and systems including, without limitation, sanitary sewer lines and systems, fire protection lines and systems, security lines and systems and storm drainage lines and systems not exclusively serving the premises of any tenant or store ("Common Utility Facilities"), mall furniture and equipment, seasonal and holiday decorations, Common Area lighting fixtures, Shopping Center sign monuments and directional signage. Common Area Expenses shall include, without limitation, the following: Expenses for maintenance, landscaping, repaving, resurfacing, repairs, replacements, painting, lighting, cleaning, trash removal, security, fire protection and similar items; nonrefundable contributions toward reserves for replacements other than equipment; depreciation or rental on equipment; charges, surcharges and other levies related to the requirements of any Federal, state or local governmental agency; expenses related to the Common Utility Facilities; Taxes on the improvements and land comprising the Common Area; public liability and property damage insurance on the Common Area; standard "all risks" fire and extended coverage insurance with, at Landlord's option, an earthquake damage endorsement covering the Common Facilities; Tenant's reasonably allocated share of the costs of the maintenance and operation of the Shared Parking Areas; and a sum payable to Landlord for administration and overhead in an amount equal to [***] of the Common Area Expenses for the applicable year. Specifically excluded from the Common Area Expenses are "Food Court Expenses", as more particularly described in Section 13.7, below. *** Confidential treatment requested. -11- 13 13.6 PRORATION OF COMMON AREA EXPENSES. Portions of the Shopping Center are, or may be, owned or leased from time to time by various persons or entities occupying freestanding facilities or other facilities containing a substantial amount of Floor Area and contributing to the Common Area Expenses on a basis other than that described herein (collectively, "Other Stores"). The contributions, if any, received from the Other Stores towards the Common Area Expenses shall be credited against the total Common Area Expenses and the balance thereof shall be prorated in the following manner: (a) From and after the Commencement Date, Tenant shall pay to Landlord, on the first (1st) day of each calendar month, an amount estimated by Landlord to be the monthly amount of Tenant's share of the Common Area Expenses. The estimated monthly charge may be adjusted periodically by Landlord on the basis of Landlord's reasonably anticipated costs. (b) Following the end of each calendar year or, at Landlord's option, its fiscal year, Landlord shall furnish to Tenant a statement covering the calendar or fiscal year (as the case may be) just expired, showing the actual Common Area Expenses for that year, the amount of Tenant's share of the Common Area Expenses for, that year and the monthly payments made by Tenant during that year for the Common Area Expenses. If Tenant's share of the Common Area Expenses exceeds Tenant's prior payments, Tenant shall pay to Landlord the deficiency within ten (10) days after receipt of such annual statement. If Tenant's payments for the calendar year exceed Tenant's actual share of the Common Area Expenses, and provided Tenant is not in arrears as to the payment of any Minimum Annual Rental, Percentage Rental or Additional Rental, Tenant may offset the excess against payments of Common Area Expenses next due Landlord. An appropriate proration of Tenant's share of the Common Area Expenses as of the Commencement Date and the expiration date of the Term shall be made. (c) Tenant's share of the Common Area Expenses shall be determined by multiplying the Common Area Expenses that remain after applying the contributions, if any, paid by the Other Stores (less reserves, to the extent available) by a fraction, the numerator of which is the number of square feet of Floor Area in the Premises and the denominator of which is the number of square feet of Floor Area in the Shopping Center and the Adjacent Center (if, pursuant to Section 13.1 above, Landlord elects to include within the Common Area those areas of the Adjacent Center provided for common use) occupied by tenants as of the commencement of the applicable calendar year or fiscal year (as the case may be) or, at Landlord's option, each calendar or fiscal quarter, exclusive of the Floor Area occupied by the Other Stores and exclusive of the Common Facilities. (d) Notwithstanding anything contained in this Section 13.6 to the contrary, tenants in the Shopping Center (and, if applicable, the Adjacent Center) that maintain, repair and replace the roofs located above their premises shall not be included in the proration of the Common Area Expenses relative to the roofs in the Shopping Center which are maintained by Landlord as part of the Common Area, and the Floor Area of such premises shall be excluded from the calculations made pursuant to Section 13.6(c) with respect to the maintenance, repair and replacement of roofs. 13.7 FOOD COURT. Landlord has designated a portion of the Shopping Center in which the Premises is located as a food court ("Food Court"). Notwithstanding any term or provision of the Lease, Landlord shall have the right to change the shape, size, location, number and extent of the improvements to the Food Court and eliminate, add or relocate any improvements to any portion of the Food Court, including, without limitation, any seating areas, restrooms, trash facilities, dishwashing facilities, temporary or permanent kiosks, displays or stands. "Food Court Expenses", as used in this Lease, shall mean all costs and expenses incurred by Landlord in connection with the operation, management, policing, repair, maintenance and replacement of the Food Court, including, but not limited to, costs and expenses related to (i) the common seating areas located in the Food Court (including, but not limited to cleaning of the Food Court tables, chairs and floors and trash removal), (ii) all facilities servicing the Food Court (including, but not limited to employee restrooms, customer restrooms, trash facilities and dishwashing facilities, (iii) cleaning of common greaseshafts and fans in the Food Court, and (iv) a reasonable allowance to Landlord for Landlord's supervision of the operation, repair, maintenance and replacement of the Food Court in an amount equal to fifteen percent (15%) of the total of the Food Court Expenses for each year. The Food Court Expenses shall be prorated among, and paid by, only those tenants located within or near the Food Court and selling food or beverages ("Food Court Tenants"). If Tenant is located within or near the Food Court and selling food, Tenant's share of the Food Court Expenses shall be determined by multiplying the Food Court Expenses by a fraction, the numerator of which is the number of square feet of Floor Area in the Premises and the denominator of which is the number of square feet of Floor Area of stores located within or near the Food Court and selling food or beverages which are from time to time occupied and open for business as of the commencement of each calendar or fiscal year (as determined by Landlord). Tenant shall be provided statements for, and annual adjustments shall be made to, the Food Court Expenses in the same general manner provided for in the Lease with respect to Common Area Expenses as set forth in Section 13.6 (a) and (b) of this Lease. Notwithstanding the foregoing, Tenant's obligation to pay its share of the Food Court Expenses shall in no way affect Tenant's obligations to pay its share of Common Area Expenses pursuant to this Article 13. -12- 14 ARTICLE 14 ASSIGNMENT AND SUBLETTING 14.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not assign, sublet, enter into franchise, license or concession agreements, change ownership or voting control, or otherwise transfer (including any transfer by operation of law) all or any part of this Lease, Tenant's interest in the Premises or Tenant's business (collectively, "Assignment" or "Assign") without first procuring the written consent of Landlord, which consent shall not be unreasonably withheld, subject to the terms, covenants and conditions contained in this Lease. Under no circumstances shall Tenant mortgage, encumber, pledge or hypothecate this Lease or its interest in the Premises. If Tenant is a corporation which, under the then current guidelines published by the Commissioner of Corporations of the State of California, is not deemed a public corporation or is an unincorporated association or partnership, the transfer, assignment or hypothecation, whether in one (1) transaction or a series of transactions, of any stock or interest in such corporation, association or partnership in excess of an aggregate of forty-nine percent (49%) shall be deemed an Assignment within the meaning and provisions of this Article 14. 14.2 PROCEDURES. Should Tenant desire to enter into an Assignment, Tenant shall request, in writing, Landlord's consent to the proposed Assignment at least sixty (60) days before the intended effective date of the proposed Assignment, which request shall include the following: (a) full particulars of the proposed Assignment including its nature, effective date, terms and conditions, (b) a description of the identity, net worth and previous business experience of the proposed transferee (c) a complete business plan prepared by the proposed transferee; and (d) any further information relevant to the proposed Assignment which Landlord shall reasonably request. Within thirty (30) days after receipt of Tenant's request for consent to the proposed Assignment together with all of the above-required information, Landlord shall respond and shall have the right either to: (i) consent to the proposed Assignment; or (ii) refuse to consent to the proposed Assignment. 14.3 STANDARD FOR CONSENT. Tenant agrees that Landlord may refuse its consent to the proposed transfer on any reasonable grounds, and (by way of example and without limitation) Tenant agrees that it shall be reasonable for Landlord to withhold its consent if any of the following situations exist or may exist: (a) the use to which the Premises will be put by the proposed transferee is different than the use set forth in Section 1.14; (b) the proposed transferee's financial condition is inadequate to support all of the financial and other obligations of Tenant under this Lease; (c) the business reputation or character of the proposed transferee is not reasonably acceptable to Landlord; (d) the proposed transferee is not likely to conduct on the Premises a business of a quality substantially equal to that conducted by Tenant; (e) the nature of the proposed transferee's proposed or likely use of the Premises would impose an increased burden on the Common Area, or involve any increased risk of the presence, use, release or discharge of Hazardous Materials, as defined in Section 27.29; (f) Landlord has not received assurances acceptable to Landlord in its sole discretion that all past due amounts owing from Tenant to Landlord, if any, will be paid and all other defaults on the part of Tenant, if any, will be cured prior to the effective date of the proposed Assignment; (g) in Landlord's reasonable business judgment the annual Percentage Rental Landlord anticipates receiving from the proposed transferee is less than the average annual Percentage Rental Landlord has received from Tenant during the two (2) years immediately prior to the proposed Assignment; and (h) in Landlord's reasonable business judgment the Assignment would breach any covenant of Landlord respecting radius, location, use or exclusivity relating to the Shopping Center, or, in Landlord's sole discretion, conflict with, be incompatible with or have an adverse impact on the tenant mix of the Shopping Center. Any purported Assignment without Landlord's prior written consent shall be void and of no force or effect and shall not confer any estate or benefit on anyone. Further, any such purported Assignment shall constitute an event of default by Tenant which shall not be susceptible to cure or rectification pursuant to Section 19.4 hereof. A consent to one (1) Assignment by Landlord shall not be deemed to be a consent to any subsequent Assignment to any other party. 14.4 PERMITTED ASSIGNMENT. Provided Tenant is a publicly-traded corporation, Tenant shall have the right without Landlord's consent, to enter into an Assignment to any subsidiary corporation of Tenant, Tenant's parent corporation or to any corporation succeeding to substantially all of the assets Tenant as a result of a consolidation or merger, or to a corporation to which all or substantially all of the assets of Tenant have been sold ("Permitted Assignment"), provided that within fifteen (15) days after the effective date of any such transfer the assignee or sublessee executes and delivers to Landlord an instrument meeting the requirements of Section 14.6, and containing an express assumption of all of Tenant's obligations under this Lease. 14.5 NO RELEASE. No Assignment, or Permitted Assignment, whether with or without Landlord's consent, shall relieve Tenant or ?? Guarantor hereunder from its covenants and obligations under this Lease. 14.6 FORM. Any Assignment shall be evidenced by an instrument in form and content satisfactory to Landlord and executed by Tenant and the transferee, assignee, sublessee, licensee or concessionaire, as the case may be. 14.7 RENTAL INCREASE. If Tenant assigns its interest in this Lease or sublets the Premises, other than in the case of a Permitted Assignment, the Minimum Annual Rental then payable by Tenant shall be increased, effective as of the date of such Assignment, to the greater of (a) an amount equal to the total of the Minimum -13- 15 Annual Rental plus Percentage Rental required to be paid by Tenant pursuant to this Lease during the twelve (12) month period immediately preceding the request for Landlord's consent to the Assignment, or (b) a sum equal to the [***], as the same shall be agreed upon by Landlord and Tenant. In the event Landlord and Tenant are unable to agree upon the then fair market rental value of the Premises sixty (60) days prior to the effective date of the Assignment, [***]. 14.8 REASONABLENESS OF RESTRICTIONS. Tenant acknowledges and agrees that each of the rights of Landlord set forth in Section 14.3, above, in the event of a request for Landlord's consent to an Assignment is a reasonable restriction for purposes of California Civil Code, Section 1951.4. 14.9 NO LIABILITY. Landlord shall have no liability for damages to Tenant or to any proposed transferee if it is adjudicated that Landlord's consent has been unreasonably withheld and such unreasonable withholding of consent constitutes a breach of this Lease or other duty to Tenant, the proposed transferee or any other person on the part of Landlord. In such event, Tenant's sole remedy shall be to have the proposed Assignment declared valid as if Landlord's consent had been given. ARTICLE 15 PROMOTIONAL SERVICES AND ADVERTISING 15.1 ASSOCIATION OR PROMOTIONAL SERVICE. Tenant shall either (a) maintain membership in a merchants' association ("Association") or (b) participate in a promotional service ("Service") to be provided by Landlord. If Landlord has established an Association, Landlord may at any time discontinue the Association and establish a Service. If Landlord has established a Service, Landlord may at any time discontinue the Service and establish an Association. 15.2 SERVICE. The purpose of a Service shall be to promote the Shopping Center for the benefit of all of the tenants therein. Landlord may select a committee to render advice to Landlord in connection with advertising or promotional activities. As compensation for directing the Service and for payment of the salaries of a promotional director, secretary and other personnel who, in Landlord's judgment, will effectively carry out the purposes of the Service, Landlord shall receive a sum not greater than [***] of the assessments collected and/or contributed by Landlord pursuant to the provisions of this Article 15. 15.3 ASSOCIATION. In the event an Association is established, Tenant shall become a member of the Association, maintain its membership in good standing, abide by the Association bylaws and regulations, pay its share of any other assessments which might be imposed by the Association and cooperate in the activities of the Association throughout the Term. If there is any conflict between the bylaws and/or regulations of the Association and the provisions of this Lease, this Lease shall control. The provisions of this Section 15.3 shall be deemed to be covenants for the benefit of Landlord and the Association and may be enforced by each of them. Further, Landlord agrees to become a member of the Association and to pay, on a noncumulative basis, an assessment equal to [***] of all monies collected by the Association from its members (excluding Landlord) each fiscal or calendar year (as the case may be). 15.4 PROMOTIONAL CHARGE AND INITIAL PROMOTIONAL ASSESSMENT. Upon execution of this Lease, Tenant shall pay to Landlord, who shall receive same on behalf of the Association or the Service, as the case may be, an "Initial Promotional Assessment" in the amount specified in Section 1.15. Thereafter, Tenant shall pay to Landlord, as Tenant's share of costs of operation of the Association or Service, as the case may be, an annual charge ("Promotional Charge"). The Promotional Charge payable by Tenant for the first full or partial calendar or fiscal year (as determined by Landlord) of the Term shall be the sum determined by multiplying the number of square feet of Floor Area in the Premises by the sum specified in Section 1.16. The Promotional Charge payable by Tenant for each full or partial calendar or fiscal year thereafter shall be adjusted in accordance with the formula contained in the following paragraph. On each anniversary of the Commencement Date ("Adjustment Date"), the Promotional Charge shall be increased to reflect the greater of (i) any change in the cost of living, in accordance with the Index, as set forth in *** Confidential treatment requested. -14- 16 Section 27.21 of this Lease, using as the Base Month the month ninety (90) days prior to the Commencement Date, and using as the Comparison Month the month ninety (90) days prior to the Adjustment Date, and (ii) [***] per square foot of Floor Area in the Premises. 15.5 PAYMENT. Tenant's obligation to pay the Promotional Charge shall commence upon the Commencement Date. The Promotional Charge shall be paid by Tenant, as Additional Rental, (i) within ten (10) days of billing for same or, at Landlord's option, (ii) monthly or quarterly. In addition, Tenant agrees to pay, as Additional Rental, any and all charges incurred in the collection of the Promotional Charge from Tenant, including attorneys' fees and costs of suit, if any, which the Association or Landlord may incur, as the case may be, in connection with the collection of same, plus interest at the maximum lawful rate from and after the due date to and including the date of payment. 15.6 ADVERTISING. In addition to the Promotional Charge and Initial Promotional Assessment, from and after the Commencement Date Tenant shall expend each calendar year for advertising a sum not less than [***] of its Gross Sales for the calendar year. Tenant shall designate the location of the Premises by, reference to the Shopping Center by name in its advertising. The advertising shall be in newspapers, tabloids, direct mailings or other media covering the trade area served by the Shopping Center. Further, the advertising shall include annual participation in at least one (1) tabloid for direct mailing sponsored by the Association or Service. Tenant shall furnish to Landlord with its annual report of Gross Sales, and at any time upon request by Landlord, a certified statement showing the amounts expended for advertising. If Tenant fails to so advertise, Tenant shall pay to Landlord, upon demand, the difference between (a) the amount actually expended by Tenant for advertising during the preceding calendar year, and (b) the amount which Tenant was required to expend for advertising during the applicable calendar year, as required pursuant to this Article 15. ARTICLE 16 INSURANCE 16.1 TENANT'S INSURANCE. Tenant, at its sole cost and expense, commencing on the earlier of the date of [***], or (ii) the date [***], and continuing during the Term, shall procure, pay for and keep in full force and effect the following types of insurance, in at least the amounts and in the forms specified below: (a) Comprehensive or commercial general liability insurance with coverage limits of not less than the combined single limit for bodily injury, personal injury, death and property damage liability per occurrence specified in Section 1.17 or the limit carried by Tenant, whichever is greater, insuring against any and all liability of the insureds with respect to the Premises or arising out of the maintenance, use or occupancy of the Premises or related to the exercise of any rights of Tenant pursuant to this Lease, subject to increases in amount as Landlord may reasonably require from time to time. All such liability insurance shall specifically insure the performance by Tenant of the indemnity agreement as to liability for injury to or death of persons and injury or damage to property set forth in Section 16.6. Further, all such liability insurance shall include, but not be limited to, personal injury, blanket contractual, cross-liability and severability of interest clauses, products/completed operations, broad form property damage, independent contractors, owned, nonowned and hired vehicles and, if alcoholic beverages are served, sold, consumed or obtained in the Premises, liquor law liability. (b) Worker's compensation coverage as required by law, including employer's liability coverage, with a limit of not less than [***] and waiver by Tenant's insurer of any right of subrogation against Landlord and Landlord's property manager by reason of any payment pursuant to such coverage. (c) Business interruption or loss of income insurance in amounts sufficient to insure Tenant's business operations for a period of not less than one (1) year. (d) Plate glass insurance covering all plate glass on the Premises at full replacement value. Tenant shall have the option either to insure this risk or to self-insure. (e) Insurance covering all of Tenant's Work, Tenant's leasehold improvements, Alterations permitted under Article 12, trade fixtures, merchandise and personal property from time to time in, on or about the Premises in an amount not less than their full replacement value from time to time, including replacement cost, endorsement, providing protection against any peril included within the classification Fire and Extended Coverage, sprinkler damage, vandalism, malicious mischief and such other additional perils as covered in an "all risks" standard insurance policy. Any policy proceeds shall be used for the repair or replacement of the property damaged or destroyed unless this Lease shall cease and terminate under the provisions of Article 17. (f) Any insurance policies designated necessary by Landlord with regard to Tenant's, or Tenant's contractors', construction of Tenant's Work, as well as with regard to the construction of Alterations including, but not limited to, contingent liability and "all risks" builders' risk insurance, in amounts acceptable to Landlord. 16.2 POLICY FORM. All policies of insurance required of Tenant herein shall be issued by insurance companies with general policy holder's rating of not less than A and a financial rating of not less than Class X as *** Confidential treatment requested. -15- 17 rated in the most current available "Best's Key Rating Guide", and which are qualified to do business in the State of California. All such policies, except for the Worker's Compensation coverage, name and shall be for the mutual and joint benefit and protection of Landlord, Tenant and Landlord's agents and mortgagee(s) or beneficiary(ies), as additional insureds. The policies described in subparagraphs (c) and (e) of Section 16.1 shall also name Landlord and Landlord's mortgagee(s) or beneficiary(ies) as loss payees. Executed copies of the policies of insurance or certificates thereof shall be delivered to Landlord prior to Tenant, its agents or employees entering the Premises for any purpose. Thereafter, executed copies of renewal policies or certificates thereof shall be delivered to Landlord within thirty (30) days prior to the expiration of the term of each policy. All policies of insurance delivered to Landlord must contain a provision that the company writing the policy will give to Landlord thirty (30) days' prior written notice of any cancellation or lapse or the effective date of any reduction in the amounts of insurance. All policies required of Tenant herein shall be endorsed to read that such policies are primary policies and any insurance carried by Landlord or Landlord's property manager shall be noncontributing with such policies. No policy required to be maintained by Tenant shall have a deductible greater than Twenty-Five Thousand Dollars (S25,000.00) unless approved in writing by Landlord. 16.3 BLANKET POLICIES. Notwithstanding anything to the contrary contained in this Article 16, Tenant's obligation to carry insurance may be satisfied by coverage under a so-called blanket policy or policies of insurance; provided, however, that the coverage afforded Landlord will not be reduced or diminished and the requirements set forth in this Lease are otherwise satisfied by such blanket policy or policies. 16.4 INCREASED PREMIUMS DUE TO USE OF PREMISES. Tenant shall not do any act in or about the Premises which will tend to increase the insurance rates upon the Premises or the Shopping Center of which the Premises are a part. Tenant agrees to pay to Landlord, upon demand, the amount of any increase in premium for insurance resulting from Tenant's use of the Premises, whether or not Landlord shall have consented to the act on the part of Tenant. If Tenant installs upon the Premises any electrical equipment which constitutes an overload of the electrical lines servicing the Premises, Tenant, at its own expense, shall make whatever changes are necessary to comply with the requirements of the insurance underwriters and any appropriate governmental authority. 16.5 REIMBURSEMENT OF INSURANCE PREMIUMS BY TENANT. Landlord, at all times from and after Substantial Completion of the Premises, shall maintain in effect during the Term a policy or policies of insurance covering the building of which the Premises are a part (including boiler and machinery) in an amount not less than [***] of the full replacement cost (exclusive of the cost of excavations, foundations and footings) or the amount of insurance Landlord's mortgagee(s) or beneficiary(ies) may require Landlord to maintain, whichever is the greater, providing protection against any peril generally included in the classification "Fire and Extended Coverage", loss of rental income insurance and such other additional insurance as covered in an "all risks" standard insurance policy, with earthquake coverage insurance if deemed necessary by Landlord in Landlord's sole judgment or if required by Landlord's mortgagee(s) or beneficiary(ies) or by any Federal, state, county, city or local authority. Landlord's obligation to carry this insurance may be brought within the coverage of any so-called blanket policy or policies of insurance carried and maintained by Landlord. From and after the Commencement Date, Tenant agrees to pay to Landlord, as Additional Rental, its share of the cost to Landlord of this insurance, including reasonable reserves for deductibles and any self-insured retention. The cost of such insurance for any partial year of the Term shall be prorated. Payment shall be made in the same manner set forth for payment of Taxes in Section 9.1 (b). Tenant's share of the premiums for this insurance shall be a fractional portion of the premiums, the numerator of which shall be the Floor Area of the Premises and the denominator of which shall be the Floor Area of all areas which are covered by this insurance and are occupied as of the commencement of the applicable calendar or fiscal year, exclusive of the Common Facilities. 16.6 INDEMNITY. "Landlord" for the purposes of this Section 16.6 shall mean and include Landlord and Landlord's directors, officers, shareholders, agents and employees. To the fullest extent permitted by law, Tenant covenants with Landlord that Landlord shall not be liable for any damage or liability of any kind or for any injury to or death of persons or damage to property of Tenant or any other person occurring from and after Substantial Completion of the Premises (or such earlier date if Tenant is given earlier access to the Premises) from any cause whatsoever related to the use, occupancy or enjoyment of the Premises by Tenant or any person thereon or holding under Tenant including, but not limited to, damages resulting from any labor dispute. Tenant shall pay for, defend (with an attorney approved by Landlord), indemnify, and save Landlord harmless against and from any real or alleged damage or injury and from all claims, judgments, liabilities, costs and expenses, including attorneys' fees and costs, arising out of or connected with Tenant's use of the Premises and its facilities, or any repairs, Alterations or improvements (including original improvements and fixtures specified as Tenant's Work) which Tenant may make or cause to be made upon the Premises, any breach of this Lease by Tenant and any loss or interruption of business or loss of rental income resulting from any of the foregoing; provided, however (and though Tenant shall in all cases accept any tender of defense of any action or proceeding in which Landlord is named or made a party and shall, notwithstanding any allegations of negligence or misconduct on the part of Landlord, defend Landlord as provided herein), Tenant shall not be liable for such damage or injury to the extent and in the proportion that the same is ultimately determined to be attributable to the negligence or misconduct of Landlord. This obligation to indemnify shall include all of Landlord's attorneys' fees, litigation costs, investigation costs and court costs and all other costs, expenses and liabilities incurred by Landlord or its counsel from the first notice that any claim or demand is to be made or may be made. Tenant's obligations under this Section 16.6 shall survive the termination of this Lease. *** Confidential treatment requested. -16- 18 16.7 WAIVER OF SUBROGATION. Except to the extent that insurance required to be maintained by Tenant pursuant to this Article 16 covers loss to Landlord, Landlord and Tenant each waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, their respective property, the Premises or its contents, or to other portions of the Shopping Center arising from any liability, loss, damage or injury caused by fire or other casualty for which property insurance is carried or required to be carried pursuant to this Lease. The insurance policies obtained by Landlord and Tenant pursuant to this Lease shall contain endorsements waiving any right of subrogation which the insurer may otherwise have against the noninsuring party. If Landlord has contracted with a third party for the management of the Shopping Center, the waiver of subrogation by Tenant herein shall also run in favor of such third party. 16.8 FAILURE BY TENANT TO MAINTAIN INSURANCE. If Tenant refuses or neglects to secure and maintain insurance policies complying with the provisions of this Article 16, Landlord may secure the appropriate insurance policies and Tenant shall pay, upon demand, the cost of same to Landlord, as Additional Rental. 16.9 SUFFICIENCY OF COVERAGE. Neither Landlord nor any of Landlord's agents make any representation that the types of insurance and limits specified to be carried by Tenant under this Lease are adequate to protect Tenant. If Tenant believes that any such insurance coverage is insufficient, Tenant shall provide, at its own expense, such additional insurance as Tenant deems adequate. Nothing contained herein shall limit Tenant's liability under this Lease. ARTICLE 17 DAMAGE 17.1 INSURED CASUALTY. In the case of damage by fire or other perils covered by the insurance specified in Section 16.5, the following provisions shall apply: (a) Within a period of sixty (60) days after all applicable permits have been obtained, Landlord shall commence such repair, reconstruction and restoration of the Premises as Landlord, in its reasonable business judgment, deems necessary, and shall diligently prosecute the same to completion; provided, however, that Tenant, at its cost, shall repair and restore all items of Tenant's Work and replace its stock in trade, trade fixtures, furniture, furnishings and equipment. Tenant shall commence this work promptly upon delivery of possession of the Premises to Tenant and shall diligently prosecute same to completion. (b) Notwithstanding the foregoing, if the Premises is totally destroyed, or if the Shopping Center is destroyed to an extent of at least fifty percent (50%) of the then full replacement cost thereof as of the date of destruction, then (i) if the destruction occurs during the last two (2) years of the Term, Landlord and Tenant shall each have the right to terminate this Lease, and (ii) if the destruction occurs prior to the last two (2) years of the Term, Landlord shall have the right to terminate this Lease. In each case, the termination right shall be exercised by the terminating party giving written notice to the other party within thirty (30) days after the date of destruction. If Landlord terminates this Lease pursuant to (ii) above, then upon Landlord's receipt of any insurance proceeds payable by reason of such destruction, Landlord shall pay to Tenant from such proceeds an amount equal to the unamortized book value of Tenant's leasehold improvements paid for by Tenant and Tenant's fixtures and equipment which are not capable of removal from the Premises, reduced by the amount of proceeds of any insurance carried or required to be carried by Tenant on such items pursuant to Article 16. 17.2 UNINSURED CASUALTY. If the Premises or the Shopping Center are damaged as a result of any casualty not covered by the insurance specified in Section 16.5, Landlord, within ninety (90) days following the date of such damage, shall commence repair, reconstruction or restoration of the Premises to the extent provided herein and shall diligently prosecute the same to completion or, if the damage to the Premises, or to the buildings in the Shopping Center excluding the Premises, and excluding any freestanding buildings, is greater than ten percent (10%) of the total replacement cost, Landlord may elect within said ninety (90) days not to so repair, reconstruct or restore the damaged property, in which event, at Landlord's option, this Lease shall cease and terminate upon the expiration of such ninety (90) day period. In the event Landlord elects to restore the Premises, Tenant shall have the same repair, restoration and replacement obligations it has pursuant to Section 17.1 (a). 17.3 DISTRIBUTION OF PROCEEDS. In the event of the termination of this Lease pursuant to this Article 17, all proceeds from the Fire and Extended Coverage insurance carried pursuant to Article 16 and all insurance covering Tenant's Work and Tenant's leasehold improvements, but excluding proceeds for trade fixtures, merchandise, signs and other personal property, shall be disbursed and paid to Landlord. 17.4 ABATEMENT. In the event of repair, reconstruction and restoration, as provided in this Article 17, and, provided Tenant has maintained the business interruption or loss of income insurance required pursuant to Article 16, to the extent that the proceeds of such business interruption or loss of income insurance may be exhausted during the period of repair, reconstruction and restoration, Minimum Annual Rental payable hereunder shall be thereafter abated proportionately with the degree to which Tenant's use of the Premises is impaired during the remainder of the period of repair, reconstruction and restoration; provided, however, the amount of Minimum Annual Rental abated pursuant to this Section 17.4 shall in no event exceed the amount of loss of rental income insurance proceeds actually received by Landlord. Tenant shall continue the operation of its business on the Premises during any such period to the extent reasonably practicable from the standpoint of prudent business -17- 19 management, and the obligation of Tenant to pay Percentage Rental and Additional Rental shall remain in full force and effect. Tenant shall not be entitled to any compensation or damage from Landlord for loss of use of the whole or any part of the Premises or the building of which the Premises are a part, Tenant's personal property or any inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration. 17.5 WAIVER OF TERMINATION. Tenant waives any statutory rights of termination which may arise by reason of any partial or total destruction of the Premises. ARTICLE 18 EMINENT DOMAIN 18.1 TAKING. The term "Taking", as used in this Article 18, shall mean an appropriation or taking under the power of eminent domain by any public or quasi-public authority or a voluntary sale or conveyance in lieu of condemnation but under threat of condemnation. 18.2 TOTAL TAKING. In the event of a Taking of the entire Premises, this Lease shall terminate and expire as of the date possession is delivered to the condemning authority and Landlord and Tenant shall each be released from any liability accruing pursuant to this Lease after the date of such termination, but Minimum Annual Rental, Percentage Rental and Additional Rental for the last month of Tenant's occupancy shall be prorated and Landlord shall refund to Tenant any Minimum Annual Rental and Additional Rental paid in advance. 18.3 PARTIAL TAKING. If there is a Taking of (a) more than twenty-five percent (25%) of the Floor Area of the Premises or, (b) a portion of the Premises and, regardless of the amount taken, the remainder of the Premises is not one (1) undivided parcel of property, either Landlord or Tenant may terminate this Lease, as of the date Tenant is required to vacate a portion of the Premises, upon giving notice in writing of such election to the other party within thirty (30) days after receipt by Tenant from Landlord of written notice that a portion of the Premises has been so appropriated or taken. 18.4 AWARD. The entire award or compensation in any such condemnation proceeding, whether for a total or partial Taking, or for diminution in the value of the leasehold or for the fee, shall belong to and be the property of Landlord; and, in any event, the holder of any mortgage or deed of trust encumbering the Shopping Center shall have a first priority to the extent of the unpaid balance of principal and interest on its loan. Without derogating the rights of Landlord or said lender under the preceding sentence, Tenant shall be entitled to recover from the condemning authority such compensation as may be separately awarded by the condemning authority to Tenant or recoverable from the condemning authority by Tenant in its own right for the taking of trade fixtures and equipment owned by Tenant and for the expense of removing and relocating its trade fixtures and equipment, but only in the event that the compensation awarded to Tenant shall be in addition to and shall not diminish the compensation awarded to Landlord as provided above. 18.5 CONTINUATION OF LEASE. In the event of a Taking, if Landlord and Tenant elect not to terminate this Lease as provided above (or have no right to so terminate), Landlord agrees, at Landlord's cost and expense as soon as reasonably possible after the Taking, to restore the Premises (to the extent of the condemnation proceeds) on the land remaining to a complete unit of like quality and character as existed prior to the Taking and, thereafter, Minimum Annual Rental shall be reduced on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining, and Landlord shall be entitled to receive the total award or compensation in such proceedings. ARTICLE 19 DEFAULTS BY TENANT 19.1 EVENTS OF DEFAULT. Should Tenant at any time be in default with respect to any payment of Minimum Annual Rental, Percentage Rental, Additional Rental or any other charge payable by Tenant pursuant to this Lease for a period of five (5) days after written notice from Landlord to Tenant (provided, however, any notice shall be in lieu of, and not in addition to, any notice required under Section 1161 of the Code of Civil Procedure of California or any similar, superseding statute), or should Tenant be in default in the prompt and full performance of any other of its promises, covenants or agreements herein contained for more than a reasonable time (in no event to exceed ten (10) days) after written notice thereof from Landlord to Tenant specifying the particulars of the default (provided, however, any notice shall be in lieu of, and not in addition to, any notice required under Section 1161 of the Code of Civil Procedure of California or any similar, superseding statute), or should Tenant vacate or abandon the Premises, or should Tenant make any general assignment for the benefit of creditors, or should there be filed against Tenant a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, same is dismissed within sixty (60) days), or should Tenant institute any proceedings under the Bankruptcy Code or any similar or successor statute, code or act, or should an appointed trustee or receiver take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease where possession is not restored to Tenant within thirty (30) days, or should substantially all of Tenant's assets located at the Premises or Tenant's interest in this Lease be attached or judicially seized where the seizure is not discharged within thirty (30) days, then Landlord may treat the occurrence of any one (1) or more of the foregoing events as a breach of this Lease and, in addition to any or all other rights or remedies of Landlord by law provided, Landlord shall have the right, at -18- 20 Landlord's option, without further notice or demand of any kind to Tenant or any other person, (a) to declare the Term ended and to re-enter and take possession of the Premises and remove all persons therefrom, or (b) without declaring this Lease terminated and without terminating Tenant's right to possession, to re-enter the Premises and occupy the whole or any part for and on account of Tenant and to collect any unpaid rentals and other charges which have become payable or which may thereafter become payable, or (c) even though it may have re-entered the Premises as provided in subparagraph (b) above, to thereafter elect to terminate this Lease and all of the rights of Tenant in or to the Premises. In any case in which Landlord shall re-enter and occupy the whole or any part of the Premises, by unlawful detainer proceedings or otherwise, Landlord, at its option, may repair, alter, subdivide or change the character of the Premises from time to time in such manner as Landlord deems best, may relet the Premises or any part thereof and receive the rents therefor, and none of such actions shall constitute a termination of this Lease, a release of Tenant from any liability hereunder, or result in the release or exoneration of any Guarantor. Landlord shall not be deemed to have terminated this Lease or the liability of Tenant to pay any Minimum Annual Rental, Percentage Rental, Additional Rental or other charges later accruing by any re-entry of the Premises pursuant to Section 19.1 (b) above, or by any action in unlawful detainer or otherwise to obtain possession of the Premises, unless Landlord shall have notified Tenant in writing that it has so elected to terminate this Lease. 19.2 TERMINATION OF LEASE. Should Landlord elect to terminate this Lease pursuant to the provisions of Sections 19.1 (a) or (c) above, Landlord may recover from Tenant, as damages, the following: (a) The worth at the time of award of any unpaid rental which had been earned at the time of the termination, plus (b) the worth at the time of award of the amount by which the unpaid rental which would have been earned after termination until the time of award exceeds the amount of rental loss Tenant proves could have been reasonably avoided, plus (c) the worth at the time of award of the amount by which the unpaid rental for the balance of the Term after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided, plus (d) any other amounts necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom including, but not limited to, any costs or expenses incurred by Landlord in (i) retaking possession of the Premises, including reasonable attorneys' fees therefor, (ii) maintaining or preserving the Premises after any default, (iii) preparing the Premises for reletting to a new tenant, including repairs or alterations to the Premises, (iv) leasing commissions, or (v) any other costs necessary or appropriate to relet the Premises, plus (e) at Landlord's election, any other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by the laws of the State of California. As used in subparagraphs (a) and (b) above, the "worth at the time of award" is computed by allowing interest at the maximum lawful rate. As used in subparagraph (c) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank situated nearest to the location of the Shopping Center at the time of award plus [***]. 19.3 DEFINITION OF RENTAL. For purposes of this Article 19 only, the term "rental" shall be deemed to be Minimum Annual Rental, Percentage Rental, Additional Rental and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All sums, other than Minimum Annual Rental, shall, for the purpose of calculating any amount due under the provisions of Section 19.2(c) above, be computed on the basis of the average monthly amount accruing during the immediately preceding sixty (60) month period, except that if it becomes necessary to compute these sums before the sixty (60) month period has occurred, then these sums shall be computed on the basis of the average monthly amount accruing during the shorter period. 19.4 NONMONETARY DEFAULTS. Notwithstanding any other provision of this Article 19, if the default complained of, other than a default for the payment of monies, cannot be rectified or cured within the period requiring rectification or curing, as specified in the written notice relating to the default, then, as to a default susceptible to being cured, the default shall be deemed to be rectified or cured if Tenant, within the notice period, shall have commenced to rectify or cure the default and shall thereafter diligently and continuously prosecute same to completion. 19.5 ASSIGNMENT OF RENTS AND PROFITS. In the event of default by Tenant hereunder, Tenant hereby grants to and confers upon Landlord the right, power and authority, at Landlord's sole option and without affecting any of Landlord's other rights or remedies hereunder, to collect all rents and profits received by Tenant as a result of the possession by Tenant of the Premises. Such amounts shall include, but shall not be limited to, amounts due under sublease, license or concession arrangements. Upon any such default, Landlord shall have the right to collect such rents and profits, including those past due and unpaid. The collection of such rents and profits shall not cure, waive or satisfy any default or notice of default hereunder. ARTICLE 20 DEFAULTS BY LANDLORD 20.1 LANDLORD'S LIABILITY. If Landlord fails to perform any of the covenants, provisions or conditions contained in this Lease on its part to be performed within thirty (30) days after written notice of default (or if more than thirty (30) days shall be required because of the nature of the default, if Landlord shall fail to diligently proceed to commence to cure the default after written notice), then Landlord shall be liable to Tenant for all damages sustained by Tenant as a direct result of Landlord's breach and Tenant shall not be entitled to terminate this Lease as a result thereof. It is expressly understood and agreed that any judgment against Landlord resulting *** Confidential treatment requested. -19- 21 from any default or other claim under this Lease shall be satisfied only out of the net rents, issues, profits and other income actually received from the operation of the Shopping Center, and Tenant shall have no claim against Landlord (as Landlord is defined in Section 16.6) or any of Landlord's personal assets for satisfaction of any judgment with respect to this Lease. 20.2 CURE BY ASSIGNEE. If any part of the Premises is at any time subject to a first mortgage or a first deed of trust, and this Lease or the rentals due from Tenant hereunder are assigned by Landlord to a mortgagee, trustee or beneficiary ("Assignee" for purposes of this Article 20 only) and Tenant is given written notice of the assignment including the post office address of Assignee, then Tenant shall also give written notice of any default by Landlord to Assignee, specifying the default in reasonable detail and affording Assignee a reasonable opportunity to make performance for and on behalf of Landlord. If and when Assignee has made performance on behalf of Landlord, the default shall be deemed cured. ARTICLE 21 SUBORDINATION, ATTORNMENT AND TENANT'S CERTIFICATE 21.1 SUBORDINATION. Upon written request of Landlord, Landlord's mortgagee, the beneficiary of a deed of trust of Landlord or a lessor of Landlord, Tenant will subordinate its rights pursuant to this Lease in writing (a) to the lien of any mortgage, deed of trust or the interest of any lease in which Landlord is the lessee (or, at Landlord's option, cause the lien of said mortgage, deed of trust or the interest of any lease in which Landlord is the lessee to be subordinated to this Lease), (b) to the Agreements referred to in Article 25, (c) upon any building hereafter placed upon the land of which the Premises are a part, and (d) to all advances made or hereafter to be made upon the security thereof. 21.2 ATTORNMENT. In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by Landlord encumbering the Premises, or should a lease in which Landlord is the lessee be terminated, Tenant shall attorn to the purchaser or lessor under such lease upon any foreclosure, sale or lease termination and recognize the purchaser or lessor as Landlord under this Lease, provided that the purchaser or lessor shall acquire and accept the Premises subject to this Lease. 21.3 TENANT'S CERTIFICATE. Tenant agrees, upon not less than ten (10) days prior notice by Landlord, to execute, acknowledge and deliver to Landlord, a statement in writing in substantially the form of Exhibit "F" hereto or in such other form as may be required by Landlord's mortgagee or beneficiary ("Tenant's Certificate"). It is intended that any Tenant's Certificate delivered pursuant hereto may be relied upon by Landlord, any prospective tenant of the Premises, any current or prospective mortgagee or beneficiary, or by any other party who may reasonably rely on such statement. At Landlord's option, the failure to deliver such Tenant's Certificate within such time shall be a default under this Lease by Tenant, and it shall be conclusively presumed, and shall constitute a representation and warranty by Tenant, that (i) this Lease is in full force and effect without modification, and (ii) Landlord is not in breach or default of any of its obligations under the Lease. ARTICLE 22 SECURITY DEPOSIT 22.1 SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit with Landlord the sum specified in Section 1.19 ("Security Deposit"). The Security Deposit shall be held by Landlord, without obligation or liability for payment of interest thereon, as security for the faithful performance by Tenant of all of the terms of this Lease to be observed and performed by Tenant. Landlord shall not be required to keep the Security Deposit separate from its general funds. 22.2 APPLICATION OF SECURITY DEPOSIT. Should Tenant be in default of any provision of this Lease at any time during the Term hereof, Landlord may, at its option and without prejudice to any other remedy which Landlord may have at law or in equity, apply the Security Deposit or any portion thereof same toward payment of Minimum Annual Rental, Percentage Rental, Additional Rental or to any loss or damage sustained by Landlord due to the default on the part of Tenant. Within five (5) days after written demand by Landlord, Tenant shall deposit cash with Landlord in an amount sufficient to restore the Security Deposit to the original sum deposited, and Tenant's failure to do so shall constitute a material default under this Lease. 22.3 REFUND. Should Tenant perform all of its obligations under this Lease, the Security Deposit or any balance thereof then remaining shall be returned to Tenant within sixty (60) days of the expiration of the Term or the earlier termination of this Lease. Tenant hereby expressly waives the benefit of any statutory right to the return of any unused portion of the Security Deposit earlier than sixty (60) days after the expiration of the Term or earlier termination of this Lease. 22.4 SALE OF PREMISES. Landlord may deliver the Security Deposit to the purchaser of Landlord's interest in the Premises and Landlord shall then be discharged from any further liability with respect to the Security Deposit. This Section 22.4 shall also apply to any subsequent transfer of Landlord's interest in the Premises. -20- 22 ARTICLE 23 QUIET ENJOYMENT Upon Tenant's payment of Minimum Annual Rental, Percentage Rental and Additional Rental and its observation and performance of all of the covenants, terms and conditions of this Lease to be observed and performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises from and after delivery thereof to Tenant; subject, however, to (a) the rights of the parties as set forth in this Lease, (b) any mortgage or deed of trust to which this Lease is subordinate, (c) any ground or underlying leases, agreements and encumbrances to which this Lease is subordinate, (d) all matters of record, and (e) disturbances, odors and similar inconveniences which are commonly associated with shopping centers of the type and size of the Shopping Center and/or with tenants located in such shopping centers. ARTICLE 24 NOTICES Every notice, demand or request (collectively "Notice") required hereunder or by law to be given by either party to the other shall be in writing. Every provision of this Lease which provides that either party shall notify the other of any particular matter shall be governed by this Section. Notices shall be given by personal service or by United States certified or registered mail, postage prepaid, return receipt requested, or by telegram, mailgram or same-day or overnight private courier, addressed to the party to be served at the address indicated in Section 1.22 or such other address as the party to be served may from time to time designate in a Notice to the other party. Notice personally served shall be effective when delivered to the party upon whom such Notice is served. If served by registered or certified mail, Notice shall be conclusively deemed served on the date shown on the return receipt, but if delivery is refused or the Notice is unclaimed, Notice shall conclusively be deemed given forty eight (48) hours after mailing. If served by telegram, mailgram or private courier, Notice to the addressee shall be conclusively deemed given as confirmed by the telegraphic agency or private courier service making delivery. Copies of any Notice shall be sent to the addresses, if any, designated for service of copies of Notices in Section 1.22; but the inadvertent failure to serve a copy of a Notice, either to the address so designated or in the manner provided in this Section, shall not render service of Notice invalid if the original Notice is served in accordance with this Section. Notice given by facsimile or telecopy shall not be effective unless receipt of such Notice is acknowledged by the recipient in writing, in which case the effective date of such Notice shall be the date of such written acknowledgement. ARTICLE 25 TITLE OF LANDLORD Landlord covenants that, as of the date of this Lease, there are no liens upon its estate other than (a) covenants, conditions, restrictions, easements, ground leases, mortgages or deeds of trust (collectively, "Agreements"); (b) liens and encumbrances which do not prevent Tenant from using the Premises as permitted by this Lease; (c) the effect of any zoning laws of the city, county and state where the Shopping Center is situated, and (d) general and special taxes not delinquent. Tenant agrees that (i) as to its leasehold estate, it and all persons in possession or holding under it will conform to and will not violate the terms of the Agreements or any matters of record, and (ii) this Lease is subordinate to the Agreements and any amendments or modifications thereto; provided, however, if the Agreements are not of record as of the date of this Lease, then this Lease shall automatically become subordinate to the Agreements upon recordation so long as the Agreements do not prevent Tenant from using the Premises for the use set forth in Section 1.14. Tenant further agrees to execute and return to Landlord, within ten (10) days of written demand by Landlord, an agreement in recordable form subordinating this Lease to the Agreements. ARTICLE 26 SHOPPING CENTER REMODELING At any time during the Term, Landlord may remodel or expand, in any manner, the existing Shopping Center, which work may include the addition of shops and/or the addition of new buildings to the Shopping Center (collectively, "Remodeled Center"). If Landlord deems it necessary for construction personnel to enter the Premises in order to construct the Remodeled Center, Landlord shall give Tenant no less than fifteen (15) days' prior notice and Tenant shall allow such entry. Landlord shall use reasonable efforts to complete the work affecting the Premises in an efficient manner so as not to interfere unreasonably with Tenant's business. Tenant shall not be entitled to any damages or to reduction in Minimum Annual Rental, Percentage Rental or Additional Rental for any interference or interruption of Tenant's business upon the Premises or for any inconvenience caused by such construction work. Landlord shall have the right to use a portion of the premises to accommodate any structures required for the Remodeled Center. If, as a result of Landlord utilizing a portion of the Premises for such purpose, there is a permanent increase or decrease in the Floor Area of the Premises of one percent (1%) or more, there shall be a proportionate adjustment of Minimum Annual Rental and all other charges based on Floor Area. During the course of construction, Tenant shall continue to pay Minimum Annual Rental, Percentage Rental and Additional Rental. -21- 23 ARTICLE 27 MISCELLANEOUS 27.1 WAIVER. Any waiver by either party of a breach by the other party of a covenant of this Lease shall not be construed as a waiver of a subsequent breach of the same covenant. The consent or approval by either party to anything requiring such party's consent or approval shall not be deemed a waiver of such party's right to withhold consent or approval of any subsequent similar act. No breach of a covenant of this Lease shall be deemed to have been waived by the other party unless the waiver is in writing and is signed by such party. 27.2 RIGHTS CUMULATIVE. Except as provided herein to the contrary, and subject to the specific limitations contained in Article 20, the respective rights and remedies of the parties specified in this Lease shall be cumulative and in addition to any rights and remedies not specified in this Lease. 27.3 ENTIRE AGREEMENT LIMITATION OF ACTIONS. It is understood that there are no oral or written agreements or representations between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, representations, brochures, agreements and understandings, if any, between Landlord and Tenant. Confirming the understandings and agreements described in this Section 27.3, Tenant agrees to execute and deliver to Landlord Tenant's Estoppel in the form and within the content of Exhibit G attached hereto ("Tenant's Estoppel") concurrently with Tenant's execution and delivery of this Lease. Any claim, demand, cause of action or defense of any kind by Tenant which is based on or arises in connection with this Lease, the negotiations prior to its execution, or any asserted statement, representation, arrangement, agreement or understanding between Landlord and Tenant which is not expressly stated in this Lease shall be barred unless Tenant commences an action thereon, or interposes in a legal proceeding a defense based thereon, within six (6) months after the date of the asserted inaction or omission, or the date of the occurrence of the event or action to which the claim, demand, cause of action or defense relates, whichever applies. 27.4 NO REPRESENTATION. Landlord reserves the absolute right to effect such other tenancies in the Shopping Center as Landlord, in the exercise of its sole business judgment, shall determine to best promote the interests of the Shopping Center. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or number of tenants shall, during the Term of this Lease, occupy any space in the Shopping Center. 27.5 AMENDMENTS IN WRITING. No provision of this Lease may be amended except by an agreement in writing signed by Landlord and Tenant. 27.6 NO PRINCIPAL/AGENT RELATIONSHIP. Nothing contained in this Lease shall be construed as creating the relationship of principal and agent or of partnership or joint venture between Landlord and Tenant. 27.7 LAWS OF CALIFORNIA TO GOVERN. This Lease shall be governed by and construed in accordance with the laws of the State of California without giving effect to the choice of law provisions thereof. 27.8 SEVERABILITY. If any provision of this Lease or the application of such provision to any person, entity or circumstance is found invalid or unenforceable by a court of competent jurisdiction, such determination shall not affect the other provisions of this Lease and all other provisions of this Lease shall be deemed valid and enforceable. 27.9 SUCCESSORS. All rights and obligations of Landlord and Tenant under this Lease shall extend to and bind the respective heirs, executors, administrators and the permitted concessionaires, successors, subtenants and assignees of the parties. If there is more than one (1) Tenant hereunder, each shall be bound jointly and severally by the terms, covenants and agreements contained in this Lease. 27.10 TIME OF THE ESSENCE. Except for the delivery of possession of the Premises to Tenant, time is of the essence of all provisions of this Lease of which time is an element. 27.11 WARRANTY OF AUTHORITY. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of the corporation or partnership represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of the corporation or partnership and that this Lease is binding upon the corporation or partnership. If Tenant is a corporation, Tenant hereby covenants and warrants that (a) Tenant is a duly qualified corporation and all steps have been taken prior to the date hereof to qualify Tenant to do business in the State of California, and (b) all franchise and corporate taxes have been paid to date. 27.12 MORTGAGE CHANGES. Tenant shall not unreasonably with its consent to changes or amendments to this Lease requested by the holder of a mortgage or deed of trust or such similar financing instrument encumbering Landlord's fee interest in the Premises so long as such change does not materially alter the economic terms of this Lease or materially diminish the rights, or materially increase the obligations, of Tenant 27.13 WAIVER OF RIGHTS OF REDEMPTION. Tenant waives any and all rights of redemption granted under any present and future laws in the event Landlord obtains the right to possession of the Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease or otherwise. -22- 24 27.14 NO IMPLICATION OF EXCLUSIVE USE. Nothing contained in this Lease shall be deemed to give Tenant an express or implied exclusive right to operate any particular type of business in the Shopping Center. 27.15 BROKERS. Tenant represents and warrants that it has not had any dealings with any realtors, brokers or agents in connection with the negotiation of this Lease, except as may be specifically set forth in Section 1.21, and agrees to pay any realtors, brokers or agents not referenced in Section 1.21 and to hold Landlord harmless from the failure to pay any realtors, brokers or agents and from any cost, expense or liability for any compensation, commission or charges claimed by any other realtors, brokers or agents claiming by, through or on behalf of Tenant with respect to this Lease and/or the negotiation hereof. 27.16 NO RECORDING. Tenant shall not record this Lease or any short form memorandum of this Lease. 27.17 TRANSFER OF LANDLORD'S INTEREST. Should Landlord sell, exchange or assign this Lease (other than a conditional assignment as security for a loan), then Landlord, as transferor, shall be relieved of any and all obligations on the part of Landlord accruing under this Lease from and after the date of such transfer provided that Landlord's successor in interest shall assume such obligations from and after such date. No holder of a mortgage or deed of trust to which this Lease is subordinate shall be responsible in connection with the Security Deposit unless the mortgagee or holder of such deed of trust actually receives the Security Deposit. 27.18 INTEREST ON PAST DUE OBLIGATIONS. Except where another rate of interest is specifically provided for in this Lease, any amount due from either party to the other under this Lease which is not paid when due, shall bear interest at the rate per annum ("Interest Rate") equal to the prime interest rate charged by Wells Fargo Bank plus two (2) percentage points (but in no event to exceed the maximum lawful rate) from the date ten (10) days after such amount was originally due to and including the date of payment. 27.19 RIGHT TO SHOW PREMISES. During the last one hundred twenty (120) days of the Term or earlier termination of this Lease, Landlord shall have the right to go upon the Premises to show same to prospective tenants or purchasers and to post appropriate signs, during normal business hours and upon reasonable notice to Tenant. 27.20 LIENS. Tenant shall pay all costs for work performed by or on account of it and shall keep the Premises and the Shopping Center free and clear of mechanics' liens or any other liens. Tenant shall give Landlord immediate notice of any lien filed against the Premises or the Shopping Center as a result of any work of improvement performed by or on behalf of Tenant. Tenant shall immediately cause any lien to be discharged or removed of record by either paying the amount thereof or recording a statutory lien release bond in an amount equal to one hundred fifty percent (150%) of the amount of said lien. If Tenant fails to do so, Landlord shall have the right, but not the obligation, in addition to all other rights and remedies available to Landlord under this Lease, to either pay and discharge such lien, without regard to the validity thereof, or procure and cause to be recorded a statutory lien release bond and to (a) collect from Tenant as Additional Rental; or (b) deduct from any Tenant Improvement Allowance or any other amount payable by Landlord to Tenant under this Lease (i) all costs incurred by Landlord in paying and discharging such lien, or in procuring such bond, and (ii) all expenses incurred by Landlord in connection with such lien, including attorneys' fees and costs, recording fees and administrative costs and expenses. 27.21 INDEX. Wherever in this Lease there is a reference to the "Index", such reference shall refer to the following: (a) The "Index", as used in this Lease, shall be deemed to mean The United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical Workers, Los Angeles-Anaheim-Riverside Average, Subgroup "All Items", (1982-1984 = 100). If at any time there shall not exist the Index in the format recited herein, Landlord shall substitute any official index published by the Bureau of Labor Statistics or successor or similar governmental agency as may then be in existence and shall, in Landlord's opinion, be most nearly equivalent thereto. (b) The sum to be increased in accordance with the provisions of the Index shall be increased using the following formula: such sum shall be increased by a percentage equal to the percentage increase, if any, in the Index published for the Comparison Month over the Index published for the Base Month; provided, however, in no event shall said sum be less than that which was due immediately preceding the date of adjustment. 27.22 FAILURE TO SUBSTANTIALLY COMPLETE PREMISES. Notwithstanding anything to the contrary contained herein, (a) if for any reason whatsoever Substantial Completion of the Premises has not occurred on or before the last day of the twenty-fourth (24th) month following the Date of Lease, or (b) if Landlord should at any time postpone or abandon the development or construction of the Shopping Center or that portion of the Shopping Center in which the Premises are located, then either party may elect to terminate this Lease by giving thirty (30) days' notice of such election to the other party. If such notice is given, this Lease and the rights and obligations of the parties pursuant to this Lease shall cease and terminate without the need for the execution of any further or other instrument but, if Landlord shall request, Tenant shall execute an instrument in recordable form confirming the termination of this Lease and of Tenant's release and surrender all right, title and interest in and to the Premises under this Lease or otherwise. If this Lease is terminated pursuant to this Section 27.22, neither party -23- 25 shall have any further or additional rights, remedies, claims or liability arising out of this Lease or the termination of this Lease. 27.23 INDEPENDENT CONTRACTORS. Whenever in this Lease it provides that Landlord shall perform certain work or services, Landlord shall be entitled to contract with an independent contractor to perform said work or services or may provide the services itself. 27.24 TRADE FIXTURES, PERSONAL PROPERTY AND ALTERATIONS. Upon the expiration or earlier termination of the Term, Tenant shall remove from the Premises all of Tenant's trade fixtures, furniture, equipment, signs, improvements, additions and Alterations to the extent such items are not permanently affixed to the Premises, and immediately repair any damage occasioned to the Premises by reason of such removal so as to leave the Premises in a neat and clean condition. Tenant may encumber or finance its movable fixtures and equipment installed in the Premises, and no such encumbrance or financing shall be deemed an Assignment, provided such encumbrance or financing creates a security interest in such movable fixtures and equipment, only, and confers no interest in the Premises. All trade fixtures, signs and other personal property installed in or attached to the Premises by Tenant must be new when so installed or attached. 27.25 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, judicial orders, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes (except financial) beyond the reasonable control of the party obligated to perform, shall excuse the performance by that party for a period equal to the prevention, delay or stoppage, except the obligations imposed with regard to Minimum Annual Rental, Percentage Rental and Additional Rental to be paid by Tenant pursuant to this Lease; provided the party prevented, delayed or stopped shall have given the other party written notice thereof within thirty (30) days of such event causing the prevention, delay or stoppage. Notwithstanding anything to the contrary contained in this Section 27.25, in the event any work performed by Tenant or Tenant's contractor results in a strike, lockout and/or labor dispute, the strike, lockout and/or labor dispute shall not excuse the performance by Tenant of the provisions of this Lease. 27.26 TERMINATION AND HOLDING OVER. This Lease shall terminate without further notice upon the expiration of the Term. Tenant shall have no right to extend or renew this Lease upon the expiration of the Term. Upon the expiration or earlier termination of the Term, Tenant shall peaceably and quietly surrender the Premises broom-clean and in the same condition (including, at Landlord's option, the demolition and removal of any improvements made by Tenant to the Premises as part of Tenant's Work or otherwise) as the Premises were in upon delivery of possession of same to Tenant by Landlord, reasonable wear and tear and any damage to the Premises Which Tenant is not required to repair pursuant to Article 17 excepted. Should Tenant hold over in the Premises beyond the expiration or earlier termination of this Lease, the holding over shall not constitute a renewal or extension of this Lease or give Tenant any rights under this Lease. In such event, Landlord may, in its sole discretion, treat Tenant as a tenant at will, subject to all of the terms and conditions in this Lease, except that Minimum Annual Rental shall be an amount equal to the greater of (a) [***] times the sum of Minimum Annual Rental and Percentage Rental which was payable by Tenant for the twelve (12) month period immediately preceding the expiration or earlier termination of this Lease, or (b) the then currently scheduled [***]. In the event Tenant fails to surrender the Premises upon the expiration or earlier termination of this Lease, Tenant shall indemnify and hold Landlord harmless from all loss or liability which may accrue therefrom including, without limitation, any claims made by any succeeding tenant founded on or resulting from Tenant's failure to surrender. Acceptance by Landlord of any Minimum Annual Rental, Percentage Rental or Additional Rental after the expiration or earlier termination of this Lease shall not constitute a consent to a holdover hereunder, constitute acceptance of Tenant as a tenant at will, or result in a renewal of this Lease. 27.27 ATTORNEYS' FEES AND PROCESSING CHARGES. In the event that, at any, time after the date of this Lease, either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease or any default hereunder, the party not prevailing in such action or proceeding shall reimburse the prevailing party for its actual attorneys' fees, and all fees, costs and expenses incurred in connection with such action or proceeding, including, without limitation, any post-judgment fees, costs or expenses incurred on any appeal or in collection of any judgment. If at the request of Tenant or in connection with any such transaction initiated by Tenant, Landlord shall prepare, review or execute any amendment, modification, consent to Assignment, approval, fixture subordination, waiver or other agreement or instrument relating to this Lease or the Premises, or any Extension Amendment or New Lease pursuant to Section 28.3 of this Lease if Tenant has been granted an option to extend the Term, Tenant agrees to pay to Landlord, as Additional Rental, (i) a reasonable processing charge in accordance with the schedule of charges from time to time established by Landlord, and (ii) Landlord's reasonable attorneys' fees and expenses incurred in connection with the evaluation and documentation thereof. Landlord may, at its option, require the payment of all or a portion of such charges and/or fees in advance. 27.28 SERVICE CHARGE. Tenant acknowledges that Tenant's failure to submit any required document, certificate, report, statement of Gross Sales, insurance policy or certificate as and when required in this Lease will cause Landlord to incur additional costs of administration, and agrees that in the event Tenant fails to submit any required document, certificate, report, statement of Gross Sales, insurance policy or certificate as and when required in this Lease, Tenant shall pay to Landlord, as Additional Rental, a "Service Charge" in the amount *** Confidential treatment requested. -24- 26 of [***] for each week or portion thereof that said failure continues. Tenant agrees that such Service Charge shall not constitute damages, and that neither Tenant's payment of such Service Charge nor Landlord's acceptance of such payment shall result in a cure of any default under this Lease, or waiver of any default under this Lease by Landlord. 27.29 HAZARDOUS MATERIALS. Tenant, at its sole cost and expense, shall comply with all laws relating to the storage, use, handling and disposal of hazardous, toxic or radioactive matter including, without limitation, those materials identified in Section 25501(k) of the California Health and Safety Code, as amended from time to time (collectively, "Hazardous Materials"). In the event Tenant intends or does store, use, handle or dispose of any Hazardous Materials, Tenant shall notify Landlord in writing at least ten (10) days prior to their first appearance on the Premises and Tenant's failure to do so shall constitute a default under the Lease. Such notification shall include identification (type and common name) and quantities of all Hazardous Materials, or any combination thereof, which are or intended to be stored, used, handled or disposed of on, under or about the Premises. Landlord may, at any time or from time to time, require Tenant to conduct monitoring or evaluation activities with respect to Hazardous Materials on the Premises, at Landlord's sole discretion, and at Tenant's sole cost and expense, performed by environmental specialists approved in advance by Landlord. Such monitoring and/or evaluation activity may include, without limitation, soil testing, air testing, production waste stream analysis, and if necessary, in Landlord's sole discretion, groundwater testing. In the event Tenant intends to store, use, handle or dispose of Hazardous Materials, Tenant shall complete, execute and deliver to Landlord an Environmental Questionnaire and Disclosure Statement, in Landlord's then current form ("Environmental Questionnaire"), prior to the execution of this Lease or ten (10) days prior to the first appearance of the Hazardous Materials on the Premises. The completed Environmental Questionnaire shall be deemed incorporated into this Lease for all purposes, and Landlord shall be entitled to rely fully on the information contained therein. Tenant shall update and resubmit to Landlord the Environmental Questionnaire periodically as required by Landlord and immediately if material changes occur in the nature or content of Hazardous Materials being stored, used, handled or disposed of on the Premises. Tenant shall promptly notify Landlord of, and shall promptly provide Landlord with, true, correct, complete and legible copies of, all of the following environmental items relating to the Premises which may be filed or prepared by or on behalf of, or delivered to or served upon, Tenant: reports filed pursuant to any self-reporting requirements, reports filed pursuant to any applicable laws or this Lease, all permit applications, permits, monitoring reports, workplace exposure and community exposure warnings or notices. In addition, Tenant shall promptly notify Landlord of, and shall promptly provide Landlord with, true, correct, complete and legible copies of, all of the following environmental items relating to the Premises which may be filed or prepared by or on behalf of, or delivered to or served upon, Tenant: all orders, reports, notices, listings and correspondence (even those which may be considered confidential) of or concerning the release, or threatened release, investigation of, compliance, clean up, remedial and corrective action, and abatement of Hazardous Materials whether or not required by applicable laws, including, but not limited to, reports and notices required by or given pursuant to applicable laws, and all complaints, pleadings and other legal documents filed against Tenant related to Tenant's use, handling, storage or disposal of Hazardous Materials on the Premises. In the event of a release or threatened release of any Hazardous Material on the Premises or to the environment from the Premises, Tenant shall promptly notify Landlord and provide Landlord with copies of all reports and correspondence with or from all governmental agencies, authorities or any other persons relating to such release or threatened release. "Landlord" as used in this Paragraph shall have the same meaning as in Section 16.6. Tenant shall be solely responsible for, shall pay for, defend (with an attorney approved by Landlord), indemnify and hold Landlord harmless against and from all claims, judgments, liabilities, costs and expenses, including attorneys' fees and costs, arising out of or connected with its storage, use, handling or disposal of Hazardous Materials on the Premises. In addition, except with respect to any Hazardous Materials installed in or placed on the Premises by Landlord or any agent, employee or contractor of Landlord, Tenant shall be solely responsible for, shall pay for, defend, indemnify and hold Landlord, and the Premises harmless against and from all claims, judgments, liabilities, liens, costs and expenses, including attorneys' fees and costs, arising out of or connected with the removal, clean-up and/or restoration work and materials necessary to return the Premises, and any other property of whatever nature, to their condition existing prior to the appearance of the Hazardous Materials on the Premises. Tenant's obligations under this Section 27.29 shall survive the termination of this Lease. 27.30 WAIVER OF TRIAL BY JURY. Landlord and Tenant desire and intend that any disputes arising between them with respect to or in connection with this Lease be subject to expeditious resolution in a court trial without a jury. Therefore, Landlord and Tenant each hereby waive the right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding or other hearing brought by either Landlord against Tenant or Tenant against Landlord on any matter whatsoever arising out of, or in any way connected with, this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises or any claim of injury or damage, or the enforcement of any remedy under any law, statute, or regulation emergency or otherwise, now or hereafter in effect. 27.31 CITY OF IRVINE OCCUPANCY DISCLOSURE FORM. Pursuant to the City of Irvine master plan approval conditions applicable to the Shopping Center, Landlord is required to provide Tenant with a City of Irvine Occupancy Disclosure form for the Shopping Center. Tenant acknowledges receipt of such Occupancy Disclosure form. *** Confidential treatment requested. -25- 27 27.32 HAZARDOUS MATERIALS DISCLOSURE. Tenant acknowledges that the 28.3 acre parcel of land of which the Shopping Center is part has previously been used for agricultural purposes; no other uses are known to have occurred there. Landlord is unaware of any releases of hazardous substances on or beneath the property -- with the following exceptions: (a) Over the years, various agricultural chemicals have been applied to the property. Residues of these materials may exist in the upper layers of the soil. Landlord anticipates that any such residues will decompose over time. The grading and development of the site also will reduce the potential for exposure. The risks associated with this previous agricultural chemical use on the property appear to be no greater than those that are associated with other similarly used properties in the area. (b) The El Toro Marine Corps Air Station, which is located approximately 3/4 mile northeast of the property, has had several releases of hazardous substances, many of which involved underground storage tanks. Contaminated ground water emanating from the Air Station may have migrated beneath portions of the property. (c) Minor spillage has occurred from a small mobile diesel tank that is stored in an agricultural equipment yard in the northeastern portion of the property. Landlord plans to cleanup the minor soil contamination prior to the development of that portion of the property. Landlord has investigated each of these matters. None of them appear to pose a significant risk to human health or the environment, or to interfere with the proposed development, occupancy, or use of the property. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] -26- 28 53. Supplements Article 18; The following supplements Article 18 and is incorporated as Section 18.6: "TENANT'S TERMINATION RIGHTS. (a) If Landlord does not commence the repair and restoration work to the Premises, or any portion of the Common Area which, if not restored, will materially adversely affect Tenant's use of the Premises for the normal conduct of its business, as required pursuant to this Article 18, by the date (the "Repair Commencement Date") which is six (6) months following the date of the Taking, then Tenant shall have the right to terminate this Lease by delivering written notice to Landlord, which notice shall be given within sixty (60) days after the Repair Commencement Date but prior to the commencement of restoration work by Landlord. Such notice by Tenant shall set forth the effective date of termination, which date shall not be later than that date occurring thirty (30) days after the Repair Commencement Date. If Tenant timely and properly exercises its foregoing option to terminate this Lease, Tenant shall vacate and deliver possession of the Premises to Landlord in accordance with the provisions of this Lease applicable thereto, whereafter neither party to this Lease shall have any further liability to the other accruing thereafter under this Lease. The failure of Tenant to timely and properly exercise the foregoing right to terminate this Lease shall result in the subject right to terminate being null and void. (b) If Landlord does not repair and restore the Premises, and that portion of the Common Area which, if not restored, will materially adversely affect Tenant's use of the Premises for the normal conduct of its business, as required pursuant to this Article 18, within eighteen (18) months following the date of the Taking (which eighteen (18) month period may be extended for up to six (6) months as a result of a Force Majeure Event or Tenant delay) (the "Repair Construction Date"), then Tenant shall have the right to terminate this Lease by delivering written notice to Landlord, which notice shall be given within sixty (60) days after the Repair Construction Date but prior to the substantial completion of the restoration work by Landlord. Such notice by Tenant shall set forth the effective date of termination, which date shall not be later than that date occurring thirty (30) days after the Repair Construction Date. If Tenant timely and properly exercises its foregoing option to terminate this Lease, Tenant shall vacate and deliver possession of the Premises to Landlord in accordance with the provisions of this Lease applicable thereto, whereafter neither party to this Lease shall have any further liability to the other accruing thereafter under this Lease. The failure of Tenant to timely and properly exercise the foregoing right to terminate this Lease shall result in the subject right to terminate being null and void." 54. Supplements Section 19.1; The first sentence of Section 19.1 is hereby deleted and replaced with the following: "Should Tenant at any time be in default with respect to any payment of Minimum Annual Rental, Percentage Rental, Additional Rental or any other charge payable by Tenant pursuant to this Lease for a period of ten (10) days after written notice from Landlord to Tenant (provided, however, any notice shall be in lieu of, and not in addition to, any notice required under Section 1161 of the Code of Civil Procedure of California or any similar, superseding statute), or should Tenant be in default in the prompt and full performance of any other of its promises, covenants or agreements herein contained for more than a reasonable time (in no event to exceed thirty (30) days) after written notice thereof from Landlord to Tenant specifying the particulars of the default (provided, however, any notice shall be in lieu of, and not in addition to, any notice required under Section 1161 of the Code of Civil Procedure of California or any similar, superseding statute), or should Tenant vacate or abandon the Premises, or should Tenant make any general assignment for the benefit of creditors, or should there be filed against Tenant a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, same is dismissed within sixty (60) days), or should Tenant institute any proceedings under the Bankruptcy Code or any similar or successor statute, code or act, or should an appointed trustee or receiver take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease where possession is not restored to Tenant within thirty (30) days, or should substantially all of Tenant's assets located at the Premises or Tenant's interest in this Lease be attached or judicially, seized where the seizure is not discharged within thirty (30) days, then Landlord may treat the occurrence of any one (1) or more of the foregoing events as a breach of this Lease and, in addition to any or all other rights or remedies of Landlord by law provided, Landlord shall have the right, at Landlord's option, without further notice or demand of any kind to Tenant or any other person, (a) to declare the Term ended and to re-enter and take possession of the Premises and remove all persons therefrom, or (b) without declaring this Lease terminated and without terminating Tenant's right to possession, to re-enter the Premises and occupy the whole or any part for and on account of Tenant and to collect any unpaid rentals and other charges which have become payable or which may thereafter become payable, or (c) even though it may have re-entered the Premises as provided in subparagraph (b) above, to thereafter elect to terminate this Lease and all of the rights of Tenant in or to the Premises." 55. Supplements Section 2 1. 1; Section 21.1 is clarified to provide that in the event Landlord requests Tenant to subordinate the Lease to any future liens of any mortgage, deed of trust, or the interest of any lease in which Landlord is the lessee, Landlord shall provide Tenant a subordination, and attornment agreement from such lender under a deed of trust or mortgage or lessor under any ground lease covering the Shopping Center, in a form reasonably acceptable to Landlord, Tenant and such lender. Further, Landlord represents that as of the Date of Lease there is no mortgage or underlying ground lease affecting the Premises or the Shopping Center. Addendum - 11 29 56. Supplements Section 21.3: The first sentence of Section 21.3 is hereby deleted and replaced with the following: "Tenant agrees, upon not less than fifteen (15) days prior notice by Landlord, to execute, acknowledge and deliver to Landlord, a statement in writing in substantially the form of Exhibit F hereto or in such other form as may reasonably be required by Landlord's mortgagee or beneficiary ("Tenant's Certificate")." 57. Supplements Section 22.2; The second sentence of Section 22.2 is hereby deleted and replaced with the following: "Within ten (10) days after written demand by Landlord, Tenant shall deposit cash with Landlord in an amount sufficient to restore the Security Deposit to the original sum deposited, and Tenant's failure to do so shall constitute a material default under this Lease." 58. Supplements Section 21.3; Section 21.3 is clarified to provide that Landlord agrees, upon not less than twenty (20) days prior written notice by Tenant (but not more frequently than once in any twelve (12) month period), during the Term of the Lease, to execute, acknowledge and deliver to Tenant, a statement in writing in a form reasonably acceptable to Landlord, stating, among other things (and to the extent accurate), that the Lease is in full force and effect without modification (or if modified so stating and identifying the modifications), the date to which Minimum Annual Rental and other charges are paid, and Tenant is not in breach or default of any of its obligations under the Lease (or, if in breach, so stating) ("Landlord's Certificate"). 59. Supplements Article 25; Article 25 is clarified to provide that there are no Agreements or liens and encumbrances to Landlord's actual knowledge which materially and adversely affect Tenant's use of the Premises as permitted under the Lease. 60. Supplements Section 27.3; The last sentence of Section 27.3 is hereby deleted. 61. Supplements Section 27.15; Section 27.15 is clarified to provide that Landlord shall pay the broker set forth in Section 1.2 1, pursuant to the terms of a separate agreement. Controlling over any contrary provisions of Section 27.15, Tenant and Landlord represent and warrant that they have not had any dealings with any realtors, brokers or agents in connection with the negotiation of the Lease, except as may be specifically set forth in Section 1.2 1, and each agrees to pay any realtors, brokers or agents not referenced in Section 1.21 and to hold each other harmless from the failure to pay any realtors, brokers or agents and from any cost, expense or liability for any compensation, commission or charges claimed by any other realtors, brokers or agents claiming by, through or on behalf of Tenant or Landlord, as applicable, with respect to the Lease and/or the negotiation hereof. 62. Supplements Section 27.20; The third sentence of Section 27.20 is hereby deleted and replaced with the following: "Tenant shall have the right to contest any lien filed against the Shopping Center and/or the Premises as a result of any work of improvement performed by or on behalf of Tenant; provided, however, Tenant shall cause such lien to be discharged or removed of record by paying the amount thereof or recording a statutory lien release bond in an amount equal to one hundred fifty percent (150%) of the amount of said lien no later than fifteen (15) days after the filing of such lien." 63. Supplements Section 27.23; Section 27.23 is hereby deleted and replaced with the following: "Whenever in this Lease it provides that Landlord shall perform certain work or services, Landlord shall be entitled to contract with an independent contractor to perform said work or services or may provide the services itself provided, such costs do not exceed the rates charged for same by unaffiliated third parties on a competitive basis in comparable shopping centers." 64. Supplements Section 27.24; Controlling over any contrary provisions of Section 27.24, upon the expiration or earlier termination of the Term, Tenant has the right, in its sole discretion, to remove all of Tenant's trade fixtures, furniture, equipment (including its simulators), signs, improvements, additions and Alterations whether or not such items are permanently affixed to the Premises, provided, that, and only so long as, Tenant repairs any and all damages to the Premises resulting from such removal. Further, Landlord agrees that Tenant may use reconditioned simulators in the Premises, provided the appearance of such equipment shall be in like new condition. Addendum - 12 30 65. Supplements Section 27.26; The third sentence of Section 27.26 shall be hereby deleted and replaced with the following: "Upon the expiration or earlier termination of the Term, Tenant shall peaceably and quietly surrender the Premises broom-clean and in substantially the same condition as the Premises were in upon delivery of possession of same to Tenant by Landlord, reasonable wear and tear and any damage to the Premises which Tenant is not required to repair pursuant to Article 17 excepted; provided, however, Tenant shall not be required to demolish and remove any improvements made by Tenant to the Premises (so long as any and all damage caused by Tenant from its election to remove same shall be repaired by Tenant)." 66. Supplements Section 27.28: Controlling over any contrary provisions of Section 27.28, Landlord shall not impose a Service Charge unless the subject failure continues for more than ten (10) days following written notice to Tenant of such failure; provided, however if Tenant fails to report Gross Sales and Percentage Rental under Section 7.3, or fails to maintain the insurance required under Article 16, no prior notice shall be required. In addition, except with respect to Tenant's failure to provide an insurance policy or certificate in accordance with this Lease, Tenant shall not be required to pay a Service Charge until the second (2nd) occasion in any consecutive twelve (12) month period during the Term and each time during such twelve (12) month period thereafter that Tenant fails to furnish any required document, report or statement as agreed in the Lease. 67. Supplements Sections 27.29; Section 27.29 is clarified to provide that Tenant may, without Landlord's prior consent, use ordinary cleaning materials, hydraulic oil and similar substances customarily used in the typical course of Tenant's business; provided same are used in compliance with all applicable laws and manufacturers specifications. Controlling over any contrary provisions of Section 27.29, Landlord shall only have the right to require Tenant to conduct monitoring or evaluation activities with respect to Hazardous Materials on the Premises, not more than one (1) time in any twelve (12) month period, or any time if Landlord, in its reasonable discretion, determines that Tenant is not complying with all laws with respect to its storage, use, handling or disposal of such Hazardous Materials. The indemnification provisions set forth in the third (3rd) paragraph of Section 27.29 are clarified to provide that in no event shall Tenant be responsible for liabilities to the extent arising from Landlord's negligence willful misconduct in connection with Landlord's Work. In addition, Landlord represents, to its actual knowledge or (without duty of investigation), that, as of the Date of the Lease, no Hazardous Materials are present in the Premises or the Shopping Center in violation of applicable laws. In the event that any Hazardous Materials are located in or discharged in the Premises or the Shopping Center other than by Tenant or its agents, contractors or employees, and such discharge is required to be remediated pursuant to applicable laws and has a material and adverse affect upon Tenant's use of or operation of its business from the Premises, then Landlord (and not Tenant) shall perform or cause to be performed the necessary remediation of such Hazardous Materials on or affecting the Premises or the Shopping Center at no cost to Tenant; provided, however, that the costs of remediating any minor spills and/or discharges typically encountered in the operation of a shopping center may be included in the Common Area Expenses. 68. Supplements Article 27; The following supplements Article 27 and is incorporated as Section 27.33: "27.33 JUDICIAL REFERENCE. Any dispute between Landlord and Tenant which is to be resolved by a reference proceeding pursuant to the provisions of this Lease (i.e., pursuant to Section 13.8 of the Addendum (inspection rights) or Section 27.3 (payment under protest)) shall be resolved by a proceeding in accordance with the provisions of California Code of Civil Procedure Section 638 et seq., for a determination to be made which shall be binding upon the parties as if tried before a court or jury. The parties agree specifically as to the following: 1. Within five (5) business days after service of a demand by a party hereto, the parties shall agree upon a single referee who shall then try all issues, whether of fact or law, and then report a finding or judgment thereon. If the parties are unable to agree upon a referee either party may seek to have one appointed, pursuant to California Code of Civil Procedure Section 640, by the presiding judge of the Los Angeles County Superior Court. 2. The compensation of the referee shall be such charge as is customarily charged by the referee for like services. The cost of such proceedings shall initially be borne equally by the parties. However, the prevailing party in such proceedings shall be entitled, in addition to all other costs, to recover its contribution for the cost of the reference as an item of damages and/or recoverable costs. 3. If a reporter is requested by either party, then a reporter shall be present at all proceedings, and the fees of such reporter shall be borne by the party requesting such reporter. Such fees shall be an item of recoverable costs. Only a party shall be authorized to request a reporter. Addendum - 13 31 4. The referee shall apply all California Rules of Procedure and Evidence and shall apply the substantive law of California in deciding the issues to be heard. Notice of any motions before the referee shall be given, and all matters shall be set at the convenience of the referee. 5. The referee's decision under California Code of Civil Procedure Section 644, shall stand as the judgment of the court, subject to appellate review as provided by the laws of the State of California. 6. The parties agree that they shall in good faith endeavor to cause any such dispute to be decided within four (4) months. The date of hearing for any proceeding shall be determined by agreement of the parties and the referee, or if the parties cannot agree, then by the referee. 7. The referee shall have the power to award damages and all other relief." 69. Supplements Exhibit C; Controlling over any contrary provisions of Exhibit C, in no event shall the store frontage and configuration of the Floor Area of the Premises materially differ from that which is reflected on the Final Plans. Addendum - 14 32 IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease on the day and year first above written. IRVINE RETAIL PROPERTIES COMPANY, a division of The Irvine Company, a Delaware corporation By: /s/ FREDERICK D. EVANS -------------------------------------------- Frederick D. Evans President Irvine Retail Properties Company By: /s/ GARY A VACCARO -------------------------------------------- Gary A. Vaccaro Senior Vice President, Finance & Acquisitions Investment Properties Group LANDLORD LBE TECHNOLOGIES, INC., a California corporation, dba "NASCAR Silicon Motor Speedway" By: /s/ DAMON DANIELSON -------------------------------------------- Name: Damon Danielson ------------------------------------------ Title: President & CEO ------------------------------------------ By: /s/ JANET WOODS -------------------------------------------- Name: Janet Woods ------------------------------------------ Title: Vice President - Real Estate ------------------------------------------ TENANT If Tenant is a corporation, the authorized officers must sign on behalf of the corporation and indicate the capacity in which they are signing. This Lease must be executed by the president or vice president and the secretary or assistant secretary, unless the bylaws or a resolution of the board of directors shall otherwise provide, in which event the bylaws or a certified copy of the resolution, as the case may be, must be attached to this Lease. Also, the appropriate corporate seal should be affixed hereto. -27- 33 EXHIBIT A SITE PLAN [IRVINE SPECTRUM CENTER PLAN] 34 EXHIBIT B PREMISES [IRVINE SPECTRUM CENTER PREMISES] 35 EXHIBIT C CONSTRUCTION PROVISIONS IRVINE SPECTRUM CENTER PHASE II RETAIL SPACE 1. LANDLORD'S WORK Except as herein provided, the Premises are leased to Tenant on an "as-is" basis. "Landlord's Work", as used in this Lease, shall mean the work specified in items A through K, below. Landlord shall not be obligated to perform any work or provide any facilities in relation to the Premises or the Shopping Center except as specified in items A through K, below, as otherwise specifically set forth in this Lease. Where two (2) types of materials or structures are indicated, Landlord will have the option of using either. A. Floor: Landlord shall provide in the Premises an exposed, unsealed concrete floor slab on the ground floor designed to support a live load of 100 pounds per square foot. B. Storefront: Landlord shall provide the opening(s) for Tenant's storefront. C. Walls: Landlord's shall provide for the Premises perimeter metal studs without drywall from finish floor surface to a height of 15 feet. Where roof structure or one-hour gyp sheeting does not exceed 15 feet, drywall will not be provided. Otherwise, drywall will be provided from 15 feet to the underside of the structure above. Landlord may provide unfinished masonry wall in lieu of metal studs at Landlord's option, in which case no drywall will be provided. D. Egress Door: Landlord will provide a 3'-0" x 7'-0" egress door per building code with appropriate hardware, but hinge only, to the service corridor or exterior at a location to be determined by Landlord. E. Clear Height: Clear height for the Premised shall be as indicated on Landlord's plans for the Premises. F. Electrical: Landlord will provide for 480/277 volt, 3-phase, 4-wire serviced from a central distribution point, at which central distribution point, Landlord shall provide an empty meter base, fusible service disconnect switch (100 amp minimum), and Landlord shall provide an empty conduit (2" trade size minimum) to the Premises. Tenant's fusible service disconnect switch and empty conduit sizes shall be based on a load density of 16 VA per square foot. If Tenant requires a different size main electrical switch and/or empty conduit, Landlord may provide same, if available, at Tenant's expense. G. HVAC: Landlord will provide roof mounted air conditioning units (all electric heat pumps), with an average cooling capacity of 300 square feet per ton condensate drainage connection completed and stubs through the roof for thermostat and electrical hook-up by Tenant. H. Plumbing: Landlord shall provide 4" sewer (under slab) and 1" water (overhead) stub-ins to rear of the Premises. I. Gas: Landlord shall provide gas service to the building in which the Premises is located and a manifold for the distribution of gas service to the Premises. J. Telephone: Landlord shall supply empty 1" conduit from the main telephone panel to the Premises. C-1 36 K. Automatic Fire Sprinklers: Landlord shall provide a fire sprinkler main above the Premises and general distribution as required to meet minimum N.F.P.A. requirements for ordinary hazard occupancies. II. TENANT'S WORK "Tenant's Work", as used in this Lease, shall mean all work, other than Landlords Work specified in Part I of this Exhibit C, which shall be necessary to complete the Premises to a finished condition from which business can be conducted. Tenant acknowledges receipt of a space outline plan for the Premises and the Tenant Design and Construction Criteria for The Entertainment Center at Irvine Spectrum ("Tenant Criteria"). All of Tenant's Work shall be performed in accordance with the provisions of the Final Working Drawings (as hereinafter described) for Tenant's Work. Tenant shall perform or cause to be performed Tenant's Work at Tenant's expense. Tenant's Work shall include, but not be limited to, the following: A. Floors: Tenant shall provide all floor coverings in the Premises. Concentrated dead loads are not allowed without specific prior written approval of Landlord. Penetrations through any walls or floor must have prior written approval from Landlord. Penetrations may require prior review and appropriate x-rays, the costs of which shall be borne by Tenant. B. Storefront: Tenant shall construct the Storefront for the Premises ("Storefront") in accordance with the Storefront Criteria set forth in the Tenant Criteria. C. Walls: Tenant shall provide drywall on all perimeter walls from finish floor to 15' above finish floor, or from finish floor to underside of roof structure if less than 15' or if masonry wall is provided, and all interior demising walls and partitions and wallcoverings in the Premises. D. Ceiling: Tenant shall provide the ceiling in the Premises and any necessary catwalks or access panels in accordance with the Tenant Criteria. Penetrations through and/or attachments to roof structures must have prior written approval from Landlord and comply with all of Landlord's roof specifications and installation procedures. E. Tenant shall provide all electrical work, equipment, fixtures and services for the Premises. Tenant shall provide all temporary power for Tenant's construction. Tenant shall arrange and pay for electric meter from the Landlord. F. HVAC: Tenant shall distribute all HVAC within the Premises. All distribution, including ductwork, electrical and piping, shall be within the Premises below the roofline. All construction, and engineering costs shall be at Tenant's expense. Any rooftop penetrations and roof repairs required shall be made using Landlord's designated subcontractor and complying with all of Landlord's roof specifications. G. Plumbing: Tenant shall provide all plumbing for the Premises. Tenant shall make all rooftop penetrations and roof repairs using Landlord's designated subcontractor and complying with all of Landlord's roof specifications. H. Gas: Tenant shall be responsible for distribution from the manifold of all gas service within the Premises and application for service from the applicable utility company. I. Telephone: Tenant shall provide all telephone equipment for the Premises and connections to the main panelboard. C-2 37 J. Automatic Fire Sprinklers: Tenant shall make any additions or changes in the sprinkler system provided by Landlord necessary to meet the minimum criteria of Landlord or governmental or insurance standards. Tenant shall use Landlord's designated contractor for this work. Tenant shall be responsible for fire alarm monitoring, including designated phone line, monitoring equipment and monitoring company, as required by code. K. Signs: Tenant shall provide signs in accordance with the sign criteria set forth in the Tenant Criteria. L. Service/Fire Exit Doors: If required by applicable codes, Tenant shall provide additional service doors and/or fire exit doors which shall conform with code requirements. M. Code-Related Items: Tenant shall be responsible for complying with any code requirements applicable to its type of business or its operation in the Premises. III. DESIGN APPROVAL PROCEDURE A. Preliminary Drawings: 1. Due to the special nature of the project, prior to preparing any drawings, Tenant shall participate in a kickoff/coordination meeting to discuss any special conditions that may affect the design of the Premises and to review the Tenant Criteria. 2. Within thirty (30) days from the Date of Lease, Tenant shall submit to Landlord's architect three (3) sets of blueline prints and one (1) set of reproducible prints showing intended design character and finishes of the Premises ("Preliminary Drawings"). 3. Preliminary Drawings shall include the following: a. Key plan showing location of shop within Shopping Center. b. Preliminary floor plans (scale 1/4" = 1'-0") indicating interior design concept. c. Typical interior elevations (scale 1/4" = 1'-0"). d. Storefront elevation and section, including any graphics, lighting and signage and indicating all materials and finishes (scale 1/4" = 1'-0"). Elevations shall be rendered in color. Elevations should include existing context (i.e., partial elevations of retail spaces) and should be drawn full height to top of building. All exterior signage is considered integral to the design and is required to be submitted with preliminary elevations. e. Preliminary finish schedule including all colors and materials to be used. 4. Within fifteen (15) days after receipt of the Preliminary Drawings, Landlord's architect will return to Tenant's architect/designer one (1) set of prints of the Preliminary Drawings with any required modifications or with approval. If Tenant wishes to take exception to any required modifications, Tenant may do so only by written notice received by Landlord within ten (10) days from the date of receipt by Tenant's architect/designer of the required modifications. Unless exception is so taken, it will be deemed that all comments are acceptable to and approved by Tenant. 5. If the Preliminary Drawings are returned to Tenant with required modifications and Tenant does not take (or is deemed not to have taken) exception to such modifications as provided above, the Preliminary Drawings must be revised and resubmitted to Landlord for approval within thirty (30) days of their receipt by Tenant's architect/designer. 6. If Tenant properly takes exception to any required modifications as provided above, Landlord will discuss the objections with Tenant and will work with Tenant to achieve Final Working Drawings (as described below) that are acceptable to Landlord. If Tenant and Landlord are unable to agree on Preliminary Drawings, Landlord may terminate this Lease. C-3 38 7. If the Preliminary Drawings are returned "Approved as Noted" and Tenant does not take exception, Tenant's architect shall incorporate Landlord's modifications into the Final Working Drawings. C. Final Working Drawings: 1. Tenant must engage an architect licensed in the State of California for the purpose of preparing the Final Working Drawings. Final Working Drawings must adhere to the Preliminary Drawings as approved by Landlord. 2. Final Working Drawings shall include, but not be limited to, the following: a. Key plan showing location of shop within Shopping Center. b. Floor plans (scale 1/4" = 1'0") indicating storefront construction materials, colors and finishes as well as sliding door track location (if required), location of partitions and type of construction, placement of merchandising fixtures and toilet room locations indicating placement of plumbing and fixtures. c. Reflected ceiling plans (scale 1/4" = 1'0") indicating ceiling materials, various heights, location of all light fixtures, their manufacturer's name and catalog number, lamps to be used and mounting (recessed, surface, etc.), location of sprinkler heads and HVAC grilles. d. Storefront elevation and section, including any graphics, lighting and signage. Indicate all materials and finishes, (scale 1/4" = 1'0"). e. Interior elevations, sections and details sufficient for construction (scale 1/4" = 1'0"). f. Complete interior finish schedule. g. Samples and color chips of the actual materials or charts firmly attached to 8-1/2" x 11" illustration boards and clearly labeled. h. Sign details (scale 1/2" = 1'0") indicating elevation and section views, letter style and size, all colors and materials, methods of illustration, color of illuminate and voltage requirements. i. Mechanical drawings, including electrical, HVAC, plumbing and automatic fire sprinklers prepared by licensed engineers or firms licensed to prepare such drawings. j. Drawings must indicate connected electrical loads, weights of heavy equipment, cases, etc. k. Specification not on drawings should be submitted on 8-1/2" x 11" paper, four sets. l. Landlord reserves the right to require mock ups of any materials, finishes, colors, special signs or lighting. 3. The Final Working Drawings prepared by Tenant's architect must be submitted in the form of two (2) sets of reproducible sepia prints and three (3) sets of black or blue line prints to the Project Architect for approval within fifteen (15) days from the earlier of delivery to Tenant's architect/designer or Landlord's approval of the Preliminary Drawings. Final Working Drawings with incomplete or inadequate information or dimensional discrepancies will be rejected. 4. Within fifteen (15) days after receipt of the Final Working Drawings, Landlord's architect will return to Tenant's architect/designer one (1) set of prints of the Final Working Drawings with any required modifications or with approval. If Tenant wishes to take exception to any required modifications, Tenant may do so only by written notice received by Landlord within ten (10) days from the date of receipt by Tenant's architect/designer of the required modifications. Unless exception is so taken, it will be deemed that all comments are acceptable to and approved by Tenant. 5. If the Final Working Drawings are returned to Tenant with comments and Tenant does not take exception to the comments as provided above, the Final Working Drawings must be revised and resubmitted to Landlord for approval within fifteen (15) days of their receipt by Tenant's architect/designer. 6. If Tenant properly takes exception to any required modifications as provided above, Landlord will discuss the objections with Tenant and will work with Tenant to achieve Final Working C-4 39 Drawings that are acceptable to Landlord. If Tenant and Landlord are unable to agree on Final Working Drawings, Landlord may terminate this Lease. 7. Approved Final Working Drawings will be so stamped and returned to Tenant's architect/designer who made the submittal. C. Final Plans: The approved Final Working Drawings will be considered the "Final Plans". Tenant agrees to provide to Landlord a complete diskette containing the computer assisted drawings of the Final Plans. All construction on the Premises must be in conformity to the Final Plans. The improvements may be inspected by Landlord or its architect who shall have the right to require all work which does not comply with the Final Plans to be corrected by Tenant, or by Landlord at Tenant's cost. Construction may not begin until Final Plans are at the job site. No changes, modifications or alterations to the Final Plans may be made without the written consent of Landlord. D. Failure to Submit Plans: If Tenant fails to submit Preliminary Drawings or Final Working Drawings or revisions thereto as and when required, the period allowed for construction of the Premises as set forth in Section 1.10 of this Lease as "Time to Complete Tenant's Work" will be reduced by the total number of days equal to the number of days the Preliminary Drawings or Final Working Drawings or the revisions thereto were delivered after they were required to be delivered. In addition, Landlord, at its option, may elect to terminate this Lease. E. Building Code Compliance and Nonresponsibility of Landlord: Landlord will not check Tenant's drawings for building code compliance. All Tenant drawings shall, however, be subject to the same engineering and safety review as described below in Section IV.B.6 below respecting Tenant's Work, and such review shall be subject to the same limitations and other provisions set forth in said Section IV.B.6. Approval of Final Working Drawings by Landlord is not a representation that the drawings are in compliance with the requirements of governmental authorities, and it shall be Tenant's responsibility to meet and comply with all Federal, state and local code requirements. Approval of Final Working drawings does not constitute assumption of responsibility by Landlord for their accuracy, sufficiency or efficiency and Tenant shall be totally responsible for such matters. Tenant at all times shall maintain at the Premises the Final Plans as approved by the Building Department, and all inspection cards with respect to Tenant's Work. F. Design Fees: All of Tenant's design fees (including, without limitation, Tenant's architect and sign designer) must be paid by Tenant. IV. CONSTRUCTION OF PREMISES A. Commencement of Construction: Tenant shall commence construction of Tenant's Work in accordance with the provisions of this Lease and shall carry such construction to completion with all due diligence. B. General Requirements: 1. Tenant's contractor shall comply with all rules and regulations and applicable fees as described in the Tenant's Criteria. 2. Tenant shall only engage contractors who are bondable, licenses contractors, possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord and other contractors on the job. All work shall be coordinated with other Shopping Center work. 3. Tenant shall perform or cause to be performed Tenant's Work in all respects with applicable Federal, state, county and city statutes, ordinances, regulations, laws and codes. All required permits, approvals, licenses, authorizations and other permits in connection with the construction and completion of the Premises including, without limitation, building permits and conditional use permits, shall be obtained and all fees (both one-time and recurring) required in connection with the construction and completion of the Premises including, without limitation, all roads fees, building and conditional use permit fees, whether similar or dissimilar, shall be paid for by Tenant. 4. Tenant shall apply and pay for all utility services including, but not limited to, temporary utilities. 5. Tenant shall cause [illegible] contractor to provide warranties for not less than one (1) year against defects in workmanship, materials and equipment, commencing upon Landlord's acceptance of Tenant's Work. 6. Tenant acknowledges that Tenant's Work shall be subject to (a) the inspection and approval of Landlord for the purpose of determining Tenant's compliance with the Final Working Drawings, and (b) an engineering and safety review by Landlord for the purpose of making C-5 40 an assessment regarding the potential safety impact of Tenant's Work on other portions of the Shopping Center, which review may include, without limitation, the examination of (i) any penetrations through the roof or other structural elements of the Premises, (ii) the transition points from the Common Areas to the Premises, and (iii) any flooring, common walls or similar surfaces which may constitute a potential for leakage into other portions of the Shopping Center. Any such inspection, approval, or review shall not constitute an approval of architectural or engineering design, a review to determine the structural safety of Tenant's Work or Tenant's compliance with any building codes or other legal requirements, or otherwise constitute any assumption of liability or responsibility by Landlord or its agents or contractors. Tenant hereby expressly acknowledges that no such inspection, approval or review shall in any way limit the obligations of Tenant or the rights of Landlord under this Lease, and, without limitation on the foregoing, Tenant's obligations under that provision in the Lease regarding Indemnity of this Lease shall apply to any claims, etc. (as more fully indicated in such Indemnity provision) arising or alleged to have arisen in connection with the Premises, Tenant's Work or the safety or structural integrity thereof. Tenant shall, at its sole cost and expense, perform any corrective measures required by Landlord or its agents or contractors in connection with any such inspection, approval or review. 7. Tenant shall be responsible for having a superintendent from its general contractors' office on site during all Tenant's Work and fixturing work. Tenant's general contractor's superintendent or other responsible representative shall be on the jobsite to receive all deliveries of materials, fixtures or merchandise. Landlord reserves the right to turn away any delivery arriving at the jobsite if Tenant's general contractor's superintendent or other responsible representative is not present. Tenant shall stage its construction equipment and materials only in the staging area designated for such purpose by Landlord. 8. Tenant shall cause its general contractor and subcontractors during the construction of Tenant's Work to maintain the Premises and the jobsite in a clean condition and to provide daily removal, cleanup and proper disposal of all trash, rubbish, refuse and construction debris and spoils generated by Tenant's general contractor and subcontractors in dumpsters and other appropriate facilities, and not by depositing any such trash, refuse and construction debris and spoils within other tenant spaces or the jobsite common areas. If Landlord incurs costs to clean up the jobsite and/or adjacent tenant spaces due to the failure of Tenant's general contractor and subcontractors to comply with the foregoing requirements, Tenant agrees to promptly reimburse such costs (or Tenant's proportionate share of such costs, which Landlord shall determine as a flat per-square-foot rate based on the Floor Area of the Premises) upon receipt of an invoice reasonably detailing such costs. 9. Tenant and Tenant's general contractor and subcontractors shall be responsible for the daily removal, cleanup and proper disposal of their own rubbish, trash and construction debris, and for providing adequate dumpster(s) for such purpose (to be located in only areas designated by Landlord). Tenant shall contract with a disposal company to provide daily removal of its rubbish, trash and construction debris. If Landlord provides dumpsters for common use, or if Tenant's contractors use Landlord's dumpsters for disposal of rubbish, trash and/or construction debris, Tenant shall pay its proportionate share of the cost of such trash service, including dumpster rental and hauling fees and charges, which Landlord shall determine as a flat per-square-foot rate based on the Floor Area of the Premises. 10. Tenant shall be responsible for any and all damage done by Tenant's general contractor and/or subcontractors to any of Landlord's buildings, other tenant premises, or the project common areas. Tenant shall at all times cause its general contractor and subcontractors to comply with the requirements of Landlord's general contractor and/or onsite construction manager with respect to protection of Landlord's construction work in the project which has been completed or is in progress, including paths of access within the project for construction materials, equipment and labor, and coordination of sequencing of work. Tenant agrees to promptly reimburse Landlord for all costs incurred by Landlord to repair (including repatching and repainting) any and all damage done by Tenant's general contractor and/or subcontractors to any of Landlord's buildings, other tenant premises, or the project common areas upon receipt of an invoice reasonably detailing such costs. 11. Tenant's general contractor shall provide its own temporary toilets within the Premises or in an area designated by Landlord. Any temporary toilets located by Tenant or Tenant's general contractor or subcontractors other than in areas designated by Landlord may be removed at Tenant's expense. Temporary toilets placed onsite by Landlord's general contractor shall not be available for use by Tenant's general contractor, subcontractors or other personnel. 12. Tenant shall provide and pay for its own temporary power and telephone service from locations designated by Landlord. Landlord's general contractor's jobsite telephones shall not be available for use by Tenant's general contractor, subcontractors or other personnel. If tenant or Tenant's general contractor or subcontractors use Landlord's temporary power, Tenant agrees to pay Landlord and/or Landlord's general contractor the actual or reasonable C-6 41 estimated cost of such power, plus a facilities charge equal [***] of the actual or reasonably estimated cost of such power usage. 13. Tenant and/or Tenant's general contractor shall be responsible for providing all security deemed necessary by Tenant to protect Tenant's Work, including furniture, fixtures and inventory, during the conduct of Tenant's Work. Neither Landlord nor Landlord's general contractor shall provide or be responsible for any such security or protection. C. Landlord's Right to Perform Work: Landlord shall have the right, but not the obligation, to perform on behalf of and for the account of Tenant, subject to reimbursement of the cost thereof by Tenant, and any all of Tenant's Work which Landlord determines, in its sole discretion, should be performed immediately and on an emergency basis for the best interest of the Shopping Center, including, without limitation, work which pertains to structural components, mechanical, sprinkler and general utility systems, fire alarm systems, roofing and removal of unduly accumulated construction materials and debris. D. As-Built Drawings. Tenant, at its expense, shall have prepared a complete set of the Final Plans marked "As-Built Drawings" which fully indicate Tenant's Work as constructed and deliver one (1) reproducible set of such drawings to Landlord no later than thirty (30) days after the completion of Tenant's Work. V. ALTERATIONS Tenant shall not perform any Alterations without the prior written approval of Landlord. Approval shall be obtained by using the procedure set forth in Part III above; provided, however, the initial date for delivery of the Preliminary Drawings shall not be thirty (30) days from the date of this Lease, but shall instead be thirty (30) days prior to the date Tenant desires to commence the Alterations. The Preliminary Drawings and the Final Working Drawings shall consist of the appropriate drawings in relation to the intended Alterations. VI. TENANT IMPROVEMENT ALLOWANCE Provided (a) Tenant is not in default under this Lease, (b) the Premises are lien-free and eighty-five (85) days have expired from the recordation of the Notice of Completion described in Paragraph F below, and (c) Landlord has approved, in advance, the scope of work and terms of any negotiated contract for Tenant's Work or Tenant has accepted the [***] bid (or any bid within [***]) from a minimum of [***] bids received from contractors approved in advance by Landlord, the scope of work for which has been approved by Landlord for a contract for construction of Tenant's Work, then within thirty (30) business days after requirements A through J below are satisfied, Landlord will reimburse to Tenant the lesser of (a) the [***] paid by Tenant for Tenant's Work (specifically excluding floor coverings, signs, fixtures, equipment, permit fees, engineering and consulting fees and plan review fees), and (b) [***] ("Tenant Improvement Allowance") which sum is calculated based on [***] per square foot of Floor Area within the premises (it being understood that if the Floor Area is increased or decreased the Tenant Improvement Allowance will be adjusted accordingly). Notwithstanding anything herein to the contrary, in no event shall the Tenant Improvement Allowance be used to pay for furniture, fixtures or equipment in the Premises: A. A building permit for the construction of Tenant's Work has been issued by the City of Newport Beach and a copy of the building permit has been delivered to Landlord; B. Tenant has delivered to Landlord lien waivers and releases, in statutory form, for all contractors, subcontractors and materialmen who performed work or supplied materials in connection with the completion of Tenant's Work; C. All required inspections of Tenant's Work by governmental agencies have taken place and the completed Tenant's Work has passed such inspections; D. Tenant has submitted to Landlord a copy of all building permits with all sign-offs executed; E. Tenant has submitted to Landlord a conformed copy of Tenant's recorded Notice of Completion, prepared and recorded in accordance with statutory requirements; F. Tenant has submitted to Landlord a conformed copy of Tenant's recorded Notice of Completion, prepared and recorded in accordance with statutory requirements; G. Tenant has delivered to Landlord a Certificate of Occupancy for the Premises; H. Tenant has submitted to Landlord invoices and proofs of payment for Tenant's Work (specifically excluding signs, movable fixtures, permit fees, engineering and consulting fees, and plan review fees) which evidence expenditure by Tenant of at least [***]; *** Confidential treatment requested. C-7 42 I. Tenant has submitted to Landlord As-built Drawings for all of Tenant's Work; and J. Tenant has paid to Landlord all amounts owing to Landlord pursuant to this Lease as of the date reimbursement is to be made, and Tenant is not otherwise in default of any other term or condition or this Lease as of such date, and no event has occurred which, given the passage of time of the giving of notice or both, could be declared a default under this Lease. VII. LIENS In the event that as a result of any work of improvement undertaken by Tenant, any mechanics' lien or other lien is filed against the Premises, Tenant shall immediately cause such lien to be removed of record by either paying the amount of the lien or procuring and recording a statutory lien release bond in an amount equal to [***] of the amount of said lien. If Tenant fails to remove such lien and such failure continues for twenty (20) days after written demand by Landlord to do so, Landlord shall have the right, but not the obligation, in addition to all other rights and remedies available to landlord under this Lease, to procure and cause to be recorded a statutory lien release bond and to (a) collect from Tenant as Additional Rental, and/or (b) deduct from any Tenant Improvement allowance payable to Tenant hereunder (i) all costs incurred in procuring such bond, and (ii) the sum of [***] as reimbursement for all recording and processing fees and administrative costs and expenses incurred by Landlord in procuring and causing such bond to be recorded. *** Confidential treatment requested. 43 EXHIBIT D TENANT'S STATEMENT OF GROSS SALES SALES VOLUME REPORT-PERCENTAGE RENTAL / / ------------------------------ ( ) Month Ended ( ) Quarter Ended ( ) Other
ITEM SALES % RENTAL ---- ----- --- ------ 1. $ --------------- -------------- --------- --------------- 2. $ --------------- -------------- --------- --------------- 3. $ --------------- -------------- --------- --------------- 4. $ --------------- -------------- --------- --------------- 5. TOTAL (Add lines 1+2+3+4) ============== 6. Less Minimum Annual Rental paid for period covered ( ) ========= 7. Total Percentage Rental payable and enclosed (Line 5 less Line 6) $ ) =========
TENANT: -------------------------------- SIGNATURE: -------------------------------- DATE: -------------------------------- ACCOUNT NUMBER: -------------------------------- Note: Signature constitutes certification that the information contained in this statement is true, accurate and complete. If tenant is a corporation, this statement must be signed by an authorized officer of Tenant. We encourage you to send as much detailed information as practical to support your calculations; however, in addition to documentation normally provided IT IS ESSENTIAL THAT THIS FORM BE COMPLETED AND RETURNED to ensure that all rental information is properly recorded to your account. D-1 44 EXHIBIT D ANNUAL GROSS SALES VOLUME REPORT ANNUAL GROSS SALES VOLUME REPORT FOR 19-
Month Sales - ----- ----- JANUARY $ $ $ ---------------- ---------------- ---------------- FEBRUARY $ $ $ ---------------- ---------------- ---------------- MARCH $ $ $ ---------------- ---------------- ---------------- APRIL $ $ $ ---------------- ---------------- ---------------- MAY $ $ $ ---------------- ---------------- ---------------- JUNE $ $ $ ---------------- ---------------- ---------------- JULY $ $ $ ---------------- ---------------- ---------------- AUGUST $ $ $ ---------------- ---------------- ---------------- SEPTEMBER $ $ $ ---------------- ---------------- ---------------- OCTOBER $ $ $ ---------------- ---------------- ---------------- NOVEMBER $ $ $ ---------------- ---------------- ---------------- DECEMBER $ $ $ ---------------- ---------------- ---------------- GROSS SALES $ $ $ ================ ================ ================
TENANT: ---------------------------- SIGNATURE: ---------------------------- DATE: ---------------------------- ACCOUNT NUMBER: ---------------------------- NOTE: Signature constitutes certification that the information contained in this statement is true, accurate and complete. If Tenant is a corporation, this statement must be signed by an authorized officer of Tenant. We encourage you to send as much detailed information as practical to support your calculations; however, in addition to documentation normally provided IT IS ESSENTIAL THAT THIS FORM BE COMPLETED AND RETURNED to ensure that all rental information is properly recorded to your account. If the figures you submit differ from the monthly reports previously submitted, please include an explanation. D-2 EX-10.14 16 THE PALISADES CENTER SHOPPING CENTER LEASE 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.14 THE PALISADES CENTER SHOPPING CENTER LEASE Name of Shopping Center: THE PALISADES CENTER Location of Shopping Center: WEST NYACK, NEW YORK Landlord: EKLECCO Tenant: SILICON ENTERTAINMENT, INC. a California corporation d/b/a NASCAR SILICON MOTOR SPEEDWAY Execution Date: 2 TABLE OF CONTENTS ARTICLE 1................................................................................ 2 Premises............................................................................ 2 1.01 Premises................................................................. 2 1.02 Center................................................................... 2 ARTICLE 2................................................................................ 2 Term of Lease....................................................................... 2 2.01 Commencement of Term..................................................... 2 2.02 Term of Lease............................................................ 3 2.03 Surrender of Premises.................................................... 3 ARTICLE 3................................................................................ 3 Rent................................................................................ 3 3.01 Rent..................................................................... 3 3.02 Rent Increases........................................................... 3 3.03 Percentage Rent.......................................................... 3 3.04 Gross Receipts Defined................................................... 4 3.05 Opening Assessment....................................................... 5 3.06 Tenant's Books and Records............................................... 6 3.07 Reports by Tenant........................................................ 6 3.08 Non-Waiver............................................................... 6 3.09 Landlord's Right to Examine and Audit Books and Records.................. 6 3.10 Delinquent Payments...................................................... 6 3.11 Additional Rent.......................................................... 7 3.12 Definition of Lease Year and Partial Lease Year.......................... 7 3.13 Place for Payments....................................................... 7 ARTICLE 4................................................................................ 7 Taxes............................................................................... 7 4.01 Real Property Taxes...................................................... 7
i 3 4.02 Tenant's Taxes............................................................. 8 ARTICLE 5................................................................................ 8 CONSTRUCTION AND FINANCING.......................................................... 8 5.01 Landlord's Work.......................................................... 8 5.02 Tenant's Work............................................................ 9 5.03 Payment.................................................................. 11 5.04 Financing................................................................ 11 ARTICLE 6................................................................................ 11 TRADE NAME AND CONDUCT OF BUSINESS BY TENANT........................................ 11 6.01 Use of Premises and Trade name........................................... 11 6.02 Tenant's Operating Covenant.............................................. 11 6.03 Other Business Practices................................................. 12 ARTICLE 7................................................................................ 13 COMMON AREAS AND OPERATING COSTS.................................................... 13 7.01 Definitions.............................................................. 13 7.02 Development of Common Areas.............................................. 13 7.03 Use of Common Areas...................................................... 13 7.04 Common Area Costs........................................................ 14 7.05 Extra Hours Common Area Costs............................................ 14 ARTICLE 8................................................................................ 14 ENERGY AND COSTS.................................................................... 14 8.01 Energy and Utility Charges............................................... 14 8.02 Miscellaneous Utility Provisions......................................... 14 ARTICLE 9................................................................................ 15 FIXTURES, ALTERATIONS, SIGNS........................................................ 15 9.01 Installation By Tenant................................................... 15 9.02 Removal and Restoration by Tenant........................................ 15
ii 4 9.03 Signs, Awnings and Canopies.............................................. 15 9.04 Remodeling of the Premises............................................... 15 ARTICLE 10............................................................................... 16 REPAIRS AND MAINTENANCE............................................................. 16 10.01 Landlord's Obligation to Repair......................................... 16 10.02 Tenant's Obligation to Repair........................................... 16 10.03 Article Not Applicable to Fire or Condemnation.......................... 16 ARTICLE 11............................................................................... 17 INDEMNITY........................................................................... 17 11.01 Indemnity............................................................... 17 ARTICLE 12............................................................................... 17 INSURANCE........................................................................... 17 12.01 Liability Insurance..................................................... 17 12.02 Special Causes of Loss and Difference in Conditions Insurance........... 17 12.03 Insurance on Common Areas............................................... 18 12.04 Waiver of Subrogation................................................... 18 12.05 Policies................................................................ 18 ARTICLE 13............................................................................... 18 DAMAGE BY FIRE OR OTHER HAZARD...................................................... 18 13.01 Restoration of Premises................................................. 18 13.02 Restoration During Last Three Years of Term............................. 19 13.03 Tenant's Obligation Upon Restoration.................................... 19 ARTICLE 14............................................................................... 19 EMINENT DOMAIN...................................................................... 19 14.01 Eminent Domain.......................................................... 19 14.02 Landlord Entitled to Award.............................................. 19
iii 5 ARTICLE 15............................................................................... 20 BANKRUPTCY AND DEFAULT PROVISIONS................................................... 20 15.01 Events of Default and Conditional Limitation............................ 20 15.02 Landlord's Remedies..................................................... 21 ARTICLE 16............................................................................... 22 MECHANICS' LIENS.................................................................... 22 16.01 Mechanic's Liens........................................................ 22 ARTICLE 17............................................................................... 22 ASSIGNMENTS, SUBLEASES AND OTHER TRANSFERS OF TENANT'S INTEREST..................... 22 17.01 Limitations on Tenant's Rights.......................................... 22 17.02 Effect of Landlord's Consent............................................ 24 ARTICLE 18............................................................................... 24 COMPLIANCE WITH GOVERNMENTAL ORDERS................................................. 24 18.01 Tenant to Comply........................................................ 24 18.02 Failure to Comply....................................................... 24 18.03 Hazardous Material...................................................... 25 18.04 Americans With Disabilities Act......................................... 25 ARTICLE 19............................................................................... 25 SUBORDINATION, MORTGAGE'S RIGHTS AND ASSIGNMENT OF RENTS............................ 25 19.01 Subordination........................................................... 25 19.02 Mortgagee's Rights...................................................... 25 19.03 Assignment of Rents..................................................... 26 ARTICLE 20............................................................................... 26 ENTRY TO PREMISES................................................................... 26 20.01 Entry to Premises by Landlord........................................... 26 ARTICLE 21............................................................................... 27
iv 6 NOTICES AND CERTIFICATES............................................................ 27 21.01 Notices................................................................. 27 21.02 Estoppel Certificate of Landlord........................................ 27 21.03 Estoppel Certificate of Tenant.......................................... 27 ARTICLE 22............................................................................... 27 COVENANT OF QUIET ENJOYMENT......................................................... 27 22.01 Covenant of Quiet Enjoyment............................................. 27 ARTICLE 23............................................................................... 28 MISCELLANEOUS PROVISIONS............................................................ 28 23.01 Holdover................................................................ 28 23.02 Limitation on Landlord's Personal Liability............................. 28 23.03 Definition of Tenant's Allocable Share.................................. 29 23.04 Force Majeure........................................................... 29 23.05 Relocation of Tenant.................................................... 29 23.06 Changes and Additions................................................... 29 23.07 Attornment by Tenant.................................................... 29 23.08 Index................................................................... 30 23.09 Survival of Tenant's Obligations........................................ 30 23.10 Effect of Landlord's Notice to Terminate................................ 30 23.11 Effect of Captions...................................................... 30 23.12 Tenant Authorized to Do Business........................................ 30 23.13 Execution in Counterparts............................................... 30 23.14 Law Governing Effect; Gender............................................ 30 23.15 Memorandum or Notice of Lease........................................... 30 23.16 Complete Agreement...................................................... 30 23.17 Guaranty of Lease....................................................... 31 23.18 Arbitration............................................................. 31 23.19 Security Agreement...................................................... 31
v 7 23.20 Invalidity of Particular Provisions..................................... 31 23.21 Execution of Lease by Landlord.......................................... 31 23.22 Relationship of the Parties............................................. 31 23.23 Brokers................................................................. 31 23.24 Representations......................................................... 31 23.25 Abatement............................................................... 31 23.26 Other Provisions........................................................ 32
vi 8 INDEX OF DEFINED TERMS
DEFINED TERM SECTION Actual Percentage Rent.................................................. 3.07 ADA.....................................................................18.04 Additional Rent......................................................... 3.11 Affiliates............................................................3.04(c) Audit....................................................................3.09 Books and Records........................................................3.06 Breakpoint............................................................3.03(a) CAM......................................................................7.04 Center...................................................................1.01 Collateral..............................................................23.19 Common Areas.............................................................7.01 Condemnation Proceedings................................................14.01 Condemnation Proceedings Award..........................................14.01 CPI.....................................................................23.08 Default Rate.............................................................3.09 Difference in Conditions......................................12.02(a), 12.03 Energy Provider.......................................................8.01(b) Event of Default.....................................................15.01(a) Extra Hours Charge....................................................7.05(a) Financing Modifications...............................................5.04(b) First Lease Year.........................................................3.12 Governmental Orders.....................................................18.01 Gross Receipts........................................................3.04(a) Hazardous Material......................................................18.03 Holder...............................................................19.01(b) HVAC Units............................................................5.02(a) Index...................................................................23.08 Insurance Matters.......................................................18.01 Insurance Policy........................................................12.01 Landlord................................................................23.02 Landlord's Tract.........................................................1.02 Landlord's Work..........................................................5.01 Lease Year...............................................................3.12 Monthly Percentage Rent..................................................3.03 Monthly Rent.......................................................3.01(a)(b) Notice..................................................................21.01 Partial Lease Year.......................................................3.12 Percentage Pay........................................................3.03(a) Percentage Rent.......................................................3.03(a) Per Location Aggregate..................................................12.01 Permanent Improvements...............................................12.02(b) Permanent Lender.....................................................19.01(b) Pilot.................................................................4.01(a) Premises.................................................................1.01 Punch List Items......................................................5.02(a) Real Property Taxes...................................................4.01(a) REA......................................................................1.02 Remodeling...............................................................9.04 Rent............................................................3.01(a)(b)(c) Site Plan................................................................1.02 Special Causes of Loss..................................12.02(a)(b)(c), 12.03 Square Feet..........................................................23.03(b) Standard Mall Hours......................................................6.02
vii 9
DEFINED TERM SECTION Structural Shell.........................................................5.01 Subrogation Waiver......................................................12.04 Substantial Completion................................................5.02(c) Tenant Area..........................................................23.03(b) Tenant's Allocable Share of Real Property Taxes.......................4.01(a) Tenant's Allocable Share................................................23.03 Tenant's Financial Institution.....................................3.13(b)(i) Tenant's Insurance Policies.............................................12.05 Tenant's Operating Covenant Period.......................................6.02 Tenant's Personal Property...........................................12.02(b) Tenant's Work............................................................5.02 Term.....................................................................2.02 Term Commencement Certificate............................................2.01 Term Commencement Date...................................................2.01 Termination Date.........................................................2.02 Then Full Replacement Cost...........................................12.02(a)
viii 10 The Palisades Center SHOPPING CENTER LEASE LEASE AGREEMENT made this 27th day of July, 1998, by and between the following parties (the "Parties"): LANDLORD: EklecCo a partnership organized and existing under the laws of the State of New York ("Landlord") with its mailing address for Notices (as defined in Section 21.01) and a principal office at: FOUR CLINTON SQUARE SYRACUSE, NEW YORK 13202-1078 ATTENTION: LEGAL DEPARTMENT and TENANT: SILICON ENTERTAINMENT, INC. a corporation organized and existing under the laws of the State of California ("Tenant"), with its mailing address for Notices and a principal office and place of business at: 10401 Bubb Road Cupertino, California 95014 Attention: Janet Setcavage Woods Tenant's Federal Tax Identification: 77-0389433. THE HEADINGS SET FORTH IN THIS LEASE ARE FOR ORGANIZATIONAL PURPOSES ONLY AND SHALL NOT AFFECT ANY LEGAL RIGHTS OR OBLIGATIONS. 1 11 - ------------------------------------------------------------------------------- ARTICLE 1 PREMISES - ------------------------------------------------------------------------------- 1.01 PREMISES (a) Landlord demises and leases to Tenant and Tenant rents from Landlord those certain premises located in the Palisades Center (the "CENTER") in the Town of Clarktown, County of Rockland, State of New York and shown on EXHIBIT "A-1" attached and made a part of this Lease, consisting of approximately 5,700 square feet, (the "PREMISES"). The Premises shall not be deemed to include the land lying under the Premises' location, or the exterior walls or roof of the building in which said Premises are located, or any area beyond the lease line of any interior demising wall. Landlord reserves the use of said land, walls and roof of the building, together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements leading through the Premises in locations which will not adversely interfere with Tenant's use of the Premises in a material way. (b) Within sixty (60) days after Landlord's delivery of possession to Tenant pursuant to the terms of this Lease, Tenant may, at its sole cost and expense, have the size of the Premises verified by an independent architect of Tenant's choice. For purposes of this verification, the square footage of the Premises shall be measured from the midpoints of any interior walls shared in common with another tenant, and from the outside face of any exterior walls of the buildings. In the event that such verification reveals a discrepancy between the measured size of the Premises and the size of the Premises set forth in Section 1.01(a) of this Lease, and Landlord and Tenant are unable to agree upon the square footage for purposes of this Lease, an independent architect acceptable to Landlord and Tenant (the cost of which shall be divided equally between Landlord and Tenant) shall measure the Premises in the manner set forth above. In the event that Tenant's architect, Landlord or its architect, and the independent architect are unable to agree upon the square footage of the Premises for purposes of this Lease, the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof. In the event the square footage of the Premises as determined in accordance with the methodology set forth in Section 1.01(b) above varies from the square footage set forth in Section 1.01(a) above, Landlord and Tenant agree to execute a lease modification agreement (effective retroactive to the Term Commencement Date) adjusting the square footage of the Premises, and if necessary appropriately adjusting the Rent, and those items of Additional Rent to the extent that such Additional Rent was originally calculated on a pro rata square foot basis. Any necessary payments or reimbursements shall be paid within thirty (30) days after the full execution of the lease modification agreement. 1.02 CENTER The Center includes (i) the parcel(s) of land and improvements referred to as "LANDLORD'S TRACT" generally depicted on the plan (the "SITE PLAN") attached and made a part of this Lease as EXHIBIT "A," whether owned in fee or ground leased by Landlord and (ii) the parcel(s) of land and improvements, if any, generally depicted on EXHIBIT "A" as "REA PARCEL" made available for use by any reciprocal construction operating and easement agreement ("REA"). Landlord reserves the right to add to or sever the lease, the ownership of or title to any portion of the Center or to add to or reduce the size of any REA Parcel at any time. No representation is made or implied that Landlord has title to the Premises, the Landlord's Tract or REA Parcel at the time of execution of this Lease. Landlord, in its sole and absolute discretion, reserves the right to expand or remodel the Center and to change the configuration, size and dimensions of the Center, including without limitation, the number, location and dimensions of buildings, parking areas, driveways, entrances, exits and landscaped areas, the number of floors in any of the buildings, the dimensions, identity, and type of stores or tenancies, and, as provided in Section 7.02, the "COMMON AREAS" (as defined in Section 7.01). - ------------------------------------------------------------------------------- ARTICLE 2 TERM OF LEASE - ------------------------------------------------------------------------------- 2.01 COMMENCEMENT OF TERM (a) Subject to Section 23.04 below and other delays solely caused by Landlord, the term of this Lease shall commence on the earlier of the date Tenant opens for business in all or any part of the Premises, or one hundred twenty (120) days following the later of the date (i) Landlord delivers possession of the Premises to Tenant in accordance with Section 5.01 below, or (ii) Tenant receives any special permit(s) required for the permitted use set forth in Section 6.01 below, provided Tenant uses diligent, good-faith efforts to obtain such permit(s) on the earlier date possible (the "TERM COMMENCEMENT DATE"). Tenant acknowledges the importance to Landlord and the tenants of the Center of Tenant's opening for business to the public on the earliest Term Commencement Date. (b) Promptly after the Term Commencement Date, Landlord shall forward to Tenant and Tenant shall execute a certificate in recordable form pursuant to applicable state law (a "TERM COMMENCEMENT CERTIFICATE") annexed hereto and made a part thereof in EXHIBIT "B", memorializing the Term Commencement Date. (c) Landlord shall use commercially reasonable efforts to deliver possession of the Premises to Tenant with Landlord's Work 2 12 complete on or before August 1, 1998. If the Premises shall not be delivered to Tenant with Landlord's Work complete on or before September 15, 1998 and Tenant shall not have otherwise accepted possession of the Premises, then Tenant may at any time thereafter terminate this Lease by three (3) days' Notice to Landlord delivered prior to Landlord's delivery of the Premises with Landlord's Work complete. If Landlord shall fail to complete Landlord's Work on or before August 1, 1998, Tenant may accept possession of the Premises and complete Landlord's Work. Within twenty (20) days after Landlord's receipt of invoices for such work performed by Tenant, Landlord shall reimburse for the actual out-of-pocket costs incurred by Tenant to complete Landlord's Work. 2.02 TERM OF LEASE The term of the Lease (the "TERM") shall expire on the last day of the seventh (7th) Lease Year (as defined in Section 3.12 below) (the "TERMINATION DATE"), unless earlier terminated pursuant to the provisions of this Lease. If the Termination Date occurs during the period October 1 through the last day of December, the Parties agree that the term shall be extended and the Termination Date shall be the immediately succeeding January 31. 2.01 SURRENDER OF PREMISES On the expiration or earlier termination of this Lease, Tenant agrees, without necessity of any notices from Landlord (statutory or otherwise), to surrender the Premises in accordance with Articles 9 and 13 below, in broom clean condition and in good order and repair, subject only to reasonable wear and tear. - ------------------------------------------------------------------------------- ARTICLE 3 RENT - ------------------------------------------------------------------------------- 3.01 RENT (a) Except as set forth in Section 23.25 below, Tenant agrees to pay Landlord throughout the Term, without diminution, abatement, deduction or set-off whatsoever and without prior Notice or demand, a rent ("RENT"), in the annual amount of [***] payable in advance, in equal monthly installments of [***] ("MONTHLY RENT") each upon the first day of each calendar month throughout the Term. (b) If the Term shall commence upon a day other than the first day of a calender month or if the Term shall terminate upon a day other than the last day of a calender month, then the Monthly Rent for such partial month shall be prorated on a per diem basis. (c) Rent shall include all Tenant occupancy costs assessed by Landlord, EXCEPT: Percentage Rent pursuant to Section 3.03 below, Opening Assessment pursuant to Section 3.05 below, Tenant's Allocable Share of Real Property Taxes pursuant to Article 4 below, Energy and Utility charge pursuant to Article 8 below, and Additional Rent as that term is defined and applied throughout this Lease. (d) As a material inducement to Tenant to enter into this Lease for Premises Landlord agrees to provide to Tenant an allowance in the amount of [***] (the "ALLOWANCE") to be utilized by Tenant to defray a portion of the costs of constructing, staffing and opening the Premises for business. [***] of the Allowance will be paid by Landlord to Tenant in the form of an abatement of the Rent beginning on the Term Commencement Date and continuing until Tenant has received the full amount of the Allowance. The remaining [***] of the Allowance shall be paid by Landlord to Tenant in cash upon the later of (i) the date Tenant opens for business within the Premises, or (ii) Landlord's receipt of a duly executed lien waiver from Tenant's General Contractor with an affidavit stating all contractors have been paid in full. Tenant acknowledges and agrees that notwithstanding Tenant's receipt of the payment of the Allowance beginning with the Term Commencement Date, the Allowance shall be deemed by the Parties hereto to be earned ratable over the term of this Lease. In the event that this Lease is terminated by Landlord following an Event of Default, then in addition to all remedies otherwise available to Landlord under this Lease upon such termination, Tenant shall pay to Landlord an amount equal to the unamortized portion of Allowance computed on a straight line basis over the term of this Lease. 3.02 RENT INCREASES Rent shall be increased by [***] annually on a compounding basis, commencing January 1, 2000 and on each January 1 thereafter throughout the Term. *** Confidential treatment requested. 3 13 (a) In addition to Rent, Tenant shall pay to Landlord throughout the Term an amount ("PERCENTAGE RENT") which shall be equal to [***] ("RIDES PERCENTAGE PAY") of Tenant's "GROSS RECEIPTS" (defined in Section 3.04 below) derived from Tenant's simulator rides in excess of [***] (the "RIDES BREAKPOINT"), and [***] ("MERCHANDISE PERCENTAGE PAY") of Tenant's Gross Receipts from the sale of merchandise in excess of [***] (the "MERCHANDISE BREAKPOINT"). The Breakpoints shall be fixed throughout the Term. (b) Percentage Rent, if any, shall be paid by Tenant to Landlord, in quarter-annual installments computed on all Gross Receipts during each three (3) month period of the term hereof (i.e., periods from January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31 (collectively, the "Quarter-Annual Periods")) in excess of one-quarter (1/4) of both the Rides Breakpoint and the Merchandise Breakpoint, respectively. Any Percentage Rent becoming due shall be payable on or before the applicable January 15, April 15, July 15 and October 15 next following the applicable quarter end of each Lease Year. In the event that the total of the quarterly installments of Percentage Rent for any Lease Year does not equal the annual Percentage Rent computed in accordance with the formula set forth in Subsection 3.02(a), then, on or before February 15 following each such Lease Year, Tenant shall pay to Landlord any deficiency, or Landlord shall refund any overpayment to Tenant within fifteen (15) days after receipt of Tenant's Annual Statement of Gross Receipts. (c) Notwithstanding anything contained in this Section 3.03 to the contrary, the Percentage Rent for any Lease Year having less than twelve (12) full months shall be based on the Gross Receipts for the twelve (12) month period immediately following the Commencement Date (as to the first Lease Year) and for the twelve (12) month period immediately preceding the expiration or earlier termination of the Lease (as to the final Lease Year). The Percentage Rent due for such period shall be established by multiplying the Percentage Rent which would have been due for such twelve (12) month period had the Gross Receipts for such period been multiplied by the applicable percentage in this Lease, by a fraction, the numerator of which is the number of days in such partial Lease Year and the denominator of which is 365. 3.04 GROSS RECEIPTS DEFINED (a) The term "GROSS RECEIPTS" as used in this Lease is defined to mean receipts from sales of products or services by Tenant exclusively at, in, on, or from the Premises (including any sales made via personal computer, "Home Shopping" television sales, catalog, direct mail telephone or electric sales) whether such sales be evidenced by check, contract rights, credit, charge account, exchange or otherwise, and shall include, but not be limited to, the amounts received from the sale or rental of goods, wares and merchandise, and from fees and charges for the use by customers of Tenant's simulators and racing entertainment center, and for services performed on or off the Premises to the extent relating to sales made from the Premises, together with the amount of all orders taken or received at the Premises, whether such orders are filled from the Premises or elsewhere, and whether such sales are made by means of merchandise or other vending devices in the Premises. Each charge or sale upon installment or credit shall be treated as a sale for the full price in the month during which such charge or sale shall be made, irrespective of the time when Tenant shall receive payment (whether full or partial) therefore. (b) Notwithstanding anything herein to the contrary the following shall not be included in Gross Receipts: (1) Sales of merchandise returned and claimed to be defective or unsatisfactory, PROVIDED such sales have been included in Gross Receipts and deducted from Gross Receipts shall be the sales price of merchandise returned by customers for exchange, PROVIDED that the sales price of merchandise delivered to the customer in exchange is included in Gross Receipts. (2) The amount of any sales tax, so-called luxury taxes, excise taxes, gross receipt taxes and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of merchandise or services and collected from customers or included in the retail selling price use, imposed by any federal, state, municipal or governmental authority directly on sales and collected from customers. (3) No franchise or capital stock tax and no income or similar tax based upon income or profits as such shall be deducted from Gross Receipts in any event whatsoever. (4) The sales price of merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon. (5) The sums and credits received in settlement of claims for loss or damage to merchandise or other property is located at the Premises. (6) The consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee. *** Confidential treatment requested. 4 14 (7) Receipts for public telephones and vending machines used exclusively by Tenant's employees. (8) Bankcard discounts (e.g., Visa, MasterCard, etc.), interest, carrying charges, or other finance charges in respect of sales made on credit. (9) Sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail. (10) The amount of any discount in sales employees of Tenant, not to exceed [***] of Gross Receipts in any Lease Year. (11) The amount of any discount in sales made to senior citizens. (12) Revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers. (13) Tenant's accounts receivable, not to exceed [***] of Gross Receipts in any Lease Year, which have been determined to be uncollectible for federal income tax purposes during the applicable Lease Year, provided however, that if such accounts are actually collected in a later Lease Year, the amount shall be included in Gross Receipts for such later Lease Year. (14) Amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in, at, or from the Premises. (15) The amount of any discounts given for promotional coupons that are redeemed from time to time. (16) Gift certificates until such time as the certificates are redeemed. (17) Amounts received in connection with remote site promotional activities. (18) Promotional fees earned by Tenant with respect to goods or services offered for sale. (19) Rents, subrents or other consideration received in connection with an assignment, sublease, license, concession or other transfer of any portion of the store (however, Gross Receipts of any such transferee shall be included), including license fees otherwise payable by Tenant in connection with a third party license agreement. (c) In the event any portion of the Premises shall be operated by one or more of Tenant's departments or divisions, or if Tenant shall, in accordance with all of the terms, covenants, and conditions of this Lease, assign this Lease or enter into any sublease, license, concession or other use or occupancy agreement with respect to all or any part of the Premises, then there shall be included in the Gross Receipts for the purpose of determining the Percentage Rent payable under this Lease all of the Gross Receipts generated by such departments or divisions, subtenants, assignees, licensees, concessionaires and all such other persons, individuals and/or entities (collectively referred to as "AFFILIATES") generating such Gross Receipts. It being the intention of the Parties that all Gross Receipts generated at or from the Premises shall be included in Gross Receipts for the purpose of determining Percentage Rent as defined herein. Tenant agrees that any assignment, sublease, license or concession, use or occupancy agreement entered into by Tenant with any Affiliates shall contain provisions setting forth the procedure for determining, recording and reporting Gross Receipts by Affiliates which are subject to the review and approval of Landlord. Such provisions shall contractually obligate Affiliates to the same procedures set forth in this Lease for determining, recording and reporting Gross Receipts. 3.05 OPENING ASSESSMENT (a) Tenant shall pay an opening assessment to Landlord in the manner set forth in Section 3.05(b) below. The opening assessment, at Landlord's sole discretion, shall be used for the purpose of advertising and promoting the Center in order to sustain and improve the market penetration and relations of the Center and related administrative expenses. Landlord may utilize its employees or independent agencies to formulate or implement such opening programs. (b) Upon the Term Commencement Date, Tenant shall pay to Landlord, an amount equal to the sum of the "Tenant Area" of the Premises (defined in Section 23.03 below), multiplied by [***] ("TENANT'S OPENING ASSESSMENT"). Tenant's Opening Assessment shall be paid within ten (10) days after demand. *** Confidential treatment requested. 5 15 3.06 TENANT'S BOOKS AND RECORDS Tenant agrees to prepare and keep on the Premises or at its principal office for a period of not less than three (3) years following the end of each Lease Year, accurate books of account, and electronic and hard document records of daily Gross Receipts, including without limitation, all federal, state and local tax returns, and copies of relevant contracts, insurance documentation, checks, vouchers, inventory records, dated cash register tapes, sales slips and such other documentation as would enable Landlord to make a full and complete audit of Gross Receipts ("BOOKS AND RECORDS"). Landlord and Landlord's authorized representatives shall have the right to examine Tenant's Books and Records during regular business hours. Tenant agrees that all Gross Receipts shall be registered at the time each sale or transaction is made in cash registers or other devices or other electronic or technology based systems, containing locked-in cumulation capacity, such systems to be consistent with Tenant's normal business practices. 3.07 REPORTS BY TENANT Within twenty (20) days after the end of each quarter as set forth in Section 3.03(b) above, or a portion thereof, during the Term, Tenant shall furnish to Landlord a written statement setting forth the amount of Gross Receipts and an itemization of any deductions or exclusions taken from Gross Receipts for such previous quarter. Tenant also agrees that it will furnish to landlord within sixty (60) days after the end of each Lease Year or Partial Lease Year, an annual statement, showing in reasonable detail the amount of Gross Receipts and an itemization of any deductions or exclusions relating to such Lease Year or Partial Lease Year and the amount of Percentage Rent due and payable to Landlord ("ACTUAL PERCENTAGE RENT"). Each quarterly and annual statement required by this Section 3.07 shall be certified by Tenant or one of Tenant's executive officers and shall be subject to further certification as provided in Section 3.08 below. In the event Tenant fails to furnish Landlord with a quarterly or annual statement within the required time period and in the manner set forth in this Section 3.07, then the Gross Receipts for such quarter or year, shall, at Landlord's option, be deemed to be equal to one hundred ten percent (110%) of Tenant's highest previously reported monthly or annual Gross Receipts, and if such failure continues for ten (10) days following Notice from Landlord, Tenant shall pay to Landlord, as liquidated damages, the sum of [***] per month until such statement is received. In addition, if Tenant is delinquent in furnishing Landlord with quarterly statements of Gross Receipts for two (2) consecutive months or is delinquent in furnishing Landlord the annual statement of Gross Receipts, and such failure continues for ten (10) days following Notice from Landlord, any subsequent "AUDIT" (defined in Section 3.09 below) the Landlord conducts shall be at Tenant's expense. 3.08 NON-WAIVER The acceptance by Landlord of payments of Percentage Rent and statements of Gross Receipts shall be without prejudice to Landlord's right to examine Tenants Books and Records in order to verify any amounts payable to Landlord, subject to Section 3.09 below. 3.09 LANDLORD'S RIGHT TO EXAMINE AND AUDIT BOOKS AND RECORDS Landlord may conduct, at its option, at any reasonable time upon seven (7) days prior written notice to Tenant, a complete Audit of Tenant's Books and Records, including the books and records of any subtenant, operator, concessionaire or licensee or of any other store operated by Tenant (the "AUDIT") for the period covered by any statement required to be furnished by Tenant as set forth above. In the event the Audit discloses that Tenant has intentionally or fraudulently understated Gross Receipts by [***] or more, Tenant agrees to pay to Landlord the reasonable cost of such examination and audit, plus a [***] administrative fee. In the event that such Audit discloses that Tenant has intentionally or fraudulently understated Gross Receipts by [***] or more, then, in addition to the foregoing, at Landlord's option, the Term shall expire ten (10) days after Tenant's receipt of a termination Notice from Landlord. Any additional Percentage Rent found to be due and owing to Landlord as a result of any Audit shall immediately be due and payable to Landlord and interest shall accrue on the unpaid portion thereof at a per annum rate ("DEFAULT RATE") equal to the lesser of (i) the maximum interest rate permitted by law, or (ii) the prime rate of interest from time to time charged by Citibank, N.A. (or its successors) to its most credit worthy corporate borrowers, plus [***]. 3.10 DELINQUENT PAYMENTS (a) If during the Term Tenant fails to pay the full amount of the Monthly Rent, Percentage Rent or "ADDITIONAL RENT" (defined in Section 3.11 below) within five (5) days when the same was due and payable, then interest equal to the Default Rate, shall accrue on the unpaid portion from and after the date on which any such sum shall be due and payable, and such interest, together with a late charge of [***] for each past due payment to cover the extra expense involved in handling such delinquency, shall be paid to Landlord at the time of payment of the delinquent sum. Landlord shall have the right to apply any payments made by Tenant first to any deficiency in the payment of the interest and administrative charges due. (b) Any payment to be made by Tenant under this Lease shall be deemed to have been paid upon the date that it is received by Landlord. *** Confidential treatment requested. 6 16 (c) The provision for a late charge and interest herein shall not be deemed to grant Tenant any grace period or extension of time or prevent Landlord from exercising any of its rights under this Lease. (d) Tenant shall pay to Landlord an administrative fee of [***] for each and every check submitted by Tenant which is dishonored. If Landlord receives from Tenant two or more checks which have been dishonored, all payments from Tenant thereafter required under this Lease, shall at Landlord's option, be either certified, cashier's checks or wire transfers. 3.11 ADDITIONAL RENT All rents, charges, costs, expenses, reimbursements, fees, interest and other payments to be made by Tenant to Landlord under this Lease, other than Rent and Percentage Rent, shall be deemed to be "ADDITIONAL RENT." 3.12 DEFINITION OF LEASE YEAR AND PARTIAL LEASE YEAR The term "LEASE YEAR" is defined to mean a period of twelve (12) consecutive calendar months commencing on the first day of January with the "FIRST LEASE YEAR" commencing on the first January 1 of the Term following the Term Commencement Date, unless the Term Commencement Date is a January 1, in which case, the Term Commencement Date and the commencement date of the First Lease Year shall be the same. Any portion of the Term which is less than a Lease Year shall be deemed a "PARTIAL LEASE YEAR" and computations requiring proration shall be made on a per diem basis using a 365 day year. Landlord reserves the right to designate and change the beginning and ending day of the Lease year, Notice of which shall be given to Tenant. 3.13 PLACE FOR PAYMENTS (a) Tenant shall deliver to Landlord all payments of Monthly Rent, Percentage Rent and Additional Rent at the office of Landlord shown at the beginning of this Lease, or such other place as may be designated in writing by Landlord. Nothing contained in this Section 3.13 shall relieve Tenant of the obligation to pay by the dates due, any and all such payments payable by Tenant under this Lease. - -------------------------------------------------------------------------------- ARTICLE 4 TAXES - -------------------------------------------------------------------------------- 4.01 REAL PROPERTY TAXES (a) Landlord shall pay to the appropriate taxing authority, on behalf of Tenant, throughout the Term (beginning with the Term Commencement Date), all real property taxes (which shall include real property tax assessments, sewer assessments, parking and environmental surcharges, and any other governmental charges and assessments, general and special, ordinary and extraordinary) which may be levied or assessed against land or improvements located in the Center by any lawful authority in effect on the Term Commencement Date of this Lease (collectively "REAL PROPERTY TAXES"). For each Lease Year and Partial Lease Year throughout the Term, Tenant shall reimburse and pay to Landlord an amount, ("TENANT'S ALLOCABLE SHARE OF REAL PROPERTY TAXES") equal to the product of Real Property Taxes paid or payable by Landlord during such Lease Year or Partial Lease Year, multiplied by Tenant's Allocable Share (defined in Section 23.03 below). The amount, charges or assessments required to be paid by Landlord, or any tenant or occupant of the Center, pursuant to any Payment in Lieu of Tax Agreement or any other agreement which Landlord makes, to such taxing authorities, municipal agencies or other governmental bodies in lieu of taxes, ("PILOT") entered into in connection with the Center shall be considered for the purposes of this Lease to be included within the definition of Real Property Taxes. Tenant shall pay to Landlord, as Additional Rent, all sums due pursuant to this Article 4, in monthly installments, in advance and without Notice, on or before the first day of each month during the Term in an amount estimated by Landlord, such that Landlord will have received the full amount of Tenant's Allocable Share of Real Property Taxes in time for payment to the applicable taxing authority when due. In the event Landlord chooses to escrow Real Property Taxes, Landlord may, but shall not be obligated to, use the amount required to be placed in an escrow account as a basis for its estimate of the monthly installments due from Tenant hereunder. Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's Allocable Shares of Real Property Taxes based upon the tax bills or assessment bills for each tax fiscal year. If the total amount paid by Tenant under this Section 4.01(a) for any tax fiscal year during the Term is less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the deficiency within thirty (30) days after demand by Landlord therefor. If the total amount paid by Tenant for any year exceeds the amount due from Tenant for such year, Tenant shall be entitled to offset the excess against payments next thereafter becoming due under this Section 4.01(a). For the tax fiscal years in which this Lease commences Tenant shall pay to Landlord, as Additional Rent and within thirty (30) days after receipt of a bill therefor, the amount of Tenant's Allocable Share of all Real Property Taxes, computed as of the Term Commencement Date for the balance of the then current tax fiscal year(s). With respect to the tax fiscal year in which this Lease terminates, Tenant's liability for Tenant's Allocable Share of Real Property Taxes for such year shall be subject to a *** Confidential treatment requested. 7 17 pro rata adjustment based on the appropriate number of days of said tax fiscal years. A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of Real Property Taxes to which such bill relates. (b) If Tenant's Premises are separately assessed, then Tenant agrees to pay to Landlord, as Additional Rent, the amount of the Real Property Taxes separately assessed against the Premises, including the land lying thereunder, plus Tenant's Allocable Share of Real Property Taxes assessed against the Common Areas of the Center. Such amount shall be calculated on the basis of the number of days (from the Term Commencement Date) remaining in each such current tax fiscal year. (c) Landlord may seek a reduction in the assessed valuation (for Real Property Tax purposes) of all or any part of the Center by administrative or legal proceeding. Tenant shall pay to Landlord, Tenant's Allocable Share of Landlord's costs for said proceedings, PROVIDED Landlord has been successful in obtaining a reduction in the assessed valuation of all or any part of the Center, including attorneys' fees, appraisal fees and other similar and necessary expenses, within thirty (30) days after Tenant's receipt of a statement from Landlord therefor. Tenant's Allocable Share of such costs shall be computed under Section 23.03(a) below. Landlord shall reimburse Tenant for Tenant's Allocable Share of any refund of Real Property Taxes (after deducting any unpaid portion of Tenant's Allocable Share of Landlord's costs for such proceedings) resulting from any proceeding for which Tenant has paid Tenant's Allocable Share of Real Property Taxes. (d) Should any alteration or improvement performed by or for Tenant during the Term cause an increase in assessment, Tenant shall pay to Landlord the full cost of all Real Property Taxes resulting from such increase in assessment. Any amount paid separately hereunder by Tenant to Landlord shall be in addition to any amounts paid by Tenant pursuant to Section 4.01(b) above. (e) Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge or assessment upon or against the rents payable by Tenant to Landlord, or upon or against the Common Areas, whether by way of substitution for or in addition to any existing Real Property Tax or otherwise, Tenant shall be responsible for and shall pay annually, Tenant's Allocable Share of such tax in the manner provided in Section 4.01(a) above. 4.02 TENANT'S TAXES Tenant shall, at all times, be responsible for and pay, before delinquency, all municipal, county, state or federal taxes charged against Tenant's income, sales, fixtures, furnishings, equipment, stock-on-trade or other personal property of any kind owned, installed or used in or on the Premises, and any tax now or hereafter charged against Tenant on any other basis. - -------------------------------------------------------------------------------- ARTICLE 5 CONSTRUCTION AND FINANCING - -------------------------------------------------------------------------------- 5.01 LANDLORD'S WORK Prior to the Term Commencement Date, Landlord shall perform all items of "LANDLORD'S WORK" defined below at Landlord's sole expense and in a good and workmanlike manner, in compliance with all Governmental Orders (defined in Section 18.01 below), and the TENANT INFORMATION PACKET separately provided to Tenant. The Tenant Information Packet provides for procedures and mechanisms, including, without limitation: (i) notice of turnover, (ii) design sequence, (iii) dates and requirements, (iv) change orders, chargebacks, documentation and Tenant cooperation. Landlord hereby warrants to Tenant that to Landlord's actual knowledge the Premises do not contain any asbestos-containing materials or other reportable amounts of hazardous or toxic materials. Any item of work requested by Tenant or necessitated by Tenant's space plans or business operation, or change orders for additional or untimely requested work not included within LANDLORD'S WORK shall be performed by Landlord at an additional cost to Tenant, plus ten percent (10%) for Landlord's profit and twelve percent (12%) for Landlord's administration. Anything contained in this Lease to the contrary notwithstanding, Tenant shall not be obligated for the payment of the profit or administration charges for any structural work performed by Landlord beyond Landlord's Work, or for any work which this Lease requires be performed by Landlord's designated contractor, and Tenant shall only be obligated for the payment of Landlord's actually incurred costs. Tenant shall not incur any expense for Landlord's Work, except as specifically set forth in this Lease. Except as explicitly set forth in this Lease, Tenant shall be permitted to perform all non-structural work within the Premises. LANDLORD'S WORK: A building structural shell of structural steel and metal floor decking ready for concrete, uninsulated precast exterior wall(s), and a roof (a "STRUCTURAL SHELL"), more specifically defined as follows: FRAME: Structural frame of steel, concrete or masonry construction, or any combination thereof, in accordance with applicable national, 8 18 state and local codes. ROOF: A watertight roof that is designed by Landlord which will be in accordance with applicable codes. EXTERIOR WALL: Exterior walls which will be of non-combustible construction as designed by Landlord. FLOOR SYSTEM: Landlord shall install a composite light weight concrete floor slab over metal decking to meet Landlord's design criteria and furnished floor elevation to withstand a live load of one hundred (100) pounds per square foot with an allowance for live load reduction in accordance with applicable codes. FIRE PROTECTION: Landlord shall furnish and install, in accordance with all applicable codes, the appropriate fire rating for all structural beams and columns within the Premises. SERVICE CORRIDOR PARTITIONS AND WALLS, PARTITIONS, FINISHES AND DOORS: Landlord shall design and construct wall partitions dividing Tenant's Premises from adjacent service corridors providing sheetrock only on the corridor side including fire wall finishes. Landlord and Tenant shall coordinate the installation of the sheetrock for the demising walls, including sheetrock, such that Tenant may install its electrical service and other items to be located within the walls of the Premises prior to the sheetrock installation. ELECTRICAL SERVICE: Landlord shall provide and install electrical conduit from Landlord's electrical room located within the Center to Tenant's Premises. Landlord shall make provisions for a 480/277 volt 3 phase, electrical service providing Tenant with at least a 600 amp service to the Premises. Any additional work that would require Tenant's electrical contractor to enter the Center electrical room shall be performed only by an electrical contractor, properly licensed and approved by Landlord, at Tenant's sole cost and expense. PLUMBING: Landlord shall provide a four inch (4") sanitary waste line and a one inch (1") water line capped within or adjacent to the Premises. DEMOLITION: Landlord shall remove the glass window facing Dave & Busters near the fire hose cabinet and close with dry wall; remove all interior existing wall partitions; remove all perimeter door openings and close with dry wall; remove roll up door at angled storefront; and remove two (2) glass windows at angled storefront. Landlord shall not remove the HVAC system components servicing the front of the Premises. 5.02 TENANT'S WORK (a) Prior to the Term Commencement Date, Tenant shall at its sole cost and expense (but subject to Landlord's payment of the Allowance) perform "TENANT'S WORK" defined below in compliance with all Governmental Orders and in accordance with the Tenant Information Packet. Any item of Tenant's Work which Tenant requests Landlord to perform on Tenant's behalf and which Landlord agrees to undertake shall be provided to Tenant at Landlord's cost, plus [***] for profit and [***] for administration. Anything contained in this Lease to the contrary notwithstanding, Tenant shall not be obligated for the payment of the profit or administration charges for any structural work performed by Landlord beyond Landlord's Work, or for any work which this Lease requires be performed by Landlord's designated contractor, and Tenant shall only be obligated for the payment of Landlord's actually incurred costs. Tenant shall not incur any expense for Landlord's Work, except as specifically set forth in this Lease. With respect to Tenant's Work as defined in Section 5.02, Tenant shall be permitted to perform all non-structural work within the Premises without further consent or approval from Landlord. Tenant represents (i) its ability to perform Tenant's Work and (ii) warrants that no delay in its performance shall cause, nor shall Landlord's undertaking of any portion of Tenant's Work be deemed to cause, any delay or postponement in the Term Commencement Date. Tenant shall not be obligated to commence Tenant's Work until such time Landlord delivers the Premises to Tenant and such Premises are in a phase of "SUBSTANTIAL COMPLETION" (defined in Section 5.02(c) below) excluding minor items of a cosmetic nature which do not in any material respect interfere with Tenant's completion or use of the Premises ("PUNCH LIST ITEMS"). Tenant will be required to perform all work above and beyond the Structural Shell necessary and appropriate for the Tenant's build-out and Tenant's operation. Tenant shall undertake and complete any and all work necessary to address all national, federal, state, and local laws, rules, ordinances, regulations and code requirements for the Premises necessary for a schedule consistent with the opening of the Center. Landlord will not be reviewing Tenant's plans and specifications for the Premises. Tenant hereby covenants that Tenant's plans and specifications for the Premises will comply with all applicable New York State and local codes and regulations and the Palisades Center Tenant Information Package. Landlord hereby waives any right to review Tenant's aesthetic design. Tenant acknowledges that certain on-site work at the Center is subject to a Project Labor Agreement (the "PLA") by and between and among Landlord's Construction Project Manager, the Building and Construction Trades Council of Rockland County, and signatory Local Unions. Tenant agrees that all Tenant Work performed or to be performed which is covered by the PLA shall be performed under and pursuant to the terms of the PLA. In furtherance thereof, prior to undertaking or commissioning any of Tenant's Work and within fifteen (15) days of the execution date of this Lease (as stated on the cover page *** Confidential treatment requested. 9 19 hereof) Tenant shall execute a signature page which will become part of the PLA signifying Tenant's agreement to be bound by the terms of the PLA. Tenant's Work includes the following: WALLS, PARTITIONS, FINISHES AND DOORS: In addition, Tenant shall install and finish all demising walls beyond the demising walls installed by Landlord, including all insulation (if required), blocking, bracing doors, including doors leading into the service corridors, exterior doors, (in precast or other) frames and hardware, paint and finishes. FIRE PROTECTION: Tenant shall maintain, in accordance with all applicable codes, the appropriate fire rating for all structural beams and columns within the Premises as installed by Landlord. If the Premises is 50,000 square feet or greater, Tenant shall provide and install a fire alarm system subpanel compatible with Landlord's fire alarm and building management systems which is connected with the Center's main fire alarm system. If the Premises is less than 50,000 square feet, Tenant shall, at its sole cost and expense, engage the services of Landlord's fire alarm system contractor to provide and install, where applicable, smoke detection devices which are compatible with, and shall be connected to, the Center's main fire alarm system. Tenant shall modify, at its sole cost and expense, the Landlord installed base sprinkler grid with heads in accordance with applicable codes based on Tenant's plans for the Premises. Tenant shall construct, from the bottom of the above metal floor decking, along the entire length of Tenant's storefront, a smoke curtain with a one hour fire rating which shall measure thirty-six inches (36") in height. HEATING, VENTILATING AND AIR CONDITIONING: A complete HVAC system, including a smoke control system, and connection to utility billing system as required by the applicable Public Utility or Energy Provider, and any equipment and/or controls necessary to interface and be compatible with the HVAC units. Tenant shall be responsible, where applicable, for installing all condensate piping to Tenant's HVAC system. a) OUTSIDE AIR DUCT SYSTEM: Landlord, at Landlord's sole cost and expense, shall provide a system to supply outside air to Tenant's HVAC equipment where necessary, and as required by the design of the Center with due regard to the nature of the mechanical equipment provided. b) TOILET EXHAUST: A toilet exhaust duct system will be provided, where necessary, in accordance with the design of the Center. Each effected tenant shall be required to connect to the system and shall be prohibited from making separate roof penetrations. Where practical, tenants shall extend all vent and exhaust piping through the roof, with roof penetrations to be made by Landlord's designated roofing contractor at Tenant's expense. PLUMBING: A master sanitary vent will be provided, where necessary, in accordance with the design of the Center. Each effected Tenant shall be required to connect to the system and shall be prohibited from making separate roof penetrations. Where practical, tenants shall extend all vent and exhaust piping through the roof, with roof penetrations to be made by Landlord's designated roofing contractor at Tenant's expense. Tenant is responsible to extend plumbing lines and provide a complete and operational plumbing system within Tenant's Premises. ELECTRICAL SERVICE: Installation, repair, maintenance and replacement of all conduit, wiring, panel boards, junction boxes, electric meters, and metering systems transformers, fixtures and equipment necessary to complete Tenant's electrical, telephone, security and public address or sound system. When designing its interior storefront display windows, Tenant shall install two hundred (200) watts of electrical illumination for each lineal foot of display window or frontage to the mall, which shall be located within the area that is three feet (3'-0") from the interior or, as applicable, exterior of the storefront of Tenant's Premises. WATER SERVICES AND SERVICE HOOK-UP: Tenant shall directly make application for and pay the appropriate fee to the applicable municipal water department to obtain water services and a water meter, and sewer hook-up. ROOF WORK: In order to maintain the integrity of the roof warranty, no penetration or other roof work will be permitted unless such work is performed by Landlord's designated roofing contractor. All such roof work shall be at Tenant's sole cost and expense. (b) Tenant agrees to obtain and maintain, or cause Tenant's contractors, at Tenant's or Tenant's contractors expense, for so long as Tenant's Work continues, owners and contractors protective liability insurance, public liability insurance, builder's risk property insurance covering Tenant's Work, and Workers' Compensation insurance, protecting from and against any and all liability for death of or injury to persons or damage to property caused in or about the Premises, or by reason of the construction of Tenant's Work. Tenant shall furnish to Landlord certificates evidencing said coverage prior to the commencement of Tenant's Work and insurance policies, required by this Section 5.02, shall comply with the provisions of Article 12 set forth below. (c) The term "SUBSTANTIAL COMPLETION" shall define a certain phase in the progress of Landlord's Work when such scope of work is sufficiently complete to allow Tenant to occupy its Premises and commence Tenant's Work, including but not limited to all utilities being available to the Premises. Landlord and Tenant shall conduct a walk-through of the Premises within ten (10) days of Landlord's delivery of 10 20 possession to Tenant to identify any and all punch list items as well as any and all major defects and incomplete items which materially impair Tenant's use of the Premises or the completion of Tenant's Work. The Premises shall not be deemed to be in a state of Substantial Completion until all such major defects and incomplete items have been repaired or completed. In the event Tenant fails to participate in said walk-through within ten (10) days of the date of Landlord's delivery Notice, then the Premises shall be deemed to be in a state of Substantial Completion as of the date of Landlord's delivery Notice. 5.03 PAYMENT Any payment due or to be made by Tenant for any items of Tenant's Work which Tenant requests Landlord to perform and which Landlord agrees to undertake as provided in Section 5.02 above, shall be paid for by Tenant, as Additional Rent, within ten (10) days after receipt of a bill therefore. 5.04 FINANCING (a) Intentionally deleted. (b) If Landlord can obtain approval of this Lease from a mortgagee for the purposes of financing or refinancing only upon the basis of reasonable modifications of terms and provisions of this Lease (the "FINANCING MODIFICATIONS"), Landlord shall have the right to terminate this Lease if Tenant refuses to approve any reasonable such modifications within thirty (30) days after Landlord's request. The Financing Modifications shall not relate to those provisions pertaining to size or location of the Premises, length of the term, or amount of Rent, Percentage Rent or Additional Rent, the Allowance or the Permitted Use, nor shall such modifications increase Tenant's obligations, decrease Tenant's rights, or increase Tenant's financial obligations under this Lease. If such right to terminate is exercised by Landlord, this Lease shall thereafter be null and void, and neither Party shall have any liability to the other by reason of such cancellation. (c) Within fifteen (15) days following request by Landlord in connection with any financing or sale of the Center, which request shall not be made more than once per Lease Year, Tenant shall provide to Landlord financial statements (audited or non-audited) for Tenant's last fiscal year, including a balance sheet, sales reports and statements of income. ARTICLE 6 TRADE NAME AND CONDUCT OF BUSINESS BY TENANT 6.01 USE OF PREMISES AND TRADE NAME Throughout the Term, Tenant shall operate the Premises solely under the trade name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" or, with Landlord's approval, not to be unreasonably withheld, any other legally permitted trade name, and use the entire Premises solely for the purpose(s) of conducting an interactive entertainment center featuring among other things racing simulators and other related retail and entertainment uses; such uses may include but shall not be limited to the installation and operation of simulators and the sale of auto racing, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR; the sale of hot and cold beverage and snack foods, and for no other purpose whatsoever. Tenant shall use its reasonable efforts not to place any food vending machines or other food sales area at the store front of the Premises. Anything contained in this Lease to the contrary notwithstanding, throughout the Term Tenant shall limit the display of merchandise to no more than forty percent (40%) of the square footage of the Premises. Landlord hereby represents and warrants to Tenant that Tenant's use of the Premises as contemplated in this paragraph does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other Tenant of the Center, and Landlord shall indemnify, defend, protect, and hold harmless Tenant from any loss, liability, cost, expense, judgment, action or claim of any such party arising from the inaccuracy of such representation and warranty. Anything contained in this Lease to the contrary notwithstanding, Landlord's consent shall not be unreasonably withheld for any change or addition to Tenant's permitted use requested in writing by Tenant. Tenant hereby agrees that the criteria which Landlord may use in determining whether or not to grant such consent shall include, but not be limited to, (i) the impact such change or addition may have on the tenant mix of the Center, (ii) whether such change or addition violates any use restriction applicable to the Center, or (iii) the compatibility such change or addition may have with a first-class super-regional shopping center. Notwithstanding anything to the contrary in this Section 6.01 of this Lease, Tenant shall be entitled to use the Premises from time to time for conducting the uses set forth in Section 6.01 for the exclusive use of groups of private parties ("Private Events"). Tenant may while such Private Events are in progress, temporarily restrict access by the general public to Tenant's simulator rides, provided that the Tenant shall otherwise remain open to the general public for the sale of merchandise and the sale of simulator ride tickets for redemption by the public after any Private Event is concluded. Gross Receipts in connection with Private Events shall be included in Gross Receipts for purposes of calculating Percentage Rent. In connection with Private Events, Tenant may serve food and beverage (including alcoholic beverages) for on-premises consumption only, provided that Tenant obtains or causes to be obtained all governmental licenses, approvals and permits required in connection 11 21 therewith and in the case of offering of any alcoholic beverages for consumption within the Premises, Dram Shop or liquor liability insurance coverage. For the preparation and serving of food and alcoholic beverages at Private Events, Tenant shall engage, and cause third parties to use, restaurants and food establishments located within the Center ("Center Caterer"), provided that up to ten percent (10%) of the total number of Private Events held during a Lease Year may be catered by non-Center Caterers and provided, further, that Tenant shall not be required to use or cause to be used Center Caterers for Private Events within the Center unless at the time of the related Private Event there are at least three restaurants or other food and beverage vendors in the Center offering catering services from the Center at prices equal to or less than the then menu prices of such restaurant or vendor and two of three of such Center Caterers are full service sit down restaurants (such as by way of example and not limitation Rainforest Cafe, California Pizza Kitchen, Dave & Busters, TGI Fridays, California Cafe, Legal Sea Foods, or Macaroni Grill) and one of the three is either a full service restaurant or a limited service restaurant, food court operator or other food and beverage operator (such as by way of example and not limitation Johnny Rockets or Sbarros). In the event that Tenant shall be in default of the immediately preceding sentence and a Private Event is conducted in whole or in part by other than a Center Caterer, then, as liquidated damages and not as a penalty, the retail value of food and beverage provided by such third party shall be included in the amount of Gross Receipts used to compute Percentage Rent payable under this Lease on merchandise sold from the Premises. Any Private Events which are held at times when the requirements set forth in the provisos above concerning Center Caterers are not met shall be excluded from the total number of Private Events held during any Lease Year for purposes of calculating the ten percent (10%) permissible number of Private Events catered by non-Center Caterers as described above. 6.02 TENANT'S OPERATING COVENANT Subject to Section 23.04 below, Tenant shall occupy and be open for business in the entire Premises, during not less than the hours of 10:00 a.m. to 10:00 p.m. ("STANDARD MALL HOURS"), and shall continuously operate its store in the entire Premises throughout the Term ("TENANT'S OPERATING COVENANT PERIOD"). Notwithstanding the foregoing, Tenant shall be permitted to be open for business until the later of (i) 2:00 a.m. or (ii) as late as any other tenant located on the fourth level of the Center is permitted to be open without incurring any Extra Hours Charge as set forth in Section 7.05 below. Landlord has the right to modify the Standard Mall Hours from time to time at its sole and absolute 11a 22 discretion. Tenant shall operate in the Premises as of the Term Commencement Date, during Standard Mall Hours as Landlord shall direct, with due diligence, effort and efficiency so as to maximize Gross Receipts. At all times during the Term, Tenant shall carry in the Premises a stock of merchandise of a size, character and quality as shall be reasonably designed to produce the maximum return to Landlord and Tenant. Tenant shall use for office, storage or other non-selling purposes only such space as is reasonably required for the proper operation of Tenant's retail business in the Premises. Tenant acknowledges and agrees that the Center's success is dependent upon the continued operation of Tenant's business as required by the terms of this Lease. In the event Tenant ceases operation prior to the Termination Date, (defined in Section 2.02 herein) Landlord shall have the right to obtain a court order for specific performance of Tenant's Operating Covenant as set forth in this Section 6.02. During any part of Tenant's Operating Covenant Period that Tenant shall fail to operate the Premises as provided herein, in addition to Landlord's right to seek specific performance of Tenant's Operating Covenant Period, Tenant shall pay as liquidated damages, as a reasonable estimate of damages suffered by Landlord due to the loss of Rent, Percentage Rent and Additional Rent, and the damage to the character and quality of the Center and other non-quantifiable adverse effects caused by Tenant's failure to continually operate, a sum equal to [***] of the Rent for the remainder or unexpired portion of Tenant's Operating Covenant Period. The payment of such sums shall not relieve Tenant of any of its obligations under this Lease. Anything contained in this lease to the contrary notwithstanding, Tenant shall not be obligated to continuously operate from the Premises during period which (i) Tenant is carrying on remodeling activities, provided prior Notice of such activities has be delivered to Landlord, (ii) Tenant is closed for the taking of inventory (not to exceed four (4) days per Lease Year), or (iii) Tenant's use and occupancy of the Premises is prohibited by any law, ordinance, order or other act of any judicial, governmental or quasi-governmental authority. 6.03 OTHER BUSINESS PRACTICES (a) Tenant shall keep the Premises, all show windows and signs and any loading area and all other areas designated for Tenants sole use, in good, safe, neat and clean condition. Tenant shall keep the premises and any sidewalk or service area contiguous to or part of the Premises free of debris, water, rubbish, garbage, pests, rodents and vermin, and, upon two (2) days written notice by Landlord to Tenant of Tenant's failure to do so, Landlord may remove such debris, water, substances, rubbish, garbage, pests, rodents and vermin and charge Tenant the actual cost of such removal plus twelve percent (12%) for administration. (b) Tenant shall keep its display windows dressed and electrically illuminated (in accordance with Section 5.02 herein) during such periods of time as may from time to time be required by Landlord of substantially all other retail businesses located within the Center. (c) Tenant shall load and unload its goods, foods, inventory, ingredients, stock, merchandise, equipment and supplies and remove its rubbish only by way of the loading area and service doors designated by Landlord for Tenant's use. (d) Tenant shall not commit nor knowingly and willfully permit any act or practice which may tend to injure the building occupied by Tenant, nor permit its equipment to be a nuisance to other tenants, nor keep goods, foods, rubbish, inventory, merchandise on or obstruct the mall area or sidewalks or other areas outside the Premises, not conduct or permit any fire, bankruptcy, auction or going-out-of-business sale, nor erect or retain any sign, light, lettering, inscription, symbol or mark which is not approved by Landlord, nor install any antenna, fixture, or improvement outside of the Premises, nor sell or display merchandise outside the Premises. Notwithstanding the foregoing, Tenant shall be permitted to place professionally generated signs, advertisements and decorations within the Premises consistent with Tenant's other operations. Anything contained in this Lease to the contrary notwithstanding, Tenant shall be permitted to install a video wall or mounted video screen or panel within the Premises which can be visible to customer from outside the Premises. (e) In all of the Tenant's printed material referring to the location of the Premises and in all of Tenant's local advertising (by newspaper, radio, television or otherwise), Tenant shall include in any reference to Tenant's place of business the name and where appropriate the symbol) of the Center. (f) Tenant agrees to store in the Premises only such goods, food, inventory and merchandise as is to be offered for sale at retail from the Premises within a reasonable time after receipt; to store all trash and refuse in adequate containers within the Premises and to maintain such containers in a healthy, safe, neat, odor free and clean condition and in a location so as not to be visible to members of the public shopping in the Center, and to attend to the daily disposal thereof in the manner designated by Landlord; and to conform to all rules and regulations which Landlord may make in the management and use of the Center requiring such conformance by Tenant and Tenant's employees. If the Premises are used for the sale of food, Tenant shall store all trash, refuse and garbage in a garbage storeroom or compartment which Tenant shall install and keep in good repair at its sole expense. Landlord may require that the premises be periodically treated against pests, rodents or vermin, and in such event, Tenant shall, at its sole cost and expense, enter into a contract with a professional pest control service for the performance of such work, which contract and service shall be subject to Landlord's prior approval. (g) Costs associated with the collection and removal of rubbish in the Common Areas are included in Rent in accordance with Section 7.04 herein. With respect to the collection and removal of rubbish produced on the Premises and in the course of the operation of Tenant's business, Tenant agrees to contract with a third party rubbish removal contractor designated by the Landlord and pay directly to such contractor, *** Confidential treatment requested. 12 23 when due, all charges at the rate established therefore from time to time. Tenant may, however, contract with an entity other than that designated by Landlord in the event that Landlord's designated contractor's rates are not reasonable and competitive with alternative services available to Tenant. Notwithstanding the foregoing, Tenant covenants to properly dispose of all rubbish, trash and refuse produced on the Premises in accordance with applicable Governmental Orders relating to the sorting or recycling of trash or refuse. (h) Tenant shall comply with additional rules and regulations for the use and occupancy of the Center as Landlord, from time to time, may impose or amend in the best interests of the Center. - -------------------------------------------------------------------------------- ARTICLE 7 COMMON AREAS AND OPERATING COSTS - -------------------------------------------------------------------------------- 7.01 DEFINITION The term "COMMON AREAS" shall mean the interior and exterior areas and facilities within and around the Center which are not leased to a tenant, or by nature not leasable to a tenant for the purpose of the sale of merchandise or the rendition of services to the general public. Common Areas shall include, but shall not be limited to, all parking areas and facilities, roadways, driveways, entrances and exits, truck service ways and tunnels, utilities, water filtration and treatment facilities, retention ponds or basins located within or outside the Center, retaining and exterior walls, sidewalks, open and enclosed malls, outside courts, landscaped and planted areas, escalators, stairways, elevators, service corridors, service areas, loading docks, hallways, public restrooms, community rooms or areas, roofs, equipment, signs and any special services provided by Landlord for the common or joint use and benefit of all tenants in the Center, their employees, customers and invitees. 7.02 DEVELOPMENT OF COMMON AREAS As Landlord deems appropriate, Landlord shall make available from time to time such Common Areas, which may in part consist of areas made available by means of REA or other agreements, for the common benefit to the tenants and occupants of the Center. Subject to the provisions of any REA Agreement, Landlord shall operate, manage, equip, heat, cool, ventilate, insure, repair and maintain such Common Areas for their intended purposes in such a manner as Landlord shall, in its sole and absolute discretion determine. Landlord shall at all times and without being subject to liability, have the right to determine, change or alter the nature, extent, size or location of the Common Areas. Tenant shall not be entitled to any compensation or diminution or abatement of rent on account of any Common Area change, nor shall any such action be deemed an actual or a constructive eviction of Tenant. 7.03 USE OF COMMON AREAS (a) Tenant and its officers, employees, agents, customers and invitees shall have the non-exclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas as designated by Landlord from time to time, subject to such regulations as Landlord may from time to time impose. (b) Landlord's regulations may include designation of the days and hours of operation and use and designation of specific areas in which motor vehicles owned or used by Tenant, its officers, employees, and agents must be parked. Tenant shall, upon request, furnish to Landlord the license numbers and descriptions of the motor vehicles operated by Tenant and its officers, agents and employees. If Landlord designates such parking areas, and if any motor vehicle of Tenant, or an officer, employee or agent of Tenant is parked in any other portion of the Center, Tenant shall pay to Landlord, the sum of [***] for each motor vehicle for each day such motor vehicle(s) is so parked. Tenant hereby authorizes Landlord to tow or cause any such car to be towed to the then designated parking area. Notwithstanding anything to the contrary herein, Tenant shall be entitled to one (1) notification during the Term before Tenant shall be obligated to pay Landlord the amount set forth in this Section 7.03(b) for said violation. Tenant, upon receipt of Landlord's statement sent to the address shown at the beginning of this Lease, agrees to pay Landlord, as Additional Rent, all sums due pursuant to this Section 7.03, to reimburse Landlord for the above amounts and the cost of towing such improperly parked vehicles. Tenant agrees to abide by such regulations and to use its best efforts to cause its officers, employees, agents, customers and invitees to conform thereto. (c) Landlord may at any time (i) close temporarily the Common Areas or any portion thereof; (ii) make repairs or changes to prevent the acquisition of public rights therein; (iii) discourage non-customer parking; and (iv) may do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Landlord shall have the sole and exclusive right to use the Common Areas for advertising purposes, promotions, exhibits, shows, displays, kiosks and such other similar uses. Notwithstanding the foregoing, Landlord shall not modify the Common Areas in any manner that would have a material adverse affect on pedestrian and vehicular traffic or that would materially limit the number of parking spaces reasonably required for the business and retail activities conducted or that otherwise would adversely affect access to the Premises or the Building in which the Premises are *** Confidential treatment requested. 13 24 located. Landlord hereby agrees that it shall not install or allow to be installed any permanent or temporary kiosk or cart in the area marked "NO KIOSK AREA" as shown on EXHIBIT "A-2" attached hereto (other than in the locations specifically noted in the No Kiosk Area, provided that any kiosk permitted in the specified locations shall not exceed an area of 150 square feet nor a height of 8 feet). (d) Anything contained in this Lease to the contrary notwithstanding and subject to all applicable governmental codes, rules and regulations, Tenant shall be permitted to place a genuine or replica NASCAR automobile in the Common Area of the Center in the location shown on Exhibit A-1A adjacent to the Premises, provided such automobile shall not obstruct the entrances of any other tenants or occupants of the Shopping Center. In addition, Tenant may be permitted to use the Common Area immediately adjacent to the Premises for the purposes of queuing Tenant's customers. The queuing of such customers shall be subject to the reasonable rules and regulations imposed by Landlord as provided in this Lease. 7.04 COMMON AREA COSTS Common Area Costs (as hereinafter defined) are included in Rent and shall be fixed for the Term. "COMMON AREA COSTS" or "CAM" shall mean the total costs and expenses incurred in operating, heating, ventilating, cooling, security, insurance, sprinklering, compactor expenses, managing, food court maintenance and maintaining the Common Areas, including but without limitation, such maintenance, repair, replacement and remodeling as shall be required in Landlord's sole and absolute judgment to preserve the utility thereof in the same condition and status as existed at the time of completion of the original construction and installation. 7.05 EXTRA HOURS COMMON AREA COSTS (a) In the event Tenant is open for business in the Premises beyond Standard Mall Hours or when less than fifty percent (50%) of the total leased area of the Center is open for business, then for each such hour that Tenant is open for business in the Premises, Tenant, shall pay to Landlord, as Additional Rent, an hourly amount (the "EXTRA HOURS CHARGE") which shall be determined at the time Tenant puts Landlord on Notice that Tenant will operate and be open for business within the Premises beyond the Standard Mall Hours. The Extra Hours Charge shall be due and payable to Landlord within ten (10) days after the end of the month in which such Extra Hours Charges are incurred. To the extent Tenant is open for business in the Premises beyond Standard Mall Hours on a consistent basis, Rent due Landlord pursuant to Section 3.01 herein shall increase at a reasonable amount to be determined at such time Tenant's operations consistently exceed Standard Mall Hours. (b) "EXTRA HOURS CHARGES" shall mean the total costs and expense incurred by Landlord in operating the Center and Common Areas in excess of the Standard Mall Hours as defined above. Such costs and expenses shall include, but shall not be limited to the following: security, lighting including exterior and interior parking lot lighting, maintenance and all energy and utility charges relating to the Common Areas. - -------------------------------------------------------------------------------- ARTICLE 8 ENERGY AND COSTS - -------------------------------------------------------------------------------- 8.01 ENERGY AND UTILITY CHARGES (a) Prior to entering into possession of the Premises, Tenant shall either directly or through Landlord, make application to the appropriate local authority, municipality or other governmental agency or other Energy Provider (as defined in Section 8.01(b) below) to obtain service for Tenant's electric, water, and any other utility requirements. The Premises shall be separately metered for electricity and water. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing, installing, maintaining, repairing and replacing any required meters. Tenant shall pay to Landlord, within ten (10) days after receipt of a bill therefor, the cost of any sewer rents or sanitary charges for service used upon or furnished to the Premises at the rates in effect from time to time which would be applicable to Tenant as a direct customer of the utility or municipality providing sewer and sanitary services to the Center. (b) From and after the date Tenant first enters into possession of the Premises, Tenant shall be billed directly by and pay to the entity providing electric and thermal energy to the Center (the "ENERGY PROVIDER"). 8.02 MISCELLANEOUS UTILITY PROVISIONS (a) Tenant shall not install within the Premises any equipment, fixtures or appliances which exceed the capacity of the utility facilities within or serving the Premises. If any such equipment, fixtures or appliances installed by Tenant requires additional utility facilities, the same shall be installed by Tenant at Tenant's sole cost and expense. Tenant agrees to use all reasonable precautions to guard against the waste of energy. (b) Tenant shall operate the heating, ventilating and cooling systems serving the Premises such that the temperature in the 14 25 Premises will be the same as that in the Common Areas, and Tenant shall set Tenant's thermostat at the same temperature as exists in the Common Areas. Tenant shall operate ventilation equipment such that the relative air pressure in the Premises will be the same as or more than that in the Common Areas. (c) Landlord shall not be liable for any damages resulting from or arising out of any discontinuance by the Energy Provider for Tenant's non-payment of energy or utility charges and the same shall not constitute a termination of this Lease or an actual or constructive eviction of Tenant. (d) Tenant agrees that Landlord shall not be responsible for any interruption of business or damage to the Premises resulting from an interruption of utility service caused by the Energy Provider, any utility company or governmental regulatory agency. - -------------------------------------------------------------------------------- ARTICLE 9 FIXTURES, ALTERATIONS, SIGNS - -------------------------------------------------------------------------------- 9.01 INSTALLATION BY TENANT After the completion of Tenant's Work, Tenant shall not make or cause to be made any alterations, additions or improvements or install or cause to be installed any exterior sign, exterior lighting, plumbing fixtures, exterior shades or awnings without first obtaining Landlord's written approval which shall not be unreasonably withheld. Notwithstanding the foregoing, Tenant shall be permitted to make interior, non-structural alterations, changes, and modifications not exceeding [***] per Lease Year without Landlord's prior consent, provided Tenant notifies Landlord in writing prior to the commencement of such alterations, changes, and/or modifications. Tenant shall present to Landlord plans and specifications of such work at the time approval is sought. All permitted alterations, additions or improvements shall be done in a good and workmanlike manner in compliance with all Governmental Orders and shall not interfere with or interrupt the conduct of any tenants' normal business. All fixtures installed by Tenant shall be new or completely reconditioned. Tenant hereby warrants that such fixtures will be free from defects in material and workmanship and designed, constructed and installed so as not to be hazardous to the Center or any persons who may come on to the Premises. 9.02 REMOVAL AND RESTORATION BY TENANT All alterations, additions, improvements or installations made by Tenant, or made by Landlord on Tenant's behalf and at Tenant's expense, shall remain the property of Tenant for the Term. Such alterations, additions, improvements, trade fixtures and equipment shall not be removed from the Premises prior to the end of the Term without Landlord's prior written consent, except in the case of routine maintenance, refurbishment or replacement of defective or broken items. Upon expiration of the Term, or upon Tenant's vacating the Premises or upon eviction or surrender of the Premises prior to expiration of the Term, any permanent leasehold improvements and fixtures or equipment permanently attached to the real estate shall become the property of Landlord if not removed by Tenant. With respect to any improvements and fixtures which Tenant does remove, Tenant shall be obligated to repair any damage resulting from such removal, and Tenant's possession of the Premises shall not be deemed terminated until such repairs have been completed. Tenant shall surrender all keys for the Premises to Landlord and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Within five (5) days following the expiration or earlier termination of this Lease, Tenant shall remove furnishings, equipment, trade fixtures and personal property or else Landlord shall have the option of retaining or removing such property at Tenant's expense. Tenant shall repair or cause to be repaired any damage to the Premises caused by such removal. 9.03 SIGNS, AWNINGS AND CANOPIES Tenant will not place, maintain or suffer to be placed or maintained on or in an exterior door, wall or window of the Premises any sign, awning or canopy, decoration, lettering or advertising matter or other thing of any kind without first obtaining Landlord's written approval, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, Landlord's consent shall not be required for any professionally prepared signs or banners, or for the installation of an awning or canopy at the store front of the Premises, provided such awning or canopy complies with all applicable building codes and further provided that such awning or canopy does not utilize any supports which cannot be integrated into the store front of the Premises. Tenant further agrees to maintain such sign, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times. 9.04 CONDITION OF THE PREMISES Throughout the Term, Tenant shall maintain the Premises in a manner consistent with a first class shopping center. *** Confidential treatment requested. 15 26 - -------------------------------------------------------------------------------- ARTICLE 10 REPAIRS AND MAINTENANCE - -------------------------------------------------------------------------------- 10.01 LANDLORD'S OBLIGATION TO REPAIR Subject to Article 13 below, Landlord agrees to repair and maintain, at Landlord's sole cost and expense, in good order and serviceable condition, the outside walls, roof, structure and foundation of the building containing the Premises. Landlord shall not be required to commence any such repair until a reasonable time after written Notice from Tenant that a repair is necessary, except this covenant shall not include the following, which shall be Tenant's sole responsibility: (a) Repair of damage caused by the act or omission of Tenant, its employees, agents, and contractors; and (b) Repair of any loading areas not used in common with others; and (c) Repairs which are the responsibility of Tenant in accordance with Section 10.02 below. 10.02 TENANT'S OBLIGATION TO REPAIR (a) Tenant agrees, at its sole cost and expense, to repair and maintain the Premises in good order and condition, including, but not limited to, the non-structural portions of the Premises, including Tenant's storefront, loading areas, show windows, doors, windows, plate and window glass, ceilings, floor coverings, and the plumbing, sprinkler, electric and sewage systems, facilities, appliances, lighting fixtures and other systems and improvements located within the Premises. Tenant shall, at its sole cost and expense, obtain any and all permits and approvals necessary to effect such repairs and submit to Landlord a copy of such permits or approvals prior to the commencement of any repair work. In addition, Tenant shall be responsible, at its sole expense, for the repair and maintenance of its HVAC equipment, in whatever form, including roof top units or other supply mechanisms and unit(s) (if any) and any other equipment or improvement located outside the Premises which is constructed or installed by Tenant or at Tenant's request. Tenant shall obtain Landlord's prior consent before making any repair or performing any maintenance which may adversely affect any aspect of the Center's operation. (b) During the entire Term, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with the Energy Provider, or, as applicable, an independent HVAC contractor approved by Landlord covering at least the routine items of maintenance for Tenant's HVAC systems are recommended by the manufacturer of such systems, provided that the cost thereof at all times shall be reasonable and competitive. Tenant agrees to provide Landlord with a copy of such HVAC service contract within thirty (30) days following the Term Commencement Date. Further, Tenant agrees during the entire Term to use the sprinkler contractor(s) and fire alarm company(ies) designated by Landlord for any repairs or maintenance required for Tenant's sprinkler system, or fire alarm system, if applicable, provided that the cost thereof at all times shall be competitive. (c) If repairs are required to be made by Tenant pursuant to the terms of this Lease, Landlord may demand (but shall not be required to do so) that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable dispatch after such demand, and if Tenant's failure to commence such repairs continues for fifteen (15) days after receipt of Notice from Landlord, Landlord may make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to its stock or business by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will, on demand, pay as Additional Rent to Landlord, the cost of the repairs, and an twelve percent (12%) administration fee, and if Tenant defaults in such payment, Landlord shall have the remedies provided in Article 15 below. Likewise, if repairs are required under the terms hereof to be made by Landlord, and Landlord fails or refuses after twenty (20) days Notice and demand by Tenant to commence such repairs and thereafter diligently prosecute same to completion, then Tenant shall have the right to make such required repairs. Landlord shall reimburse Tenant for the cost of such repairs within twenty (20) days after receipt by Landlord of evidence of payment therefor by Tenant; additionally, Tenant shall have the right to offset such costs against the payment of Rent, Percentage Rent or Additional Rent if Landlord shall fail to reimburse Tenant for the cost of such repairs within thirty (30) days after receipt by Landlord of evidence of payment therefor by Tenant. (d) If Landlord determines Tenant's use of the Premises requires a grease trap, Tenant agrees to install, maintain, repair and, as necessary, replace any grease trap at Tenant's sole cost, and enter into a maintenance contract with an independent service contractor approved by Landlord to inspect, clean and repair such grease trap at such intervals as may be required by Tenant's use but in no event less frequently than once a month. 10.03 ARTICLE NOT APPLICABLE TO FIRE OR CONDEMNATION The provisions of this Article shall not apply to the repair of damage caused by fire casualty, which matter is covered under Article 13, nor shall these provisions apply to a taking under the power of Eminent Domain, which matter is covered under Article 14 below. 16 27 - -------------------------------------------------------------------------------- ARTICLE 11 INDEMNITY. - -------------------------------------------------------------------------------- 11.01 INDEMNITY Tenant shall indemnify, hold harmless and defend Landlord, Landlord's managing agent, if any, and such other persons who are in privity of estate with Landlord, or to whom Landlord is legally responsible, from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Premises, from or out of the occupancy or use by Tenant of the Premises or the Center or any part thereof, or occasioned wholly or in part by any negligent act or omission of Tenant, its agents, contractors, employees, lessees, invitees or concessionaires. In case Landlord, Landlord's managing agent or such other persons who are in privity of estate with Landlord, or to whom Landlord is legally responsible, shall be made a party to any action or proceeding commenced by or against Tenant, then Tenant agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Tenant shall pay to such parties all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Landlord in enforcing the terms, conditions, covenants and agreements in this Lease. Landlord shall indemnify, hold harmless and defend Tenant, Tenant's managing agent, if any, and such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible, from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Center, or occasioned wholly or in part by any negligent act or omission of Landlord, its agents, contractors, employees, lessees, invitees or concessionaires. In case Tenant, Tenant's managing agent or such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible, shall be made a party to any action or proceeding commenced by or against Landlord, then Landlord agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Landlord shall pay to such parties all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Tenant in enforcing the terms, conditions, covenants and agreements in this Lease. - -------------------------------------------------------------------------------- ARTICLE 12 INSURANCE - -------------------------------------------------------------------------------- 12.01 LIABILITY INSURANCE Throughout the Term, Tenant, at its sole cost and expense, for the mutual benefit of Landlord and Tenant, shall maintain personal injury and property damage liability insurance of not less than [***] in respect of personal injury, bodily injury, death or property damage (combined single limit) against claims for personal injury, bodily injury, death or property damage occurring on, in or about the Premises, or arising from, in or about Tenant's use of the Common Areas, or resulting from or arising out of products sold from the Premises or Tenant's use of the Common Areas during the Term, (the "INSURANCE POLICY"). First, the Insurance Policy shall expressly contain a contractual endorsement to provide coverage for Tenant's indemnification set forth in Section 11.01 of this Lease, and shall contain a "PER LOCATION AGGREGATE" endorsement. The Insurance Policy shall be endorsed (i) as primary and (ii) so as to waive rights of subrogation against Landlord. Second, prior to the Term Commencement Date, Tenant shall provide Landlord with a certificate containing evidence of such coverage and of the coverage required in Sections 12.02(c) and (d) below, and Tenant shall thereafter provide Landlord with appropriate evidence of said coverage upon each anniversary date of the Insurance Policy. All such certificates should be sent to Landlord at the address shown at the beginning of this Lease, Attention: Legal Department. In the event that Tenant fails to provide the certificate as set forth herein or fails to provide evidence of such coverage at least thirty (30) days prior to the expiration date of each expiring Insurance Policy, Landlord may obtain such insurance at Tenant's sole cost and expense and upon demand of Landlord, Tenant shall reimburse Landlord for the cost of procuring such insurance coverage together with [***] for administration costs. 12.02 SPECIAL CAUSES OF LOSS AND DIFFERENCE IN CONDITIONS INSURANCE (a) At all times during the Term, Landlord shall keep all "PERMANENT IMPROVEMENTS," (defined in Section 12.02(b)) insured for the benefit of Landlord against loss or damage by risks now or hereafter embraced by "SPECIAL CAUSES OF LOSS" coverage and against such other risks as Landlord from time to time reasonably may designate in amounts sufficient to prevent Landlord from becoming a co-insurer under the terms of the applicable policies. In any event, the amount applicable to "SPECIAL CAUSES OF LOSS" policies shall be not less than [***] of the "THEN FULL REPLACEMENT COST" (being the cost of replacing the Permanent Improvements exclusive of the costs of excavations and footings below the lowest grade level). The Then Full Replacement Cost shall be determined from time to time (but not more frequently than once in any twelve (12) calendar months) by an appraiser, architect or other person or firm designated by Landlord. *** Confidential treatment requested. 17 28 (b) Permanent Improvements for purposes of this Section 12.02 shall mean the building in which the Premises is situated, the appurtenances thereto and the equipment and other improvements constructed by Landlord and Tenant pursuant to Section 5.01 and 5.02 of this Lease. Permanent Improvements shall EXCLUDE, however, Tenant's merchandise, inventory, trade fixtures, furnishings, equipment, wall covering, carpeting, drapes, and all personal property (collectively "TENANT'S PERSONAL PROPERTY"). Tenant shall provide Landlord with a certificate setting forth the cost of Tenant's Work no less than [***] days following the Term Commencement Date. Tenant shall, prior to commencing the build out of Tenant's Premises as such scope of work is defined Section 5.02 herein, purchase Improvement and Betterment insurance and provide Landlord with a copy of such insurance certificate no less than [***] days prior to the commencement of work. (c) At all times throughout the Term, Tenant shall keep all of Tenant's Personal Property situated at or on the Premises, insured with "SPECIAL CAUSES OF LOSS" coverage for not less than its full replacement cost, with any deductible, but not to exceed [***]. (d) Tenant shall maintain, and shall cause all parties performing work on or about the Premises or on behalf of Tenant to maintain, (i) statutory Workers' Compensation coverage in the minimum amount required according to the laws of the state in which the Center is located and (ii) Employer's Liability coverage in limits of not less than [***]. 12.03 INSURANCE ON COMMON AREAS. At all times during the Term, Landlord shall keep the Common Areas insured for personal injury, bodily injury and property damage liability, "SPECIAL CAUSES OF LOSS" property coverage, Workers' Compensation, Employer's Liability and any other casualty or risk insurance which Landlord or Landlord's insurance carrier deems necessary or appropriate. Landlord may elect to self insure up to the first [***] for personal injury, bodily injury, or under Workers' Compensation. 12.04 WAIVER OF SUBROGATION Each party releases and waives on behalf of itself and on behalf of the insurers of such party's property, any and all claims and any rights of subrogation of any such insurer against the other party, its employees and agents for loss (other than loss or damage resulting from the willful act of such other party, its employees and agents) sustained from any peril to property required to be insured against herein, whether or not such insurance is actually in force, or from any peril to property actually insured against, though not required to be under this Lease. The policies of the respective Parties shall contain an express waiver of subrogation to this effect (the "SUBROGATION WAIVER"). 12.05 POLICIES All insurance provided pursuant to this Article 12 shall be effected under valid and enforceable policies of insurers with a minimum Best rating of A-, XII (or the equivalent in the event the Best rating system is discontinued), and issued by insurers of recognized responsibility which are licensed to do business in the State of New York. All of Tenant's policies of insurance required by this Article 12 ("TENANT'S INSURANCE POLICIES") shall name Landlord, Tenant, Landlord's managing agent and any mortgagee having an interest in any part or all of the Center (the name and address of which Tenant will have received written notice), as additional insureds, as their respective interests may appear. Tenant agrees that Tenant's Insurance Policies shall also be made payable, if required by Landlord, to a mortgagee or ground lessor, as the interest of such mortgagee or ground lessor may appear. The loss, if any, under any of Tenant's Insurance Policies provided for under this Article 12 may be adjusted with the insurance company by Landlord. Each of Tenant's Insurance Policies shall contain an agreement by the insurer that such policy shall not be terminated, canceled or reduced in coverage without at least thirty (30) days prior written Notice to Landlord and to any mortgagee or ground lessor to whom a loss is payable. The minimum limits of coverage for all of Tenant's Insurance Policies of insurance required by this Article 12 shall be increased by Tenant if reasonably required by Landlord. - ------------------------------------------------------------------------------- ARTICLE 13 DAMAGE BY FIRE OR OTHER HAZARD - ------------------------------------------------------------------------------- 13.01 RESTORATION OF PREMISES (a) The Parties mutually agree that if the Premises are partially or totally destroyed or damaged by fire or otherwise, then Landlord (subject to being able to obtain all necessary permits and approvals) shall repair and restore the Premises as soon as is reasonably practicable to substantially the same condition in which the Premises existed before such damage; PROVIDED, that if the insurance proceeds (other than the amount of any deductible, self insured retention or co-insurance requirement) collected or collectible and available to Landlord to pay the cost of such repairs and restorations by Landlord as a consequence of such destruction or damage are less than the cost of such repairs and restoration as *** Confidential treatment requested. 18 29 estimated by Landlord's architect, Landlord shall not be obligated to commence or perform such repairs and restorations, and this Lease upon Notice by Landlord to Tenant shall at the option of Landlord terminate, unless Tenant undertakes (in form and upon terms satisfactory to Landlord) to pay the difference between such estimated cost and such insurance proceeds. Within forty-five (45) days following the date of damage or destruction, Landlord shall notify Tenant of its intentions with respect to the repairs or restoration of the Premises. If, however, the Premises are totally destroyed or so damaged that Landlord cannot reasonably complete restoration or rebuilding in four (4) months to substantially the same condition in which the Premises were before such damage, then Landlord shall not be required to rebuild or restore, and this Lease shall be terminable by either party serving written Notice upon the other. In any event, if repairs have not been commenced within sixty (60) days after the date on which Landlord receives the insurance proceeds, this Lease may be terminated by Tenant serving Notice upon Landlord following the expiration of such sixty (60) days by giving Landlord not less than thirty (30) days advanced written Notice of such election, but in no event may Tenant terminate this Lease after such repairs have been commenced by Landlord. (b) In the event the Premises are completely or partially destroyed or so damaged by fire or other hazard that the Premises cannot be reasonably used by Tenant or can only be partially used by Tenant and this Lease is not terminated as provided in Section 13.01 (a) above, there shall be no abatement of Rent for the first sixty (60) days following the date of damage or destruction, it being understood and agreed that Tenant, at its discretion, and sole cost and expense, shall procure insurance necessary to protect itself against any interruption of its business during such sixty (60) day period. In the event Tenant is prevented from using the Premises in excess of sixty (60) days, then Rent and Additional Rent shall be abated, and there shall be a proportionate reduction to the Breakpoint, from and after said sixtieth day until the date Tenant is able to reopen for business within the Premises. 13.02 RESTORATION DURING LAST ONE AND ONE-HALF YEARS OF TERM Notwithstanding anything to the contrary in Section 13.01, if within one and one-half years prior to the expiration of the Term the Premises shall be damaged or destroyed by fire or otherwise and the estimated cost of restoration exceeds Fifty and 00/100 Dollars ($50.00) per square foot of each square foot of the Tenant Area (as defined in Section 23.03(b)) of Tenant's Premises, Landlord shall be under no obligation to repair and restore the Premises, and at the election of Landlord by Notice to Tenant this Lease shall terminate within one hundred twenty (120) days after such Notice. 13.03 TENANT'S OBLIGATION UPON RESTORATION In the event of damage or destruction to the Premises, and unless this Lease is terminated by Landlord or Tenant as provided in this Article 13, Tenant shall, as soon as possible, repair, redecorate and re-fixture the premises and restock the contents thereof in a manner and to at least a condition equal to that existing prior to its destruction or casualty, and reopen the entire Premises for business. All proceeds of insurance carried by Tenant on Tenant's Personal Property shall be held in trust and used for such purposes. - -------------------------------------------------------------------------------- ARTICLE 14 EMINENT DOMAIN - -------------------------------------------------------------------------------- 14.01 EMINENT DOMAIN If the Premises, or any portion of the Premises so as to render the balance wholly unsuitable for the purpose of Tenant's occupancy, is taken by condemnation or the right of eminent domain, or by agreement between Landlord and those authorized to exercise such rights (collectively the "CONDEMNATION PROCEEDINGS"), either Party upon written Notice to the other shall be entitled to terminate this Lease, PROVIDED that such Notice is given not later than thirty (30) days after Tenant has been deprived of possession or use by such taking. Should any part of the Premises be so taken and should this Lease not be terminated in accordance with the foregoing provisions, Landlord covenants and agrees promptly after such taking to expend so much as may be necessary of the net amount which may be awarded to and received by it in such condemnation proceedings (the "CONDEMNATION PROCEEDINGS AWARD"), in restoring the Premises to an architectural unit as nearly like its condition prior to such taking as shall in the reasonable judgment of Landlord be practicable, with an appropriate abatement to be made in Rent, and a corresponding reduction in Breakpoint. Should the net amount so awarded to and received by Landlord be insufficient to cover the cost of restoring the Premises as estimated by Landlord's architect, Landlord may at its election, supply the amount of such insufficiency and restore the Premises, as above provided, or terminate this Lease. Where Tenant has not already exercised any right of termination accorded to it under this Section 14.01, Landlord shall notify Tenant of Landlord's election within ninety (90) days after the final determination of the amount of the Condemnation Proceedings' award. 14.02 LANDLORD ENTITLED TO AWARD Out of any award for any such taking of the Premises or any part thereof, Landlord shall be entitled to receive and retain the amounts awarded for the Premises out of any Condemnation Proceedings' Award, EXCEPT that Tenant shall be entitled to receive and retain only those 19 30 amounts which may be specifically awarded to it in any Condemnation Proceedings because of the taking of its trade fixtures and its leasehold improvements which have not become a part of the realty, and such business loss as Tenant shall specifically and separately establish, but not otherwise. It is understood in the event of the termination of this Lease as provided in this Article 14, Tenant shall have no claim against the Landlord or the condemning authority for the value of any unexpired Term of its Lease and no right or claim to any part of the Condemnation Proceedings' Award. Tenant WAIVES each such claim or right and assigns any such claim or right to any part or all of the Condemnation Proceedings' Award to Landlord, EXCEPT as reserved in this Section 14.02. Anything contained in this Lease to the contrary notwithstanding, Tenant shall have the right to bring any claim during any Condemnation Proceedings, provided such claim does not reduce the claim of Landlord in said Condemnation Proceedings. - -------------------------------------------------------------------------------- ARTICLE 15 BANKRUPTCY AND DEFAULT PROVISIONS - -------------------------------------------------------------------------------- 15.01 EVENTS OF DEFAULT AND CONDITIONAL LIMITATION (a) If at any time prior to or during the Term any one or more of the following events occurs, each such event shall constitute an "EVENT OF DEFAULT": (i) Tenant makes an assignment for the benefit of its creditors; (ii) Tenant becomes insolvent; (iii) The leasehold estate created in Tenant by this Lease is taken on execution or by other process of law; (iv) Any petition is filed against Tenant in any court, whether or not pursuant to any bankruptcy, reorganization, composition extension, arrangement or insolvency proceedings, and Tenant is thereafter adjudicated bankrupt, or such petition is approved by the Court; or the Court assumes jurisdiction of the subject matter and such proceedings are not dismissed within ninety (90) days after their institution; or any such petition is so filed by Tenant; (v) In any proceedings, a receiver or trustee is appointed for Tenant's property and such receivership or trusteeship is not vacated or set aside within ninety (90) days after the appointment of such receiver or trustee; (vi) There is a transfer or an attempted transfer of this Lease or of Tenant's interest in this Lease in violation of the restrictions set forth below in Article 17 of this Lease; (vii) Tenant ceases operation in or vacates or abandons the Premises or otherwise fails to fully perform the obligations contained in Section 6.02 of this Lease, and such failure continues for ten (10) days following Notice from Landlord; (viii) Tenant fails to comply with any local, state or federal law, rule or regulation governing the use, handling and disposal of Hazardous Materials or is otherwise in violation of the obligations contained in Section 18.03 of this Lease, and Tenant fails to commence a cure of such violation within thirty (30) days following Notice from Landlord (or such shorter time period if required by law); (ix) Tenant fails to comply with the obligations contained in Section 21.03 of this Lease, and such failure continues for fifteen (15) days following Notice from Landlord; (x) Tenant fails to pay all or any portion of any installment of the Rent, Percentage Rent, or Additional Rent, when all or any portion of such is due and payable, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; (xi) Tenant fails to pay all or any portion of any installment of the Rent, Percentage Rent, or Additional Rent, when due and payable, and such failure occurs on three (3) or more occasions in any Lease Year or Partial Lease Year; (xii) Tenant fails to perform or observe any other material requirement of this Lease on the part of Tenant to be performed or observed and such failure continues for thirty (30) days after receipt of written notice from Landlord to Tenant; or (xiii) Tenant fails to comply with the obligations contained in Section 6.01 of this Lease, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; or where any such event shall occur on two or more occasions in any Lease Year or Partial Lease Year. 20 31 (b) This Lease and the Term are expressly subject to the conditional limitation that upon the happening of any one or more of the aforementioned events of default, Landlord, in addition to the other rights and remedies it may have, shall have the right, upon Notice to Tenant, to declare this Lease terminated and the Term ended, in which event all of the right, title and interest of Tenant hereunder shall wholly cease and expire upon receipt by Tenant of a notice of termination. Tenant shall then quit and surrender the Premises to Landlord in the manner and under the conditions as provided for under this Lease, but Tenant shall remain liable as hereinafter provided. 15.01 LANDLORD'S REMEDIES (a) If this Lease shall be terminated as provided in Section 15.01(b) above, Landlord or Landlord's agents or employees may immediately or at any time thereafter re-enter the Premises and remove Tenant, its agents, employees, licensees, and any sub-tenants and other persons, firms or corporations, and all or any of its or their property from the Premises, either by summary dispossess proceedings or by any suitable action or proceedings at law or in equity, without being liable to indictment or prosecution of damages therefor, and repossess and enjoy the Premises, together with all alterations, additions and improvements to the Premises. In the event of such re-entry and repossession, Landlord may store Tenant's Personal Property in a public warehouse or elsewhere at the cost of and for the account of Tenant. (b) In case of any termination, re-entry or dispossession by summary proceedings or otherwise, the rents and all other charges required to be paid up to the time of such termination, re-entry or dispossession, shall be paid by Tenant, and Tenant also shall pay to Landlord all reasonable expenses which Landlord may then or thereafter incur for legal expenses, reasonable attorneys' fees, brokerage commissions and all other costs paid or incurred by Landlord as the result of such termination, re-entry or dispossession, for restoring the Premises to good order and condition and for altering and otherwise preparing the Premises for reletting. Landlord may, at any time and from time to time, relet the Premises, in whole or in part, for any rental then obtainable either in its own name or as agent of Tenant, for a term which, at Landlord's option, may be for the remainder of the then current term of this Lease or for any longer or shorter period. (c) If this Lease is terminated by Landlord, Tenant nevertheless covenants and agrees notwithstanding any entry or re-entry by Landlord, whether by summary proceedings, termination, or otherwise, to pay and be liable for, on the days originally fixed by this Lease for payment, the amounts equal to the several installments of Rent, Percentage Rent and Additional Rent reserved, as Tenant would under the terms of this Lease become due, if this Lease had not been terminated, or if Landlord had not entered or re-entered as aforesaid, and whether the Premises is relet or remains vacant in whole or in part or for a period less than the remainder of the Term, and for the whole thereof. In the event the Premises be relet by Landlord, Tenant shall be entitled to a credit (but not in excess of the Rent, Percentage Rent and Additional Rent reserved under the terms of this Lease) in the net amount of rent received by Landlord in reletting the Premises, after deduction of all expenses and costs incurred or paid as aforesaid in reletting the Premises and in collecting the rent in connection with reletting. If Tenant fails to make such payments in accordance with the first sentence of this subsection 15.02(c) for any two (2) consecutive months following the termination of this Lease, Landlord shall at any time thereafter, in lieu of collecting any monthly deficiencies, or any further monthly deficiencies, -- at Landlord's option, be entitled to recover from Tenant, in addition to any other relief, such a sum as at the time of such termination represents the amount of the then present value of the total Rent, Percentage Rent, and Additional Rent and other benefits which would have accrued to Landlord under this Lease for the remainder of the Lease Term, as if the Lease had been fully complied with by Tenant, less any monthly deficiencies for such period previously paid to Landlord by Tenant. The present value ("Present Value Amount") shall be calculated by discounting all amounts due by a discount rate equal to the greater of (i) the then current yield of the U.S. Treasury debt securities with an original term equal to the same number of calendar years then remaining in the original Term (without regard to earlier termination) and a maturity date nearest to the original expiration date of the term (without regard to the earlier termination) or (ii) six percent (6%). Tenant shall be entitled to a credit against the Present Value Amount for Fixed Annual Minimum Rent, Percentage Rent and Additional Rent subsequently received by Landlord from a replacement tenant against amounts paid by Tenant to Landlord after deducting [the allowance paid by Landlord to Tenant and] all expenses and costs incurred or paid (including any allowances, construction costs and administrative costs) by Landlord in reletting the Premises and in collecting the rent in connection therewith, which right to a credit shall terminate on the date this Lease would have expired pursuant to Section 2.02. Suit or suits for the recovery of the deficiency or damages referred to in this Subsection 15.02(c) or for any installment or installments of Rent, Percentage Rent or Additional Rent under this Lease, or for a sum equal to any such installment or installments, may be brought by Landlord all at once or from time to time, at Landlord's election, and nothing in this Lease shall be deemed to require Landlord to await the date whereon this Lease or the Term hereof would have naturally expired had there been no such default by Tenant or no such termination. (d) For the purpose of this Section 15.02, it shall be deemed that the Percentage Rent for any period after any default by Tenant and entry by Landlord would have been at the monthly rate thereafter equal to the average Percentage Rent which Tenant was obligated to pay to Landlord under this Lease within the three (3) Lease Years (or lesser number of Lease Years since the Term Commencement Date) immediately preceding the date of such entry. (e) Tenant expressly WAIVES, so far as permitted by law, any and all right of redemption or re-entry or repossession under present or future laws arising after Landlord's recovery of possession, including any amendments hereafter, or to restore the operation of this Lease. (f) Landlord and Tenant, so far as permitted by law, WAIVE and will WAIVE trial by jury in any action, proceeding or 21 32 counterclaim brought by either of the Parties against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, or any claim or injury or damage. (g) The terms "ENTER," "RE-ENTER," "ENTRY" or "RE-ENTRY" as used in this Lease are not restricted to their technical legal meaning. (h) In the event Landlord commences any proceedings for the recovery of possession of the Premises or to recover for non-payment of Rent, Percentage Rent or Additional Rent, Tenant shall not interpose any non-compulsory counterclaim in any such proceeding. This may not, however, be construed as a waiver of Tenant's rights to assert such claim in any separate action or actions initiated by Tenant. (i) No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial Rent during the continuance of any such breach shall be deemed an accord and satisfaction, thus Landlord may accept any check or payment without prejudice to Landlord's rights to recover the balance due, nor shall Landlord's acceptance of any check or payment constitute a waiver of any Tenant breach or of any Tenant covenant, agreement, term and condition, and this Lease shall continue in full force and effect with respect to any existing or subsequent breach thereof. (j) In the event of any breach or threatened breach by Tenant of any of the covenants, agreements, terms or conditions contained in this Lease, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity, by statute or otherwise. (k) Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereinafter existing at law or in equity, by statute or otherwise. - -------------------------------------------------------------------------------- ARTICLE 16 MECHANICS' LIENS - -------------------------------------------------------------------------------- 16.01 MECHANICS' LIENS (a) If any mechanics' liens are filed against the Premises or any portion of the Center based upon any act of Tenant or anyone claiming through Tenant, Tenant shall hold Landlord harmless and defend from all damages, claims and expenses arising therefrom, and Tenant, after Notice from Landlord (or any person in privity of estate with Landlord), shall forthwith commence action as will remove or satisfy such lien within thirty (30) days by bonding, deposit, payment or otherwise. In the event Tenant does not remove or satisfy a lien within said thirty (30) day period, Landlord shall have the right to do so by posting a bond or undertaking, and Tenant agrees to reimburse Landlord for any and all expenses incurred by Landlord in connection therewith, including Tenant's providing a replacement bond or posting cash or securities satisfactory to Landlord's bonding company to provide sufficient independent security of the Landlord's bond, five (5) days after receipt by Tenant of Landlord's invoice therefor. Expenses shall include, but are not limited to, filing fees, legal fees and disbursements, bond premiums and bond rating premium increases. (b) Nothing in this Article 16 shall be deemed or construed as (i) Landlord's consent to any person, firm or corporation for the performance of any work or services or the supply of any materials to the Premises or any improvement thereon, or (ii) giving Tenant or any other person, firm or corporation any right to contract for or to perform or supply any work, services or materials that would permit or give rise to a lien against the Premises or any part thereof. - -------------------------------------------------------------------------------- ARTICLE 17 ASSIGNMENTS, SUBLEASES AND OTHER TRANSFERS OF TENANT'S INTEREST - -------------------------------------------------------------------------------- 17.01 LIMITATIONS ON TENANT'S RIGHTS (a) Neither this Lease, nor the interest of Tenant in this Lease, shall be sold, assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation of law or otherwise, nor shall the Premises or any part of the Premises be sublet or subject to any license or concession, without the express, prior written consent of Landlord in each instance. For the purpose of this Lease, the sale or transfer of stock constituting a controlling interest in Tenant shall be considered an assignment, and likewise shall require Landlord's prior written consent EXCEPT where Tenant is a corporation having its shares traded on the New York, American, NASDAQ or Over-The-Counter stock exchange or market. Tenant shall make available to Landlord the stock record books of Tenant and shall produce the same on request of Landlord. Similarly, if Tenant is a partnership, the interest of any partner shall not be transferred without Landlord's prior written consent. For the purposes of this Lease, the entering into of any management agreement or any similar agreement which transfers control of the business operations of Tenant in the Premises shall be treated as an assignment of this Lease and shall require Landlord's prior written consent. Any attempted transfer, assignment, subletting, license or concession agreement, hypothecation or other transfer herein that is prohibited without Landlord's prior written consent shall be void, and confer no rights upon any third party. Anything contained in this Section 17.01(a) to the contrary notwithstanding, Tenant shall have the right without Landlord's consent to assign this Lease or sublet the Premises, subject to the terms of this Lease, in conjunction with the sale of substantially all of the other assets and other store locations of Tenant to Tenant's parent, Tenant's subsidiary, or a 22 33 subsidiary of Tenant's parent, provided that at least seventy-five percent (75%) of Tenant's other stores located in the United States are simultaneously transferred to such entity. Tenant shall remain primarily liable under this Lease following any assignment of the Lease or subletting of the Premises. Subject to paragraph (f) hereinbelow, Landlord shall not unreasonably withhold its consent to any assignment or subleasing and shall respond to any request by Tenant for permission to sublease or assign with thirty (30) days after receipt of written request. If Landlord objects to such assignment or sublease, Landlord shall advise Tenant of the reasons for such objections. If Landlord fails to respond to such request within said thirty (30) days, and such failure continues for ten (10) days following Notice from Tenant, then such failure shall be deemed approval of such sublease or assignment. Notwithstanding the terms of the immediately preceding grammatical paragraph provided Tenant is not in default beyond any applicable cure period, named Tenant may, without the consent of Landlord, assign this Lease or sublet the entire Premises to any corporation which owns all of the issued and outstanding common stock of named Tenant, or to a wholly owned subsidiary corporation of named Tenant, or to any corporation resulting from the consolidation or merger of named Tenant, in or with any other business organization or any person, firm or corporation acquiring all of the issued and outstanding capital stock of named Tenant, or all or substantially all of the assets and store locations of named Tenant; however, no such assignment shall be deemed effective unless and until such assignee executes and delivers to Landlord, at no cost to Landlord, a written agreement in form and substance acceptable to Landlord whereby such assignee assumes for the benefit of Landlord the performance and observance of all of the terms, conditions and covenants contained in this Lease. The foregoing is subject to Tenant providing Landlord with thirty (30) days' written notice in advance, including statements of fact certified by an authorized officer of Tenant, certifying the facts upon which Tenant is claiming the right to assign this Lease pursuant to this grammatical paragraph. In addition, any private placement or public offering of ownership interest in Tenant shall not require Landlord's prior consent, provided that as a result of any private placement the day-to-day management of Tenant remains unchanged. (b) No permitted assignment made shall be effective until there are delivered to Landlord (i) an agreement, in recordable form, executed by Tenant and the proposed assignee, in which such assignee assumes due performance of all the obligations of Tenant's part to be performed under this Lease to the end of the Term and (ii) a written consent to such assignment by the holder of any fee or leasehold mortgage affecting the Premises to which this Lease is then subject; such consent shall have been obtained and delivered to Landlord if so required by the terms of such mortgage or by a collateral document securing the same obligations as are secured by such mortgage. (c) Any assignment of this Lease or any sublease affecting the Premises or any other permitted transfer under this Lease shall be subject and subordinate to the full terms and conditions of this Lease. Regardless of either the assumption by any assignee or sublease of due performance or the Landlord's acceptance of Rent or other charges from such assignee or sublessee, Tenant shall not be released by any assignment, license or sublease but shall continue to be fully responsible for the due performance of Tenant's obligations in the same manner and to the same extent as if no such assignment, license or sublease had been made. (d) In the event Tenant assigns or subleases all or any portion of the Premises as set forth in this Article 17 and the amounts due to Tenant under such assignment or sublease exceed the amounts reserved to be paid to Landlord by Tenant under this Lease, then Tenant shall pay to Landlord [***] of the amount by which such assignment or sublease rent exceeds Rent as set forth in Section 3.01(a) above. In the event Tenant assigns or subleases only a portion of the Premises, the assignment or sublease rent shall be calculated on a per square foot basis and then compared to the then applicable per square foot Rent reserved in Section 3.01(a) above to determine whether or not such assignment or sublease rent exceeds Rent. (e) Any transfer made in violation of the provisions of subsections (a), (b) or (c) in this section 17.01 shall constitute an Event of Default under Section 15.01 herein and give rise to Landlord's right to re-enter the Premises in accordance with Section 15.02. (f) Notwithstanding anything in this Section 17.01 to the contrary, if Tenant desires to assign its interest under this Lease or to sublet all of the Premises to a Permitted Party (as hereinafter defined), Tenant shall deliver to Landlord written notice, requesting Landlord's consent to such transaction, which consent request shall include (i) a fully executed letter of intent containing the material terms of the proposed assignment or sublet transaction (including proposed rent (including additional rent), square foot area, term and use), (ii) current reasonable financial information with respect to the proposed assignee or sublessee, including without limitation its most recent financial report, (iii) a statement that the proposed assignment or sublease relates to the entire Premises for the remaining term of this Lease, and (iv) an express statement to the effect that the proposed assignee or sublessee is a Permitted Party within the meaning of this paragraph and that Landlord has the right to terminate this Lease in connection with the assignment or sublease pursuant to this Section 17.01(f) or such assignment or sublease shall be deemed consented to by Landlord. A notice that contains the information described in clauses (i) through (iv) shall be deemed an offer ("Takeback Offer") from Tenant to Landlord whereby Landlord may terminate this Lease. If Tenant's notice does not expressly state the items described in clauses (i) through (iv) including that the proposed assignee or sublessee is to a Permitted Party, such notice shall constitute a request by Tenant for Landlord's consent to sublease the Premises or assign this Lease subject to the other terms of this Section 17.01; such notice shall not constitute a Takeback Offer and Landlord shall not be entitled to terminate this Lease under this Section 17.01(f). The Takeback Offer may be exercised by Landlord by written notice ("Takeback Notice") to Tenant at any time within thirty (30) days after such Takeback Offer has been given by Tenant to Landlord; and during such thirty (30) day period Tenant shall not assign this Lease to such prospective assignee or sublet the Premises to such prospective sublessee unless such assignment is expressly conditioned upon and not effective until the expiration of the 30-day period for Landlord to deliver the Takeback Notice. The term "Permitted Party" shall mean a third party (i) who will operate the Premises for a *** Confidential treatment requested. 23 34 lawful bona fide retail use consistent with uses at other first-class shopping centers or for the use permitted under Section 6.01 of this Lease, and not in violation of any use restriction in effect for the Shopping Center of which Tenant has been advised within twenty (20) days after Landlord's receipt of Tenant's Takeback Offer; (ii) who has a net worth equal to or greater than the then net worth of Tenant; and (iii) who is a national or regional chain of retail stores, or is then operating (directly or indirectly) at least five (5) stores in the States of New York, New Jersey, Pennsylvania, Massachusetts and Connecticut for the same or similar use, or has at least ten (10) years of retail operating experience. Upon such termination, all obligations of Landlord and Tenant (other than those that expressly are stated to survive termination) shall cease to be of further force and effect. If Landlord exercises its option to terminate this Lease pursuant to this subsection in connection with an assignment or sublet of all of the Premises, then, unless Tenant, within fifteen (15) days after receipt of the Takeback Notice, withdraws Tenant's request for Landlord's consent to the proposed assignment or sublet, this Lease shall end and expire on the effective date designated by Landlord in its Takeback Notice (which date shall not be less than sixty (60) days nor more than one hundred twenty (120) days after the date of the Takeback Notice) as fully and completely as if such early termination date were the original expiration date of the Term, and all Rent shall be apportioned as of such date. If (x) Landlord shall not elect to send a Takeback Notice within said 30-day period and (y) Tenant is not then in default under this Lease beyond any applicable notice or cure periods, Tenant shall be entitled, without any consent by Landlord, to assign this Lease or sublet all of the Premises on substantially the terms for proposed rent (including additional rent), square foot area, term and use and to the Permitted Party, described in Tenant's request for Landlord's consent, provided that if Tenant shall then be in default under this Lease beyond any applicable notice or cure period, then any such assignment or sublet shall not be effective until such defaults are cured. Any assignment or sublet to a Permitted Party shall be subject and subordinate to the terms, conditions and covenants of this Lease (other than with respect to the use set forth in Section 6.01), provided that if the assignee or sublessee will not operate any racing simulator or other rides within the Premises, then notwithstanding anything to the contrary in Section 3.02, Percentage Rent shall be an amount equal to [***] of Gross Receipts in excess of $3,000,000.00. To the extent necessary, Tenant and Landlord shall execute and deliver a Lease Modification Agreement or other agreement reflecting the new use clause, if any. 17.02 EFFECT OF LANDLORD'S CONSENT (a) Any consent by Landlord to a sale, assignment, sublease, mortgage, pledge, license, concession, hypothecation or transfer of this Lease, shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from the requirement of obtaining prior written consent of Landlord to any further sale, assignment, sublease, mortgage, pledge, hypothecation, or transfer of this Lease. When the consent of Landlord is required to any proposed assignment or sublease of this Lease, or to the mortgaging, pledging, licensing, concession or hypothecation of this Lease, Tenant shall submit in writing with its request for any proposed sale, assignment, sublease, mortgage, pledge, license concession, hypothecation or transfer of this Lease, information reasonably sufficient to enable Landlord to make a decision with respect thereto. (b) With respect to any of the consents requested by Tenant, whether or not the Landlord has consented thereto, Tenant shall pay to the Landlord all reasonable attorney or other related fees, disbursements and all other expenses incurred by Landlord in connection with Tenant's request. - -------------------------------------------------------------------------------- ARTICLE 18 COMPLIANCE WITH GOVERNMENTAL ORDERS - -------------------------------------------------------------------------------- 18.01 TENANT TO COMPLY Tenant, at its own expense, shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state and local governments and of any and all other agencies, departments and bureaus applicable to Tenant's particular use of the Premises or to the business conducted by Tenant at the Premises, whether ordinary, extraordinary, foreseen or unforeseen (collectively, "GOVERNMENTAL ORDERS"). In addition, Tenant, at its own expense, shall comply promptly with and execute all rules, orders, regulations and recommendations of the Board of Fire Underwriters, Rating Board and Landlord and Tenant's insurance companies with respect to the prevention of fires and the exposure of liability risks (collectively, "INSURANCE MATTERS"). Tenant, at its own expense, shall furnish and maintain in good order an adequate number and type of fire extinguishers on the Premises at all times. Notwithstanding the foregoing, in no event shall Tenant be responsible for any violation of Governmental Orders or Insurance Matters arising directly out of Landlord's Work. Landlord hereby represents that the Premises shall comply with all applicable Governmental Orders and Insurance Matters on the date Landlord delivers possession of the Premises to Tenant. 18.02 FAILURE TO COMPLY In case Tenant fails or neglects to comply with any of the Governmental Orders, Insurance Matters or the ADA (defined in Section 18.04 below) as required of Tenant, then Landlord or its agent may enter the Premises and make said repairs to comply with any and all of the Government Orders, Insurance Matters or the ADA at the sole cost and expense of Tenant plus ten percent (10%) profit and twelve percent (12%) *** Confidential treatment requested. 24 35 for administration costs, which shall be added to Tenant's next months installment of Rent and be due and payable as such, or Landlord may deduct the same from any balance remaining in Landlord's hands. This provision is in addition to the right of Landlord to terminate this Lease under Article 15 by reason of default on the part of Tenant. 18.03 HAZARDOUS MATERIAL Tenant shall, at all times, comply with local, state and federal laws, rules and regulations governing the use, handling and disposal by Tenant of Hazardous Material in the Premises including, but not limited to Section 1004 of the Federal Resource Conservation and Recovery Act, 24A 36 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) and any additions, amendments, or modifications thereof. As used herein, the term "HAZARDOUS MATERIAL" shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the Premises is located or by the United States Government. Landlord and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Tenant is complying with the terms of this Section. If Tenant is not in compliance with this Section, Landlord shall have the right to immediately enter upon the Premises and take whatever actions are reasonably necessary to comply with the terms set forth in this Section, including, but not limited to, the removal from the Premises of any Hazardous Material and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Tenant shall pay all such costs incurred by Landlord ten (10) days upon receipt of a bill therefor plus ten percent (10%) profit and twelve percent (12%) for administration. The covenants in this Section 18.03 shall survive the expiration or earlier termination of this Lease. 18.04 AMERICANS WITH DISABILITIES ACT Tenant, at its own expense, shall at all times comply with and shall cause the Premises to be in compliance with the requirements of the Americans With Disabilities Act of 1990, and any additions, amendments or modifications thereto and all related regulations (the "ADA"). Landlord, at Landlord's sole cost and expense, shall be responsible for insuring that Landlord's Work and the Common Areas are in compliance with the ADA. - -------------------------------------------------------------------------------- ARTICLE 19 SUBORDINATION, MORTGAGEE'S RIGHTS AND ASSIGNMENT OF RENTS - -------------------------------------------------------------------------------- 19.01 SUBORDINATION (a) The rights and interests of Tenant under this Lease shall be subject and subordinate to any ground lease, mortgage trust deed or REA now or hereafter placed upon any portion of the Center, and to any advances made under any ground lease, mortgage, trust deed or REA, and to the interests therein, and to all renewals, modifications, consolidations, replacements, extensions and re-financings thereof. Tenant agrees that any ground lessor, mortgagee, REA holder or trustee (collectively referred to as a "HOLDER") may elect to give the rights and interest of Tenant under this Lease priority over the lien of its ground lease, mortgage, REA or trust deed. In the event of such election, the rights and interest of Tenant under this Lease automatically shall have priority in whole or in part, over the lien of said ground lease, mortgage or trust deed, and no additional consent or instrument shall be necessary or required. Upon request by Tenant, Landlord shall use reasonable efforts to obtain from such Holder a subordination, nondisturbance and attornment agreement containing such terms, covenants and conditions which such Holder customarily and consistently requires of tenants similarly situated to Tenant leasing comparable space in a super-regional shopping center similar to the Center. Tenant agrees to execute and deliver such subordination, nondisturbance and attornment agreement as well as all other instruments which may be requested by a Holder for such purposes. In the event Landlord shall elect to refinance the Center during the Term, Tenant's subordination to such future lender shall be expressly conditioned upon Tenant's receipt of a non-disturbance agreement reasonably acceptable to both Tenant and such future lender. (b) Notwithstanding anything to the contrary contained in this Section 19.01, in the event, and so long as a permanent lender ("PERMANENT LENDER") has an interest in all or any part of the Center, the rights of Tenant under this Lease shall be subject and subordinate only to any first mortgage and to any subordinate mortgage approved by the Permanent Lender. 19.02 MORTGAGEE'S RIGHTS (a) So long as any such ground lease, trust deed, REA or mortgage remains a lien on any portion of the Center, Tenant agrees, simultaneously with the giving of any Notice to Landlord which is required to be given by this Lease, to give a duplicate copy thereof to the respective Holder, provided Landlord has given Tenant Notice of the name and address of any such Holder. Landlord agrees to notify Tenant of any Holder to whom such Notice must be sent. Further, Tenant agrees that if Landlord defaults in its performance of any of the covenants under the Lease and if such default entitles Tenant to terminate this Lease, the Holder may cure said default within a reasonable period of time beyond any time period required of Landlord, and, if necessary, be permitted entry upon the Premises for the purpose of curing any such default. The giving of any such Notice to Landlord shall not be properly given under the terms of this Lease and shall be of no force and effect until a duplicate copy thereof is also given to the Holder pursuant to this Section 19.02. (b) Tenant hereby acknowledges that so long as any ground lease, mortgage, REA or trust deed is a lien upon the Premises, Landlord cannot agree to reduce the rents below that provided for in this Lease, provide for payments of Rent prior to the time herein provided for, nor terminate this Lease prior to the end of the Term, EXCEPT as otherwise provided in this Lease, without first obtaining the written consent of the Holder. Tenant hereby acknowledges that without such consent, any such modification or termination shall be void as against said Holder. (c) So long as a mortgage remains a lien on any portion of the Center, neither Tenant nor any other person having an interest in the 25 37 possession, use, occupancy or utilization of the Premises shall enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the Premises which provides for rental or other payment for such use, occupancy or utilization based, in whole or in part, on the net income or profits derived from any person from the Premises leased, used, occupied or utilized (other than an amount based upon a fixed percentage or percentages of Gross Receipts, as defined herein), and any purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the Premises. 19.03 ASSIGNMENT OF RENTS (a) With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable under this Lease, conditional in nature or otherwise, which assignment is made to the Holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees: (i) That the execution of such assignment by Landlord, and the acceptance thereof by the Holder of such mortgage shall never be treated as an assumption by such Holder of any of the obligations of Landlord hereunder, unless such Holder shall, by Notice sent to Tenant, specifically otherwise elect; and (ii) That except as stated above, such Holder shall be treated as having assumed Landlord's obligations hereunder with respect only to those obligations that arise following a foreclosure or deed in lieu of foreclosure, or assumption of Landlord's position by a Holder only upon foreclosure of such Holder of a mortgage and the taking of possession of the Premises, or, in the case of a ground lessor, the assumption of Landlord's position hereunder by such ground lessor. Tenant agrees that with respect to those obligations of Landlord that arise prior to a foreclosure or deed in lieu thereof, or assumption of Landlord's position by such Holder, Holder shall have no liability, provided that nothing contained herein shall be deemed to relieve such Holder from performance of non-monetary obligations of a continuing nature arising under this Lease prior to the date of such assumption. (b) Where a party acquires Landlord's interest in property (whether land only, or land and buildings) which includes the Premises, and simultaneously leases the same back, such acquisition shall not be treated as an assumption of Landlord's position under this Lease, and this Lease shall thereafter be subject and subordinate at all times to such lease. - -------------------------------------------------------------------------------- ARTICLE 20 ENTRY TO PREMISES - -------------------------------------------------------------------------------- 20.01 ENTRY TO PREMISES BY LANDLORD (a) Landlord shall have the right to enter the Premises at all reasonable times acceptable to both Landlord and Tenant for the purposes of: (i) Inspecting the Premises; (ii) Making any repairs to the Premises and performing any work that may be necessary or desirable; (iii) Exhibiting the Premises for the purpose of sale, ground lease, mortgage or other financing; (iv) Exhibiting the Premises (within one year prior to the expiration of the Term or at any time following delivery of Tenant's Notice pursuant to Section 17.01 herein) to prospective tenants. Except in the case of an emergency, Landlord shall be accompanied by a representative of Tenant during any entry to the Premises unless Tenant waives such requirement in advance of such entry. During any such entry, Landlord shall not interfere with Tenant's access to the Premises. (b) Nothing in this Lease shall imply any duty on the part of Landlord to do work or perform obligations which, under any of the provisions of this Lease, Tenant may be required to perform, and any such performance by Landlord shall not constitute a constructive eviction, nor a waiver of Tenant's default. 26 38 - -------------------------------------------------------------------------------- ARTICLE 21 NOTICES AND CERTIFICATES - -------------------------------------------------------------------------------- 21.01 NOTICES (a) Any notice, statement, certificate, request or demand required or permitted to be given or delivered by or in this Lease (a "NOTICE") shall be in writing, and sent either by a nationally recognized overnight courier service, registered or certified mail, postage prepaid, return receipt requested, with simultaneous first class mailing, and in either case addressed, as the case may be, to Landlord and Tenant at the addresses shown at the beginning of this Lease, or to such other addresses as Landlord or Tenant shall designate in the manner provided in this Section 21.01. In the case of any default Notice sent by Landlord to Tenant, Landlord shall send a copy to: Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301; Attn: Daniel K. Seubert. Landlord's managing representative, as designated from time to time, is authorized to give or deliver to Tenant any Notice under this Lease. Any Notice, shall, in the case of registered or certified mailing, be deemed to have been given on the date mailed in any post office or branch post office regularly maintained by the United States Government, and in the case of delivery by a nationally recognized overnight courier service, shall be deemed to have been given upon the date of delivery to an authorized agent of such courier service, EXCEPT in each case for Notice of change of address or revocation of a prior Notice, which shall only be effective upon receipt. (b) At any time or times when Tenant's interest is vested in more than one person, firm or corporation, jointly, in common or in severalty, a Notice given by Landlord to any one such person, firm or corporation shall be conclusively deemed to have been given to all such persons, firms or corporations. Any Notices by Tenant to Landlord pursuant to the provisions of this Lease shall be void and ineffective unless signed by all persons, firms and corporations unless all such persons, firms and corporations have previously given Notice to Landlord, signed by each of them and designating and authorizing one or more of them to give the Notice referred to, and such Notice shall then be unrevoked by any Notice to Landlord. 21.02 ESTOPPEL CERTIFICATE OF LANDLORD Within fifteen (15) days after request by Tenant, Landlord, from time to time and without charge, shall deliver to Tenant or to a person, firm or corporation specified by Tenant, a duly executed and acknowledged instrument "LANDLORD'S ESTOPPEL CERTIFICATE" as set forth on EXHIBIT "C," annexed hereto, and made a part hereof. Such certification shall not estop Landlord from thereafter asserting any existing default of which Landlord did not have actual knowledge on the date of execution thereof. 21.03 ESTOPPEL CERTIFICATE OF TENANT Within fifteen (15) days after request by Landlord or Holder, Tenant, from time to time and without charge, shall deliver to Landlord or the requesting party, or to a person, firm or corporation, specified by Landlord or Holder, a duly executed and acknowledged "TENANT'S ESTOPPEL CERTIFICATE" as set forth on EXHIBIT "D," annexed hereto, and made a part hereof. Such certification shall not estop Tenant from thereafter asserting any existing default of which Tenant did not have actual knowledge on the date of execution thereof. - -------------------------------------------------------------------------------- ARTICLE 22 COVENANT OF QUIET ENJOYMENT - -------------------------------------------------------------------------------- 22.01 COVENANT OF QUIET ENJOYMENT (a) So long as no Event of Default is existing, Tenant shall lawfully, peaceably and quietly have, hold and enjoy the Premises during the Term on and after the Term Commencement Date, without hindrance or ejection by any persons lawfully claiming under Landlord; but it is understood and agreed that this covenant, and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownership of Landlord's interest in the Premises. If Landlord is unable to place Tenant in possession of the Premises at the Term Commencement Date by reason of the possession of the Premises by another tenant holding over under a lease, such inability by Landlord shall not constitute a default under this Lease; but the Term Commencement Date shall be postponed until such date as such holdover tenant gives up possession of the Premises and the Term shall be deemed to commence on such Term Commencement Date as postponed. (b) With respect to any services to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish 27 39 the same when prevented from doing so by strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, or because of war or other emergency, or for any cause beyond Landlord's control. (c) Landlord shall be in default of this Lease if Landlord fails to perform any obligation required to be performed by Landlord under this Lease and if such failure is not cured within thirty (30) days after receipt of Notice from Tenant specifying the nature of such failure. In the event of any such default by Landlord, Tenant shall have the right to exercise all rights and remedies available at law or in equity. Landlord shall reimburse Tenant for any reasonable expenses incurred by Tenant in curing Landlord's failures within twenty (20) days following receipt by Landlord of paid invoices from Tenant. In the event Landlord fails to reimburse Tenant for such amounts within thirty (30) days following receipt by Landlord of paid invoices from Tenant, then Tenant shall have the right to offset such amounts against the next ensuing installments of Rent, Percentage Rent and Additional Rent coming due under this Lease until the entire amount has been recouped by Tenant. - -------------------------------------------------------------------------------- ARTICLE 23 MISCELLANEOUS PROVISIONS - -------------------------------------------------------------------------------- 23.01 HOLDOVER (a) It is expressly understood by Tenant that Tenant's right to possession of the Premises under this Lease shall terminate at the expiration or earlier termination of the Term, and should Tenant continue thereafter to remain in possession, Landlord, should it so elect, shall be entitled to the benefits of all provisions of law with respect to summary recovery of possession from a holdover tenant. Tenant shall indemnify, save harmless and defend Landlord from and against any claim, damage, expense, cost or loss which Landlord may incur by reason of such holding over, including without limitation, any claim of a succeeding tenant, or any loss by Landlord with respect to a lost opportunity to re-let the Premises. (b) Should Tenant continue to occupy the Premises after the expiration or earlier termination of the Term with the consent of the Landlord, such tenancy shall be from month-to-month, and such month-to-month tenancy shall be under the same terms, covenants and conditions as set forth in this Lease, EXCEPT that Tenant shall pay holdover rent ("Holdover Rent") equal to one and one-half (1 1/2) times the Rent for the last Lease Year of the Term. 23.02 LIMITATION ON LANDLORD'S PERSONAL LIABILITY (a) The term "LANDLORD" as used in this Section 23.02 and throughout this Lease, shall be limited to mean and include only the owner or owners at the time in question of Landlord's interest in this Lease. Further, in the event of any transfer by Landlord of Landlord's interest in this Lease, then provided such transferee assumes Landlord's obligations under this Lease, Landlord named (and in case of any subsequent transfers or conveyances, the then assignor), including each of its partners, trustees, beneficiaries, shareholders, affiliates, co-tenants, or principals shall be automatically freed and relieved, from and after the date of such transfer or conveyance, of all liability for the performance of any covenants and agreements on the part of Landlord except for the obligations which arise prior to such transaction. (b) Tenant, its partners, trustees, beneficiaries, shareholders, affiliates, alter egos, successors and assigns are limited solely to the estate, interest and property of Landlord in the real property upon which the Center is situated and improvements to the real property, for the satisfaction of any of Tenant's remedies, or for the satisfaction of any liens, rights or the collection of any damages, judgment or other judicial process with respect to any of the terms and conditions of this Lease, or any other obligations created by, under or related to this Lease. (c) Tenant, shall not have any recourse to or against any other property or assets of Landlord or its partners, trustees, beneficiaries, shareholders, affiliates, alter egos, successors, assigns, co-tenants or principals, nor shall Landlord or its agents, employees, partners, trustees, beneficiaries, stockholders, affiliates, representatives, insurers, nor shall any of Landlord's banking institutions or trusts be subject to levy, execution or other prejudgment or judgment enforcement or attachment, for the satisfaction of Tenant's remedies arising from or relating to this Lease. (d) Landlord's partners, trustees, beneficiaries and affiliates, shareholders, alter egos, successors, assigns, are not and shall not become personally liable under this Lease, nor shall they be named in any action arising from or relating to a breach or the enforcement of this Lease. 23.03 DEFINITION OF TENANT'S ALLOCABLE SHARE (a) The term "TENANT'S ALLOCABLE SHARE" shall be a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is ninety five percent (95%) of the total number of square feet of Total Tenant Area 28 40 EXHIBIT D TENANT'S ESTOPPEL CERTIFICATE [Date] EklecCo 4 Clinton Square Syracuse, NY 13202 RE: Lease Agreement (the "LEASE") executed this _____ day of ________, 19__, by and between EklecCo (the "LANDLORD") and SILICON ENTERTAINMENT, Inc. (the "TENANT"), a California corporation Gentlemen: As Tenant under this Lease, the undersigned acknowledges with respect to the Premises demised under the Lease (the "PREMISES"), the truth and accuracy of the following statements pertaining to the Lease and the Premises except as otherwise disclosed in an attachment hereto: 1. Tenant now occupies the Premises described in the Lease. 2. Tenant presently is open and conducting business with the public in the Premises. 3. The Lease Rent in the amount of [amount] per month has commenced. 4. The Lease is in full force and effect and has not been modified, amended or assigned and Tenant is not aware of any Landlord Notice of Default or termination under the Lease. 5. The Lease represents the entire agreement between the Parties. 6. The Term of the Lease expires on [date]. 7. To Tenant's actual knowledge, all conditions under the Lease to be performed by Landlord have been satisfied. 8. On this date there are not existing defenses or offsets which Tenant has against the enforcement of the Lease by Landlord. 9. Tenant has not paid any Rent in advance, nor has Tenant deposited any security with Landlord. 10. The size of the Premises is approximately [size] square feet. 11. The Premises are being operated in accordance with all applicable environmental laws, zoning ordinances and building codes. 12. Capitalized undefined terms used herein shall have the respective meanings given such terms in the Lease. By: _______________ Name: _____________ Title: ____________ Date: _____________ 41 (defined in Section 23.03(b)) of the Center. (b) "TOTAL TENANT AREA" when used in this Lease as pertaining to the Center shall mean the total floor area, described in square feet, of all Tenant and REA Parcel space which is either designated by Landlord as available for lease or in fact leased EXCLUDING the Common Areas, any outdoor selling areas whether or not mechanically heated or air-conditioned, and any tenant or REA parcels which are separately assessed and taxed. Whenever used in this Lease, the term "SQUARE FEET" shall consist of the area of floor area located within the buildings measured from the outside face of all exterior walls of the buildings (or the mid-point of any interior walls). Square Feet shall not include the surface area of any roof structures used for mechanical equipment. 23.04 FORCE MAJEURE The period of time during which either Party is prevented or delayed in any performance or the making of any improvements or repairs or fulfilling any obligation under this Lease, other than the payment of Rent, Percentage Rent and Additional Rent, due to unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil commotion, Acts of God, the public enemy, governmental prohibitions or regulations or inability to obtain materials by reason thereof, or any other causes beyond such Party's reasonable control (excluding lack of funds), shall be added to such Party's time for performance, and such party shall have no liability by reason of such delay, except that as a condition to Tenant's right to avail itself of force majeure, Tenant must give Landlord written Notice of such claimed force majeure not later than three (3) business days following the occurrence of such force majeure. 23.05 RELOCATION OF TENANT Landlord shall have the right to relocate Tenant within the Center during the last twelve (12) months of the Term upon one hundred twenty (120) days Notice to Tenant, at Landlord's cost and expense, which relocation shall in no way affect the obligation or duties of either party hereunder. Landlord shall be obligated for all expenses associated with such relocation, including but not limited to the construction of the new space to a condition and level of quality of finishes at least equivalent to the condition and level of the Premises on the date of Landlord's relocation notice and any actual out-of-pocket costs incurred by Tenant for the printing of new stationary and business cards, and the costs of moving Tenant's Personal Property. In the event Tenant shall fail or refuse to accept the new location within twenty (20) days of such Notice, Landlord at its option, may terminate this Lease upon forty-five (45) days written Notice to Tenant, provided that if Landlord shall fail to give the Notice of Landlord's election to terminate within forty-five (45) days after the expiration of such twenty (20) days, then Landlord's termination right under this Section 23.05 shall be waived and this Lease shall remain in full force and effect through the Termination Date as defined in Section 2.02. 23.06 CHANGES AND ADDITIONS Landlord reserves the right at any time, and from time to time, to make alterations or additions to, and to build additional stories on, under, above and adjoining the building in which the Premises are located. Landlord also reserves the right at any time, and from time to time, to construct other buildings and improvements in Landlord's Tract, to enlarge or otherwise modify the Center, to make alterations or additions thereto, to build additional stories on any building or buildings within the Landlord's Tract, to build adjacent thereto, to construct decks or elevated parking facilities, to install, maintain, use, repair and replace ducts, wires, pipes and conduits passing through or under the Premises serving other parts (now existing or hereafter added) of Center, and to sell or lease any part of Landlord's Tract. The purpose of the attached site plan is to show the approximate location of the Premises within the Center, and Landlord reserves the right at any time to relocate the various buildings, parking areas and other Common Areas shown on said site plan; PROVIDED, however, that there shall not be any unreasonable obstruction of Tenant's right of access to the Premises or any unreasonable interference with Tenant's use of the Premises for the purposes set forth above. 23.07 ATTORNMENT BY TENANT If at any time during the Term Landlord shall be the holder of a leasehold estate covering premises which include the Premises, and if such leasehold estate shall be canceled or otherwise terminated prior to the expiration date of the leasehold and prior to the expiration of the Term, or in the event of the surrender thereof whether voluntary, involuntary or by operation of law, then provided the lessor of such leasehold estate assumes all of Landlord's obligations under this Lease, Tenant shall make full and complete attornment to such lessor for the balance of the Term upon the same covenants and conditions as are contained in this Lease, so as to establish direct privity between such lessor and Tenant and with the same force and effect as though this Lease was made directly from such lessor to Tenant. Tenant shall then make all rent payments thereafter directly to such lessor. In the event any proceedings are brought for the foreclosure of, or in the event of conveyance by deed in lieu of foreclosure of, or in the event of the exercise of the power of sale under, any mortgage or deed of trust made by Landlord covering the Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Center or any portion thereof containing the Premises, Tenant shall attorn to and hereby covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as the Landlord under this Lease. 23.08 INDEX 29 42 Intentionally deleted. 23.09 Survival of Tenant's Obligations Any sums due either party that by the terms herein would be payable, or are incapable of calculation, until after the expiration or earlier termination of this Lease shall survive and remain a continuing obligation until paid. 23.10 Effect of Landlord's Notice to Terminate Any right on the part of Landlord to terminate this Lease shall, when exercised, require no further act, to the end that at the expiration of the applicable time period, if any, contained in the particular termination provision, this Lease and the Term hereunder shall end and expire as fully and completely as if such termination date was the date herein definitely fixed for the end and expiration of this Lease and its Term, and upon such date Tenant shall quit and surrender the Premises to Landlord. 23.11 Effect of Captions The captions, bold-faced type, underlying, notational references, or legends in this Lease are inserted only for convenient reference or identification of the particular paragraphs and are in no way intended to describe, interpret, define or limit the scope, extent or interest of this Lease, or any paragraph or provision thereof. 23.12 Tenant Authorized to Do Business Tenant represents, warrants and covenants upon the date of execution, and throughout the Term, Tenant is authorized to do business and is in good standing in Rockland County, State of New York. Tenant, if a partnership or corporation, agrees to furnish to Landlord, upon request, evidence of authority for entering into this Lease. 23.13 Execution in Counterparts This Lease may be executed in one or more counterparts, any one or all of which shall constitute but one agreement. 23.14 Law Governing Effect; Gender This Lease, and any dispute concerning this Lease, shall be governed by the laws of the State of New York and any dispute concerning the application or any interpretation of any portion of the Lease or the conduct of the parties shall be brought in the New York Supreme Court, Rockland County. Tenant consents to service of process at the Premises in the event Tenant does not maintain a separate business office within the state where the Premises is located. This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns, except as expressly provided otherwise. Use of the neutral gender shall be deemed to include the masculine and feminine. 23.15 Memorandum or Notice of Lease Upon request by either party, Landlord and Tenant agree to execute a Memorandum or Notice of Lease in recordable form pursuant to applicable state law. Upon the expiration or earlier termination of this Lease, the party who shall have recorded such Memorandum or Notice of Lease shall promptly execute any necessary instrument and remove the Memorandum or Notice of Lease from the public records, and upon failure to do so, the other Party is appointed attorney-in-fact to execute any such instrument in the recording party's name, place and stead. 23.16 Complete Agreement This Lease contains and embraces the entire agreement between the parties with respect to the matters contained in this Lease, and it or any part of it may not be changed, altered, modified, limited, terminated, or extended orally or by any agreement between the parties unless such agreement is in writing and signed by the parties hereto, their legal representatives, successors or assigns. Tenant acknowledges and agrees that neither Landlord nor any representative of Landlord nor any broker has made any representation to or agreement with Tenant relating to the Premises, this Lease or the Center which is not contained in the express terms of this Lease. Tenant acknowledges and agrees that Tenant's execution and delivery of this Lease is based upon Tenant's independent investigation and analysis of the business potential and expenses represented by this Lease, and Tenant expressly WAIVES any and all claims or defenses by Tenant against the enforcement of this Lease which are based upon allegations of representations, projections, estimates, understandings or agreements by Landlord or Landlord's representative that are not contained in the express terms of this Lease. With respect to this Lease, Tenant hereby represent to Landlord that the transaction contemplated herein is not in violation of the provisions of Tenant's documents of incorporation or constitute a breach or violation of any provision 30 43 of any indenture, mortgage, lease, agreement, judgment, statute, rule or regulation to which Tenant is a party or by which Tenant is subject or bound. 23.17 GUARANTY OF LEASE Intentionally deleted. 23.18 ARBITRATION Any controversy or claim arising from or relative to any matter in connection with this Lease, with reference to which this Lease shall expressly provide that this paragraph governs, shall be settled by arbitration in Rockland County, New York, in accordance with the rules of the American Arbitration Association or its successor organization, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. 23.19 SECURITY AGREEMENT Intentionally deleted. 23.20 INVALIDITY OF PARTICULAR PROVISIONS If any term or provision of this Lease or the application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 23.21 EXECUTION OF LEASE BY LANDLORD The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall be effective and binding only upon the execution and delivery hereof by both the Landlord and Tenant. 23.22 RELATIONSHIP OF THE PARTIES Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent, or of partnership or of joint venture between the parties, it being understood and agreed that neither the method of computation of rent nor any other provision contained in this Lease, nor any acts of the parties, shall be deemed to create any relationship between the parties other than Landlord and Tenant. 23.23 BROKERS Landlord and Tenant each represent and warrant to the other that neither of them has employed any realtors or brokers in connection with the negotiation of this Lease. Landlord and Tenant shall each indemnify, defend and hold harmless the other form any cost, expense or claim for brokerage or other commission arising from or out of any breach of the foregoing representation and warranty. 23.24 REPRESENTATIONS Landlord warrants to Tenant that the Center is in good condition and repair, free of material defects, and that the Center has been constructed in accordance with applicable laws and requirements. Landlord warrants that Dave & Busters, Inc. has signed a lease agreement for space within the Center. 23.25 ABATEMENT In the event Tenant is prevented from using the Premises or any portion thereof, for five (5) consecutive business days or ten (10) days in any twelve (12) month period (the "Eligibility Period") as a result of the failure of Landlord to maintain and repair the Center and the Premises in accordance with its obligations as set forth in this Lease, and such failure interferes with Tenant's operations and use of the Premises, or as a result of any failure to provide services or access to the Premises, or because of the presence of Hazardous Materials in or on the Center or the land on which the Center is located resulting from the acts or omissions of any party other than Tenant which pose a health risk to occupants of the 31 44 Premises, then Tenant's Rent shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using the Premises or a portion thereof, in the proportion that the square footage of the portion of the Premises that Tenant is prevented from using bears to the Tenant Area of the entire Premises. However, in the event that Tenant is prevented from conducting its business in any portion of the Premises under such circumstances for period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not reasonably sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the square footage of such reoccupied portion of the Premises bears to the Tenant Area of the Premises, shall be payable by Tenant from the date such business operations commence. 23.26 OTHER PROVISIONS There is attached hereto and incorporated herein an addendum containing additional provisions to this Lease: NONE 23.27 SPECIAL USE PERMIT Landlord represents that as of the date hereof, no "special" use permit from local governmental authorities is required for Tenant's operation for the permitted use in Section 6.01 within the Premises in accordance with this Lease. The foregoing representation shall not extend to any building or similar permits required for Tenant's Work or a certificate of use and occupancy for the Premises or licenses to conduct business and the like. 23.28 PYLON OR MONUMENT SIGN In the event Landlord erects in its sole discretion a pylon or monument sign that references the "thEATery" and contains the names of other tenants or occupants of premises located in the "thEATery" (other than cinemas), Tenant shall be entitled to have its identification sign installed on such sign at Tenant's expense. The location thereon and size of Tenant's identification size shall be equivalent to the location and size of similarly sized tenants in the "thEATery." IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date first above written. EKLECO By: /s/ [Signature Illegible] ------------------------------------- Title: Partner/Auth. Agent ---------------------------------- SILICON ENTERTAINMENT, INC., a California corporation By: /s/ JANET WOODS ------------------------------------- Title: VP Real Estate ---------------------------------- 32 45 (Acknowledgment of LANDLORD) STATE OF NEW YORK ) ss: COUNTY OF ONONDAGA ) On the 27th day of July, in the year 1998 before me, the undersigned, a notary public in and for said state, personally appeared James A. Tuozzolo, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual or the person upon behalf of which the individual acted, executed the instrument. /s/ JENNIFER D. YOUNG -------------------------------------- (Notary Public) [SEAL] (Acknowledgment of TENANT) STATE OF CALIFORNIA ) ss: COUNTY OF SANTA CLARA ) On the 24th day of July, in the year 1998 before me, the undersigned, a notary public in and for said state, personally appeared Jaret Woods, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acted, executed the instrument. /s/ CAROL BURKE -------------------------------------- (Notary Public) [SEAL] 33 46 TABLE OF EXHIBITS Exhibit A ............................................................ Site Plan Exhibit A-1 ........................................................... Premises Exhibit B ........................................ Term Commencement Certificate Exhibit C ...................................... Landlord's Estoppel Certificate Exhibit D ........................................ Tenant's Estoppel Certificate 34 47 EXHIBIT A Note: This is a schematic plan and is intended to show only the proposed layout of the Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 48 EXHIBIT A-1 PREMISES -- Space F401 NOTE: This diagram is an approximate lease plan of the Center. All measures, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 49 EXHIBIT-A-1-A Permissible Area for Projection of Car and Sign Board Note: This diagram is an approximate lease plan of the Center. All measures, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 50 EXHIBIT A-2 Kiosk Restricted Area Permitted Kiosk Locations within Restricted Area Note: This diagram is an approximate lease plan of the Center. All masues, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 51 EXHIBIT A-3 /// - Relocation Areas Note: This diagram is an approximate lease plan of the Center. All measures, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 52 EXHIBIT B TERM COMMENCEMENT CERTIFICATE This Lease Agreement (the "Lease") executed this ________ day of ________, 19__, by and between EklecCo (the "Landlord") and SILICON ENTERTAINMENT, Inc. (the "Tenant"), a California corporation. WITNESSETH WHEREAS, Landlord is the owner of a certain shopping center situated in West Nyack, New York known as the Palisades Center (the "Center"); and WHEREAS, by that certain Lease, Landlord leased a certain portion (the "Premises") of the Center to Tenant; and NOW THEREFORE, Landlord and Tenant hereby acknowledge with respect to the Premises demised under the Lease, the truth and accuracy of the following: 1. Landlord turned over the Premises to Tenant, and Tenant accepted delivery of the Premises on ________ day of 19__. 2. The Term Commencement Date (as such term is defined in the Lease) was, _______ , 199_. 3. Capitalized undefined terms used herein shall have the respective meanings given such terms in the Lease. IN WITNESS WHEREOF, the undersigned executes this certificate as of this _________ day of ___________ , 19__. EKLECCO By: -------------------------------------- Title: ----------------------------------- Date: ------------------------------------ SILICON ENTERTAINMENT, INC., a California corporation By: -------------------------------------- Title: ----------------------------------- Date: ------------------------------------ 53 (Acknowledgment of LANDLORD) STATE OF NEW YORK ) ss: COUNTY OF ONONDAGA ) On the _________ day of ____________________, in the year 19__ before me, the undersigned, a notary public in and for said state, personally appeared ___________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acted, executed the instrument. --------------------------------------- (Notary Public) (Acknowledgment of TENANT) STATE OF ) ss: COUNTY OF ) On the _________ day of ___________________, in the year 19__ before me, the undersigned, a notary public in and for said state, personally appeared _______________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acted, executed the instrument. ---------------------------------------- (Notary Public) 54 EXHIBIT C LANDLORD'S ESTOPPEL CERTIFICATE [Date] SILICON ENTERTAINMENT, Inc. 10401 Bubb Road Cupertino, California 95014 RE: Lease Agreement (the "Lease") executed this ___ day of ___, 19__, by and between EklecCo ("Landlord") and SILICON ENTERTAINMENT, Inc. (the "TENANT"), a California corporation Landlord acknowledges with respect to the Premises demised under the Lease (the "Premises"), the truth and accuracy of the following statements pertaining to the Lease and Premises: 1. The commencement date of the Lease if [Date] and the expiration date of the Term of the Lease is [Date]. 2. The Lease is in full force and effect and has not been modified, amended or extended, Landlord has neither received nor given notice of default or termination under the Lease, nor is Landlord aware of any condition existing that with notice and/or the passage of time or both would constitute a default under the Lease. 3. Tenant currently is in sole possession of the Premises. All of the construction required to have been performed by Landlord or Tenant prior to the date hereof under the provisions of the Lease has been satisfactory completed in all respects and, to the best knowledge of Landlord, all construction and material used in connection therewith has been fully paid for by the respective Parties responsible therefor, and Landlord has neither given nor received any notice of any failure on the part of Landlord or Tenant to comply with the provisions of the Lease in connection with any construction to have been performed in or about the Premises. 4. The monthly Rent due under the Lease is [amount]. All Rent and Additional Rent due through [Date] has been paid in full. No other rent or additional rent has been paid in advance. 5. Capitalized undefined terms used herein shall have the respective meanings given such terms in the Lease. In witness whereof, the undersigned has executed this certificate as of the date and year first above written. By: EklecCo as Landlord Name: -------------------------- Title: -------------------------- Date: -------------------------- EX-10.15 17 LEASE, THE REGISTRANT, TENANT, "NASCAR SILICON 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.15 LEASE LBE TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- TENANT "NASCAR SILICON MOTOR SPEEDWAY" - ----------------------------------------------------------------------------- TRADE NAME N/A - ----------------------------------------------------------------------------- GUARANTOR WOODFIELD MALL A REGIONAL RETAIL DEVELOPMENT VILLAGE OF SCHAUMBURG COUNTY OF COOK STATE OF ILLINOIS PROVISIONS ADDED TO THIS LEASE APPEAR ON THE DATA SHEET AND ON THE ATTACHED RIDER AND, EXCEPT IN INSTANCES OF ADDITIONAL SENTENCES OR PARAGRAPHS BEING ADDED AT THE END OF A SECTION OR PARAGRAPH, ARE INDICATED IN THE TEXT BY AN UNDERSCORING OF THE LINE NUMBER IN THE RIGHT-HAND MARGIN OF THE LINE BEING CHANGED. ADDITIONAL LANGUAGE IS INSERTED EITHER IN PLACE OF DELETED LANGUAGE OR AFTER AN UNDERSCORED WORD, EXCEPT AS OTHERWISE NOTED ABOVE. 2 TABLE OF CONTENTS
PAGE DATA SHEET..................................................................... D1 EXECUTION/ACKNOWLEDGMENT....................................................... E1 ADDENDUM....................................................................... A1 ARTICLE I. GRANT AND TERM SECTION 1.01. LEASED PREMISES............................................. S1 SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM......................... S1 SECTION 1.03. OPENING..................................................... S2 ARTICLE II. RENT SECTION 2.01. MINIMUM RENT................................................ S2 SECTION 2.02. PERCENTAGE RENT............................................. S2 SECTION 2.03. GROSS SALES................................................. S2 SECTION 2.04. RENT ADJUSTMENT............................................. S3 SECTION 2.05. TENANT'S TAX OBLIGATION..................................... S3 SECTION 2.06. PAYMENTS.................................................... S4 ARTICLE III. RECORDS AND BOOKS OF ACCOUNT SECTION 3.01. TENANT'S RECORDS............................................ S5 SECTION 3.02. REPORTS BY TENANT........................................... S5 ARTICLE IV. AUDIT SECTION 4.01. RIGHT TO EXAMINE BOOKS...................................... S5 SECTION 4.02. AUDIT....................................................... S5 ARTICLE V. CONSTRUCTION OF LEASED PREMISES SECTION 5.01. CONSTRUCTION OF LEASED PREMISES............................. S6 SECTION 5.02. AVAILABILITY AND POSSESSION OF PREMISES FOR TENANT'S WORK... S7 SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL RIGHT OF CANCELLATION...... S7 SECTION 5.04. ULTIMATE COMMENCEMENT DATE.................................. S7 ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS SECTION 6.01. INSTALLATION BY TENANT...................................... S8 SECTION 6.02. REMOVAL BY TENANT........................................... S8 SECTION 6.03. CHANGES AND ADDITIONS....................................... S8 ARTICLE VII. CONDUCT OF BUSINESS BY TENANT SECTION 7.01. USE OF PREMISES............................................. S8 SECTION 7.02. OPERATION OF BUSINESS....................................... S8 SECTION 7.03. RADIUS...................................................... S10 SECTION 7.04. STORAGE, OFFICE SPACE....................................... S10 SECTION 7.05. CARE OF PREMISES............................................ S10 ARTICLE VIII. COMMON AREAS SECTION 8.01. OPERATION AND MAINTENANCE OF COMMON AREAS................... S10 SECTION 8.02. USE OF COMMON AREAS......................................... S10 SECTION 8.03. TENANT'S PRO RATA SHARE OF EXPENSES......................... S11 ARTICLE IX. SIGNS SECTION 9.01. SIGNS....................................................... S12 ARTICLE X. MAINTENANCE SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE..................... S12 SECTION 10.02. TENANT'S OBLIGATION FOR MAINTENANCE........................ S12 ARTICLE XI. INSURANCE AND INDEMNITY SECTION 11.01. TENANT'S INSURANCE......................................... S14 SECTION 11.02. LANDLORD'S INSURANCE........................................S15 SECTION 11.03. COVENANTS TO HOLD HARMLESS..................................S15 ARTICLE XII. UTILITY CHARGES SECTION 12.01. UTILITY CHARGES.............................................S16 ARTICLE XIII. ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION SECTION 13.01. ESTOPPEL STATEMENT..........................................S17 SECTION 13.02. ATTORNMENT..................................................S18 SECTION 13.03. SUBORDINATION...............................................S18 SECTION 13.04. REMEDIES....................................................S18 ARTICLE XIV. ASSIGNMENT AND SUBLETTING SECTION 14.01. NO ASSIGNMENT OR SUBLETTING.................................S18 ARTICLE XV. WASTE SECTION 15.01. WASTE OR NUISANCE...........................................S19
(i) 3 TABLE OF CONTENTS
PAGE ARTICLE XVI. TRADE NAME, PROMOTIONAL CHARGE SECTION 16.01. TRADE NAME................................................... S19 SECTION 16.02. SOLICITATION OF BUSINESS..................................... S19 SECTION 16.03. PROMOTIONAL CHARGE........................................... S19 ARTICLE XVII. DESTRUCTION OF LEASED PREMISES SECTION 17.01. RECONSTRUCTION OF DAMAGED PREMISES........................... S20 SECTION 17.02. WAIVER OF SUBROGATION........................................ S21 ARTICLE XVIII. EMINENT DOMAIN SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES........................ S21 SECTION 18.02. PARTIAL CONDEMNATION......................................... S21 SECTION 18.03. LANDLORD'S AND TENANT'S DAMAGES.............................. S22 ARTICLE XIX. DEFAULT SECTION 19.01. RIGHT TO RE-ENTER............................................ S22 SECTION 19.02. RIGHT TO RELET............................................... S23 SECTION 19.03. EXPENSES..................................................... S23 SECTION 19.04. WAIVER OF COUNTERCLAIMS AND TRIAL BY JURY.................... S23 ARTICLE XX. BANKRUPTCY OR INSOLVENCY.......................................... S24 SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE........................... S24 SECTION 20.02. TERMINATION.................................................. S24 SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITORS' PROCEEDINGS.......... S24 SECTION 20.04. RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE............. S24 ARTICLE XXI. ACCESS BY LANDLORD SECTION 21.01. RIGHT OF ENTRY............................................... S25 ARTICLE XXII. TENANT'S PROPERTY SECTION 22.01. TAXES ON TENANT'S PROPERTY................................... S25 SECTION 22.02. LOSS AND DAMAGE.............................................. S25 SECTION 22.03. NOTICE BY TENANT............................................. S25 ARTICLE XXIII. HOLDING OVER SECTION 23.01. HOLDINGS OVER................................................ S26 SECTION 23.02. SUCCESSORS................................................... S26 ARTICLE XXIV. RULES AND REGULATIONS SECTION 24.01. RULES AND REGULATIONS........................................ S26 ARTICLE XXV. QUIET ENJOYMENT SECTION 25.01. LANDLORD'S COVENANT.......................................... S26 SECTION 25.02. TENANT'S COVENANT............................................ S26 ARTICLE XXVI. SECURITY PROVISION SECTION 26.01. SECURITY..................................................... S26 ARTICLE XXVII. MISCELLANEOUS SECTION 27.01. WAIVER; ELECTION OF REMEDIES................................. S27 SECTION 27.02. ENTIRE AGREEMENT............................................. S27 SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS........................... S27 SECTION 27.04. DELAYS....................................................... S28 SECTION 27.05. NOTICES...................................................... S28 SECTION 27.06. CAPTIONS AND SECTION NUMBERS................................. S28 SECTION 27.07. BROKER'S COMMISSION.......................................... S28 SECTION 27.08. RECORDING.................................................... S28 SECTION 27.09. FURNISHING OF FINANCIAL STATEMENTS........................... S28 SECTION 27.10. LANDLORD'S USE OF COMMON AREAS............................... S28 SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST.............................. S28 SECTION 27.12. FLOOR AREA................................................... S29 SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS............................. S29 SECTION 27.14. LIABILITY OF LANDLORD........................................ S29 SECTION 27.15. ACCORD AND SATISFACTION...................................... S29 SECTION 27.16. EXECUTION OF LEASE; NO OPTION................................ S30 SECTION 27.17. GOVERNING LAW................................................ S30 SECTION 27.18. SPECIFIC PERFORMANCE OF LANDLORD'S RIGHTS.................... S30 SECTION 27.19. CERTAIN RULES OF CONSTRUCTION................................ S30 SECTION 27.20. INDEX........................................................ S30 SECTION 27.21. SURVIVAL; NONDISCLOSURE; FREE ACT............................ S30 EXHIBIT A SITE PLAN; LEASED PREMISES; LEGAL DESCRIPTION (if included) EXHIBIT B CONSTRUCTION EXHIBIT B-1 UTILITIES EXHIBIT B-2 (additional construction information and procedures, if any) EXHIBIT C CENTRAL-AIR/CONDENSER-WATER SYSTEM (if any) OTHER EXHIBITS (if any) RIDER
(iii) 4 WOODFIELD MALL A REGIONAL RETAIL DEVELOPMENT VILLAGE OF SCHAUMBURG, ILLINOIS THIS LEASE made as of this 18 day of December, 1997, by and between CHICAGO TITLE AND TRUST COMPANY, a corporation of Illinois, as Trustee under Trust No. 46746, and not personally, (Landlord), and LBE TECHNOLOGIES, INC., the address of which is 10401 Bubb Road, Cuppertino, CA 90401, Attention: Ms. Janet Setcavage Woods (Tenant). All of the provisions of the Lease, including the Data Sheet, the standard provisions commencing with Article I and continuing through Article XXVII of the Lease (hereinafter at times referred to as the "text of the Lease" or the "Standard Form"), the Addendum, all exhibits, and riders, if any, are incorporated in full in this preamble as if fully set forth at this point. DATA SHEET The following references furnish data to be incorporated in the specified Sections of the Lease and shall be construed to incorporate all of the terms of the entire Section as stated in the said Lease: (1) SECTION 1.01: LEASED PREMISES: Store Number 144, situated on the lower level of Building "G," having an irregular shape and consisting of approximately six thousand one hundred eleven (6,111) square feet. (2) SECTION 1.02: COMMENCEMENT DATE OF TERM: The date one hundred fifty (150) days after the date that the leased premises are available to Tenant free and clear of the occupancy rights of the existing tenant with Landlord's Work completed to the point where Tenant can commence and diligently pursue completion of Tenant's Work. LENGTH OF TERM: Five (5) lease years (3) SECTION 2.01 AND SECTION 2.02: NAME AND ADDRESS FOR RENT PAYMENTS: Payments from Tenant shall be made payable to WOODFIELD ASSOCIATES, and shall be sent to: Woodfield Associates Department 55401 P.O. Box 67000 Detroit, Michigan 48267-0554 SECTION 27.05: NOTICE ADDRESS FOR LANDLORD: Woodfield Associates 200 East Long Lake Road P.O. Box 200 Bloomfield Hills, MI 48303-0200 (4) SECTION 2.01: MINIMUM RENT: [***] per annum, payable in equal consecutive monthly installments of [***]. (5) SECTION 2.02(a): PERCENTAGE RENT: [***] (the "percentage rent factor") of Gross Sales related to the use of auto racing simulators and the automobile racing entertainment center made during each lease year of the term hereof in excess of [***] ("Minimum Gross Sales") plus [***] (the "percentage rent factor") of all other Gross Sales made during each lease year of the term hereof in excess of [***] ("Minimum Gross Sales"). (6) SECTION 5.01(b): DESIGN OF LEASED PREMISES: The store design to be used by Tenant in the preparation of Working Drawings and Specifications for Tenant's Work in the leased premises shall be substantially the same (taking into account differences due to space configuration) as the store design reflected in the design for the NASCAR Silicon Motor Speedway store for Mall of America (except there shall be no projections beyond the lease line and storefront signage must comply with the criteria set forth in Exhibit "B"), and Tenant's architect shall provide certification to Landlord, with the submission of such Working *** Confidential treatment requested. D1 5 Drawings and Specifications, that this store design requirement has been satisfied. The Working Drawings and Specifications for Tenant's Work in the leased premises shall be completed and submitted to Landlord no later than sixty (60) days following full execution of this Lease. Such submission shall also include the certification of Tenant's architect that the Working Drawings and Specifications comply with the Space Layout Drawings provided by Landlord, all criteria and specifications set forth in Exhibits B and B-1 and any further construction exhibits attached to this Lease, and all applicable code requirements. Landlord shall not withhold its approval of the store design indicated in the Working Drawings and Specifications if Tenant and Tenant's architect shall comply with the foregoing requirements. (7) SECTION 5.01(c): TENANT REIMBURSEMENT TO LANDLORD: Not Applicable. (8) SECTION 7.01: PERMITTED USE: The premises shall be occupied and used by Tenant for the purpose of conducting a simulated automobile racing entertainment center and other related retail uses. Such uses may include but shall not be limited to the installation and operation of automobile racing simulators (operated by the use of coins, tokens, or otherwise) and the sale of auto racing and other entertainment merchandise. Incidental to the foregoing uses, Tenant shall be permitted to sell a limited number of prepackaged snacks and beverages (limited to the number and types of items of the attached list) provided Tenant shall post signage at Tenant's entrance to the mall which states that food and beverage items may not be consumed in the mall areas. (9) SECTION 7.03: RADIUS: Ten (10) miles. (10) SECTION 16.01: TRADE NAME: "NASCAR Silicon Motor Speedway" provided, Tenant may operate under the trade name "Silicon Motor Speedway" if Tenant shall no longer have the license to operate under the "NASCAR" name. (11) SECTION 16.03: ORIGINAL ANNUAL PROMOTIONAL CHARGE: [***]. Original, annual promotional charge to be paid in monthly installments of: [***]. (12) SECTION 26.01: SECURITY DEPOSIT: Not Applicable. Additional Security: Not Applicable. (13) GUARANTOR(S): Not Applicable. Address(es): Not Applicable. (14) RIDER: The Rider attached and made a part of this Lease is the "Standard NASCAR Silicon Motor Speedway Rider" containing the pre-negotiated revisions to the Standard Form and Exhibit B, which revisions are accepted by Landlord and Tenant by their execution of this Lease. SPECIAL PROVISIONS: ADDENDUM SECTION 12.01: On page A1, lines 32, and 45, in place of the deleted language, insert "twenty (20)". ADDENDUM SECTION 16.03: On page A2, lines 32, 38 and 39, in place of the deleted language, insert "two (2)". On page A2, line 44, in place of the deleted language, insert "be obligated to pay to Landlord the sum of [***] (per failure) as Landlord's sole remedy." On page A2, line 45, in place of the deleted language, insert "twenty (20)". SECTION 1.02: Landlord represents to Tenant that Landlord has lawful possession of the leased premises free and clear of the occupancy rights of the prior tenant. *** Confidential treatment requested. D2 6 Tenant Termination Option. Provided Tenant shall not be in default hereunder beyond any applicable grace or cure period set forth in the Lease, then Tenant may terminate this Lease with an effective date of termination to occur any time after expiration of the forty-second (42nd) full calendar month after the commencement date of the lease term. In order for Tenant's exercise of such option to be effective, Tenant must provide written notice to Landlord (setting forth the effective date of lease termination) at least one hundred eighty (180) days prior to the effective date of termination. Provided Tenant shall not then be in default under any of the terms, covenants, or conditions of said Lease beyond any applicable grace or cure period set forth in this Lease, then one half (1/2) of Tenant's initial monthly installments of minimum rent for the initial [***] months of the lease term shall be abated. Landlord and Tenant agree that no portion of the minimum rent paid by Tenant after the expiration of any period during which such rent was abated shall be allocated by Landlord or Tenant to such abatement period, nor is such rent intended by the parties to be allocable to any abatement period. In the event that this Lease is terminated prior to expiration of the stated lease term as a result of Tenant's default beyond any applicable grace or cure period set forth in this Lease, or as a result of Tenant's exercise of its termination option set forth in Section 1.02 of this Data Sheet, Tenant shall immediately repay to Landlord an amount equal to the then unamortized potion of the minimum rent abatement which amortization shall be on the straight-line basis over the full stated lease term, plus interest on such unamortized portion at a rate equal to [***] percentage points above the prime rate then charged by a plurality of FDIC member banks headquartered in the State, which interest shall accrue from the date of the minimum rent abatement through the date of termination of the Lease. Competing Business. For so long as (1) Tenant shall be continuously operating its business in the leased premises with a principal business which is the operation of automobile racing simulators and (2) Tenant is not in default hereunder beyond any applicable notice or cure period set forth in this Lease, Landlord agrees that if Landlord hereafter enters into another lease agreement for a business whose principal business is the operation of automobile racing simulators ("Competing Business"), then following thirty (30) days' written notice from Tenant to Landlord thereof (and opportunity for Landlord to remedy such situation during such thirty [30] day period) [***] of each monthly payment of minimum rent required to be paid by Tenant to Landlord hereunder shall be abated and Tenant shall have the right to terminate this Lease upon prior written notice to Landlord with no repayment of the then unamortized portion of the abatement amount and Tenant inducement referenced in Sections 1.02 and 5.01(b) of this Data Sheet. The provisions of this paragraph shall not apply to (a) the operation of a business which is owned in whole or in part by, or operated by, Tenant or by any licensee, franchisee, assignee, sublessee or affiliate of Tenant, or by any entity related in any other manner to Tenant or to any licensee, franchisee, assignee, sublessee or affiliate of Tenant or (b) the operation of a business resulting from an order or other action of a bankruptcy court. Landlord's agreement under this subsection shall become null and void and of no further force and effect immediately upon: (i) the commencement of any action or proceeding against Landlord by any third party or governmental agency challenging the enforceability of this subsection, or asserting any claim under any Federal or state law or regulation; or (ii) a finding or judgment of any Federal court or agency or state court or agency that the provisions of this subsection are unenforceable, invalid or illegal. A business shall not have, as its principal business, automobile racing simulators unless at least [***] of such business' Gross Sales are derived directly from the operation of automobile racing simulators. The second paragraph of Section 1.02 of the Standard Form shall not apply to this Lease. SECTION 2.04 The provisions of Section 2.04 shall not apply to Tenant. ARTICLES III AND IV. Tenant shall maintain separate books, records and source documents evidencing Gross Sales for each of Tenant's two uses: (i) sales related to auto racing simulators and the automobile racing entertainment center and (ii) all other sales. SECTION 5.01(b): Provided that Tenant shall not be in default under this Lease beyond any applicable grace or cure period set forth in this Lease, then, Landlord shall pay to Tenant, as a Tenant inducement, the sum of [***]. Such Tenant inducement shall be payable to Tenant in three (3) equal installments as follows: one-third (1/3) within thirty (30) days following Tenant's completion of one-third (1/3) of Tenant's leasehold improvements and issuance of Landlord's Letter of Acceptance for such portion of the leasehold improvements, one-third (1/3) within thirty (30) days following completion of two-thirds (2/3) of Tenant's leasehold improvements, and issuance of Landlord's Letter of Acceptance for such portion of the leasehold improvements, and the remainder within thirty (30) days following completion of Tenant's Work, Tenant's opening for business and issuance of Landlord's Letter of Acceptance for all of Tenant's Work. In the event that this Lease is terminated prior to expiration of the stated lease term as a result of Tenant's default beyond any applicable grace or cure period set forth in this Lease, or as a result of Tenant's exercise of its termination option set forth in Section 1.02 of the Data Sheet, Tenant shall immediately repay to Landlord an amount equal to the then unamortized portion of the Tenant inducement paid to Tenant, which amortization shall be on the straight-line basis over the full stated lease term, plus interest on such unamortized portion at a rate equal to three (3) percentage points above the prime rate then charged by a plurality of FDIC member banks headquartered in the State, which interest shall accrue from the date of payment of the Tenant inducement to Tenant through the date of termination of the Lease. Upon Tenant's request, Landlord shall promptly inspect Tenant's work and promptly issue *** Confidential treatment requested. D3 7 Landlord's Letter of Acceptance provided Tenant shall have satisfied the conditions for issuance of Landlord's Letter of Acceptance. Landlord shall not have the option of terminating this Lease pursuant to the provisions of the sentence commencing on page S6, line 50 [***]. If Landlord shall fail to respond to Tenant's submissions of plans and specifications within seven (7) business days following receipt thereof, then the date set forth in Section 1.02 of page D1 of the Data Sheet shall be extended one (1) day for each day beyond such seven (7) business day period that Landlord fails to respond. SECTIONS 5.01(b) AND 7.02: Tenant shall be permitted to place a full size race car (with characteristics which are similar to the race car placed in Tenant's Mall of America store) in the area of the leased premises abutting Tenant's entranceway. Such car may have lights, flashing lights and sound effects, provided sound shall not travel within other leased or licensed premises. SECTION 7.02: Subject to Tenant's compliance with governmental laws, ordinances and regulations, Tenant may open for business as early as 8:30 a.m. Mondays through Saturdays and 10:00 a.m. on Sundays and may remain open as late as 2:00 a.m. on Mondays through Saturdays and 11:00 p.m. on Sundays. Tenant shall not be obligated to pay any additional charges to Landlord for operating before or after Shopping Center hours, provided if Landlord determines that additional security personnel is needed in connection with Tenant's particular business operations before or after Shopping Center hours, then Tenant shall be obligated for the reasonable costs of such additional security personnel. SECTION 7.03: If a competitor of Tenant opens an operation within the ten (10) mile radius area whose principal business is the operation of automobile racing simulators, then this Section 7.03 shall not apply to one store operation with automobile racing simulators opened by Tenant within such radius area after the opening of such competitor's operation. This Section 7.03 shall not apply to Tenant's operation of automobile racing simulators within the radius on a temporary basis (not to exceed seven [7] days) provided same are not operated within shopping centers. ARTICLE XII: Notwithstanding these provisions to the contrary, to the extent permitted by law and by the utility company providing electrical service to the regional retail development, Tenant shall be permitted (at Tenant's sole cost and expense) to obtain additional electrical current in a manner substantially consistent with the plans prepared by the prior tenant for the leased premises. Any work undertaken within the common areas in connection therewith shall be undertaken under the supervision of Landlord. SECTION 13.03: Upon Tenant's written request, Landlord agrees to request from its mortgagee whose interest in the leased premises is, as of the date of this Lease, superior to Tenant's interest therein, a non-disturbance agreement on the mortgagee's standard form, which shall provide that in the event Landlord defaults under such mortgage, Tenant's possession of the leased premises shall not be disturbed so long as Tenant is not in breach or default of this Lease. Tenant (and not Landlord) shall be liable and responsible for any fee or expense charged by such mortgagee in attempting to secure, or in providing, any such non-disturbance agreement. Further, the mortgagee's failure or refusal to execute a non-disturbance agreement following Landlord's request shall not be deemed to be a breach or default of this Lease by Landlord. SECTION 16.01: Tenant hereby represents to Landlord that Tenant has entered into a license agreement ("License Agreement") with the National Association for Stock Car Auto Racing, Inc. ("NASCAR") dated as of August 18, 1997. Pursuant to the License Agreement, NASCAR has granted Tenant a license to use the names "NASCAR Silicon Motor Speedway," as well as certain trademarks and trade dress of NASCAR, in the conduct of Tenant's interactive stock car racing simulation business subject to the terms and conditions set forth therein. The effective term of the License Agreement commences on August 18, 1997 and ends on August 12, 2001, unless terminated earlier in accordance with its terms. The parties may mutually agree to extend the license term. Following termination of the license, Tenant is permitted to use the word mark "Silicon Motor Speedway" (without the word "NASCAR") but not "NASCAR Silicon Motor Speedway." SECTION 16.03(a): The initial promotional charge shall not apply to Tenant. SECTION 19.01(a): The "Cross Default" provisions of this Section shall not apply to this Lease. EXHIBIT B. SECTION II.B: The $20.00 per lineal foot charge shall not apply to Tenant. EXHIBIT B. SECTION II.C: The $45.00 per lineal foot charge shall not apply to Tenant. *** Confidential treatment requested. D4 8 EXHIBIT B. SECTION III.D.2.a.: Neither the $45.00 per lineal foot charge nor the $66.00 per lineal foot charge shall apply to Tenant. EXHIBIT B. SECTION IV.C.2: Tenant may employ an "open" rather than a "drop" ceiling design. EXHIBIT B. SECTION V.B.3.: The fee for Coordination and Administrative Services shall not apply to this Lease. EXHIBIT B. SECTION VI.B.5.: The mid-term remodeling requirements of Paragraph 5 of Section VI.B shall not apply to this Lease. EXHIBIT B. SECTION VI.D.2: The electrical service charge in this Section shall not apply. EXHIBIT B. SECTION VI.D.3.: The trash removal charge in this Section shall not apply to Tenant. EXHIBIT B-1: Landlord represents that 277/480 volt electrical service capacity is available to the leased premises. [END OF TEXT OF DATA SHEET] D5 9 EXECUTION/ACKNOWLEDGMENT In confirmation of their agreement to enter into this Lease (including the Preamble, Data Sheet, Addendum, Standard Form, all exhibits and the Rider (if any) attached hereto), and intended to be bound hereby, Landlord and Tenant have signed and sealed this Lease as of the day and year first above written on page D1 of this Lease. In the Presence of: CHICAGO TITLE AND TRUST COMPANY, a corporation of Illinois, as Trustee, under Trust No. 46746, and not personally, /s/ EVELYN F. MILLS By: /s/ [Signature Illegible] - ---------------------------- --------------------------------------- Its: Authorized Agent - ---------------------------- LANDLORD LBE TECHNOLOGIES, INC. By: /s/ JANET SETCAVAGE WOODS - ---------------------------- --------------------------------------- Print Name: Janet Setcavage Woods ---------------------------- Its: Vice President --------------------------------------- Print Title: --------------------------- And: - ---------------------------- --------------------------------------- Print Name: ---------------------------- Its: --------------------------------------- Print Title: --------------------------- TENANT Tenant's Federal Tax Identification Number: ------------------------------------------- Tenant's corporate seal: ------------------- It is expressly understood and agreed by and between the parties hereto, anything herein to the contrary notwithstanding, that each and all of the warranties, indemnities, representations, covenants, undertakings and agreements herein made on the part of the Trustee while in form purporting to be warranties, indemnities, representations, covenants, undertakings and agreements of said Trustee are nevertheless each and every one of them, made and intended not as personal warranties, indemnities, representations, covenants, undertakings and agreements by the Trustee or for the purpose or with the intention of binding said Trustee personally but are made and intended for the purpose of binding only that portion of the trust property specifically described herein, and this instrument is executed and delivered by said Trustee not in its own right, but solely in the exercise of the powers conferred upon it as such Trustee and that no personal liability or personal responsibility is assumed by nor shall at any time be asserted or enforceable against the Chicago Title and Trust Company or any of the beneficiaries under said Trust Agreement, on account of this instrument or on account of any warranty, indemnity, representation, covenant, undertaking or agreement of the said Trustee in this instrument contained, either expressed or implied, all such personal liability, if any, being expressly waived and released. E1 10 ACKNOWLEDGMENT OF LANDLORD STATE OF MICHIGAN ) ) ss. COUNTY OF OAKLAND ) On this 18 day of December, 1997, before me personally appeared the above named Agent of the Chicago Title and Trust Company, Trustee, personally known to me to be the same person whose name is subscribed to the foregoing Lease as such Agent, and acknowledged before me that he signed and delivered the said Lease as his own free and voluntary act and as the free and voluntary act of said Company for the uses and purposes therein set forth; and the said Agent then and there acknowledged that said Agent, as custodian of the corporate seal of said Company, caused the corporate seal of said Company to be affixed to said Lease as said Agent's own free and voluntary act and as the free and voluntary act of said Company for the uses and purposes therein set forth. /s/ EVELYNE F. MILLS ---------------------------------------- Evelyne F. Mills Notary Public - Oakland County, MI My Commission expires: November 23, 1990 ACKNOWLEDGMENT OF LANDLORD STATE OF ) ) ss. COUNTY OF ) On this ____ day of ___________, 19__, before me personally appeared ______ __________________________________________ and _________________________________ to me personally known, who, being by me duly sworn, did each for himself say that he is, respectively, the _______________________________ and ______________ of _____________________________________ the corporation named in and which executed the within instrument, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors; and said _____________________________ and ____________________________________ acknowledged before me said instrument to be the free act and deed of said corporation. _________________________________________ Notary Public, County, My Commission expires: E2 11 ADDENDUM -- WOODFIELD MALL All of the provisions set forth in this Addendum are in addition to, and not in substitution for, the provisions of the Standard Form, except to the extent specifically otherwise stated. SECTION 1.01(a). LEASED PREMISES: The regional retail development is commonly known as "Woodfield Mall," located in the Village of Schaumburg, Cook County, Illinois. SECTION 7.02. OPERATION OF BUSINESS: To the extent that Tenant shall accept payment by credit card for goods or services offered from the leased premises, Tenant shall be obligated to comply with the "point-of-purchase" display requirements of its merchant agreement with the credit card company designated in writing by Landlord from time to time. If Landlord has not designated a particular credit card company, then the provisions of this paragraph shall not apply. Likewise, if Tenant does not have a merchant agreement with the credit card company designated by Landlord, the provisions of this paragraph shall not apply. SECTION 12.01. UTILITY CHARGES: In substitution for the text of paragraphs (a) through (g) of Section 12.01, the following provisions shall apply: Tenant shall be solely responsible for and shall promptly pay all charges for water, gas, heat, electricity, sewer and any other utility used upon or furnished to the leased premises. Tenant shall contract directly with and shall be solely responsible to the public utility companies for the installation of service and the payment of all charges for Tenant's usage of such utility services. Landlord shall have the right, at its sole option, to supply electricity to the leased premises in which event the minimum rent reserved under the Lease will be increased for the period that Landlord so supplies such electricity to include the increase in the fair and reasonable rental value of the leased premises due to the supplying of such electricity in accordance with the numbered paragraphs set forth below. If Landlord shall elect to supply any of the foregoing other utilities used upon or furnished to the leased premises, Tenant agrees to purchase and pay for same as additional rent, within ______ days of the presentation by Landlord to Tenant of bills therefor, at the rates which would be applicable to Tenant as a direct customer of the public utility company, as such rates are filed by the utility company serving the area with the proper regulating authority and in effect from time to time covering such services. Landlord shall also have the right to periodically estimate the monthly amount required to be paid by Tenant to Landlord with respect to any or all of such services provided by Landlord and such estimated monthly amount or amounts shall be paid by Tenant on the first day of each calendar month, in advance, at the place and in the manner specified for payments of minimum rent hereunder. Landlord shall have the right to change such estimated amount or amounts at any time and from time to time, by notice to Tenant. If the total of the estimated monthly payments made by Tenant shall be less for any lease year or calendar year than the actual amount due from Tenant pursuant to the provisions of this Section, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due within _____ days after submission to Tenant of Landlord's statement and invoice therefor; and if the total of the estimated payments made by Tenant for any such year shall exceed the actual amount due from Tenant, the excess amount paid shall be credited against the next payment due from Tenant to Landlord under this Section. The obligation of Tenant to pay for such utilities shall commence as of the date on which possession of the premises is delivered to Tenant, without regard to any free rent period or formal commencement date of this Lease. SEE ATTACHED DATA SHEET FOR INSERTS Prior to the commencement of the term of this Lease, (1) Landlord shall analyze Tenant's Working Drawings and Specifications covering its construction of the leased premises and shall determine Tenant's annual electric (kilowatt) requirements at the leased premises. Such determination shall be based upon (i) Tenant's electric requirements for the projected number of hours per year during which the leased premises will be open for business (i.e., the number of hours established for the Shopping Center by the Landlord), and during which Tenant's employees will be present at the leased premises (for inventory, clean-up, meetings, etc.); and (ii) Tenant's electric requirements during the remaining hours in the year. Based upon such information, Landlord will calculate the annual amount which Tenant would be charged by the local electric public utility company for furnishing such electrical energy, and Tenant agrees that the minimum rent reserved under the Lease will be increased by such amount. -A1- 12 (2) Landlord reserves the right to further increase the minimum rent to reflect any increase in the annual amount which Tenant would be charged by the local electric utility company or in the event of any change in the construction of the leased premises or if Tenant operates its premises in excess of the number of hours as projected above. (3) At any time after the execution of the Lease, either Landlord or Tenant may request an appraisal by an independent electrical engineer, mutually acceptable to Landlord and Tenant, who is qualified to determine whether the adjustment in the minimum rent as computed by Landlord is below or in excess of the amount which Tenant would be charged by the local electric utility company for furnishing such electrical energy. If Landlord and Tenant cannot agree promptly upon an independent electrical engineer, then the matter shall be submitted for arbitration before the American Arbitration Association. (4) The appraisal or arbitration, as the case may be, shall be binding on both parties and shall set forth the amount, if any, by which the adjustment of the minimum rent reflecting the increased value of the leased premises resulting from Landlord supplying electrical energy is below or in excess of the annual amount which Tenant would be charged by the local electric utility company for furnishing such electrical energy. The minimum rent shall thereupon be adjusted by the amount of such deficiency or excess, such adjustment to become effective as of the first day of the month following the month in which demand for the appraisal was made. (5) The cost of such appraisal or arbitration shall be shared equally between Landlord and Tenant; provided, that if either party requests an appraisal prior to one year after the effective date of the last preceding appraisal or arbitration, the entire cost of such appraisal or arbitration shall be paid for by the party requesting such appraisal. In each case, upon completion of an appraisal and, if necessary, arbitration pursuant to this agreement, the parties agree that the minimum rent shall reflect such adjustment or adjustments. SECTION 16.03. PROMOTIONAL CHARGE: (e) In any event, and notwithstanding the formation of a promotion fund or Merchants' Association, Tenant agrees to participate in at least ________ Shopping Center promotions in each lease year. Tenant shall reimburse to Landlord all costs of including Tenant in each promotion. Such promotions may consist of tabloids, circulars, catalogs, special Shopping Center newspaper inserts or sections, direct mailings, electronic media including radio and television, standard newspaper advertisements and/or any other promotions sponsored by Landlord. The media type, format and content of any such promotions, as well as the timing of any such promotions, shall be in Landlord's sole discretion. If Landlord establishes more than ________ Shopping Center promotions in each lease year, Tenant shall be permitted to determine in which ________ promotions it shall participate. Tenant shall be required to submit a proposed advertisement within thirty (30) days after Landlord's notice of the type of promotion being sponsored and the requirements for individual advertisements in connection with such promotion. In the event that Tenant fails to submit a proposed advertisement in accordance with such advertising requirements within the thirty (30) day period, Tenant ________. All amounts payable by Tenant hereunder shall be payable within ________ days after written notice by Landlord. SEE ATTACHED DATA SHEET FOR INSERTS SECTION 26.01. SECURITY: For purposes of this Section 26.01, references to "Landlord" shall be deemed to be references to Woodfield Associates for payment, retention and application of said security deposit. SECTION 27.14. LIABILITY OF LANDLORD: The parties hereto agree that wherever in this Lease the term "Woodfield Associates" or "beneficiary" of the Trust (or trust) is used, it shall be deemed to mean Woodfield Associates, its successors and assigns, or any other entity designated in writing by Landlord. EXHIBIT B, ADDITIONAL CONSTRUCTION EXHIBIT (IF ANY): To the extent that any construction exhibit beyond Exhibits B and B-1 shall be attached to the Lease, and any such exhibit shall refer to electrical criteria, such electrical criteria shall be field verified by Tenant prior to preparation of any plans for Tenant's Work and prior to the undertaking of any work with respect to the leased premises. Tenant shall be solely responsible for such verification. [END OF TEXT OF ADDENDUM] 13 STANDARD FORM ARTICLE I. GRANT AND TERM SECTION 1.01. LEASED PREMISES. (a) Landlord, in consideration of the rent to be paid and the covenants to be performed by Tenant, does hereby demise and lease unto Tenant, and Tenant hereby rents and hires from Landlord, those certain premises in the regional retail development shown on Exhibit A, subject to covenants, restrictions and easements of record, the terms and provisions of certain reciprocal easement and/or operating agreements now or hereinafter entered into by Landlord with the owners or lessees of the Department Store Sites, and the terms and provisions of the underlying lease, if any. It is agreed that the term "regional retail development" as used herein shall mean and refer to the Department Store Sites and the Shopping Center, including the buildings located or to be located thereon, all as shown on the site plan which is set forth in Exhibit A attached hereto and made a part hereof, and that the term "Shopping Center" shall, except as otherwise specifically provided herein, mean and refer to the hatched and the shaded portions of such site plan which portions from time to time open directly on the enclosed Mall and which may vary at each level of the regional retail development, together with the enclosed Mall (whether or not shaded or hatched). The approximate location of the premises leased to Tenant hereunder is shown in Exhibit A. The legal description of the regional retail development or of the Shopping Center is set forth in Exhibit A or referenced in the Addendum attached hereto and made a part hereof. The leased premises (herein referred to as the "leased premises" or "premises") are described as set forth in the Data Sheet attached hereto. As used in this Lease, the term "State" shall mean the state in which the Shopping Center is located. (b) The exterior walls and the roof of the leased premises and the area beneath said premises are not demised hereunder, and the use thereof, together with the right to locate, both vertically and horizontally, install, maintain, use, repair and replace pipes, utility lines, ducts, conduits, flues, refrigerant lines, drains, sprinkler mains and valves, access panels, wires and structural elements leading through the leased premises serving other parts of the regional retail development, is hereby reserved unto Landlord. Landlord reserves an easement in, over and through the area occupied by the storefront of the leased premises, and an easement above Tenant's finished ceiling to the roof, or to the bottom of the floor deck above the leased premises, for general access purposes and in connection with the exercise of Landlord's other rights under this Lease. SEE ATTACHED RIDER FOR INSERTS (c) The attached site plan of the regional retail development, Exhibit A, includes premises identified thereon as Department Store Sites, including the buildings located or to be located thereon, which sites are collectively hereinafter referred to as the "Department Store Sites" and/or "Department Stores," unless otherwise specifically set forth. It is agreed that, whenever the term "Shopping Center" is used herein, it shall be deemed to exclude the Department Store Sites (even if such Sites shall be within the hatched and/or shaded area shown on the site plan), except as otherwise specifically stated herein. In addition, said site plan includes other portions of the Shopping Center which Landlord may from time to time sell or lease for the purpose of construction and/or use by one or more department stores (as defined in Section 27.12 hereof), which portion(s) may thereupon, at Landlord's option, be referred to and treated as "Department Store Site(s)" and/or "Department Stores" upon occupancy thereof by a department store, and which, at Landlord's option, may be excluded from the Shopping Center. In the event Landlord elects to enlarge the regional retail development, any additional area may be included by Landlord in the definition of the Shopping Center for purposes of this Lease. Landlord shall also have the general right from time to time to include within and/or to exclude from the defined Shopping Center any existing or future areas, and the floor area of the Shopping Center shall be accordingly adjusted. SECTION 1.02. COMMENCEMENT AND ENDING DAY OF TERM. The term of this Lease shall commence upon (a) the commencement date set forth in the Data Sheet, or (b) the date on which Tenant opens its store in the leased premises for business to the public, whichever of said dates is the first to occur, and shall end on the final day of the last lease year of the term or other specified date as set forth in the Data Sheet, unless sooner terminated as hereinafter provided. For the purpose of this Lease, the first "lease year" shall be a period commencing on the day the term of this Lease commences and ending on January 31 next following; after the first lease year, the term "lease year" shall mean a fiscal year of twelve (12) consecutive calendar months commencing on February 1 of each calendar year, except that the final lease year of the term shall be a period of less than twelve (12) consecutive calendar months in the event that an expiration date other than January 31 is set forth in the Data Sheet. In the event Landlord elects to recapture space adjacent to the leased premises, combine the leased premises with vacant space adjacent to the leased premises, or cause an expansion or contraction of, or perform structural changes or alterations to, the Shopping Center or the regional retail development, and such expansion, contraction and/or structural changes or alterations directly affect all or any portion of the leased premises, then Landlord upon one hundred eighty (180) days' prior notice in writing to Tenant may terminate this Lease. In the event of such termination, within thirty (30) days following the date that Tenant shall have vacated the premises, Landlord shall pay to the Tenant a sum equal to the then unamortized cost (without interest) of Tenant's leasehold improvements, such amortization to be calculated on the straight-line basis over the full term of the Lease, with Landlord's obligation being limited to the balance of such cost remaining as of the date that Tenant shall have so vacated. Tenant shall furnish to Landlord such backup information as Landlord may reasonably require. S1 14 SECTION 1.03. OPENING. Tenant covenants and agrees to complete its construction within the leased premises in accordance with the provisions of this Lease and to open its store for business to the public not later than the date established for commencement of the term of this Lease pursuant to Section 1.02 hereof. ARTICLE II. RENT SECTION 2.01. MINIMUM RENT. (a) The minimum rent during the term of this Lease shall be the amount set forth in the Data Sheet attached hereto as adjusted pursuant to Section 2.04 or other provisions of this Lease, which sum shall be payable by Tenant in equal consecutive monthly installments in the sum set forth in the Data Sheet attached hereto, on or before the first day of each month, in advance, payable as set forth, and at the address set forth, in the Data Sheet attached hereto under "Name and Address for Rent Payments," or such other place as the Landlord may designate in writing, such payments to be without any prior demand therefor and without any deductions or setoff whatsoever. (b) Should the term of this Lease commence on a day other than the first day of a calendar month, then the rent for such month shall be prorated on a daily based upon a thirty (30) day calendar month. Should any lease year contain less than twelve (12) calendar months, said annual rent shall be prorated. SECTION 2.02. PERCENTAGE RENT. (a) In addition to the payment of the minimum rent, as hereinbefore provided, Tenant shall pay to Landlord for each lease year of the term hereof, as percentage rent, an amount equal to the percentage rent factor (see Data Sheet) multiplied by all Gross Sales resulting from business conducted in, on or from the leased premises during such lease year in excess of the amount of Gross Sales set forth in the Data Sheet (hereinafter referred to as "Minimum Gross Sales"). Subsequent to the date upon which Tenant is initially obligated to open for business in the leased premises, in addition to any and all other remedies afforded to Landlord under this Lease by reason of default, "Minimum Gross Sales" shall be reduced by 1/360th for each day or portion thereof that Tenant does not operate its business pursuant to Section 7.02 hereof. If percentage rent hereunder shall be calculated on the basis of a split percentage arrangement, as defined in subsection (b) below, then the reduction required by the preceding sentence shall be applied to the minimum rent which would otherwise be deductible in the calculation of percentage rent with respect to all Gross Sales of Tenant (provided that such reduction shall be made solely for the purpose of the percentage rent calculation). The percentage rent shall be payable as set forth, and at the address set forth, in the Data Sheet attached hereto under "Name and Address for Rent Payments," or such other place as the Landlord may designate in writing, such payments to be without any prior demand therefor and without any deductions or setoff whatsoever. (b) Such percentage rent shall be paid in quarter-annual installments computed on all Gross Sales during each quarter-annual period of the term hereof in excess of one quarter (1/4) of annual Minimum Gross Sales. Such quarter-annual periods during each lease year shall be measured as follows: February through April, May through July, August through October, and November through January. Such quarter-annual installments shall be payable within thirty (30) days after the expiration of each three (3) month period of each lease year. In the event that the total of the quarter-annual installments of percentage rent for any lease year does not equal the percentage rent computed on the total amount of Gross Sales for such lease year, in accordance with the formula set forth in the Data Sheet, then Tenant, at the time it submits the annual statement of Gross Sales required under Section 3.02, shall pay Landlord any deficiency, or Landlord shall credit any overpayment to the next installment of percentage rent due from Tenant, as the case may be. In no event, however, shall the aggregate of minimum rent and percentage rent to be paid by Tenant and retained by Landlord for any lease year be less than the minimum rent specified herein. If the commencement date of the lease term is other than February 1, then the percentage rent covering the first lease year hereunder shall be paid in the following manner: for the quarter-annual period during which the lease term commences, the percentage rent shall be equal to the product of the percentage rent factor and the amount of Gross Sales in excess of a prorated fraction of annual Minimum Gross Sales (with such prorated fraction to be calculated by taking the number of days remaining in such quarter-annual period as of the date the leased premises are initially opened for business to the general public, dividing by 360, and multiplying the resulting quotient by the stated annual Minimum Gross Sales figure); for the balance of the first lease year, the percentage rent shall be equal to the product of the percentage rent factor and the amount of Gross Sales in excess of one-quarter (1/4) of annual Minimum Gross Sales during each subsequent quarter-annual period. If the expiration date of the lease term is other than January 31, then the percentage rent covering the final lease year hereunder shall be calculated in a like manner, with proration to occur in the quarter-annual period during which the lease term expires. In the event that Tenant shall be obligated to pay percentage rent calculated on different percentages for more than one category of merchandise and/or services (a "split percentage" arrangement), then the percentage rent payable by Tenant hereunder shall be calculated for each quarter-annual period (and for any fractional period occurring at the beginning or end of the term) based upon the stated percentages being applied to the respective categories of Gross Sales for such period, with the minimum rent paid by Tenant for any such period being deducted from the combined total in order to arrive at the percentage rent owing by Tenant for such period. Such amounts shall be payable within thirty (30) days after the expiration of the applicable period. SECTION 2.03. GROSS SALES. The term "Gross Sales" as used herein shall be construed to include the entire amount of the actual sales price, whether for cash or otherwise, of all sales of merchandise or services and all other receipts whatsoever of all business conducted in or from the leased premises by Tenant, or by all concessionaires (as defined in Section 3.02 hereof) or otherwise, including, without limitation, mail, catalogue or telephone orders received or filled at the leased premises, all deposits not refunded to purchasers, and orders taken, although said orders may be filled elsewhere. A "sale" shall be deemed to have been consummated for the purposes of this Lease, and the entire amount of the sales price shall be included in Gross Sales, at such time that (i) the transaction is initially reflected in the S2 15 books or records of Tenant or a concessionaire (if a concessionaire makes the sale), or (ii) Tenant or such concessionaire receives all or any portion of the sales price, or (iii) the applicable goods or services are delivered to the customer, whichever first occurs, irrespective of whether payment is made in installments, the sale is for cash or for credit, or otherwise, or all or any portion of the sales price has actually been paid at the time of inclusion in Gross Sales or at any other time. No deduction shall be allowed for direct or indirect discounts, rebates, or other reductions on sales to employees or others, unless generally offered to the public on a uniform basis. In addition, no deduction shall be allowed for uncollected or uncollectible credit accounts, or for trade-ins or other credits on sales to employees or others. The term "Gross Sales" shall not include, however, any sums collected and paid out by Tenant for any sales or excise tax imposed by and accounted for by Tenant to any duly constituted governmental authority, nor shall it include the exchange of merchandise between the stores of Tenant, if any, where such exchange of goods or merchandise is made solely for the convenient operation of the business of Tenant and not for the purpose of consummating a sale which has theretofore been made in or from the leased premises and/or for the purpose of depriving Landlord of the benefit of a sale which otherwise would be made in or from the leased premises, nor shall the term include the amount of returns to shippers or manufacturers, nor proceeds from the sale of trade fixtures. There shall be deductible from Gross Sales the amount of any cash or credit refund made upon any sale in or from the leased premises, previously included in "Gross Sales" hereunder, not to exceed the sum so previously included, where the merchandise sold is thereafter returned by the purchaser and accepted by Tenant. The term "merchandise" as used in this Lease shall include food and beverages if Tenant is permitted to sell such items in Section 7.01 hereof. SEE ATTACHED RIDER FOR INSERTS SECTION 2.04 RENT ADJUSTMENT. (a) Notwithstanding any provisions to the contrary contained in this Lease, Tenant shall pay to Landlord as minimum rent for the second lease year of the term of this Lease, and for each subsequent lease year of said term, but subject to further increase pursuant to this Section 2.04 and other provisions of this Lease, the greater of the amounts calculated according to the formulas set forth in Paragraphs (i) and (ii) below. (i) Minimum rent for the lease year in question shall be increased by the net percentage of change between the Base Index and the Index published for the first calendar month of such lease year (as such terms are defined below). (ii) Minimum rent for the lease year in question shall be increased by the amount of percentage rent payable for the immediately preceding lease year pursuant to Section 2.02 hereof. (b) For purposes of the foregoing calculations, the term "Base Index" shall be the Index (as defined in Section 27.20), for the month during which the term of this Lease commences (or, if the Index is not published for such month, then the Index published for the month closest, but prior, to the lease commencement date). Following any increase in minimum rent pursuant to Paragraph (a) above, the "Base Index" for future calculations shall be redefined as the Index published for the first calendar month of the lease year for which the minimum rent has been increased pursuant to said Paragraph (a). The Index for the first calendar month of any given lease year, if the Index is not published for such month, shall be the Index published for the month closest, but prior, to the first calendar month of such lease year. For the purposes of this Section, the percentage rent payable by Tenant for any lease year consisting of less than twelve (12) full calendar months shall be calculated by dividing the percentage rent payable by Tenant for such lease year pursuant to Section 2.02 hereof by the actual number of days in such lease year, and by multiplying the resulting quotient by 360. Landlord shall notify Tenant of the increased minimum rent for each lease year following the determination of same by Landlord, and Tenant shall pay such increased minimum rent for the applicable lease year in the manner set forth in Section 2.01 hereof. In the event that the increase in minimum rent results from the calculation set forth above in subsection (a)(ii), then the Minimum Gross Sales otherwise applicable for such period shall be increased by a percentage equal to the percentage increase in minimum rent made by reason of the percentage rent payable in the preceding lease year. If percentage rent under this Lease shall be calculated on the basis of a split percentage arrangement, as defined in Section 2.02(b) hereof, then, in the even of an increase in minimum rent resulting from the calculation set forth above in subsection (a)(i), only the minimum rent (not including such increase) which would otherwise be deducted shall be deductible from the percentage rent calculated with respect to all Gross Sales of Tenant. The minimum rent for any period as stated in Section 2.01 hereof, if different than that stated for the immediately preceding period, shall be adjusted by multiplying such different minimum rent ("Changed Rent") by the cumulative percentage increase in minimum rent pursuant to this Section from the commencement of the term of this Lease through and including the first lease year during which such Changed Rent would have become effective, with the resulting product to be added to such Changed Rent to yield the effective minimum rent for such period, subject to further adjustment as provided in this Section or elsewhere in this Lease. (c) Upon the opening of any department store within the regional retail development during the term of this Lease (if such department store was not open for business to the general public as of the commencement date of this Lease), the minimum rent and Minimum Gross Sales then in effect shall be immediately and automatically increased by fifteen percent (15%), subject to further increases pursuant to this paragraph, this Section and other provisions of this Lease. SECTION 2.05. TENANT'S TAX OBLIGATION. Tenant shall pay to Landlord its proportionate share of all taxes and assessments which may be levied or assessed by any lawful authority during the term of this Lease, or with respect to each fiscal tax year falling in whole or in part during the term of this Lease, against the land, buildings and improvements comprising the Shopping Center, and all other taxes which Landlord becomes obligated to pay with respect to the regional retail development, irrespective of whether such taxes are assessed against real or personal property. The portion of such taxes and assessments allocated to the common areas of the Shopping Center, and the portion of such taxes allocated to the "net-building area" (gross building area less the sum of gross leasable floor area S3 16 and common areas) of the Shopping Center, shall be deducted from the total of such taxes and assessments and charged to Tenant in accordance with the provisions contained in Section 8.03 of this Lease. Tenant's proportionate share of the remaining taxes and assessments (i.e., those not charged under Section 8.03) shall be equal to the product obtained by multiplying such taxes and assessments by a fraction, the numerator of which shall be the number of square feet of floor area in the leased premises and the denominator of which shall be the total number of square feet of gross leased and occupied floor area in the Shopping Center. In the event that any present or future enactment of the State or any political subdivision thereof or any governmental authority having jurisdiction thereover either: (a) imposes a direct or indirect tax and/or assessment of any kind or nature upon, against or with respect to the rents payable by tenants or occupants in the regional retail development to Landlord derived from the regional retail development or with respect to the Landlord's (or the individuals' or entities' which constitute the partners of the partnership which is the Landlord, or which is the beneficiary of the Trust of which Landlord is Trustee, as applicable) ownership of the land and buildings comprising the regional retail development, either in addition to or by way of substitution for all or any part of the taxes and assessments levied or assessed against such land and such buildings, including, without limitation, any net profits tax or any comparable tax imposed on any portion of Landlord's revenues from the regional retail development; and/or (b) imposes a direct or indirect tax or surcharge of any kind or nature, upon, against or with respect to the parking areas or the number of parking spaces in the regional retail development, then in either or both of such events, Tenant shall be obligated to pay its proportionate share thereof as provided herein. For purposes of this Section, the term "regional retail development" shall be deemed to include the land upon which any parking facilities, temporary or permanent off-site utility systems and any wooded area, lake, shoreline thereof or island park serving the regional retail development are located with all improvements situated thereon. To the extent that real estate taxes and assessments are the obligation of Tenant pursuant to Section 8.03 hereof, the same shall not be includable in Tenant's proportionate share pursuant to this section. SEE ATTACHED RIDER FOR INSERTS Tenant's proportionate share of all of the aforesaid taxes and assessments levied or assessed for or during the term hereof, as determined by Landlord, shall be paid in monthly installments on or before the first day of each calendar month, in advance, in an amount estimated by Landlord; provided that Landlord shall have the right to initially determine monthly estimates and to revise the estimates from time to time, and shall have the right to apply such monthly installments to tax bills according to the formula being utilized by Landlord from time to time. Upon receipt of all tax bills and assessment bills attributable to any calendar or fiscal year during the term hereof, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's proportionate share of the taxes and assessments for such year. In the event no tax bill is available, Landlord will compute the amount of such tax. If the total amount paid by Tenant under this Section for any calendar or fiscal year during the term of this Lease shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within ______ days after demand therefor by Landlord; and if the total amount paid by Tenant hereunder for any such calendar or fiscal year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment of taxes and assessments due from Tenant to Landlord hereunder. All amounts due hereunder shall be payable to Landlord at the place where the minimum rent is payable. In the event Landlord contests any taxes levied or assessed during the term hereof upon, against or with respect to the Shopping Center or any portion thereof or interest therein, or in the event of Landlord's negotiation with respect to assessed valuation for the Shopping Center, Tenant shall pay its proportionate share of Landlord's costs, expenses and attorneys' fees in connection therewith calculated on the same basis as set forth above in this Section. For the calendar or fiscal years in which this Lease commences and terminates, the provisions of this Section shall apply, and Tenant's liability for its proportionate share of any taxes and assessments for such years shall be subject to a pro rata adjustment based on the number of days of said calendar or fiscal years during which the term of this Lease is in effect. A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of taxes and/or assessments assessed or levied against the property to which such bill relates. Prior to or at the commencement of the term of this Lease and from time to time thereafter throughout the term hereof, Landlord shall notify Tenant in writing of Landlord's estimate of Tenant's monthly installments due hereunder. SEE ATTACHED RIDER FOR INSERTS SECTION 2.06. PAYMENTS. Rent shall be defined in this Lease as (i) minimum rent, (ii) percentage rent and (iii) all other charges of whatever nature required to be paid by Tenant under this Lease, including the Exhibits hereto. The rent charges described in item (iii) of the preceding sentence shall, unless otherwise specified, be due and payable _____ days after demand, without any deductions or setoff whatsoever, in the manner and at the place where minimum rent is payable and Tenant's failure to pay rent shall carry with it the consequences set forth under Article XIX hereof. Landlord's rights and remedies pursuant to this Section shall be in addition to any and all other rights and remedies provided under this Lease or at law. Notwithstanding anything to the contrary contained in this Lease, Landlord's demand for any and all rent may be sent to Tenant by regular mail. Rent is specifically agreed by Tenant to be a minimum reasonable use and occupancy charge for the leased premises. In the event any sums required hereunder to be paid are not received on or before the tenth (10th) day after the same are due, then, for each and every such payment, Tenant shall immediately pay, as additional rent, a service charge of ______ of the outstanding amount due, which service charge again shall be imposed for each month that such amount shall remain unpaid. In the event of Tenant's failure to pay the foregoing service charge, Landlord may deduct said charge from the deposit set forth in Section 26.01 hereof. The provisions of this Section shall not be construed to extend the date for payment of any sums required to be paid by Tenant under this Lease or to relieve Tenant of its obligation to pay all such sums at the time or times herein stipulated, and neither the demand for, nor collection by Landlord of, late payment service charges pursuant to this Section shall be construed as a cure of any default in payment by Tenant. It is agreed that the said service charge is a fair and reasonable charge under the circumstances and shall not be construed as interest on a debt payment. In the event any charge imposed hereunder or under any other section of this Lease is either stated to be or construed as interest, then no such interest charge shall be calculated at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Lease. SEE ATTACHED RIDER FOR INSERTS S4 17 ARTICLE III. RECORDS AND BOOKS OF ACCOUNT SECTION 3.01. TENANT'S RECORDS. Tenant shall prepare and keep full, complete and proper books and source documents, in accordance with generally accepted accounting principles, of the Gross Sales, whether for cash, credit or otherwise, of each separate department at any time operated in the leased premises and of the operations of each subtenant, concessionaire, licensee and/or assignee, and shall require and cause all such parties to prepare and keep books, source documents, records and accounts sufficient to substantiate those kept by Tenant. The books and source documents to be kept by Tenant shall include, without limitation, true copies of all ________ tax returns and reports, records of inventories and receipts of merchandise, daily receipts from all sales and other pertinent original sales records and records of any other transactions conducted in or from the leased premises by Tenant and any other persons conducting business in or from the leased premises. Pertinent original sales records shall include, without limitation: (i) cash register tapes, including tapes from temporary registers, (ii) serially pre-numbered sales slips, (iii) the original records of all mail and telephone orders at and to the leased premises, (iv) settlement report sheets of transactions with subtenants, concessionaires, licensee and assignees, (v) original records indicating that merchandise returned by customers was purchased at the leased premises by such customers, (vi) memorandum receipts or other records of merchandise taken out on approval, (vii) detailed original records of any exclusions or deductions from Gross Sales, (viii) sales tax records, and (ix) such other sales records, if any, which would normally be examined by an independent accountant pursuant to accepted auditing standard in performing an audit of Tenant's sales. Tenant shall record at the time of each sale or other transaction, in the presence of the customer, all receipts from such sale or other transaction, whether for cash, credit or otherwise, in a cash register or cash register or cash registers having a cumulative total which shall be sealed in a manner approved by Landlord and which shall possess such other features as shall be required by Landlord. Al of the foregoing books, source documents and records shall be retained for a period of at least (4) years after the expiration of each lease. SEE ATTACHED RIDER FOR INSERTS SECTION 3.02. REPORTS BY TENANT. Tenant shall furnish to Landlord within thirty (30) days after the expiration of each quarter-annual period of each lease year a complete statement ("quarterly report"), certified by Tenant, of the amount of Gross Sales, as defined in Article II, Section 2.03 of this Lease, made in, on or from the leased premises during said period. Failure of Tenant to timely submit quarterly reports as aforesaid shall entitle Landlord to estimate Gross Sales based upon available data (with a reconciliation upon receipt of the annual report), and Tenant shall be obligated to pay percentage rent, as set forth in Section 2.02, on such estimated Gross Sales. Tenant also agrees that it will furnish to Landlord within _____ days after the expiration of each full lease year a complete statement, certified by an ________________________, showing in all reasonable detail the amount of such Gross Sales made by Tenant from the leased premies during the preceding lease year. Tenant shall in all events furnish to Landlord within five (5) days after the end of each month of the term of this Lease a written statement of Gross Sales covering the preceding month, the statement to be in such form and style and contain such details and breakdown as the Landlord may reasonably require. Tenant shall require and cause all its concessionaires, if any, to furnish statements at the times and in the form and content specified in this Section, relating to their operations within the leased premises. All reports of Gross Sales submitted or caused to be submitted by Tenant to Landlord shall be conclusive and binding upon Tenant unless such reports are corrected within the two (2) years after the date of issuance. The term "concessionaire" as used in this Lease shall mean and include any and all concessionaires, licenses, franchises, department operators, subtenants, permittees or others directly or indirectly operating or conducting a business in or from the leased premises. SEE ATTACHED RIDER FOR INSERTS ARTICLE IV. AUDIT SECTION 4.01. RIGHT TO EXAMINE BOOKS. Notwithstanding the acceptance by Landlord of payments of percentage rent, Landlord shall have the right to all rents and other charges actually due hereunder, and the right to examine, make extracts from and copy, at the leased premises or (at the option of Landlord) at the corporate headquarters office of Tenant in the United States, Tenant's and all concessionaires' books, source documents, accounts, records and sales tax reports filed with applicable government agencies in order to verify the amount of Gross Sales in and from the leased premises. Tenant shall make all such documents and records available at the leased premises (or at Tenant's corporate headquarters, if elected by Landlord) upon ______ days' prior written from Landlord. SEE ATTACHED RIDER FOR INSERTS SECTION 4.02. AUDIT. At this option, Landlord may at any time, upon _________ days' prior written notice to Tenant, arrange for an auditor selected by Landlord to conduct a complete audit (including a physical inventory) of the entire records and operations of Tenant and/or any concessionaire concerning business transacted upon or includable in Gross Sales from the leased premiss during the period covered by any statement issued by Tenant or a concessionaire as above set forth in Article III. Tenant shall make available to Landlord's auditor at the leased premises (or at Tenant's corporate headquarters, if elected by Landlord) within ______ days following Landlord's notice requiring such audit, all of the books, source documents, accounts and records referred to in Section 3.01 of this Lease and any other materials which such auditor deems necessary or desirable for the purpose of making such audit. Tenant shall promptly pay to Landlord the amount of any deficiency in percentage rent payments disclosed by any such audit. If such audit shall disclose that Tenant's statement of Gross Sales is ______ to the extent of ___________ or more, Landlord may bill to Tenant the amount of any deficiency and the cost of such audit, which shall be paid by Tenant within ______ days after Tenant's receipt of Landlord's invoice; in the event Tenant fails to pay such discrepancy and costs, Landlord shall have such rights and remedies as may be provided herein or at law arising by virtue of Tenant's failure to pay rent. 18 In addition to the foregoing, and in addition to all other remedies available to Landlord, in the event Landlord or Landlord's auditor shall schedule a date for an audit of Tenant's records in accordance with this Section, and Tenant shall fail to be available or shall otherwise fail to comply with the requirements for such audit, Tenant shall pay all costs and expenses associated with the scheduled audit. SEE ATTACHED RIDER FOR INSERTS In addition to all other remedies available to Landlord, in the event that any such audit shall disclose that Tenant's records and other documents as referred to in Articles III and IV hereof and such other materials provided by Tenant to Landlord's auditor are inadequate, in the opinion of Landlord's auditor, to accurately disclose Tenant's Gross Sales, then Landlord shall be entitled to collect as additional rent from Tenant an amount equal to fifteen percent (15%) of the highest Effective Rent (minimum rent plus percentage rent) payable by Tenant in any of the three (3) preceding lease years. Landlord's exercise of the foregoing remedy shall in no way limit or otherwise affect Landlord's ability to exercise other remedies available to it, nor shall Tenant's obligations pursuant to the terms, covenants and conditions of this Lease (including, without limitation, Tenant's obligation with respect to reporting Gross Sales and payment of percentage rent) be in any manner reduced or diminished by the exercise of such remedy. In the event that Tenant shall, following the exercise of such remedy, provide to Landlord all records and documentation as required to be provided pursuant to the terms of this Lease so as to permit Landlord's auditor to accurately establish Tenant's Gross Sales for the period in question, then Tenant shall be permitted a _______________ with respect to any amount of additional rent collected by Landlord from Tenant pursuant to this paragraph. Neither the provisions of this Section 4.02 nor any other provisions in this Lease shall restrict Landlord's rights to discovery in any litigation or arbitration proceeding. SEE ATTACHED RIDER FOR INSERTS ARTICLE V. CONSTRUCTION OF LEASED PREMISES SECTION 5.01. CONSTRUCTION OF LEASED PREMISES. (a) The leased premises shall be constructed substantially as set forth in Exhibit B, which is attached hereto and made a part hereof. Each of the parties hereto does hereby agree to perform the obligations imposed upon such party in said Exhibit B at the times and in the manner therein provided. All references in the text of the Lease to Exhibit B shall include Exhibit B-1. Minor changes from any plans or specifications covering Landlord's Work which may be, or which may have been, necessary or appropriate during construction of the Shopping Center or leased premises shall not affect or change this Lease or invalidate same. If this Lease is executed after the opening of the regional retail development or if the leased premises are in an expansion wing of the regional retail development which opened prior to the date of this Lease, the parties hereto acknowledge that the work to be performed by Landlord pursuant to Exhibit B has been fully performed (except to the extent specifically otherwise set forth in Exhibit B). (b) Tenant agrees, prior to the commencement of the term of this Lease, at Tenant's sole cost and expense, to provide all work of whatsoever nature in accordance with its obligations set forth in Exhibit B as "Tenant's Work." Tenant agrees to furnish to Landlord the Working Drawings and Specifications (and Demolition Drawings, as applicable) with respect to the leased premises prepared in the manner and within the time periods required in Exhibit B. If such Working Drawings and Specifications (and Demolition Drawings, as applicable) are not furnished by Tenant to Landlord within the required time periods in form to permit approval by Landlord, then Landlord may at its option at any time while Tenant is in default of this provision, in addition to any and all other remedies provided in this Lease, by notice to Tenant, declare this Lease null and void and of no further force or effect, in which event this Lease shall terminate, but Tenant shall remain liable for all obligations arising during the original stated term as provided in this Lease. In addition, if Landlord determines that Landlord and Tenant are unable to agree upon Working Drawings and Specifications (and Demolition Drawings, as applicable), Landlord shall have the option, upon notice to Tenant, to declare this Lease null and void and of no further force or effect, in which event this Lease shall terminate on the date specified in such notice, in the same manner as provided in the preceding sentence. No deviation from the final set of plans and specifications, once approved by the Landlord, shall be made by Tenant without Landlord's prior written consent. Approval of the plans and specifications by Landlord shall not constitute the assumption of any responsibility by Landlord or Landlord's architect for their accuracy, efficacy or sufficiency, and Tenant shall be solely responsible for such items. Unless Landlord otherwise directs in writing, Tenant shall not open the lead premises for business until all construction has been completed pursuant to the provisions of Exhibit B. Until such time as Tenant's final Working Drawings and Specifications (and Demolition Drawings, as applicable) have been approved in writing by Landlord, the right of Tenant to enter upon the leased premises shall be solely for the purpose of inspection, measurement and obtaining information necessary to prepare architectural drawings and construct its premises. Tenant shall not be deemed to have taken possession of the leased premises until, and Landlord shall be deemed to have delivered and Tenant shall be deemed to have taken such possession when, Tenant actually commences construction of its leasehold improvements following Landlord's approval of Tenant's final Working Drawings and Specifications (and Demolition Drawings, as applicable). Until Tenant is so deemed to have taken possession, in the event of a default by Tenant under this Article V, Landlord, upon notice to Tenant, shall have the right to declare this Lease null and void and of no further force or effect and thereafter may demise and lease the premises described in Section 1.01 free from any rights of Tenant. Tenant shall not S6 19 open its store for business until Tenant's storefront sign is installed, the store is fully fixtured, lighted, stocked with merchandise in place and staffed, and Tenant is prepared to engage in the sale of goods and/or services to the public pursuant to Article VII. Under no circumstances shall Tenant remove the storefront barricade, unless Landlord shall specifically otherwise direct in writing. Landlord shall remove the storefront barricade (or Tenant shall remove the same if so directed in writing by Landlord) when Tenant is so prepared to open for business as determined by Landlord, and Tenant shall pay for all such costs and expenses directly (including transportation of the barricade to storage in the regional retail development), if Tenant shall be directed by Landlord to perform such removal. If all or any part of the leased premises shall have been previously occupied, Tenant acknowledges that the Tenant's Work described in Exhibit B has been initially performed by a tenant previously occupying the leased premises and that Tenant accepts the leased premises in an "as is" condition without representation by the Landlord or any person, firm or corporation on behalf of Landlord as to the condition thereof. Tenant shall submit Working Drawings and Specifications and Demolition Drawings showing the work to be performed by Tenant to completely remodel and refurbish the leased premises and, subject to Landlord's approval, will cause such work to be performed prior to the commencement of the term of this Lease. All such additional work and permitted alterations, repairs and improvements shall be in accordance with the provisions of Exhibit B. SEE ATTACHED RIDER FOR INSERTS (c) Upon execution of this Lease, Tenant shall pay to Landlord, as a reimbursement to Landlord for costs and expenses with respect to the leased premises, the sum set forth in the Data Sheet as "Tenant Reimbursement to Landlord." The payment of such sum by Tenant shall not in any manner reduce or limit the obligation of Tenant for payment of other charges under this Lease, including, without limitation, the charges set forth in the Exhibits attached hereto. SECTION 5.02. AVAILABILITY AND POSSESSION OF PREMISES FOR TENANT'S WORK. (a) The leased premises shall be considered available to Tenant when Landlord furnishes Tenant with a written notice to such effect (the "Notice of Availability"). Upon receipt of such Notice of Availability, Tenant shall have only limited access to the premises for purposes of inspection and measurement verification. The Notice of Availability shall not constitute delivery of the premises, and Landlord (or a current occupant of the premises) will retain possession of the premises until delivery of possession is made to Tenant as provided below. Landlord may furnish the Notice of Availability at any time subsequent to Landlord's obtaining possession of the premises. If the leased premises are presently occupied by another tenant, Landlord will not make the premises available to Tenant until a date after Landlord regains possession of the leased premises from the tenant presently occupying the same. (b) Landlord covenants to deliver possession of the leased premises to Tenant upon written approval by Landlord of Tenant's Working Drawings, but only if said approval is subsequent to or simultaneous with a furnishing to Tenant of a Notice of Availability. Upon receiving actual possession, Tenant shall have access to the leased premises for all purposes set forth under this Lease. (c) Upon delivery of possession, Tenant accepts the premises and acknowledges that the premises are in the condition required by this Lease, subject to all field conditions existing at the time of delivery of possession. Failure of Landlord to deliver possession of the leased premises in the manner and condition as provided for in this Lease will not give rise to any claim for damages by Tenant against Landlord, or against Landlord's contractor, or permit Tenant to rescind or terminate this Lease. SEE ATTACHED RIDER FOR INSERTS SECTION 5.03. LANDLORD'S AND TENANT'S OPTIONAL RIGHT OF CANCELLATION. If for any reason the leased premises are not ready for Tenant's Work on the date eighteen (18) months following the date of this Lease, then, for a period of thirty (30) days thereafter, Tenant shall have the option, and for a period of forty-five (45) days following such eighteen (18) month period, Landlord shall have the option, of cancelling and terminating this Lease by not more than sixty (60) days' written notice, one to the other, and, in the event that either party shall exercise such option, this Lease shall terminate with neither party being liable to the other in damages or otherwise, and any money deposited pursuant to Section 26.01 hereof shall be returned to Tenant. In the event that neither Tenant nor Landlord gives such written notice of cancellation, then said options shall be null and void and of no further force or effect, and this Lease shall be considered as continuing in full force and effect. If as of the date of this Lease the leased premises are (i) in a regional retail development, or in an expansion wing of a regional retail development, which development or wing, as applicable, has not initially opened for business to the public, or (ii) presently occupied by another entity, then the foregoing eighteen (18) month period under this Section 5.03 (and the four (4) year period set forth in Section 5.04) shall be modified to commence as of (i) the currently projected date of such initial opening, or (ii) the currently projected date of Landlord's repossession of the leased premises from such present entity, as applicable. SECTION 5.04. ULTIMATE COMMENCEMENT DATE. Notwithstanding anything to the contrary contained herein, if for any reason whatsoever (including without limitation, excusable delay) the term of this Lease shall not have commenced prior to such date as shall be four (4) years from the date of this Lease (subject to extension as set forth in Section 5.03), then this Lease shall be automatically terminated without further act of either party hereto, and the parties hereto shall be released from all obligations hereunder. S7 20 ARTICLE VI. ALTERATIONS, CHANGES AND ADDITIONS SECTION 6.01. INSTALLATION BY TENANT. Tenant shall not make or cause to be made any alterations, additions or improvements to the leased premises (for example, but without limiting the generality of the foregoing, Tenant shall not install or cause to be installed any signs, floor covering, interior or exterior lighting, plumbing fixtures, shades, canopies or awnings, electronic detection devices, antennas, mechanical, electrical or sprinkler systems, or make any changes to the storefront) without the prior written approval of Landlord in each instance. Tenant shall present to Landlord plans and specifications for such work at the time approval is sought, in accordance with criteria and procedures as provided in Exhibit B. See Attached Rider For Inserts SECTION 6.02. REMOVAL BY TENANT. All alterations, additions, trade fixtures and improvements made by Tenant shall be deemed to have attached to the leasehold and to have become the property of Landlord upon such attachment. Upon expiration or earlier termination of the term of this Lease, Tenant shall not remove any of such alterations, additions, trade fixtures or improvements. Landlord may, however, designate by written notice to Tenant those trade fixtures which shall be removed by Tenant at the expiration or earlier termination of the Lease, and Tenant shall promptly remove the same and repair any damage to the leased premises caused by such removal. Landlord shall have the right to padlock or otherwise secure the leased premises upon the expiration or earlier termination of the term of the Lease. Landlord shall also have the right, at any time during the term of this Lease, and upon expiration or earlier termination of the term of this Lease, to immediately enter the leased premises in order to remove any items which shall be determined to be a violation of existing health, safety, security or other similar codes or regulations affecting or applicable to the leased premises or the regional retail development. Landlord shall attempt to provide prior notification to Tenant of such removal, subject to the then existing circumstances. See Attached Rider For Inserts SECTION 6.03. CHANGES AND ADDITIONS. Landlord, for itself and for the underlying lessor, if any, hereby reserves the right at any time, and from time to time, to make alterations to, and to build additional stories on the building in which the leased premises are located, and to construct other buildings and improvements in the regional retail development, including any modifications of the common areas in connection therewith, to enlarge or reduce the Shopping Center or the regional retail development, to add decks or elevated parking facilities, and to sell or lease any part of the land comprising the regional retail development, as shown on the site plan attached hereto as Exhibit A, for the construction thereon of a building(s) to be occupied by a Department Store(s) which may or may not be part of the regional retail development. Landlord also reserves for itself and for the underlying lessor, if any, the right at any time, and from time to time, to change, modify, or abolish any temporary off-site utility or any storm sewer or retention pond system (if applicable) serving the regional retail development. The purpose of Exhibit A is to show the approximate location of the leased premises within the Shopping Center and Landlord reserves for itself and for the underlying lessor, if any, the right at any time to relocate, enlarge, or reconfigure the various buildings, parking areas and other common areas on said site plan. Tenant hereby consents to the exercise by Landlord of the rights set forth in this Section 6.03 and agrees that the exercise of such rights by Landlord or by the underlying lessor, if any, shall not diminish Tenant's obligations under this Lease. See Attached Rider For Inserts ARTICLE VII. CONDUCT OF BUSINESS BY TENANT SECTION 7.01. USE OF PREMISES. Tenant shall continuously use and occupy the entire leased premises during the term of this Lease, which use and occupancy shall be solely for the purpose of conducting the business specifically set forth in the Data Sheet and for no other purpose or purposes. It is agreed that the use specified in the Data Sheet has been, and is, a material inducement to Landlord in entering into this Lease with Tenant, and that Landlord would not enter into this Lease without this inducement. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business or other activity carried on in the leased premises or if a failure to procure such a license or permit might or would in any way affect Landlord or the Shopping Center, then Tenant, at Tenant's expense, shall duly procure and thereafter maintain such license or permit and submit the same for inspection by Landlord. Tenant, at Tenant's expense, shall, at all times, comply with the requirements of each such license or permit. SECTION 7.02. OPERATION OF BUSINESS. Tenant shall be open for business and operate continuously, during all days and hours established by Landlord, in all of the leased premises during the entire term of this Lease, and shall conduct its business at all times in a first class and reputable manner, maintaining at all times a full staff of employees and a full and complete stock of merchandise. Failure by Tenant so to be open for business and to operate shall entitle Landlord, in addition to other remedies provided in this Lease, to mandatory injunctive relief, and shall give Landlord the right to erect a storefront barricade in front of the leased premises at Tenant's expense, which barricade shall not be removed except upon Landlord's prior written consent and with Tenant paying the cost of such removal. The erection of such a barricade by Landlord shall not be construed as a re-entry by Landlord into the leased premises or as an acceptance by Landlord of any surrender of possession of the leased premises by Tenant. In the event the maximum hours during which the Shopping Center (or any separate part thereof) is legally permitted to be open to the public are regulated by any lawful authority, then Landlord shall be the sole judge of which days and hours shall be Shopping Center business days and hours (and the days and hours applicable to any such separate part). Tenant shall install and maintain at all times a display of merchandise in the display windows, if any, of the leased premises and shall keep the same well lighted during such hours as Landlord shall designate. Tenant, at Tenant's expense, shall promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction, affecting or applicable to the leased premises or the cleanliness, safety, occupancy, and use of the same, S8 21 whether or not any such law, ordinance, order, rule, regulation or requirement is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate structural changes or improvements or interfere with the use and enjoyment of the leased premises. Tenant shall not do or permit anything to be done in or about the leased premises, or bring anything therein, which will in any way conflict with any such law, ordinance, order, rule, regulation or requirement affecting the occupancy or use of the leased premises or the regional retail development which is or may hereafter be enacted or promulgated by governmental authorities, or in any way obstruct or interfere with the rights of others, nor shall Tenant use or allow the premises to be used for any improper, immoral or objectionable purposes as determined by Landlord. Tenant shall not cause or permit the use, generation, storage or disposal in or about the leased premises or the regional retail development of any substances, materials or wastes subject to regulation under any federal or state or local laws from time to time in effect concerning hazardous, toxic or radioactive materials unless Tenant shall have received Landlord's prior written consent, which Landlord may withhold or at any time revoke in its sole discretion. Tenant shall comply with all federal, state and local laws in effect from time to time prohibiting discrimination or segregation by reason of race, color, creed, age, religion, sex or national origin. No auction, liquidation, going out of business, fire or bankruptcy sales may be conducted or advertised by sign or otherwise in the leased premises. Tenant shall display and sell only first-quality, current-season merchandise and Tenant's sales practices shall be in accord with standards and practices generally acceptable in enclosed first-class, full-retail-price regional shopping centers. Tenant shall be obligated to permit returns of merchandise and shall allow cash refunds on such returns, except in connection with special sales and close outs. Tenant shall not offer any goods or services which Landlord determines, in its sole discretion, to be inconsistent with the image of a first-class, family-oriented regional retail development, nor shall Tenant display or sell any goods containing portrayals which Landlord determines, in its sole discretion, to be lewd, graphically violent or pornographic. Tenant agrees that it will conduct its business in good faith, and will not do any act tending to injure the reputation of the Shopping Center (or any part thereof) as determined by Landlord. Tenant shall not sell or display any paraphernalia used in the preparation or consumption of controlled substances. In the event Landlord has approved Tenant's remaining open for business after normal Shopping Center hours (and/or any hours applicable to that part of the Shopping Center containing the leased premises), then such approval shall be conditioned upon Tenant's paying for all additional costs incurred by Landlord as a result thereof. Tenant shall not permit noise or odors in the leased premises which are objected to by Landlord and, upon written notice from Landlord, Tenant shall immediately cease and desist from causing such noises or odor, and failing of which Landlord may deem the same a material breach of this Lease. Tenant shall not permit the operation of any coin operated or vending machines or pay telephones on the leased premises, other than in the areas reserved solely for the use of Tenant's employees. Tenant shall not sell or display any merchandise within of the storefront opening unless such sale or display shall be expressly approved on the Store Design Drawings or otherwise approved by Landlord, in writing, except that Tenant shall be permitted to display merchandise in the display windows, if any. Tenant shall not use the areas adjacent to the leased premises for business purposes. Tenant shall not store anything in service or exit corridors. Tenant agrees that all receiving and delivery of goods and merchandise, and all removal of merchandise, supplies, equipment, trash and garbage, and all storage of trash and garbage, shall be made only by way of or in the areas provided therefor by Landlord. Tenant shall not use or permit the use of any portion of the leased premises as sleeping quarters, lodging rooms, or for any unlawful purposes. Tenant shall not install any radio or television or other similar device exterior to the leased premises and shall not erect any aerial on the roof or exterior walls of any building within the regional retail development. Landlord may direct the use of all pest extermination contractors at the sole cost and expense of Tenant and at such intervals as Landlord may require. Failure of Tenant to employ the pest extermination contractor designated by Landlord shall entitle Landlord to employ such contractor with respect to Tenant's premises and Tenant shall reimburse Landlord for the cost thereof. Landlord shall have the option to provide pest extermination services for the Shopping Center or the regional retail development or any part thereof, in which event Tenant shall pay to Landlord Tenant's proportionate share of the cost of such service, with such proportionate share to be calculated in the manner provided in Section 8.03 of this Lease. In the event that Tenant is permitted pursuant to this Lease to engage in the sale of food and beverages from the leased premises, then Tenant shall: (i) offer such food and beverages only pursuant to a menu approved by Landlord, which shall not be changed without Landlord's prior written consent (which consent Landlord may grant or withhold in its sole and absolute discretion), (ii) serve its customers in containers or dishes and with utensils to be approved by Landlord, subject to change by Landlord from time to time, (iii) be solely responsible for prompt disposal within the premises of all trash, garbage and debris, and (iv) inspect and maintain all grease traps, pans and hood ventilators in good order, condition and repair, and shall contract for same if and as required by Landlord. The covenants of Tenant regarding hazardous, toxic or radioactive materials, as set forth in this Lease, shall survive the expiration or earlier termination of the term of this Lease. Without limiting any of the foregoing provisions, Tenant also shall be required to maintain, at all times, a minimum staff of two (2) employees for operation of the leased premises, and Tenant shall not permit the leased premises to be left unattended at any time. S9 22 SECTION 7.03 RADIUS. During the term of this Lease, in the event Tenant, its parent corporation or subsidiary corporation, or its franchisor or franchisee, or its licensor or licensee, or any person, firm, corporation or other entity who or which controls or is controlled by tenant, or by any person, firm, corporation or other entity which directly or indirectly controls or is controlled by Tenant, shall, directly or indirectly, either individually or as a partner or stockholder or otherwise, own, operate or become financially interested in any business similar to or in competition with the business of Tenant described in Section 7.01 within a radius of ten (10) miles from the leased premises, then the Gross Sales (as defined in this Lease) of any such business or businesses within said radius shall be included in the Gross Sales made from the leased premises and the percentage rent hereunder shall be computed upon the aggregate of the Gross Sales made from the leased premises and by any such other business or businesses then conducted within said radius and Tenant shall report and maintain records of such sales in the manner provided in Article III hereof. This Section 7.03 shall not apply to any such business or businesses open and being operated by Tenant within said radius as of the date of this Lease as long as such business or businesses shall continue to be operated in the same location(s) existing as of said date. If Tenant fails to make payments required pursuant to this Section 7.03, Landlord or Landlord's authorized representative or agent shall have the right at all reasonable times during the term hereof and for a period of at least four (4) years after the expiration of the term of this Lease, to inspect, audit, copy and/or make extracts of the books, source documents, records and accounts pertaining to such other business or businesses conducted within said radius, in accordance with the provisions of Article IV hereof, for the purpose of determining or verifying the additional rents due to Landlord pursuant to this Section. Moreover, in the event Tenant fails to supply to Landlord sales records with respect to any such similar or competing business, Landlord shall have the right to estimate the sales for such businesses based upon Tenant's Gross Sales in the leased premises, and the additional percentage rent generated from the inclusion of such estimated sales and Tenant's Gross Sales shall be deemed additional rent to be paid by Tenant in accordance with the provisions of Section 2.02 and 2.06 of this Lease. SECTION 7.04. STORAGE, OFFICE SPACE. Tenant shall warehouse, store and/or stock in the leased premises only such goods, wares and merchandise as Tenant intends to offer for sale at retail at, in, from or upon the leased premises. This shall not preclude occasional emergency transfers of merchandise from the other stores of Tenant, if any, not located in the Shopping Center. Tenant shall use for office, clerical or other non-selling purposes only such space in the leased premises as is from time to time reasonably required for Tenant's business in the leased premises. SECTION 7.05. CARE OF PREMISES. Tenant, at Tenant's expense, shall at all times keep the leased premises (including the service areas adjacent to the premises, display windows and signs) orderly, neat, safe, clean and free from rubbish and dirt, and vermin, and shall store all trash, garbage and other solid waste within the leased premises. Tenant shall not burn any trash or garbage at any time in or about the regional retail development. Landlord may direct the use by Tenant at Tenant's expense of all solid waste disposal contractors at such intervals as Landlord may require. If Landlord shall provide or contract for any services or facilities for solid waste pickup or sewer cleaning, then Tenant shall be obligated to use the same and shall pay a proportionate share of the expense thereof within __ days after being billed therefor. If Landlord does not provide such services, Tenant shall arrange for the regular pickup of all solid waste at Tenant's expense. SEE ATTACHED RIDER FOR INSERTS ARTICLE VIII. COMMON AREAS SECTION 8.01. OPERATION AND MAINTENANCE OF COMMON AREAS. Landlord agrees to cause to be operated and maintained during the term of this Lease all common areas within the Shopping Center. The manner in which such areas and facilities shall be operated and maintained, and the expenditures therefor, shall be at the sole discretion of Landlord and the use of such areas and facilities shall be subject to such regulations as Landlord shall make from time to time. SEE ATTACHED RIDER FOR INSERTS SECTION 8.02. USE OF COMMON AREAS. The term "common area," as used in this Lease, shall mean (i) the following areas within the regional retail development: parking areas and facilities as determined by Landlord (collectively "parking facilities"), roadways, pedestrian sidewalks and walkways, pedestrian plazas, pedestrian passage areas, driveways, public transportation loading and unloading facilities, truckways, loading docks, delivery areas, landscaped areas, community rooms, office facilities, the enclosed Mall, berms, elevators and escalators and stairs and ramps and vertical transportation facilities not contained within any leased premises, public restrooms and comfort stations, service areas, service and fire and exit corridors, passageways, retention ponds (if applicable), and other areas, amenities, facilities and improvements provided by Landlord, (ii) those areas within the regional retail development and areas adjacent to the regional retail development which from time to time may be provided by the owners of such areas for the convenience and use of Landlord, the tenants of the Shopping Center, the owners and occupants of the Department Store Sites, and their respective concessionaires, agents, employees, customers, invitees and all other licensees and others entitled to the use thereof and (iii) any other facilities or areas, whether within or outside the regional retail development, as may be designated by Landlord from time to time. The use and occupancy by Tenant of the leased premises shall include the use of the common areas in common with Landlord and with all others for whose convenience and use the common areas have been or may hereafter be provided by Landlord or by the owners of common areas not within the Shopping Center, subject, however, to rules and regulations for the use thereof as prescribed from time to time by Landlord or the owner of such common area, including, without limitation, the right of Landlord to determine the hours and mode of operation of the elevators, escalators and vertical transportation facilities serving the Shopping Center, and including the right of Landlord or such owner to impose parking charges, whether by meter or otherwise, with respect to any parking facilities. In no event, however, shall Tenant, its agents or employees, use the common areas for the display or sale of merchandise. Without limiting the generality of the foregoing, Landlord may include in common areas S10 23 those portions of the Shopping Center presently or hereafter sold or leased to Department Stores, until the building thereon has been opened for business, at which time there shall be withdrawn from the common areas those areas not provided by the owner thereof for common use. Tenant and its employees and agents shall park their cars and other vehicles only in areas specifically designated from time to time by Landlord for that purpose, and shall not in any case park their vehicles in any private or non-public portions of the parking facilities. Tenant covenants that it will enforce the parking by its employees and agents in such designated areas and in only public areas. Automobile license numbers of employees' and agents' vehicles shall be furnished by Tenant to Landlord upon Landlord's request. In the event any vehicle is parked by Tenant or by an employee or agent of Tenant in a private or non-public parking area or in any portion of the parking facilities other than the area of such parking facilities as shall be designated by Landlord, Tenant shall be obligated to pay Landlord the sum of One Hundred Dollars ($100) per day for each such vehicle in order to partially compensate Landlord for the loss of percentage rent arising from the business lost to Tenant and to other tenants in the Shopping Center due to the lack of available parking space in the said parking facilities, and Landlord shall have the right to cause the vehicle to be towed to a location designated by Landlord and Tenant shall be obligated to reimburse Landlord for all towing charges. Similarly, Landlord shall have the right to cause any vehicle to be towed if the parking charges, if any, or the per diem charge or reimbursement due to Landlord hereunder, with respect to such vehicle have not been paid; with any such vehicle to be towed to a location designated by Landlord and with Tenant being obligated to pay all parking charges, fines and towing charges imposed by Landlord with respect to such vehicles. Tenant further agrees to hold harmless Landlord and defend Landlord, its agents and employees against any and all claims of the employee, agent and/or owner of the vehicle towed. Landlord shall have the further option of prohibiting Tenant and its employees and agents from parking their cars or other vehicles in the parking facilities, and the violation of such prohibition shall be subject to the same provisions as set forth above. Landlord may at any time close temporarily any common area to make repairs or changes, to prevent the acquisition of public rights in such area, to discourage non-customer parking, to use areas for attendant or valet parking, and may do such other acts in and to the common areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not provide, nor shall Tenant authorize any person or entity to provide, valet or attendant parking for Tenant's customers or others; Landlord shall have the exclusive right, but shall not be obligated, to provide valet or attendant parking at the regional retail development. SEE ATTACHED RIDER FOR INSERTS SECTION 8.03. TENANT'S PRO RATA SHARE OF EXPENSES. (a) Tenant agrees to pay to Landlord in the manner hereinafter provided, but not more often than once each calendar month Tenant's proportionate share of: (1) all costs and expenses of every kind and nature paid or incurred by Landlord in operating, equipping, policing and protecting, lighting, heating, air conditioning, providing sanitation and sewer and other services, providing a music and public address system, insuring (including self-insurance and the payment of deductible amounts under insurance policies), repairing, replacing and maintaining (i) common areas and (ii) all buildings and roofs within the Shopping Center and (iii) all other areas, facilities and buildings, including project offices, parking facilities, vertical transportation facilities, retention ponds (if applicable), and any and all facilities and improvements connecting the regional retail development to off-site buildings or areas, which are used in connection with the maintenance and/or operation of, and whether located within or outside of, the regional retail development (hereinafter collectively referred to as "project areas"); such costs and expenses shall include, but shall not be limited to, the full cost of: illumination and maintenance of regional retail development signs, whether located on or off the regional retail development; holiday and seasonal lighting, decorations and displays; refuse disposal, water, gas, sewage, electricity and other utilities (without limitation), including any and all usage, service, hook-up, connection, availability and/or standby fees or charges pertaining to same, and including all costs associated with the provision, maintenance and operation of any central telephone service for the regional retail development; the operation, maintenance, repair and replacement of all or any part of the parking facilities; snow removal; maintenance, operation, repair and replacement of any and all roads (temporary or otherwise) servicing the regional retail development including, without limitation, any landscaping or other work related to such roads; maintenance and operation of any temporary or permanent utility, including a sewage disposal system, within or without the regional retail development, built, operated and/or maintained for the specific purpose of servicing the regional retail development, together with hook up or connection fees and service charges; compliance with laws, rules, regulations and orders of governmental authorities; maintenance for wooded areas, retention ponds, lakes and shoreline areas (if applicable); cleaning, lighting, striping and landscaping; curbs, gutters, sidewalks, drainage and irrigation ditches, conduits, pipes and canals located on or adjacent to the regional retail development; premiums and all other costs with respect to liability, casualty, and property insurance, and compliance with insurance requirements; personal property taxes; licensing fees and taxes; audit fees and expenses; supplies; the cost and expense of supplying music to the regional retail development; all costs and expenses of enforcing the rules and regulations established by Landlord for the Shopping Center and handling of claims or other matters arising from the operation of the regional retail development; real estate taxes and assessments and substitutions and replacements thereof levied or assessed by municipal, county, state, federal or other taxing or assessing authority upon, against or with respect to the common areas, the project areas and/or the land thereunder and the land on which the Shopping Center buildings are located, and all property (including any land upon which may be located any temporary or permanent utility, including a sewage disposal system, within or without the regional retail development built, operated and/or maintained for the purpose of servicing the regional retail development) provided by Landlord which may at any time comprise or serve the Shopping Center, whether located on or off the site of the Shopping Center, irrespective of whether the same is taxed or assessed as real or personal property; cost, lease payment or depreciation of any equipment, improvements or facilities used in the operation or maintenance of the common areas or project areas, including, without limitation, any imputed interest as may be applicable to costs paid or incurred by Landlord the full amount of which is not included under this Section 8.03 in the year so paid or incurred, and including any interest or other expense associated with any loans obtained by Landlord with respect to any cost or expense included or includable hereunder, including any portion of the long-term debt on the Shopping Center which has been incurred for such purposes; total compensation and benefits (including premiums for workers' compensation or any S11 24 other insurance or other retirement or employee benefits, and including all costs incurred in providing such benefits) paid to or on behalf of employees involved in the performance of the work specified in this Section 8.03 or employees otherwise providing services to tenants or customers of the Shopping Center; and (2) an amount equal to fifteen percent (15%) of the total of all of the foregoing costs and expenses for the regional retail development. The proportionate share to be paid by Tenant shall be that portion of the foregoing costs and expenses which the number of square feet of floor area in the leased premises bears to the total number of square feet of gross leased and occupied floor area of all buildings in the Shopping Center abutting on the enclosed Mall. The gross leased and occupied floor area in effect for the whole of any lease year shall be the average of the gross leased and occupied floor area in effect on the first day of each calendar month in such lease year. SEE ATTACHED RIDER FOR INSERTS (b) Tenant's proportionate share of such costs and expenses for each lease year shall be paid in monthly installments on the first day of each calendar month, in advance, in an amount estimated by Landlord from time to time. Subsequent to the end of each calendar or fiscal lease year (at Landlord's option), Landlord shall furnish Tenant with a statement of the actual amount of Tenant's proportionate share of such cost and expenses for such period. If the total amount paid by Tenant under this Section for any such year shall be less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within __ days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section. Landlord may estimate the annual budget and charge the estimated share to the Tenant on a monthly basis subject to revision by Landlord of the budget from time to time and final annual adjustment based upon actual expenses. Neither the provisions of this Section, nor any of the other requirements or restrictions imposed upon Tenant under this Lease, shall excuse Tenant from its obligation to comply with laws and ordinances and other governmental requirements as set forth in Section 7.02 hereof. SEE ATTACHED RIDER FOR INSERTS ARTICLE IX. SIGNS SECTION 9.01. SIGNS. Tenant shall affix a sign to the exterior surface of the storefront of the leased premises fronting on the enclosed Mall and shall maintain said sign in good condition and repair during the entire term of this Lease. Said sign shall conform to the criteria for signs contained in Exhibit B, and the size, content, design and location thereof shall be subject to the prior written approval of Landlord. Except as hereinabove mentioned, Tenant shall not place or cause to be placed, erected or maintained on any exterior door, wall, window or the roof of the leased premises, or on the glass of any window or door of the leased premises, or on any sidewalk or other location outside the leased premises, or within any display window space in the leased premises, or within ___ feet of the front of the storefront opening, whether or not there is a display window space in the leased premises, or within any entrance to the leased premises, or otherwise visible from the Mall, any sign (flashing, moving, hanging, handwritten, or otherwise), decal, placard, decoration, flashing, moving or hanging lights, lettering, or any other advertising matter of any kind or description. Moreover, Tenant is prohibited from utilizing any displays which are not part of the fixture plan approved in writing by Landlord for the leased premises. If Tenant places or causes to be placed or maintained any of the foregoing, the same may be removed by Landlord or Landlord's representative without notice and without such removal constituting a breach of this Lease or entitling Tenant to claim damages on account thereof. No symbol, design, name, mark or insignia adopted by Landlord for the Shopping Center shall be used without the prior written consent of Landlord. No illuminated sign located in the interior of the leased premises and which is visible from the outside thereof shall be permitted without the prior written approval of Landlord. All signs located in the interior of the leased premises shall be in good taste and professionally printed so as not to detract from the general appearance of the leased premises and the Shopping Center. SEE ATTACHED RIDER FOR INSERTS ARTICLE X. MAINTENANCE SECTION 10.01. LANDLORD'S OBLIGATIONS FOR MAINTENANCE. Landlord shall keep and maintain the exterior surfaces of the exterior walls of the building in which the leased premises are located (exclusive of doors, door frames, door checks, other entrances, windows and window frames which are not part of common areas, and storefronts) in good repair, except that Landlord shall not be called upon to make any such repairs occasioned by the act or negligence of Tenant, its agents, employees, invitees, licensees or contractors. Landlord shall not be called upon to make any other improvements or repairs of any kind upon the leased premises and appurtenances, except as may be required under Articles XVII and XVIII hereof, and nothing contained in this Section 10.01 shall limit Landlord's right to reimbursement from Tenant for maintenance, repair costs and replacement costs conferred elsewhere in this Lease. SEE ATTACHED RIDER FOR INSERTS SECTION 10.02. TENANT'S OBLIGATIONS FOR MAINTENANCE. (a) Except as provided in Section 10.01 of this Lease, Tenant, at Tenant's expense, shall keep and maintain in first-class appearance, in a condition at least equal to that which existed when Tenant initially opened the leased premises for business, and in good order, condition and repair as determined by Landlord (including replacement of parts and equipment, if necessary) the leased premises and every part thereof and any and all appurtenances thereto wherever located, including, but without limitation, the interior surfaces of the exterior walls, the exterior and interior portion of all doors, door frames, door checks, other entrances, windows, window frames, plate glass, storefronts, all plumbing and sewage facilities within the leased premises, including free flow up to the main sewer line, fixtures, ventilation, heating and air conditioning and electrical systems (whether or not located in the leased premises), sprinkler systems, walls, floors and ceilings, and all other S12 25 repairs, replacements, renewals and restorations, interior and exterior, ordinary and extraordinary, foreseen and unforeseen, and all other work performed by or on behalf of Tenant pursuant to the exhibits attached hereto or Articles V or VI hereof or otherwise in accordance with the provisions of this Lease. Tenant shall remodel the leased premises as required in Exhibit B. (b) Tenant shall keep and maintain the leased premises in a clean, sanitary and safe condition in accordance with the laws of the State and in accordance with all directions, rules and regulations of the health officer, fire marshall, building inspector, or other proper officials of the governmental agencies having jurisdiction, and Tenant shall comply with all requirements of law, ordinances and otherwise, affecting the leased premises, all at the sole cost and expense of Tenant. At the time of the expiration or sooner termination of the tenancy created herein, Tenant shall surrender the leased premises in good order, condition and repair. SEE ATTACHED RIDER FOR INSERTS (c) Tenant shall keep the leased premises and all other parts of the regional retail development free from any and all liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant, and agrees to bond against or discharge any such lien (including, without limitation, any construction, mechanic's or materialman's lien) within _____ days after written request therefor by Landlord. Tenant shall give Landlord at least fifteen (15) days' notice prior to commencing or causing to be commenced any work on the leased premises (whether prior or subsequent to the commencement of the lease term), so that Landlord shall have reasonable opportunity to file and post notices of non-responsibility for Tenant's work. In addition, prior to commencing or causing to be commenced any work on the leased premises, Tenant shall file a Notice of Commencement (or other similar instrument limiting lien rights related to Tenant's Work) as provided by applicable statutory provisions and shall deliver a copy of such Notice of Commencement (or similar instrument) to Landlord. Tenant shall reimburse Landlord for any and all costs and expenses which may be incurred by Landlord by reason of the filing of any such liens and/or the removal of same, such reimbursement to be made within _____ days after written notice from Landlord to Tenant setting forth the amount of such costs and expenses. SEE ATTACHED RIDER FOR INSERTS (d) Tenant, at its own expense, shall install and maintain fire extinguishers, other fire protection devices as may be required from time to time by any agency having jurisdiction thereof. Should Landlord's insurance carrier require that Tenant's fire protection system be modified, Tenant shall make such modification at its sole expense within thirty (30) days after notice in writing by Landlord. Failure of Tenant to do so shall entitle Landlord to enter the leased premises and make such modification at the expense of Tenant. Tenant shall pay all charges billed by Landlord within _____ days after invoice. Tenant shall also be liable for any additional insurance premiums assessed to Landlord relating to the leased premises. SEE ATTACHED RIDER FOR INSERTS (e) (1) Tenant agrees to operate its heating and its ventilating and air conditioning system(s) serving the leased premises during regular Shopping Center business hours so as to maintain comfort conditions. Temperatures in the leased premises shall be compatible with temperatures in the enclosed Mall. Tenant's installation of its heating and ventilating and air conditioning system shall be as set forth in Exhibit B, attached hereto and made a part hereof. Tenant shall be fully obligated for its maintenance and repair. Tenant shall not drain heat or ventilation or air conditioning from the enclosed Mall into the leased premises and Tenant shall at all times maintain adequate temperatures within the leased premises to prevent any such drainage; likewise, Tenant shall not discharge air from the leased premises into the enclosed Mall or other interior areas. Landlord shall not be obligated to Tenant for any damages or cost or expense resulting, directly or indirectly, from any failure or malfunction of any air conditioning supply system or condenser water system serving the Shopping Center or any component parts of any such system. (2) To the extent the leased premises shall be serviced by a central air conditioning or condenser water system, Tenant's obligation for connecting to, and all charges for, the central system, as well as Tenant's installation, operation and maintenance of its heating and ventilating and air conditioning portion of the system shall be as set forth in Exhibit B (and any separate exhibit relating to such central system) attached hereto and made a part hereof. Landlord shall not be obligated to Tenant for any damages or cost or expense resulting, directly or indirectly, from any failure or malfunction of the central air conditioning supply system (or central condenser water system, as applicable) or any component parts thereof. Tenants approved by Landlord for the installation of a separate heating, ventilating and air conditioning system, serving the leased premises, shall construct the same in accordance with Landlord's criteria. If Tenant shall install such a system, Tenant shall be fully obligated for its maintenance and repair. (f) Tenant expressly waives all rights to make repairs at the expense of Landlord as provided for in any statute or law in effect during the term of this Lease. (g) In the event that Tenant fails, refuses or neglects to commence and complete repairs promptly and adequately, to remove any lien, to pay any cost or expense, to reimburse Landlord, or otherwise to perform any act or fulfill any obligation required of Tenant pursuant to this Section 10.02, Landlord may, but shall not be required to, make or complete any such repairs, remove such lien (without inquiring into the validity thereof), pay such cost or perform such act or the like without prior notice to, but at the sole cost and expense of, Tenant, and Tenant shall reimburse Landlord for all costs and expenses of Landlord thereby incurred within _____ days after receipt by Tenant from Landlord of a statement setting forth the amount of such costs and expenses. The failure by Tenant so to make repairs, to remove any lien, to pay any such cost or expense, or to so reimburse Landlord (in the case of reimbursement, within such ten-day period) shall constitute a default by Tenant under this Lease and shall carry with it the same consequences S13 26 as failure to pay any installment of rent. Landlord's rights and remedies pursuant to this subsection (g) shall be in addition to any and all other rights and remedies provided under this Lease or at law. SEE ATTACHED RIDER FOR INSERTS ARTICLE XI. INSURANCE AND INDEMNITY SECTION 11.01. TENANT'S INSURANCE. (a) Tenant, at its sole cost and expense, shall, at all times, commencing with the date upon which the leased premises shall be made available for Tenant's Work, procure, pay for and keep in full force and effect: (i) a commercial general liability policy (ISO form or equivalent), including insurance against assumed or contractual liability under this Lease with respect to the leased premises and the operations of Tenant and any subtenants of Tenant in, on or about the leased premises in which the limits with respect to personal liability and property damage shall be not less than Two Million Dollars ($2,000,000) per occurrence; (ii) all risk property insurance, including theft and, if applicable, boiler and machinery coverage, written at replacement cost value in an adequate amount to avoid coinsurance and a replacement cost endorsement insuring Tenant's merchandise, trade fixtures, furnishings, equipment and all items of personal property of Tenant and including property of Tenant's customers located on or in the leased premises; (iii) workers' compensation coverage as required by law; (iv) with respect to alterations, improvements and the like required or permitted to be made by Tenant hereunder, contingent liability and builder's risk insurance, in amounts satisfactory to Landlord; (v) product liability coverage, including, without limitation (if this Lease covers leased premises in which food and/or beverages are sold and/or consumed), liquor liability coverage (if applicable to Tenant's business) and coverage for liability arising out of the consumption of food and/or alcoholic beverages on or obtained at the leased premises, of not less than Two Million Dollars ($2,000,000) per occurrence for personal injury and death and property damage; (vi) the insurance required under Exhibit B; and (vii) such insurance as may from time to time be required by city, county, state or federal laws, codes, regulations or authorities, together with such other insurance as is reasonably necessary or appropriate under the circumstances. The minimum limits of coverage as set forth in this paragraph may from time to time, at Landlord's option, be increased by not more than ten percent (10%) per annum, on a cumulative basis, with such increase to occur not more often than once during each lease year during the term hereof. The deductibles under any of such insurance policies to be carried by Tenant shall not exceed ___________. SEE ATTACHED RIDER FOR INSERTS (b) All policies of insurance required to be carried by Tenant pursuant to this Section 11.01 shall be written by responsible insurance companies authorized to do business in the State and acceptable to Landlord. Any such insurance required of Tenant hereunder may be furnished by Tenant under any blanket policy carried by it or under a separate policy therefor; provided, however, that: (1) any such blanket policy carried with respect to the insurance required under subparagraphs (i), (iv), (v), (vi) and (vii) of Section 11.01(a) shall contain a "per location" endorsement assuring that any aggregate limit under such blanket policy shall apply separately to the leased premises and that the insurer thereunder shall provide written notice to Landlord if the available portion of such aggregate is reduced to less than the minimum amounts required under Section 11.01(a) by either payment of claims or the establishment of reserves for claims (whereupon Tenant shall be obligated to take immediate steps to increase the amount of its insurance coverage in order to satisfy the minimum requirements set forth above), and (2) any such blanket policy carried with respect to the property insurance required under subparagraph (ii) of Section 11.01(a) shall contain an "agreed value" endorsement with respect to all of the items of property identified in such subparagraph. A copy of each paid-up policy evidencing such insurance (appropriately authenticated by the insurer) or a certificate of the insurer, certifying that such policy has been issued, providing the coverage required by this Section and containing provisions specified herein, shall be delivered to Landlord prior to the commencement of the term of this Lease and, upon renewals, not less than thirty (30) days prior to the expiration of such coverage. Landlord may, at any time, and from time to time, inspect and/or copy any and all insurance policies required to be procured by Tenant hereunder. (c) Each policy evidencing insurance required to be carried by Tenant pursuant to this Section 11.01 shall provide coverage on an occurrence basis (and not on a "claims-made" basis) and shall contain the following provisions and/or clauses: (i) a cross-liability clause; (ii) a provision that such policy and the coverage evidenced thereby shall be primary and non-contributing with respect to any policies carried by Landlord, and that any coverage carried by Landlord shall be excess insurance; (iii) a provision including Landlord, the beneficial ownership entity of the Shopping Center (if any), the managing agent of the Shopping Center and any other parties in interest designated by Landlord or such beneficial ownership entity (if any), as additional insureds (except with respect to workers' compensation insurance); (iv) a waiver by the insurer of any right of subrogation against Landlord, the underlying lessor, if any, and their respective agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives; (v) a severability clause; (vi) a provision that the insurer will not cancel, materially change or fail to renew the coverage provided by such policy without first giving Landlord and the underlying lessor, if any, thirty (30) days' prior written notice; and (vii) a provision (to the extent available) that no act or omission of Landlord shall affect or limit the obligation of the insurer to pay the amount of any loss sustained. (d) In the event that Tenant fails to procure, maintain and/or pay for, at the times and for the durations specified in this Section 11.01, any insurance required by this Section, or fails to carry insurance required by law or governmental regulation, Landlord may (but without obligation to do so) at any time or from time to time, and without notice, procure such insurance and pay the premiums therefor, in which event Tenant shall repay to Landlord all sums so paid by Landlord together with interest thereon as provided elsewhere herein and any costs or expenses incurred by Landlord in connection therewith, within _______ days following Landlord's written demand to Tenant for such payment. SEE ATTACHED RIDER FOR INSERTS S14 27 (e) Tenant shall not carry any stock of goods or do anything in or about the leased premises which will in any way tend to increase the insurance rates on the Shopping Center, the regional retail development, the leased premises and/or the building of which they are a part and/or the contents thereof. If Tenant installs any electrical equipment that overloads the lines in the leased premises, Tenant shall at its own expense make whatever changes are necessary to comply with the requirements of the insurance underwriters and governmental authorities having jurisdiction. SECTION 11.02. LANDLORD'S INSURANCE. (a) Landlord agrees, during the term hereof to provide, to the extent the name is available from Landlord's insurance carrier, in amounts and coverages determined by Landlord, with or without deductibles, insurance coverage against such risks as are from time to time included in a standard extended coverage endorsement, insuring the improvements to the leased premises provided by Tenant pursuant to this Lease (exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment, plate glass, signs and personal property of Tenant). Landlord may also carry at its option special extended coverage endorsements and other special insurance coverage (including, without limitation, earthquake coverage). Tenant shall submit to Landlord an itemized statement setting forth the cost of such improvements promptly after completion thereof and Tenant shall provide to Landlord, within thirty (30) days after the end of each lease year of the term hereof, a written ___________ of the then current replacement value of the leasehold improvements to the leased premises, which ________ shall be certified by an __________________. In the event Tenant fails to provide such itemized statement or any such Landlord shall have the right to estimate the value of said improvements, which estimate shall be binding upon Tenant. Tenant agrees to pay Landlord for the total cost of so insuring such improvements, including, without limitation, the payment of all applicable deductible amounts, such payments (other than deductible amounts) to be made in equal monthly installments on the first day of each calendar month, in advance, in an amount estimated by Landlord; provided, however, that Landlord may elect to bill Tenant for such costs on a basis less frequent than monthly. Deductible amounts shall be paid by Tenant upon notice from Landlord. Subsequent to the receipt by Landlord of an invoice for such insurance premium, Landlord shall furnish Tenant with a written statement setting forth such cost. If the total amount paid by Tenant under this Section for any calendar, lease or fiscal year (at Landlord's option) shall be less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such calendar year shall exceed such actual amount due from Tenant for such calendar year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section 11.02. SEE ATTACHED RIDER FOR INSERTS (b) Landlord agrees, during the term hereof, to carry rent interruption insurance, which insurance may be carried in amounts equal to Tenant's total minimum rent obligation for twelve (12) full months (or such other period as Landlord may elect) under this Lease plus the total of the estimated costs to Tenant of taxes, assessments, insurance premiums and common area maintenance costs for such twelve (12) month period (or such other period as Landlord may elect). Tenant agrees from time to time, to reimburse Landlord for the total cost of such insurance, such reimbursement to be made within _________ days after receipt of a written statement from Landlord setting forth such cost. SEE ATTACHED RIDER FOR INSERTS (c) Any insurance required of Landlord hereunder may be furnished by or for Landlord under any blanket policy carried by or for Landlord or under a separate policy therefor. The cost of the foregoing insurance under this Section 11.02 is a part of the cost of the property insurance which may be included in the costs and expenses set forth in Section 8.03 hereof. To the extent that the foregoing insurance costs shall be so included under Section 8.03 and Tenant shall pay its proportionate share of costs and expenses pursuant to said Section 8.03, such insurance costs shall not be separately charged to Tenant under this Section 11.02. SECTION 11.03. COVENANT TO HOLD HARMLESS. Tenant covenants to indemnify Landlord, the underlying lessor, if any, and their respective officers, directors, stockholders, beneficiaries, partners, representatives, agents and employees, and save them harmless (except for loss or damage resulting from the negligence of Landlord and not required to be insured against by Tenant pursuant to this Article XI) from and against any and all claims, actions, damages, liability, cost and expense, including attorneys' fees, in connection with all losses, including loss of life, personal injury and/or damage to property, arising from or out of any occurrence in, upon or at the leased premises or the occupancy or use by Tenant of the leased premises or any part thereof, or arising from or out of Tenant's failure to comply with any provision of this Lease or occasioned wholly or in part by any act or omission of Tenant, its concessionaires, agents, contractors, suppliers, employees, servants, customers or licensees. For the purpose of this Section 11.03, the leased premises shall include the service areas adjoining the same and the loading platform area allocated to the use of Tenant ______________________________. In case Landlord or any other party so indemnified shall, without fault, be made a party to any litigation commenced by or against Tenant, or if Landlord or any such party shall, in its ____ discretion, determine that it must intervene in such litigation to protect its interest hereunder, including, without limitation, the incurring of costs, expenses, and attorney's fees in connection with relief of Tenant ordered pursuant to the Bankruptcy Code (11 USC Section 101 et. seq.), then Tenant shall protect and hold them harmless by attorneys satisfactory to Landlord and shall pay all costs, expenses and reasonable attorneys' fees incurred or paid by such party in connection with such litigation. Landlord shall have the right to engage its own attorneys in connection with any of the provisions of this Section 11.03 or any other provision of this Lease, including, without limitation, any defence of Landlord or intervention by Landlord, notwithstanding any contrary provision or court decisions of the State. The foregoing provisions of this Section shall survive the expiration or earlier termination of the term of this Lease. SEE ATTACHED RIDER FOR INSERTS 28 ARTICLE XII. UTILITY CHARGES SECTION 12.01. UTILITY CHARGES. (a) Tenant shall be solely responsible for and shall promptly pay all necessary fees, deposits and charges, including use and/or connection fees, hook-up fees, standby fees, and/or penalties for discontinued or interrupted service, and the like, for water, gas, heat, electricity, centrally conditioned cold air supply, sewer and sanitation, solid waste disposal and any other service or utility used in or upon or furnished to the leased premises, irrespective of whether Landlord has paid for these services in advance, or otherwise. Landlord, at its sole option, may elect to furnish any or all of the above services on a "rent inclusion basis" without separate charge therefor to Tenant, by metering or otherwise, such charge to be included in the minimum rent payable hereunder, in which event the minimum rent specified in Section 2.01 shall be increased to reflect the value of such service(s) as provided in paragraph (h) below. Alternatively, Landlord, at its sole option, may provide for any or all of such services on a separate-charge basis, and in such event Tenant shall purchase such service(s) from Landlord, and within _____ days after Landlord bills Tenant for any such service Tenant shall pay Landlord such rates, charges and fees, upon terms and conditions as Landlord may establish; provided that, if the rates, charges or fees for any such service are regulated by a public agency, the rates, charges and/or fees to Tenant shall be computed using the maximum rate schedules which would be applicable if Tenant were at the time a direct customer of the applicable public utility corporation. If the cost of any such service for any month has not been made known to Landlord at the time of billing, Landlord shall have the right to estimate the amount thereof, and to base its billing to Tenant upon said estimated amount, and Landlord may adjust such billing when the actual amount is made known to Landlord. Landlord shall also have the right to periodically estimate the monthly amount required to be paid by Tenant to Landlord with respect to any or all of such services provided by Landlord and such estimated monthly amount or amounts shall be paid by Tenant on the first day of each calendar month, in advance, at the place and in the manner specified for payments of minimum rent hereunder. Landlord shall have the right to change such estimated amount or amounts at any time and from time to time, by notice to Tenant. If the total of the estimated monthly payments made by Tenant for any lease year or calendar year shall be less than the actual amount due from Tenant pursuant to the provisions of this Section, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due within _____ days after submission to Tenant of Landlord's statement and invoice therefor; and if the total of the estimated payments made by Tenant for any such year shall exceed the actual amount due from Tenant, the excess amount paid shall be credited against the next payment due from Tenant to Landlord under this Section. Landlord, at its sole option, may require Tenant to install separate, appropriate meters for measuring Tenant's consumption of water, electricity or the like, and may require Tenant to remove any or all such meters upon Landlord's discontinuing the service in question to Tenant. The failure by Tenant to pay when due any amount payable to Landlord under this Section 12.01 shall carry with it the same consequences as failure to pay any installment of rent when due. Notwithstanding the foregoing, if a separate exhibit describing applicable rates for a utility service is attached to this Lease, Tenant shall pay for such service pursuant to such exhibit. SEE ATTACHED RIDER FOR INSERTS (b) In the event Landlord furnishes electricity on a rent inclusion basis as provided above, at such time as Tenant's lighting and electrical equipment has been completely installed, Landlord may, at Landlord's sole option (and to the extent permitted by applicable regulations), cause a survey of Tenant's usage of electricity to be made by an independent electrical consultant selected by Landlord. The consultant shall render a report to Landlord and Tenant showing the estimated amount of electricity which Tenant will consume, the value thereof, and the minimum rent reserved hereunder shall thereupon be increased to reflect such value. Tenant shall promptly pay to Landlord the difference between the minimum rent hereunder and the increased minimum rent as so determined for all months of the term of this Lease which have therefore elapsed, and each monthly installment of rent thereafter paid by Tenant shall be based upon such increased rent. Subject to applicable utility regulations, each party to this Lease shall thereafter have the right whenever such party believes there has been a material increase or decrease in Tenant's regular usage of electric current (that is, a change therein other than on a temporary basis) to request, by notice to the other party, a redetermination of the fair rent value of the electric service then furnished by Landlord. When any such request occurs, the redetermination shall be made as promptly as possible by an independent electrical consultant selected by Landlord, and, based upon its report, the minimum rent theretofore required to be paid hereunder shall thereafter be adjusted to reflect such new fair rent value. Any change or adjustment in such report shall be binding on both Landlord and Tenant. It is agreed that the cost of conducting the redetermination shall be borne solely by the party requesting same. Tenant agrees, on request of Landlord, to execute and deliver from time to time a supplement to this Lease, setting forth the new minimum rent, as then determined as above provided. After the making of the initial survey referred to above, Tenant shall not without prior written notice to Landlord make any alterations in or additions to the electrical equipment and/or appliances in the leased premises. Tenant shall promptly execute a separate utility letter or utility agreement if requested by Landlord or by the applicable utility company. (c) Any furnishing by Landlord of electric current to the leased premises shall be limited to the extent of the capacity of Landlord's existing feeders, switches, risers, wiring installations and other electrical system serving the leased premises (the "electric distribution system"). Tenant agrees that Tenant's use of electrical current will at no time exceed the capacity of the electric distribution system, and that Tenant will not make any alteration or addition to the electric distribution system without Landlord's prior written consent in each instance. (d) In the event that, at any time during the term of this lease, Tenant desires to connect or install any additional electric fixtures, equipment or appliances to the electric distribution system and such fixtures, equipment or appliances require additional electric current which, in combination with Tenant's existing electrical requirements exceeds the capacity of the electric distribution system, then, provided that Landlord shall have consented in writing to such connections or installations, Landlord, upon the written request of Tenant and at the sole cost and expense of Tenant, will S16 29 install any additional riser or risers (and all other equipment necessary and proper in connection therewith) to supply Tenant's electric requirements, but only if such riser or risers (and such other equipment) are necessary to supply Tenant with the electric current required by it and will not cause permanent damage or injury to the leased premises or the regional retail development of which the leased premises form a part or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations, repairs, expense or interference with or disturbance of other tenants or occupants of the regional retail development. Notwithstanding any provisions contained in this Section 12.01, Landlord shall not be obligated to provide any new utility services or increased utility capacities to the leased premises to the extent that the leased premises shall have been previously occupied by another tenant, and, if the leased premises have not been previously occupied, Landlord shall not be obligated to provide any utility services or utility capacities other than as specifically set forth in Exhibit B. Tenant shall promptly advise Landlord of any increase in Tenant's connected load to the electric distribution system. Any additional utility services or any increase in utility capacities beyond that in existence if the leased premises shall have been previously occupied (or beyond the specifications set forth in Exhibit B if the leased premises have not been previously occupied) shall be subject to the prior written approval of Landlord, and such additional services or capacities shall be provided at the sole cost and expense of Tenant. (e) Tenant agrees further to provide and install, at Tenant's sole cost and expense, all lamps, tubes, bulbs, starters, ballasts, transformers and the like items used or required in the leased premises. (f) At any time during the term hereof, Landlord may, upon the thirty (30) days' prior written notice to Tenant, discontinue furnishing electric current (or such other utility being furnished by Landlord) to the leased premises without thereby affecting this lease in any manner or otherwise incurring any liability to tenant, except that the minimum rent reserved herein shall be reduced by the amount then being paid by Tenant on account of Landlord's service of electricity (or such other utility) to the leased premises, determined as provided above (as the same may have been adjusted from time to time pursuant to other provisions of this Article), and Landlord shall no longer be obligated to furnish electric current (or such other utility) to the leased premises. If Landlord shall give Tenant notice of intentions to cease furnishing electric current (or other utility) to the leased premises, Tenant may contract for and receive such electric current (or such other utility) directly from the public utility corporation then serving the Shopping Center, and if Tenant does so, Landlord shall permit Tenant, at Tenant's sole cost, to use Landlord's risers, wiring and electric installations (or other utility conduits, as applicable), then serving the leased premises for such purposes to the extent that the same are available, suitable and may be safely so used consistent with concurrent and anticipated future use by Landlord and other tenants. (g) If at any time after the date hereof, the electrical energy rates (or other utility rates) as filed by the public utility corporation then serving the Shopping Center shall be reduced or increased, or any tax shall be imposed thereon (or subsequently increased or decreased), then the minimum rent reserved herein shall be equitably adjusted as of the first day of the month next following the effective date of such rate change to reflect the resulting reduction or increase in the value of Landlord's service of providing Tenant with electric current (or other utility service) on a rent inclusion basis, but in no event, shall the minimum rent be reduced below the amount stated in Article II hereof. (h) Notwithstanding any other provisions of this Lease, the value of, or (as applicable) the rate for, each utility furnished by Landlord, which utility shall be subject to regulation by a public agency, shall be computed for the purposes of this Lease in accordance with the maximum rate schedules which would be applicable if Tenant were at the time a direct customer of the applicable public utility company serving the Shopping Center (subject to any separate rate schedules for utility services as may be included in the exhibits to this Lease). The value of, or (as applicable) the rate for, any nonregulated utility service provided by Landlord shall be computed at the prevailing rates which would be paid by Tenant for direct comparable service from contractors in the local area, except to the extent that specific rates are otherwise set forth in this Lease. The public utility corporation referred to in this Section 12.01 shall be the utility company named in Exhibit C attached hereto (if any), or the successor to such company or such other company designated by Landlord. (i) Landlord shall not be liable to Tenant for any loss, damage or expense which Tenant may sustain if the quality or character of utilities used upon or furnished to the leased premises are no longer available or suitable for Tenant's requirements, or if said utilities are interrupted as a result of actions by the public utility companies or any other cause and no such change, interruption, or cessation of service shall constitute an eviction of Tenant. SEE ATTACHED RIDER FOR INSERTS (j) Any obligation of Landlord to furnish light, heat, conditioned air, or power or any utility service shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce heat, lighting, air conditioning or other utility services within the regional retail development, including without limitation, the leased premises and the common areas, as required by any mandatory or voluntary fuel or energy saving allocation, or any similar statute, regulation, order or program without such action diminishing Tenant's obligations hereunder. ARTICLE XIII. ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION SECTION 13.01. ESTOPPEL STATEMENT. Tenant shall, without charge, at any time and from time to time, within _____ days after receipt by Tenant of written request therefor from Landlord or from any mortgagee under any mortgage or any beneficiary under any deed of trust on the real property on which the building containing the leased premises is located or of which the leased premises are a part, deliver, in recordable form, a duly executed and acknowledged certificate or statement to the party requesting said certificate or statement or to any other person, firm S17 30 or corporation designated by Landlord certifying: (a) that this Lease is unmodified and in full force and effect, or, if there has been any modification, that the same is in full force and effect as modified, and stating any such modification; (b) the date of commencement of the term of this Lease; (c) that rent is paid currently without any off-set or defense thereto; (d) the dates to which the rent and other charges payable hereunder by Tenant have been paid, and the amount of rent and other charges, if any, paid in advance; (e) whether or not there is then existing any claim of Landlord's default hereunder and, if so, specifying the nature thereof; and (f) any other matters relating to the status of such Lease as shall be requested by Landlord or any such mortgagee or beneficiary from time to time; provided that, in fact, such facts are accurate and ascertainable. Any such certificate or statement by Tenant may, at the election of the requesting party, include Tenant's undertaking not to pay rents or other charges for more than a specified period in advance of the due dates therefor set forth herein. SEE ATTACHED RIDER FOR INSERTS SECTION 13.02. ATTORNMENT. In the event any proceedings are brought for the foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure of, or in the event of exercise of the power of sale under, any mortgage and/or deed of trust made by Landlord covering the leased premises, or in the event Landlord sells, conveys or otherwise transfer its interest in the Shopping Center or any portion thereof containing the leased premises, this Lease shall remain in full force and effect and Tenant hereby attorns to, and covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as the Landlord under this Lease. Payment by or performance of this Lease by any person, firm or corporation claiming an interest in this Lease or the leased premises by, through or under Tenant without Landlord's consent in writing shall not constitute an attornment or create any interest in this Lease or the leased premises. SEE ATTACHED RIDER FOR INSERTS SECTION 13.03. SUBORDINATION. Tenant agreed that this Lease shall, at the request of Landlord, be subordinate to any underlying lease and to any mortgages or deeds of trust that are now, or may hereafter be, place upon the leased premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof, provided that the lessor under any such underlying lease or the mortgagees or beneficiaries named in said mortgages or trust deeds shall agree to recognize the interest of Tenant under this Lease in the event of foreclosure, if Tenant is not then in default. Tenant also agrees that any underlying lessor or mortgagee or beneficiary may elect to have this Lease constitute a prior lien to its underlying lease or mortgage or deed of trust, and in the event of such election and upon notification by such underlying lessor or such mortgagee or beneficiary to Tenant to that effect, this Lease shall be deemed prior in lien to such underlying lease or mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of said underlying lease or mortgage or deed of trust. Tenant agrees that upon the request of Landlord, or any mortgagee or beneficiary, Tenant shall execute whatever instruments may be required by Landlord or by any mortgagee or beneficiary to carry out the intent of this Section. SECTION 13.04. REMEDIES. Failure of Tenant to execute any statements or instruments necessary or desirable to effectuate the foregoing provisions of this Article, within ________ days after written request so to do by Landlord, shall constitute a breach of this Lease. In the event of such failure, Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant any such statements or instruments, which appointment shall be in addition to any other rights or remedies available to Landlord. In addition, for each day beyond the referenced ________ day period that Tenant shall fail to execute said statements or instruments, Tenant shall pay to Landlord ________________________ in order to partially compensate Landlord for the administrative costs and other damages arising from Tenant's failure. Such per diem amount shall be immediately due and payable as additional rent under this Lease. SEE ATTACHED RIDER FOR INSERTS ARTICLE XIV. ASSIGNMENT AND SUBLETTING SECTION 14.01. NO ASSIGNMENT OR SUBLETTING. Notwithstanding any provision herein to the contrary or reference herein to concessionaires or subtenants or otherwise, Tenant agrees not to assign or in any manner transfer this Lease or any estate or interest therein, and not to lease or sublet the leased premises or any part or parts thereof of any right or privilege appurtenant thereto, and not to allow anyone to conduct business at, upon or from the leased premises (whether as concessionaire, franchisee, licensee, permittee, subtenant, department operator or otherwise), or to come in, by, through or under it, in all cases either by voluntary or involuntary act of Tenant or by operation of law or otherwise. Without limiting any of the other provisions contained in this Section 14.01, the restrictions of this Section shall apply to any merger, consolidation or other reorganization of Tenant or of Tenant or of Tenant's Guarantor or of any corporate entity which directly or indirectly controls Tenant, and any such merger, consolidation or other reorganization shall be deemed to be an assignment of this Lease within the meaning of this Section 14.01. The sale, issuance or transfer of any voting capital stock of Tenant or Tenant's Guarantor or any voting capital stock of any corporate entity which directly or indirectly controls Tenant (if any one of such entities, Tenant or Tenant's Guarantor or any such controlling corporate entity, is a corporation the stock of which is not traded on the New York Stock Exchange or the American Stock Exchange), or any interests in any noncorporate entity which directly or indirectly controls Tenant or Tenant's Guarantor which results in a change in the direct or indirect voting control (or a change in the identity of any person, persons, entity or entities with the power to vote or control at least fifty percent (50%) of the voting shares of any class of stock) of Tenant, or Tenant's Guarantor, or any corporate or noncorporate entity which directly or indirectly controls Tenant or Tenant's Guarantor shall be deemed to be an assignment of this Lease within the meaning of this Section 14.01. If Tenant is a partnership, trust or an unincorporated association, then the sale, issuance or transfer of a controlling interest therein, or the transfer of a majority interest in or a change in voting control of any partnership, trust, unincorporated association, or corporation which directly or indirectly controls Tenant, or the transfer of any S18 31 portion of any general partnership or managing interest in Tenant or in any such entity, or any change or conversion of Tenant or of any such entity to a limited liability company, a limited liability partnership, or any other entity which possesses the characteristics of limited liability, shall be deemed to be a prohibited assignment of this Lease within the meaning of this Section 14.01. Any such prohibited act by Tenant or Tenant's Guarantor (or any attempt at same), either voluntarily or involuntarily or by operation of law or otherwise, shall, at Landlord's option, terminate this Lease without relieving Tenant of any of its obligations hereunder for the balance of the stated term, and any such act shall be null and void. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, or the termination thereof by Landlord pursuant to any provision contained herein, shall not work a merger and shall, at the option of Landlord, terminate all or any existing franchises, concessions, licenses, permits, subleases, subtenancies, departmental operating arrangements or the like, or may, at the option of Landlord, operate as an assignment to Landlord of the same. Nothing contained elsewhere in this Lease shall authorize Tenant to enter into any franchise, concession, license, permit, subtenancy, departmental operating arrangement or the like, except pursuant to the provisions of this Section. Landlord has entered into this Lease with Tenant in order to obtain for the benefit of the entire regional retail development the unique attraction of Tenant's trade name set forth in Section 16.01 and the unique merchandising mix and product line associated with Tenant's business as described in Section 7.01, and Landlord has specifically relied on the identity and special skill of the Tenant in its ability to conduct the specific business identified in Section 7.01, and the foregoing prohibition on assignment or subletting or the like is expressly agreed to by Tenant as an inducement to Landlord to lease to Tenant. Tenant hereby acknowledges that the foregoing provisions of this Section 14.01 constitute a freely negotiated restraint on alienation. Without limiting any of the foregoing provisions, neither Tenant nor any other person having an interest in the possession, use, occupancy or utilization of the leased premises shall enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the leased premises which provides for rent or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, used, occupied or utilized (other than an amount based on a fixed percentage or percentages of receipts or sales), and any such purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the leased premises. SEE ATTACHED RIDER FOR INSERTS ARTICLE XV. WASTE SECTION 15.01. WASTE OR NUISANCE. Tenant shall not commit or suffer to be committed any waste upon the leased premises and shall not place a load upon any floor of the leased premises which exceeds the floor load per square foot which such floor was designed to carry. Tenant shall not commit or suffer to be committed any nuisance or other act or thing which may disturb the quiet enjoyment of any other occupant or tenant of the regional retail development. Tenant agrees that business machines and mechanical equipment used by Tenant which cause vibration or noise that may be transmitted to the building or buildings comprising the regional retail development or to the leased premises, to such a degree as to be reasonably objectionable to Landlord or to any occupant, shall be placed and maintained by Tenant at its expense in settings of cork, rubber or spring-type vibration isolators sufficient to eliminate such vibrations or noise. Tenant shall take such action as Landlord reasonably deems necessary to prevent or terminate any such nuisance or waste arising out of Tenant's business, including, without limitation, any nuisance created by employees, agents, contractors, invitees or licensees of Tenant. ARTICLE XVI. TRADE NAME, PROMOTIONAL CHARGE SECTION 16.01. TRADE NAME. Tenant agrees (a) to operate its business in the leased premises under the name specifically set forth in the attached Data Sheet; (b) not to change the advertised name or character of the business operated in the leased premises; and (c) to refer to the Shopping Center by the name set forth in Section 1.01 for the regional retail development in designating the location of the leased premises in all advertising and in all other references to the location of the leased premises. Landlord shall have the right to Tenant's trade name in any public relations, promotional or advertising materials or information. By its execution of this Lease, Tenant authorizes Landlord to Tenant's trade name in the foregoing manner. SEE ATTACHED RIDER FOR INSERTS SECTION 16.02. SOLICITATION OF BUSINESS. Tenant and Tenant's employees and/or agents shall not solicit business in the parking areas or other common areas, or any part of the regional retail development other than in the leased premises, nor shall Tenant distribute any handbills or other advertising matter in the parking area, other common areas, or any part of the regional development other than in the leased premises. Tenant shall not give samples or approach customers outside the leased premises for purposes of soliciting sales. Moreover, and generally, Tenant shall not give away any promotional items which could create a nuisance or require Landlord to incur additional common area expenses. SECTION 16.03. PROMOTIONAL CHARGE. (a) Landlord shall provide or cause to be provided a program of advertising or promotional events which, in Landlord's sole judgment, will serve to promote the regional retail development. Landlord shall be compensated, out of promotional charges collected by Landlord during each year for promotional services provided, in an amount equal to [***] of the promotional charges so collected, on a non-cumulative basis. Landlord shall not be obligated to expend more than is actually collected. Any promotional *** Confidential treatment requested. S19 32 services and personnel so provided shall be under the exclusive control and supervision of Landlord, who shall have the sole authority to employ and discharge personnel and to establish a budget. Tenant agrees to pay to Landlord, as Tenant's share of the cost of said advertising and promotional program, an annual promotional charge which originally shall equal the amount as shown in the Data Sheet for this Lease, which annual promotional charge shall, at Landlord's option, be payable by Tenant in equal monthly installments at the time and in the manner set forth for rent payments in this Lease. However, such annual promotional charge payable by Tenant will be adjusted commencing January 1st immediately succeeding the commencement date of the term of this Lease and annually thereafter, by a percentage equal to the percentage increase from the base period of the Index (as defined in Section 27.20) to the respective January 1st or the closest month thereto that the Index is published (but in no even shall Tenant pay less than the original promotional charge as specified above). The term "base period" shall refer to the month of adjustment in such annual promotional charge closest to and prior to the date of commencement of the term of this Lease (i.e., the most recent month prior to the commencement date during which such promotional charge has been adjusted), or the date of the opening of the Shopping Center, whichever of such dates shall be the later to occur. In addition to this cost of living adjustment, such annual promotional charge may be increased from time to time by Landlord to the extent required by increases in the costs of promotional, public relations or advertising services provided pursuant to this Section (including, without limitation, changes in costs arising from variations in the type, nature or extent of such services). Tenant also agrees to pay to Landlord, within ____days after demand therefor, an initial promotional charge in the amount set forth in the Data Sheet in addition to the foregoing promotional charges. The various promotional charges set forth in this Section 16.03 and in the Data Sheet shall be increased as of the commencement date of the Lease to reflect the then current charges per square foot for Shopping Center tenants. SEE ATTACHED RIDER FOR INSERTS (b) Landlord reserves the right at any time to cease providing promotional services and to cause a Merchants' Association to be formed. Upon the formation of the Association, Landlord will turn over to the Association any funds in its possession, collected from tenants as promotional charges, not spent or required to discharge indebtedness, and less Landlord's compensation due under Section 16.03(a). Thereupon, Landlord shall be relieved of any and all liability to Tenant in connection with such advertising and promotional services. Upon formation of the Association, Tenant shall become a member thereof and will maintain membership in good standing and will abide by the regulations and cooperate in the activities of such Association throughout the term of this Lease and any extensions or renewals thereof. The purpose of the Merchants' Association shall be to encourage its members to deal fairly and courteously with their customers, to follow ethical business practices, and to assist the business of its members by sales promotions and centerwide advertising. If Landlord shall elect to provide promotional services and personnel to formulate and effect an advertising, promotional and public relations program for the Shopping Center, Landlord shall be reimbursed by the Merchants' Association for Landlord's cost of providing such promotional services and personnel, in an amount equal to twenty-five percent (25%) of the annual dues payable to the Merchants' Association. Any promotional services and personnel so provided shall be under the exclusive control and supervision of Landlord, who shall have the sole authority to employ and discharge such personnel. The provisions of this Section 16.03 shall be deemed to be covenants for the benefit of Landlord and said Association as and when formed, and may be enforced by either of them as binding obligations of Tenant. Tenant's obligation for payment of dues to the Association shall be the same sum per month as Tenant was obligated to pay for promotional service prior to the formation of the Association, subject, however, to annual adjustments approved by the Board of Directors of the Association increasing said dues to the extent required by increases in the costs of promotional, public relations and advertising services (including, without limitation, changes in costs arising from variations in the type, nature or extent of such services). In addition, the cost of living adjustment referred to in Section 16.03(a) above with respect to Tenant's monthly payment to Landlord for promotion services shall also apply in the same manner to the Merchants' Association dues. In the event that such a Merchants' Association shall be in operation as of the date of this Lease, the parties hereby acknowledge the present application of this Section 16.03(b). (c) Landlord reserves the right, at any time, to dissolve any Merchants' Association which may exist and to provide, or cause to be provided, a program of advertising and promotional events which, in Landlord's sole judgment, will serve to promote the regional retail development. In the event any such program is so established, it shall be governed by the provisions of Section 16.03(a) hereof, and Tenant's obligations shall be as set forth therein. (d) All recurring payments, charges, dues and assessments (other than the initial assessment) payable under this Section 16.03 shall be due in monthly installments on the first day of each month during the term of this Lease, and all such items, and the initial assessment, shall be paid without deduction or offset. Failure by Tenant to pay all amounts when due shall carry with it the same consequences under Article XIX hereof as Tenant's failure to pay rent. ARTICLE XVII. DESTRUCTION OF LEASED PREMISES SECTION 17.01. RECONSTRUCTION OF DAMAGED PREMISES. In the event the leased premises shall be partially or totally destroyed by fire or other casualty insured under the insurance carried by Landlord pursuant to Section 11.02 of this Lease so as to become partially or totally untenantable, then the damage to the leased premises shall be promptly repaired (unless Landlord shall elect not to rebuild as hereinafter provided), and the minimum rent and (to the extent covered by the insurance carried by Landlord under Section 11.02(b)) other charges payable by Tenant to Landlord (to the extent that such charges are based upon the square foot area of the leased premises) shall be abated in proportion to the floor area of the leased premises rendered untenantable, and the Minimum Gross Sales above which percentage rent is computed and payable shall likewise be proportionately reduced. Payment of full rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business on the ________ day S20 33 following the date that Landlord advises Tenant that the premises are tenantable, unless Tenant opens at an earlier time in the damaged area or remains open in such area following destruction or damage, in which event there shall be no abatement or any such abatement shall terminate as of the date of Tenant's earlier reopening. If Landlord shall elect to cause Tenant to make the necessary repairs to the leased premises, as provided below, payment of full rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business on the ______ day following the date that Landlord advises Tenant of Landlord's election for Tenant to perform such work. Landlord shall be obligated to cause such repairs to be made unless Landlord, at its sole option, elects to cause Tenant to make such repairs, in which event Tenant shall promptly complete the same and Landlord will make available to Tenant for the sole purpose of reconstruction of Tenant's improvements such portion of any insurance proceeds received by Landlord from its insurance carrier, under a policy carried pursuant to Section 11.02 of this Lease, allocated to the leased premises by Landlord. In the event of any such reconstruction by Tenant, an architect duly registered in the State shall be selected by Landlord and direct the payment of such insurance proceeds. Such insurance proceeds shall be payable to Tenant only upon receipt by Landlord of certificates of said architect stating that the payments specified therein are properly payable for the purpose of reimbursing Tenant for expenditures actually made by Tenant in connection with such work. At the election of Landlord or Landlord's mortgagee, direct payments may be made to material suppliers and laborers upon written certification by said architect that such payments are due and payable. Any such insurance proceeds in excess of Tenant's actual expenditures in restoring the damage or destruction shall belong to Landlord. In making repairs, restoration or reconstruction, Tenant, at its expense, shall comply with all laws, ordinances, and governmental rules or regulations, and shall perform all work or cause such work to be performed with due diligence and in a first-class manner. All permits required in connection with said repairs, restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost and expense. Any amount expended by Tenant in excess of such insurance proceeds received by Landlord and made available to Tenant shall be the sole obligation of Tenant. In the event of reconstruction or repair by Landlord, any amount expended by Landlord in repairing the leased premises in excess of the proceeds of insurance received by Landlord pursuant to Section 11.02 of this Lease allocated to the leased premises shall be repayable by Tenant to Landlord within _____ days after receipt by Tenant from Landlord of a statement setting forth the amount of such excess. The party required hereunder to repair the damage to the leased premises shall reconstruct such leased premises in accordance with the working drawings originally approved by Landlord or with new drawings prepared by Tenant and acceptable to Landlord and Tenant. In no event shall Landlord be required to repair or replace Tenant's merchandise, trade fixtures, furnishings or equipment. If (i) more than thirty-five percent (35%) of the floor area of the building in which the leased premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (ii) during the last three (3) years of the term hereof more than twenty-five percent (25%) of the floor area of the leased premises or of the building in which the leased premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (iii) all or any part of the Shopping Center or said building or the leased premises are damaged or destroyed at any time by the occurrence of any risk not insured under the insurance carried by Landlord pursuant to Sections 8.03 or 11.02(a), then Landlord, at its sole option, may terminate this Lease by giving written notice to Tenant of Landlord's election so to terminate, such notice to be given within ninety (90) days after the occurrence of such damage or destruction. If Landlord repairs or rebuilds, or requires Tenant to repair or rebuild the leased premises as herein provided, Tenant, at Tenant's sole cost, shall repair or replace Tenant's merchandise, trade fixtures, furnishings and equipment in a manner and to at least a condition equal to that prior to the damage or destruction thereof. SEE ATTACHED RIDER FOR INSERTS SECTION 17.02. WAIVER OF SUBROGATION. Each party hereto does hereby waive, remise, release and discharge the other party hereto and any officer, director, shareholder, beneficiary, partner, agent, employee or representative of such other party, of and from any liability whatsoever hereafter arising from loss, damage or injury caused by fire or other casualty for which insurance containing a waiver of subrogation is carried by the injured party at the time of such loss, damage or injury to the extent of any recovery by the injured party under such insurance. SEE ATTACHED RIDER FOR INSERTS ARTICLE XVIII. EMINENT DOMAIN SECTION 18.01. TOTAL CONDEMNATION OF LEASED PREMISES. If the whole of the leased premises shall be taken by any public authority under the power of eminent domain or sold to public authority under threat or in lieu of such a taking, then the term of this Lease shall cease as of the day possession shall be taken by such public authority, and the rent shall be paid up to that day with a proportionate refund by Landlord of such rent and other charges as may have been paid in advance for a period subsequent to the date of the taking. SECTION 18.02. PARTIAL CONDEMNATION. (a)(i) If less than the whole but more than twenty percent (20%) of the leased premises or more than fifty percent (50%) of the common areas shall be so taken under eminent domain, or sold to public authority under threat or in lieu of such a taking, Tenant shall have the right either to terminate this Lease and declare the same null and void as of the day possession is taken by public authority, or, subject to Landlord's right of termination as set forth in Section 18.02(b) of this Article, to continue in the possession of the remainder of the leased premises, upon notifying Landlord in writing within _____ days after such taking of Tenant's intention. In the event Tenant elects to remain in possession, all of the terms herein provided shall continue in effect, except that, as of the day possession of such percentage of the leased premises is taken by public authority, the minimum rent and other charges payable by Tenant to Landlord (to the extent that such charges are based upon the square foot area of the leased premises) shall be reduced in proportion to the floor area of the leased premises taken and the Minimum Gross Sales above which percentage rent is computed and payable shall likewise be proportionately reduced; thereafter, Landlord shall, at its own cost and expense, make all necessary repairs or alterations to the basic building, so as to S21 34 constitute the remaining leased premises a complete architectural unit, and Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's improvements, trade fixtures, furnishings and equipment. (ii) If twenty percent (20%) or less of the leased premises shall be so taken, the lease term shall cease only on the part so taken, as of the day possession shall be taken by such public authority, and Tenant shall pay rent and other charges up to that day, with appropriate credit by Landlord (toward the next installment of such rent for charges due from Tenant) of such rent or charges as may have been paid in advance for a period subsequent to the date of the taking; thereafter, the minimum rent and other charges payable to Landlord (to the extent that such charges are based upon the square foot area of the leased premises) shall be reduced in proportion to the amount of the leased premises taken and the Minimum Gross Sales above which percentage rent is computed and payable shall likewise be proportionately reduced. Landlord shall, at its expense, make all necessary repairs and alterations to the basic building, so as to constitute the remaining leased premises a complete architectural unit, and Tenant, at Tenant's sole cost, shall similarly act with respect to Tenant's improvements, trade fixtures, furnishings and equipment. (b) If more than fifty percent (50%) of the building in which the leased premises are located, or more than fifty percent (50%) of the leased premises, or more than fifty percent (50%) of the Shopping Center or of the common areas, shall be taken under power of eminent domain, or sold to public authority under the threat or in lieu of such a taking, Landlord may, by written notice to Tenant delivered on or before the tenth (10th) day following the date of surrendering possession to the public authority, terminate this Lease as of the day possession is taken by public authority. The rent and other charges shall be paid up to the day possession is taken by public authority, with an appropriate refund by Landlord of such rent as may have been paid in advance for a period subsequent to that date. SECTION 18.03. LANDLORD'S AND TENANT'S DAMAGES. All damages awarded for such taking under the power of eminent domain or sale under threat or in lieu of such taking, whether for the whole or a part of the leased premises, shall belong to and be the property of Landlord, irrespective of whether such damages shall be awarded as compensation for diminution in value to the leasehold or to the fee of the leased premises, and Tenant shall have no claim against either Landlord or the condemning authority with respect thereto; provided, however, that Landlord shall not be entitled to any award specifically designated as compensation for, depreciation to, and cost of removal of, Tenant's stock and trade fixtures. SEE ATTACHED RIDER FOR INSERTS ARTICLE XIX. DEFAULT SECTION 19.01. RIGHT TO RE-ENTER. (a) In the event of (1) any failure of Tenant to pay any rent or other charges due hereunder due, or (2) if Tenant shall fail to move into the premises and to commence the conduct of its business date specified in Section 1.02 hereof, or fail to perform any obligation hereunder prior to such commencement date, or fail to continuously operate its business pursuant to Section 7.02 for the purpose specified in Section 7.01 hereof, or fail to operate under the name specified in Section 16.01 hereof, or if Tenant shall abandon said premises, or permit this Lease to be taken under any writ of execution, or if there shall be any default by Tenant (or by any person or entity which, directly or indirectly, controls, is controlled by, or is under common control with Tenant) under any other lease with Landlord (or with any person or entity which is affiliated with Landlord or which, directly or indirectly, controls, is controlled by, or is under common control with Landlord, or which is managed by the managing agent utilized by Landlord for the Shopping Center) which shall not be remedied within the applicable grace period, if any, provided therefor under such other lease, or if there shall be any default by Tenant or any entity affiliated with Tenant with respect to any financing instrument or arrangement, if any, relating to any items used in, or the operation of business upon, the leased premises, or (3) any failure to perform any other of the terms, conditions or covenants of this Lease to be observed or performed by Tenant for more than thirty (30) days after written notice of such default shall have been mailed to Tenant; then Landlord, besides other rights or remedies it may have, shall have the right to declare this lease terminated and the term ended (in which event, this Lease and the term hereof shall expire, cease and terminate with the same force and effect as though the date set forth in any required notice were the date originally set forth herein and fixed for the expiration of the term and Tenant shall vacate and surrender the premises but shall remain liable for all obligations arising during the balance of the original stated term as hereafter provided as if this Lease had remained in full force and effect) and Landlord shall have the right to bring a special proceeding to recover possession from Tenant holding over and/or Landlord may, in any of such events, without notice, re-enter the leased premises either by force or otherwise, and dispossess, by summary proceedings or otherwise, Tenant and the legal representative of Tenant or other occupant of the leased premises and remove their effects and hold the premises as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. SEE ATTACHED RIDER FOR INSERTS (b) In addition to the remedies set forth herein for such failure by Tenant, Landlord shall have the further remedy of erecting a barricade at the storefront of the leased premises at such time as possession of the leased premises is deemed vested in Landlord, which barricade may be erected, at Tenant's expense, and without notice to Tenant or resort to legal process, and without Landlord in any manner becoming liable for any loss or damage which may be occasioned thereby. Notwithstanding the foregoing provisions of this Section, in the event Tenant shall fail to perform or shall default in the performance of term, covenant or condition of this lease on two (2) or more separate occasions during any twelve-month period, then, even though such failures or defaults may have been cured by Tenant, any further failure or default by Tenant during shall be deemed a default without the ability for cure by Tenant. During the continuance of any failure of performance of any default by Tenant in the performance of any term, covenant or condition of this Lease, Tenant shall not be entitled to exercise any rights or options, or to receive any funds or proceeds being held under or pursuant to this Lease, notwithstanding any contrary provisions contained herein. In the S22 35 event of re-entry by Landlord, Landlord may remove all persons and property from the leased premises and such property may be stored in a public warehouse or elsewhere at the cost of, and for the account of Tenant, with notice resort to legal process and without Landlord being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby. In addition, and to the extent permitted by law, in the event of re-entry by Landlord, Landlord may, but shall not be required to, padlock or otherwise secure the entrances to the leased premises without prior notice or resort to legal process and without being deemed guilty of trespass or becoming liable for any loss or damage; all costs and expenses incurred by Landlord in securing the entrances to the leased premises shall be borne by Tenant and shall be payable to landlord on ____ days' written notice; and any such padlocking or securing of the premises shall not constitute or be deemed as an election on Landlord's part to terminate this Lease unless a written notice of such intention shall be given to Tenant or unless the termination of this Lease is decreed by a court of competent jurisdiction. In the event Tenant shall not remove its property from the leased premises within ten (10) days after Tenant has vacated the premises, then such property shall be deemed abandoned by Tenant and Landlord may dispose of the same without liability to Tenant. To the extent that this Lease specifically provides for any abatement of rent otherwise payable by Tenant under this Lease, or any payment by Landlord to Tenant, such abatement shall not be effective, nor shall such payment be required to be made, if Tenant shall have failed to observe or perform any of Tenant's obligations hereunder or if Tenant shall otherwise be in default hereunder, and Tenant shall be obligated to immediately repay to Landlord the amount of any rent previously abated or the amount of any payment previously made by Landlord to Tenant hereunder, notwithstanding anything contained in this Lease to the contrary. See Attached Rider For Inserts SECTION 19.02. RIGHT TO RELET. Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided for by law, it may either terminate this Lease or it may from time to time, without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the premises, and relet said premises or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rent and upon such other terms and conditions as Landlord in its sole discretion may deem advisable. Upon each such reletting all rents and other sums received by Landlord from such reletting shall be applied, first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including reasonable brokerage fees and attorneys' fees and the costs of any alterations and repairs; third, to the payment of rent and other charges due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. If such rents and other sums received from such reletting during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay such deficiency to Landlord; if such rents and the sums shall be more, Tenant shall have no right to, and shall receive no credit for, the excess. Such deficiency shall be calculated and paid monthly. No re-entry or taking possession of the leased premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time elect to terminate this Lease for such previous breach. Should Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from Tenant all damages it may incur by reason of such breach, including the cost of recovering the leased premises, reasonable attorneys' fees, and including the worth at the time of such termination of the excess, if any, of the amount of rent and charges equivalent to rent reserved in this Lease for the remainder of the stated term over the then reasonable rental value of the leased premises for the remainder of the stated term, all of which amounts shall be immediately due and payable from Tenant to Landlord. In determining the rent which would be payable under this Lease by Tenant subsequent to default, the percentage rent for each year of the unexpired portion of the term shall be equal to the average percentage rent payable by Tenant from the commencement of the term to the time of default, or during the preceding three (3) full lease years, whichever period is shorter. The failure or refusal of Landlord to relet the premises shall not affect Tenant's liability. The terms "entry" and "re-entry" are not limited to their technical meanings. Nothing contained in this Lease shall be construed to limit or prejudice the right of Landlord to prove for and obtain as damages by reason of the termination of this Lease or re-entry of the leased premises for the default of Tenant under this Lease an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount shall be greater than any of the sums referred to in this Section 19.02. See Attached Rider For Inserts SECTION 19.03. EXPENSES. In case suit shall be brought for recovery of possession of the leased premises, for the recovery of rent or any other amount due under the provisions of this Lease, or because of the breach of any other covenant herein contained on the part of Tenant to be kept and performed, and a breach shall be established, Tenant shall pay to Landlord all expenses incurred therefor, including reasonable attorneys' fees. In addition, in the event Landlord shall incur expenses, including reasonable attorneys' fees, as a result of Tenant's failure to perform or comply with any term, covenant or condition set forth in this Lease, Tenant shall pay to Landlord all such expenses. Any amounts payable by Tenant to Landlord pursuant to this Section 19.03 or Section 11.03 of this Lease may be included in any subsequent monthly rent bill to Tenant, and the failure of Tenant to promptly pay same shall entitle Landlord to all remedies for failure to pay rent as available under this Lease or at law or in equity. SECTION 19.04. WAIVER OF COUNTERCLAIMS AND TRIAL BY JURY. Landlord and Tenant waive their right to trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use of or occupancy of said premises, and any S23 36 emergency statutory or any other statutory remedy. Tenant shall not interpose any counterclaim or counterclaims or claims for set-off, recoupment or deduction of rent in a summary proceeding for nonpayment of rent or other action or summary proceeding based on termination, holdover or other default in which Landlord seeks repossession of the leased premises from Tenant. SEE ATTACHED RIDER FOR INSERTS ARTICLE XX. BANKRUPTCY OR INSOLVENCY SECTION 20.01. TENANT'S INTEREST NOT TRANSFERABLE. Neither Tenant's interest in this Lease, nor any estate hereby created in Tenant nor any interest herein or therein, shall pass to any trustee, except as may specifically be provided pursuant to the Bankruptcy Code (11 USC Section 101 et. seq.), or to any receiver or assignee for the benefit of creditors or otherwise by operation of law. SECTION 20.02. TERMINATION. In the event the interest or estate created in Tenant hereby shall be taken in execution or by other process of law, or if Tenant or Tenant's Guarantor, if any, or Tenant's executors, administrators, or assigns, if any, shall be adjudicated insolvent or bankrupt pursuant to the provisions of any state law or an order for the relief of such entity shall be entered pursuant to the Bankruptcy Code, or if a receiver or trustee of the property of Tenant or Tenant's Guarantor, if any, shall be appointed by reason of the insolvency or inability of Tenant or Tenant's Guarantor, if any, to pay its debts, or if any assignment shall be made of the property of Tenant or Tenant's Guarantor, if any, for the benefit of creditors, then and in any such events, this Lease and all rights of Tenant hereunder shall automatically cease and terminate with the same force and effect as though the date of such event were the date originally established herein and fixed for the expiration of the term, and Tenant shall vacate and surrender the leased premises but shall remain liable as herein provided. Notwithstanding the foregoing provisions of this Section, in the event that such termination shall result solely from the bankruptcy or insolvency of, or such other described event relating to, Tenant's Guarantor, Landlord shall have the option to reinstate all of the provisions of this Lease (including, without limitation, the obligation of Tenant to continuously operate pursuant to Article VII hereof) upon written notice to Tenant. SECTION 20.03. TENANT'S OBLIGATION TO AVOID CREDITORS' PROCEEDINGS. Tenant or Tenant's Guarantor, if any, shall not cause or give cause for the appointment of a trustee or receiver of the assets of Tenant or Tenant's Guarantor, if any, and shall not make any assignment for the benefit of creditor, or become or be adjudicated insolvent. The allowance of any petition under any insolvency law except under the Bankruptcy Code or the appointment of a trustee or receiver of Tenant or Tenant's Guarantor, if any, or of the assets of either of them, shall be conclusive evidence that Tenant caused, or gave cause, therefor, unless such allowance of the petition, or the appointment of a trustee or receiver, is vacated within thirty (30) days after such allowance or appointment. Any act described in this Section 20.02 shall be deemed a material breach of Tenant's obligations hereunder, and this Lease shall thereupon automatically terminate in the same manner and with the same force and effect as set forth in Section 20.02 hereof. Landlord does, in addition, reserve any and all other remedies provided in this Lease or in law. Notwithstanding the foregoing provisions of this Section, in the event that such termination shall result solely from the bankruptcy or insolvency of, or such other described event relating to, Tenant's Guarantor, Landlord shall have the option to reinstate all of the provisions of this Lease (including, without limitation, the obligation of Tenant to continuously operate pursuant to Article VII hereof) upon written notice to Tenant. SECTION 20.04. RIGHTS AND OBLIGATIONS UNDER THE BANKRUPTCY CODE. (a) Upon the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor as a debtor in possession, and any trustee who may be appointed agree as follows: (i) to perform each and every obligation of Tenant under this Lease including, but not limited to, the manner of "operation" as provided in Section 7.02 of this Lease until such time as this Lease is either rejected or assumed by order of the United States Bankruptcy Court; (ii) to pay monthly in advance on the first day of each month, as reasonable compensation for use and occupancy of the leased premises, an amount equal to all minimum rent and other charges otherwise due pursuant to this Lease and to pay percentage rent monthly at the percentage set forth in this Lease for the lease year in which such month falls on all sales during such month in excess of one twelfth (1/12th) of the Minimum Gross Sales for such lease year, with payment of all such percentage rent to be made by the tenth (10th) day of the succeeding month; (iii) to reject or assume this Lease within sixty (60) days of the appointment of such trustee under Chapter 7 of the Bankruptcy Code or within sixty (60) days (or such shorter term as Landlord, in its sole discretion, may deem reasonably, so long as notice of such period is given) of the filing of a petition under any other Chapter; provided that no extension of either of the foregoing periods by or on behalf of Tenant shall be permitted; (iv) to give Landlord at least forty-five (45) days' prior written notice of any proceeding relating to any assumption of this Lease; (v) to give at least thirty (30) days' prior written notice of any abandonment of the leased premises, with any such abandonment to be deemed a rejection of this Lease and an abandonment of any property not previously removed from the leased premises; (vi) to do all other things of benefit to Landlord otherwise required under the Bankruptcy Code; (vii) to be deemed to have rejected this Lease in the event of the failure to comply with any of the above; and (viii) to have consented to the entry of an order by an appropriate United States Bankruptcy Court providing all of the above, waiving notice and hearing of the entry of same. (b) No default of this Lease by Tenant, either prior to or subsequent to the filing of such a petition, shall be deemed to have been waived unless expressly done so in writing by Landlord. (c) It is understood and agreed that this is a Lease of real property in a shopping center and that, therefore, Section 365(b)(3) of the Bankruptcy Code is applicable to any proposed assumption of this Lease in a bankruptcy case. S24 37 (d) Included within and in addition to any other conditions or obligations imposed upon Tenant or its successor in the event of assumption and/or assignment are the following: the cure of any monetary defaults and the reimbursement of pecuniary loss immediately upon entry of a court order providing for assumption and/or assignment; (ii) the deposit of an additional sum equal to three (3) months' rent to be held pursuant to the terms of Section 26.01 of this Lease (notwithstanding any alteration or modification of the terms of said Section); (iii) the use of the leased premises as set forth in Section 7.01 of this Lease and the quality, quantity and/or lines of merchandise of any goods or services required to be offered for sale are unchanged; (iv) the payment of any sums which may then be due or which may thereafter become due pursuant to the provisions of Section 2.04 this Lease; (v) the debtor, debtor in possession, trustee, or assignee of such entity demonstrates in writing that it has sufficient background including, but not limited to, substantial retailing experience in shopping centers of comparable size and financial ability to operate a retail establishment out of the leased premises in the manner contemplated in this Lease, and meets all other reasonable criteria of Landlord as did Tenant upon execution of this Lease; (vi) the prior written consent of any mortgagee to which this Lease has been assigned as collateral security; and (vii) the premises, at all times, remains a single store and no physical changes of any kind may be made to the premises unless in compliance with the applicable provisions of this Lease. (e) Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption. ARTICLE XXI. ACCESS BY LANDLORD SECTION 21.01. RIGHT OF ENTRY. Landlord or Landlord's agents shall have the right to enter the leased premises at all reasonable times to examine the same and to show them to prospective purchasers or mortgagees. Landlord or Landlord's agents shall have the further right to enter the leased premises to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable, irrespective of whether the work shall be for the leased premises or for other premises or facilities, and Landlord shall be allowed to take all material into and upon the leased premises that may be required therefor without the same constituting an eviction of Tenant in whole or in part, and the rent and other charges reserved shall in no wise abate while said repairs, alterations, improvements, or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise. Landlord may, at any time, exhibit the leased premises to prospective tenants. If an excavation shall be made upon land adjacent to the leased premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the leased premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which leased premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Landlord, or diminution or abatement of rent. SEE ATTACHED RIDER FOR INSERTS ARTICLE XXII. TENANT'S PROPERTY SECTION 22.01. TAXES ON TENANT'S PROPERTY. Tenant shall be responsible for, and shall pay, prior to delinquency, any and all taxes, assessments, levies, fees and other governmental charges of every kind or nature (for all purposes under this Lease, collectively called "taxes") levied or assessed by municipal, county, state, federal or other taxing or assessing authority upon, against or with respect to (i) the leased premises or any leasehold interest, (ii) all furniture, fixtures, equipment and any personal property of any kind owned by Tenant or any previous tenant and occupant, and placed, installed or located in, within, upon or about the leased premises, (iii) all alterations, additions or improvements of whatsoever kind or nature, if any, made to the leased premises, by Tenant or any previous tenant or occupant, and (iv) rents or other charges payable by Tenant to Landlord, irrespective of whether any of the terms described in clauses (i) through (iv) above are assessed against real or personal property, and irrespective of whether any of such items are assessed to or against Landlord or Tenant. If at any time during the term of this Lease any of such taxes are not levied and assessed separately and directly to Tenant (for example, if the same are levied or assessed to Landlord, or upon or against the building containing the leased premises and/or the land underlying said building), Tenant shall pay to Landlord Tenant's share thereof as determined by Landlord. SECTION 22.02. LOSS AND DAMAGE. Landlord shall not be responsible or liable to Tenant for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connected with the premises hereby leased or any part of the building of which the leased premises are a part, or any other area in the regional retail development, or for any loss or damage resulting to Tenant or its property from bursting, stoppage or leaking of water, gas, sewer or steam pipes, or (without limiting the foregoing) for any damages or loss of property within the leased premises from any cause whatsoever. SEE ATTACHED RIDER FOR INSERTS SECTION 22.03. NOTICE BY TENANT. Tenant shall give notice to Landlord in case of any damage to or destruction of all or any part of, or accidents in, the leased premises or of defects therein or in alterations, decorations, additions or improvements, including, without limitation, any fixtures or equipment. SEE ATTACHED RIDER FOR INSERTS S25 38 ARTICLE XXIII. HOLDING OVER SECTION 23.01. HOLDING OVER. Any holding over after the expiration of the term hereof with the consent of the Landlord, shall be construed to be a tenancy from month to month at a monthly at a monthly minimum rent of not less than ______ the annual minimum rent effective for the final lease year or partial lease year preceding expiration of the term (subject to further adjustment pursuant to the various provisions of this Lease, including, without limitation, Section 2.04), together with an amount estimated by Landlord for the monthly additional charges payables pursuant to this Lease, and shall otherwise be on the same terms and conditions (including, without limitation, payment of percentage rent) as herein specified so far as applicable, subject to any changes in any of the foregoing terms or conditions as may be submitted by Landlord to Tenant. Any holding over without Landlord's consent shall entitle Landlord to re-enter the leased premises as provided in Section 19.01 of this Lease. SEE ATTACHED RIDER FOR INSERTS SECTION 23.02. SUCCESSORS. All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors, and assigns of the said parties; and if there shall be more than one person or entity comprising Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant. ARTICLE XXIV. RULES AND REGULATIONS SECTION 24.01. RULES AND REGULATIONS. Tenant agrees to comply with and observe all rules and regulations established by Landlord from time to time, provided the same shall apply uniformly to all tenants of the Shopping Center. Tenant's failure to keep and observe said rules and regulation shall constitute a breach of the terms of this Lease in the same manner as if the rules and regulations were contained herein as covenants. In the case of any conflict between said rules and regulations and this Lease, this Lease shall be controlling. ARTICLE XXV. QUIET ENJOYMENT SECTION 25.01. LANDLORD'S COVENANT. Upon payment by Tenant of the rents herein provided, and upon the observance and performance of all covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the leased premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease and any mortgage, deed of trust underlying lease to which this Lease is subordinate. SECTION 25.02. TENANT'S COVENANT. Tenant hereby acknowledges and agrees that Landlord has specifically relied upon the identity, skill, product line, and trade name of Tenant in entering into this Lease with Tenant. Tenant recognizes that its use of the leased premises in accordance with the use clause set forth in the Data Sheet and its compliance with the particular provisions of Article VII hereof, regarding the conduct and continuous operation of Tenant's business in the leased premises throughout the term of this Lease, forms a material inducement to Landlord, Tenant specifically covenants that it will strictly adhere to these provisions. Any ambiguities in Article VII or in the use clause set forth in the Data Sheet shall be construed against Tenant. Tenant further acknowledges and agrees that any indebtedness from Tenant to Landlord existing as of the date of this Lease shall be deemed additional rent hereunder, and Tenant's commitment and obligation to pay all such indebtedness as additional rent under this Lease has formed an additional necessary consideration to Landlord in entering into this Lease and in hereby granting Tenant the right to use the leased premises as set forth herein. SEE ATTACHED RIDER FOR INSERTS ARTICLE XXVI. SECURITY PROVISION SECTION 26.01. SECURITY. The amount set forth in the Data Sheet as a security deposit is payable by Tenant, upon the execution of this Lease by Tenant, in the manner and at the place where minimum rent is payable. Landlord is to retain said amount as security for the faithful performance of all covenants, conditions and agreements of this Lease. Such amount is occasionally referred to here as the "Security". Landlord may, at its option, apply the security to remedy defaults in the payment of any rent or other charge hereunder, to repair damages to the leased premises caused by Tenant, or to clean the leased premises upon the expiration or termination of this Lease; in no event however, shall Landlord be obligated so to apply the security. Landlord's right to bring a special proceeding to recover or otherwise to obtain possession of the leased premises before or after Landlord's declaration of the termination of this Lease for nonpayment of rent or for any other reason shall not in any event be affected by reason of the fact that Landlord holds such security. Such security, if not applied toward the payment of rent in arrears or toward the payment of damages suffered by Landlord by reason of Tenant's breach of the covenants, conditions and agreements of this Lease, is to be returned to Tenant without interest, except as provided by law, when this Lease is terminated according to its terms, but in no event is such security to be returned until Tenant has vacated the leased premises and delivered possession thereof to Landlord. In the event that Landlord repossesses itself of the leased premises, whether by special proceeding or re-entry or otherwise, because of Tenant's default or failure to carry out the covenants, conditions and agreements of this Lease, Landlord may apply such security upon all damages suffered to the date of said repossession S26 39 and may retain the security to apply upon such damages as may be suffered or shall accrue thereafter by reason of Tenant's default or breach. In the event any bankruptcy, insolvency, reorganization or other creditor-debtor proceedings shall be instituted by or against Tenant, or its successors or assigns, or any guarantor of Tenant hereunder, such security shall be deemed to be applied first to the payment of any rents and/or other charges due Landlord for all periods prior to the institution of such proceedings, and the balance, if any, of such security may be retained by Landlord in partial liquidation of Landlord's damages. Landlord shall not be obligated to keep such security as a separate fund but may commingle the security with its own funds. In the event Landlord applies the security in whole or in part, Tenant shall, upon demand by Landlord, deposit sufficient funds to maintain the security in the initial amount. Failure of Tenant to deposit such additional security shall entitle Landlord to avail itself of the remedies provided in this Lease for nonpayment of rent by Tenant. The acceptance by Landlord of the security deposit submitted by Tenant shall not render this Lease effective unless and until Landlord shall have executed and actually delivered to Tenant a fully-executed copy of this Lease. ARTICLE XXVII. MISCELLANEOUS SECTION 27.01. WAIVER; ELECTION OF REMEDIES. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. In particular, but without limitation, if Tenant assigns or transfers its interest in this Lease contrary to the terms of this Lease, any acceptance by Landlord of such assignee's or transferee's payment shall not be deemed to be a waiver of the restrictions set forth in Section 14.01 hereof. In the event that Tenant shall be at any time in default of both monetary and nonmonetary terms, covenants or conditions of this Lease, any acceptance by Landlord of any payment rendered by Tenant shall not have the effect of curing Tenant's nonmonetary defaults and shall not have the effect of curing any monetary default other than the particular amount owing for which such payment is specifically accepted by Landlord. Following notice of termination or other remedy exercised by Landlord with respect to any monetary default of Tenant, such default shall not be deemed cured by the payment of rent owing by Tenant for the current period only, and Landlord may apply such payments to current rent only without any effect upon Tenant's existing indebtedness and continuing monetary default, notwithstanding any contrary instructions by or on behalf of Tenant, which instructions shall be null and void and of no effect. In addition, after the service of notice or the commencement of a suit, or after final judgment for the possession of the leased premises, Landlord may receive and collect rent due from Tenant, and the payment of rent by Tenant shall not waive or affect said notice or suit or judgment. One or more waivers of any covenant or condition by landlord shall not be construed as a waiver of a subsequent breach of the same covenant or condition, and the consent or approval by Landlord to or of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary Landlord's consent or approval to or of any subsequent similar act by Tenant. The failure of Landlord to insist upon a strict performance of any term, condition or covenant contained in this Lease shall not be deemed a waiver of any rights or remedies that Landlord may have and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions or covenants herein contained, and any such failure shall not be construed as creating a custom of Landlord's accepting other than strict performance or as modifying in any way the terms, covenants or conditions of this Lease. No breach by Tenant of a covenant or condition of this lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord. No act or thing done by Landlord or Landlord's agents shall be deemed an acceptance of surrender of the leased premises and no agreement to accept such surrender shall be valid unless in writing signed by Landlord. In addition to any and all other remedies available to Landlord, Landlord may obtain an injunction to restrain any breach or threatened breach of any term, covenant or condition of this Lease. The rights and remedies of Landlord under this Lease or under any specific section, subsection or clause hereof shall be cumulative and in addition to any and all other rights and remedies which Landlord has or may have elsewhere under this Lease or at law or equity, whether or not such section, subsection or clause expressly so states. Nothing contained in this Lease shall be construed to confer upon any person or entity other than Landlord or Tenant any rights, benefits or causes of action, except to the extent specifically otherwise provided in this Lease and except to the extent provided for the benefit of any mortgage, deed-of-trust beneficiary, ground lessor or trustee for the Shopping Center. SECTION 27.02. ENTIRE AGREEMENT. The Addendum, and all exhibits, and riders, if any, attached hereto form a part of this Lease and shall be given full force and effect, as fully as if set forth at length herein. This Lease and said Addendum, exhibits, and riders, if any, so attached hereto and forming a part hereof, set forth all the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the leased premises, and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them other than as are herein set forth. Tenant has not relied upon any representation of Landlord or its agents, other than any items contained in this Lease, as an inducement to enter into this Lease. No alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by each party. SECTION 27.03. INTERPRETATION AND USE OF PRONOUNS. Nothing contained herein shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties herein shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant. Whenever herein the singular number is used the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. S27 40 SECTION 27.04. DELAYS. In the event that either party hereto shall be delayed in the performance of its initial construction or maintenance and/or repair obligations by reason of strikes, lockouts, labor troubles, inability to procure materials or shall at any time be so delayed by reason of failure of power, restrictive governmental laws or reasons of a similar nature not the fault of the party delayed performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. Nothing contained in this Section shall excuse Tenant from the continuous operation of its business in the leased premises in accordance with the provisions of Section 7.01 and 7.02 hereof. The provisions of this Section 2704 shall not operate to delay the commencement of the term of this Lease or to excuse Tenant from payment of minimum rent, percentage rent or any other payments required by the is Lease or to excuse Tenant from payment of minimum rent, percentage rent or any other payments required by the terms of this Lease; provided, however, that the obligation of Tenant to open for business pursuant to Section 1.03 hereof may be delayed pursuant to the provisions of this Section 27.04. Further, Landlord's reduction of heat, light, air conditioning, or any other services whatsoever to the Shopping Center because of any similar or dissimilar event constituting a cause for excusable delay hereunder shall not relieve Tenant from its obligations under Article VII of this Lease. See Attached Rider For Inserts SECTION 27.05. NOTICES. Unless specifically stated to the contrary in this Lease, any notice, demand, request or other instrument which may be oris required to be given by Tenant under this Lease or by law shall be sent by United States certified mail, return receipt requested, postage prepaid, and shall be deemed to have been give as of the third day following receipt of same by Landlord; or, if required to be given by Landlord under this Lease or by law, such notice, demand, request or other instrument may be sent by certified mail, by regular mail, by overnight courier (using Federal Express, United Parcel Service, or a similar reputable courier service), by personal delivery or by other comparably reliable means, and shall be deemed to have been given upon the date of and shall be addressed (a) if to Landlord, at the address set forth for Landlord on Page D1 of this Lease or at such other address as Landlord may designate by written notice, Attention Lease Administration, together with copies thereof to such other parties designated by Landlord, and (b) if to Tenant, at the leased premises the address set forth for Tenant on Page D1 of this Lease, or such other address as Tenant shall designate by written notice. All notices give from Landlord to Tenant, including without limitation, notices of default and/or termination of Tenant's interest under this Lease, may be given by Landlord's attorney acting as agent on behalf of Landlord. See Attached Rider For Inserts SECTION 27.06. CAPTIONS AND SECTION NUMBERS. The captions, section numbers, article numbers, and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such sections or articles of this Lease, nor in any way affect this Lease. SECTION 27.07. BROKER'S COMMISSION. Each party represents and warrants to the other party that the warrantor has dealt with no brokers and that there are no claims for brokerage commissions or finder's fees, nor will there by any such claim, arising from any act or omission of the warrantor in connection with this Lease, and the warrantor agrees to indemnify the other party and hold it harmless from all liabilities arising from any such claim, including, without limitation, the cost of attorneys' fees in connection therewith. Such agreement shall survive the termination of this Lease. SECTION 27.08. RECORDING. Tenant shall not record this Lease or any memorandum, affidavit or other notice of this Lease. SECTION 27.10. LANDLORD'S USE OF COMMON AREAS. Landlord reserves the right, from time to time, to utilize portions of the common areas for carnival type shows, rides and entertainment, outdoor shows, displays, automobile and other product shows, the leasing of permanent and temporary kiosks, or such other uses which in Landlord's judgement tend to attract the public. Further, Landlord reserves the right to utilize the lighting standards and other areas in the parking facilities for advertising purposes. Any revenues derived by Landlord from the use of the common areas, whether from usage fees or other wise, shall not be applied as a deduction against any cost or expense required to be paid by Tenant under this Lease. See Attached Rider For Inserts SECTION 27.11. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer or transfers of Landlord's interest in the premises including a so-called sale-leaseback, the transferor shall be automatically relieved of any and all obligations on the part of Landlord accruing from and after the date of such transfer, provided that (a) the interest of the transferor, as Landlord, in any funds then in the hands of Landlord in which tenant has an interest shall be turned over, subject to such interest, to the then transferee; and (b) notice of such sale, transfer or lease shall be S28 41 delivered to Tenant as required by law. Upon the termination of any such lease in a sale-leaseback transaction prior to termination of this Lease, the former lessee thereunder shall become and remain liable as Landlord hereunder until a further transfer. No holder of a mortgage or deed of trust, or underlying lessor on an underlying lease, to which this Lease is or may be subordinate, and no lessor under a so-called sale-leaseback shall be responsible in connection with the security deposited hereunder, unless such mortgagee, holder of such deed of trust, underlying lessor or lessor shall have actually received the security deposited hereunder. SECTION 27.12. FLOOR AREA. (a) The term "floor area" as used in this Lease means, with respect to any leasable area in the Shopping Center or in the regional retail development, the aggregate number of square feet of floor space of all floor levels therein, including any mezzanine space (to the extent reflected as floor area in the applicable leases), measured from (i) the outside faces of all perimeter walls thereof other than any party wall separating such premises from other leasable premises, (ii) the center line of any such party wall, (iii) the outside face of any interior wall, and (iv) the building and/or leaseline adjacent to any entrance to such premises. In the event Landlord determines that the square foot area of the leased premises is at variance with the square foot area stated in this Lease, Landlord may, at its option, adjust the floor area of the leased premises and make proportional adjustments in minimum rent, percentage rent, and promotional/Merchants' Association charges, and other charges to Tenant under this Lease. (b) For the purpose of this Lease, in determining the gross leasable floor area or the gross leased and occupied floor area of the Shopping Center, there shall be excluded therefrom, at the sole option of Landlord, the leasable area of 20,000 square feet or more occupied by a single entity (which, for purposes of this Lease, shall be defined as a department store), the floor area of any premiss leased for the operation of a post-office type or packaging or delivery facility or other public/consumer-service or governmental facility, the floor area of any space without direct customer access from the enclosed Mall, and the total floor area utilized by Landlord for the operation of a skating rink or other recreational area, child care center, community room, library, project offices, and related rooms, common areas and project areas, which shall be deemed amenities to the Shopping Center. The term "gross leased and occupied floor area" shall include only such areas as are leased and occupied by tenants subsequent to the dates of commencement of the terms of their respective leases. Areas shall not be considered occupied to the extent that Landlord shall not be receiving full proportionate share contributions for the same. No deduction or exclusion from floor area shall be made by reason of columns, ducts, stairs, elevators, escalators, shafts, or other interior construction or equipment. SEE ATTACHED RIDER FOR INSERTS SECTION 27.13. INTEREST ON PAST DUE OBLIGATIONS. Any amount due from Tenant to Landlord hereunder which is not paid when due (including, without limitation, amounts due as reimbursement to Landlord for costs incurred by Landlord in performing obligations of Tenant hereunder upon Tenant's failure to so perform) shall bear interest at the rate from the date due until paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. SEE ATTACHED RIDER FOR INSERTS SECTION 27.14. LIABILITY OF LANDLORD. If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed, and if as a consequence of such default Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right, title and interest of Landlord in the Shopping Center and out of net income from such property received by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Shopping Center, subject, nevertheless, to the rights of Landlord's mortgagee, and neither Landlord, nor the individuals or entities which constitute the partners of the partnership which is Landlord, nor the individuals or entities which constitute the partners of the partnership which is the beneficiary of the Trust of which Landlord is Trustee (if applicable), shall be liable for any deficiency. If Landlord is identified in this Lease as a Trustee, Tenant hereby recognizes that Landlord is executing this Lease as Trustee under an express trust, and it is expressly understood and agreed by and between the parties hereto, anything herein to the contrary notwithstanding, that each and all of the representations, covenants, undertakings and agreements herein made on the part of the Landlord while in form purporting (except as herein otherwise expressed) to be the representations, covenants, undertakings, and agreements of the Landlord are nevertheless each and every one of them, made and intended not as personal representations, covenants, undertakings and agreements by the Landlord or for the purpose of with the intention of binding said Landlord personally but are made and intended for the purpose of binding only that portion of the trust property specifically leased hereunder, and this Lease is executed and delivered by said Landlord not in its own right, but solely in the exercise of the powers conferred upon it as such Trustee; that no duty shall rest upon Landlord to sequester the trust estate or the rents, issues and profits arising therefrom, or the proceeds arising from any sale or other disposition thereof; and that no personal liability or personal responsibility is assumed by nor shall at any time be asserted or enforceable against Trustee, or any successor trustee or any of the beneficiaries under said trust, on account of this Lease or on account of any representation, covenant, undertaking or agreement of the said Landlord in this Lease contained, either expressed or implied, all such personal liability, if any, being expressly waived and released by the Tenant herein and by all persons claiming by, through or under said Tenant. SECTION 27.15. ACCORD AND SATISFACTION. Payment by Tenant or receipt by Landlord of a lesser amount than the rent or other charges herein stipulated may be, at Landlord's sole option, deemed to be on account of the earliest due stipulated rent or other charges, or deemed to be on account of rent owing for the current period only, notwithstanding any instructions by or on behalf of Tenant to the contrary, which instructions shall be null and void, and no endorsement or statement on any check or any letter accompanying any check payment as rent or other charges shall be deemed an accord and satisfaction, and Landlord shall accept such check or payment without prejudice to Landlord's S29 42 right to recover the balance of such rent or other charges or pursue any other remedy in this Lease or in law or in equity against Tenant. SECTION 27.16. EXECUTION OF LEASE; NO OPTION. The submission of this Lease to Tenant shall be for examination purposes only, and does not and shall not constitute a reservation of or option for Tenant to lease, or otherwise create any interest of Tenant in the leased premises or any other premises situated in the Shopping Center. Execution of this Lease by Tenant shall be irrevocable. The return to Landlord of Tenant-executed copies of this Lease shall not be binding upon Landlord, notwithstanding any reparation or anticipatory reliance or expenditures by Tenant or any time interval, until Landlord has in fact executed and actually delivered a fully-executed copy of this Lease to Tenant. SEE ATTACHED RIDER FOR INSERTS SECTION 27.17. GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the State. If any provision of this Lease or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease shall not be affected thereby and each remaining provision of the Lease shall be valid and enforceable to the full extent permitted by the law. Tenant appoints the following persons at the following locations as agent to receive service of process, writs, notices, summonses, or other legal documents in any suit, action or proceeding which Landlord may commence against Tenant: any officer, partner or other principal of Tenant, or any person in charge, at the Tenant's address as set forth in Page D1 of this Lease. Where permitted by law or local court rule, Tenant consents to service of such process by United State mail, in the manner specified in the applicable law or court rule. SECTION 27.18. SPECIFIC PERFORMANCE OF LANDLORD'S RIGHTS. Landlord shall have the right to obtain specific performance of any and all of the covenants or obligations of Tenant under this Lease, and nothing contained in this Lease shall be construed as or shall have the effect of abridging such right. SECTION 27.19. CERTAIN RULES OF CONSTRUCTION. Time is of the essence in this Lease. Notwithstanding the fact that certain references elsewhere in this Lease to acts required to be performed by Tenant hereunder omit to state that such acts shall be performed at Tenant's sole cost and expense, unless the context clearly implies to the contrary, each and every act to be performed or obligations to be fulfilled by Tenant pursuant to this Lease shall be performed or fulfilled at Tenant's sole cost an expense. Any breach or default by Tenant of its obligations under this Lease shall be deemed material. Tenant shall be fully responsible and liable for the observance and compliance by concessionaires with all the terms and conditions of this Lease, which terms and conditions shall be applicable to concessionaires as fully as if such concessionaires were the Tenant hereunder; any failure by a concessionaire fully to observe and comply with the terms and conditions of this Lease shall constitute a default hereunder by Tenant. Nothing contained in the preceding sentence shall constitute a consent by Landlord to any concession, subletting or other arrangement prescribed by Section 14.01. All provisions of this Lease have been freely negotiated by and between the parties. SECTION 27.20. INDEX. The term "Index" as used in this Lease shall be the "Consumer Price Index for All Urban Consumers (1982-84 = 100), U.S. City Average, All Items," as published by the Bureau of Labor Statistics of the United States Department of Labor. If the Index is not published by the Bureau of Labor Statistics or another governmental agency at any time during the term of this Lease, or if the Index is otherwise re-named, discontinued or superseded, then the calculations based on the Index shall be made using the most closely comparable statistics on the purchasing power of the consumer dollar as published by a responsible financial authority and selected by Landlord. SECTION 27.21. SURVIVAL; NONDISCLOSURE; FREE ACT. The obligations of Tenant for payment of rent and charges under this Lease shall survive the expiration or earlier termination of the term of this Lease. Tenant covenants that neither Tenant nor any attorney or other representative for Tenant shall disclose the contents of this Lease to any other person or entity. Tenant shall be fully responsible for the actions of its attorneys and representatives. By its execution of this Lease, Tenant acknowledges and agrees that it has read this Lease, understands the contents hereof, and is signing this Lease as its own free act and deed, and as the free act and deed of the representatives signing on Tenant's behalf, without any persuasion or coercion by any person or entity, and with full advice of counsel. SEE ATTACHED RIDER FOR INSERTS - -------------------------------------------------------------------------------- [End of Standard Form; signature and acknowledgment pages for the Lease appear after the Data Sheet on the pages immediately preceding the Addendum.] S30 43 [DIAGRAM] SITE PLAN OF SHOPPING CENTER SHOPPING CENTER SITE This Exhibit is not a representation as to the identity, size, location or opening date of any store, tenant, space user, occupant, or facility, or the occupancy of any premises, building, or future premises or future building within the regional retail development. Landlord reserves the right to not construct, or to construct differently (in any manner, including, without limitation, location, size, shape, height and/or design), any item shown on this Exhibit, as well as the right, after any buildings, common areas or other improvements have been constructed, to change, alter, modify, delete or add buildings, common areas or other improvements to and from the Shopping Center and/or the regional retail development (including, without limitation, any future phases or additions -- there being no representation that any future phase or addition will, in fact, be built). Landlord further reserves the right to change the access points to the regional retail development, the parking areas, and/or the common areas and to otherwise modify any items or matters indicated on this Exhibit at any time and from time to time. WOODFIELD A MULTI-LEVEL RETAIL DEVELOPMENT SCHAUMBURG, ILLINOIS MAY '93 Exhibit A, page 1 of 5 44 [SITE PLAN] NASCAR SILICON MOTOR SPEEDWAY BLDG. G LOWER LEVEL WOODFIELD Date: 11-20-97 Exhibit A, page 2 of 5 45 [SITE PLAN] LOWER LEVEL KEY PLAN WOODFIELD Date: 11-20-97 Exhibit A, page 3 of 5 46 [SITE PLAN] WOODFIELD LOWER LEVEL LEASING PLAN Exhibit A, page 4 of 5 47 LEGAL DESCRIPTION OF SHOPPING CENTER Parcel 1: That part of Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield, and that part of Lot 2 in Woodfield, taken as a Tract, said Woodfield being a Subdivision of part of the Northwest Quarter, Northeast Quarter and Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third Principal Meridian, bounded and described as follows: Commencing at the most Northerly corner of Lot 2A aforesaid, thence South 43 degrees 40' 00" East, along the Northeasterly line of said Lot 2A, 308.33 feet; thence South 46 degrees 20' 00" West, 30.00 feet; thence South 43 degrees 40' 00" East, 86.75 feet; thence North 46 degrees 20' 00" East, 192.42 feet; thence South 43 degrees 40' 00" East, 1.42 feet; thence North 46 degrees 20' 00" East, 25.17 feet; thence North 43 degrees 40' 00" West, 6.75 feet; thence North 88 degrees 40' 00" West, 8.25 feet; thence North 43 degrees 40' 00" West, 2.33 feet; thence North 01 degrees 20' 00" East, 4.95 feet; thence North 01 degrees 20' 00" East, 2.33 feet; thence North 43 degrees 40' 00" West, 53.92 feet; thence North 46 degrees 20' 00" East, 52.67 feet; thence North 43 degrees 40' 00" West, 272.00 feet; thence South 46 degrees 20' 00" West, 50.67 feet; thence North 43 degrees 40' 00" West, 41.50 feet; thence South 46 degrees 20' 00" West, 20.25 feet; thence North 43 degrees 40' 00" West, 2.33 feet; thence North 88 degrees 40' 00" West, 7.78 feet; thence South 46 degrees 20' 00" West, 56.46 feet; thence North 88 degrees 40' 00" West, 6.36 feet; thence South 46 degrees 20' 00" West, 11.75 feet; thence South 01 degrees 20' 00" West, 11.55 feet; thence South 46 degrees 20' 00" West, 30.08 feet; thence North 88 degrees 40' 00" West 11.55 feet; thence South 46 degrees 20' 00" West 11.75 feet; thence South 01 degrees 20' 00" West, 6.36 feet; thence South 46 degrees 20' 00" West, 28.46 feet to the point of beginning, in Cook County, Illinois. Also Parcel 2: Lot 10 and Lot 2 in Woodfield, a Subdivision of part of the Northwest Quarter and the Northeast Quarter and the Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third Principal Meridian, in Cook County, Illinois, except that part of Lot 2 lying Northerly of the following described line: Beginning at a point on the East line of said Lot 2, said point being 8.897 feet Southerly of (as measured along the East line of said Lot 2) the Northeasterly corner of said Lot 2; thence Westerly along a straight line having a bearing of South 88 degrees 17' 05" West a distance of 171.83 feet to a point on the West line of said Lot 2, said point being 7.119 feet Southerly of (as measured along the West line of said Lot 2) the Northwesterly corner of said Lot 2, said area containing approximately 1,005 square feet, and except Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield, being a Subdivision of part of the Northwest Quarter, Northeast Quarter and Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third Principal Meridian, (except that part bounded and described as follows: commencing at the most Northerly corner of said Lot 2A; thence South 43 degrees 40' 00" East, along the Northeasterly line of said Lot 2A, 334.00 feet to the point of beginning, thence South 46 degrees 20' 00" West 30.00 feet; thence South 43 degrees 40' 00" East, 5.00 feet; thence North 46 degrees 20' 00" East, 30.00 feet; thence North 43 degrees 40' 00" West, 5.00 feet to the point of beginning) in Cook County, Illinois, and in addition thereto Lot 5A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield, being a Subdivision of part of the Northwest Quarter, Northeast Quarter and Southeast Quarter of Section 13, Township 41 North, Range 10 East of the Third Principal Meridian, Cook County, Illinois, excepting therefrom the following: That part of Lot 2A in the Resubdivision of parts of Lots 2, 5, 6 and 7 in Woodfield, and that part of Lot 2 in Woodfield, taken as a Tract, said Woodfield being a Subdivision of part of the Northwest Quarter, Northeast Quarter and Southeast Quarter of Section 13, Township 41 North, Range 10, East of the Third Principal Meridian, bounded and described as follows: Commencing at the most Northerly corner of Lot 2A aforesaid, thence South 43 degrees 40' 00" East, along the Northeasterly line of said Lot 2A, 25.67 feet to the point of beginning; thence South 43 degrees 40' 00" East along said Northeasterly line of Lot 2A, 308.33 feet; thence South 46 degrees 20' 00" West, 30.00 feet; thence South 43 degrees 40' 00" East, 86.75 feet; thence North 46 degrees 20' 00" East, 192.42 feet; thence South 43 degrees 40' 00" East, 1.42 feet; thence North 46 degrees 20' 00" East, 25.17 feet; thence North 43 degrees 40' 00" West, 6.75 feet; thence North 88 degrees 40' 00" West 8.25 feet; thence North 43 degrees 40' 00" West, 2.33 feet; thence North 01 degrees 20' 00" East, 4.95 feet; thence North 01 degrees 20' 00" East, 2.33 feet; thence North 43 degrees 40' 00" West, 53.92 feet; thence North 46 degrees 20' 00" East, 52.67 feet; thence North 43 degrees 40' 00" West, 272.00 feet; thence South 46 degrees 20' 00" West, 50.67 feet; thence North 43 degrees 40' 00" West, 41.50 feet; thence South 46 degrees 20' 00" West, 20.25 feet; thence North 43 degrees 40' 00" West, 2.33 feet; thence North 88 degrees 40' 00" West, 7.78 feet; thence South 46 degrees 20' 00" West, 56.46 feet; thence North 88 degrees 40' 00" West, 6.36 feet; thence South 46 degrees 20' 00" West, 11.75 feet; thence South 01 degrees 20' 00" West, 11.55 feet; thence South 46 degrees 20' 00" West, 30.08 feet; thence North 88 degrees 40' 00" West, 11.55 feet; thence South 46 degrees 20' 00" West, 11.75 feet; thence South 01 degrees 20' 00" West, 6.36 feet; thence South 46 degrees 20' 00" West, 28.46 feet, to the point of beginning, in Cook County, Illinois. Exhibit A, page 5 of 5 48 EXHIBIT B CONSTRUCTION This Exhibit B shall be deemed to include Exhibit B-1 and any additional construction exhibits as may be attached to this Lease. Such additional exhibits may have the effect of providing further specifications or criteria or may serve to amplify or adjust certain of the provisions contained in this Exhibit B. SECTION I. EXISTING IMPROVEMENTS. The reuse by Tenant of existing improvements, if any, within the leased premises shall be as dictated by practicality and Landlord's existing design criteria and shall be subject to Landlord's written approval. SECTION II. LANDLORD'S WORK A. A complex of building shells and common area improvements of exterior and interior design and materials as determined by Landlord substantially as shown in Exhibit A. B. If any partitions are required to separate the leased premises from adjacent spaces, Landlord shall install metal stud framing only, after Tenant has performed any demolition necessary to accommodate installation of said framing. Such stud framing shall extend from the floor slab of the leased premises to the underside of the floor or roof structure. Tenant shall reimburse Landlord as Tenant's share of the cost of such work. $20.00 per lineal foot of said stud framing. Tenant shall install gypsum board on Tenant's side of stud framing to underside of structure as required for a one-hour fire resistant separation. C. In the event that the leased premises are located in a retail development, or in an expansion wing of a retail development, which development or expansion wing shall not yet have opened for business to the public, and Tenant shall be able to complete its construction within the leased premises prior to such opening, Landlord shall not provide a temporary barricade at the storefront lease line, except to the extent that Landlord shall determine that such barricade is necessary or desirable. If the leased premises are not located in such a development or in such an expansion wing, or if Tenant shall be unable to complete the construction of the leased premises and to open for business at the time that such development or expansion wing, as applicable, first opens for business to the public, Landlord shall provide, for Tenant's use during construction and demolition, a temporary barricade at the storefront lease line. Tenant shall reimburse Landlord $45.00 per lineal foot of storefront lease line for any such temporary barricade provided by Landlord. Landlord shall remove the storefront barricade upon completion of Tenant's Work and when Tenant is prepared to open for business as determined by Landlord. Landlord shall have the option, by written notice to Tenant, to require Tenant to remove the storefront barricade and to store the same at a location specified by Landlord within the regional retail development. In the event of such removal by Tenant, Tenant shall be responsible for any damage caused to the barricade by such removal and storage. In either case, Tenant shall immediately repair any damage caused to the leased premises by the removal of the barricade. D. If the entire leased premises shall not have been previously occupied by another tenant or occupant, the provision of utility connections by Landlord shall be as set forth under Section II of Exhibit B-1. If the entire leased premises shall have been previously occupied, and the following utilities or utility stubs are not contained within the premises, Landlord shall cause said utilities to be extended to within the leased premises at a point which is closest to Landlord's pickup point. Such utilities shall include: sanitary, domestic cold water, plumbing vent (where applicable), fire protection, and air conditioning supply duct stub (where applicable). Refer to Exhibit B-1 (and/or to other construction exhibits, if any, attached to this Lease) for additional information on certain utilities. SECTION III. TENANT'S WORK Tenant at its sole cost and expense shall perform all work required to complete the leased premises to a finished condition ready for the conduct of business therein. Tenant's Work shall conform to criteria, procedures, and schedules as set forth in Sections IV, V, and VI respectively, of this Exhibit, and shall include, but not be limited to, the following: A. Field Conditions: Prior to the preparation of its working drawings and the commencement of its construction, Tenant shall survey the site to inspect, verify and coordinate all exiting conditions within the leased premises. Such survey shall include the location of existing mall utilities which are to remain, placement of wall stud framing defining the leased premises, and identification of various improvements, made by previous occupant(s), if any, which are to remain, be relocated or removed and the determination of the extent of demolition or repair to be performed by Tenant. Tenant shall advise Landlord immediately of any discrepancies with respect to Landlord's Space Layout drawings. The results of such survey shall be incorporated into Tenant's working drawings and specifications. Tenant shall verify conditions pertaining to the leased premises from time to time after commencement of construction of its leased premises. Any adjustments to the work arising from field conditions not apparent on drawings and other building documents shall receive the prior written approval of Landlord. Exhibit B, page 1 OF 11 49 Immediately following the installation by Landlord of wall stud framing defining the leased premises, Tenant shall verify the accuracy of said installation and shall immediately advise Landlord of any discrepancies. Failure to so notify Landlord shall be deemed as acceptance by Tenant of said installation and layout. Tenant shall coordinate its work with the work of others or with existing conditions occurring above or below the leased premises and shall make changes from time to time as required to accommodate such work or conditions. B. Working Drawings and Specifications: Working Drawings and Specifications as set forth in Section V of this Exhibit. C. Demolition 1. All demolition required to facilitate Tenant's construction shall be performed by Tenant at Tenant's expense, and shall be as approved by Landlord on Tenant's demolition plans, prior to commencing such work. a. Floors: Tenant shall repair or replace any part of the existing concrete slab which may have been removed by Landlord or Tenant to allow for extension of underground utilities. Backfill and compaction shall be provided by Tenant. b. Interior Finishes: Tenant shall demolish any existing improvements made by previous occupant(s) within the leased premises which Tenant has indicated on the survey referred to in Section III (A) above are not to remain. Such work shall include but not be limited to: storefront and storefront enclosure, abandoned party walls, interior partitions and finishes, floor coverings, ceilings and miscellaneous improvements. Removal of demolition debris shall be performed by Tenant. In no event shall removal of debris take place through the malls during the hours in which the Shopping Center is open for business. c. Mechanical and Electrical Equipment: Tenant shall remove all mechanical and electrical systems existing on the leased premises which are no longer functional or designated to be reused. Such work shall include but not be limited to: roof top and interior HVAC equipment and supports, duct work, wire and conduits, electrical distribution equipment, plumbing fixtures, sprinkler lines, telephone equipment and any specialty equipment as may exist in the leased premises. 2. Repairs: Tenant shall make all repairs to the premises necessitated by the removal of the improvements made by previous occupant(s). Such work shall include but not be limited to: concrete slab, roof, structural members, mechanical and electrical equipment, telephone equipment, party walls and interior finishes. D. Architectural and Finishing Work 1. Storefront work. 2. Partitions. a. To the extent that new corridor-partitions are required, Landlord will erect stud framing and one (1) layer of 5/8" firecode gypsum wallboard on the corridor side of one-hour fire resistant partitions separating the leased premises from adjacent service/exit corridors. Such stud framing shall extend from the floor slab of the leased premises to the underside of the floor or roof structure. Tenant shall reimburse Landlord as Tenant's share of the cost of such work $45.00 per lineal foot of said stud framing, and gypsum wallboard. Tenant shall install one (1) layer of 5/8" firecode gypsum wallboard on Tenant's side of stud framing to underside of structure as required for a one-hour fire resistant separation. Note: Service/exit corridors where a two-hour fire resistant partitions separating the leased premises from the adjacent service/exit corridor is required, Landlord will erect stud framing and two (2) layers of 5/8" firecode gypsum wallboard on the corridor side of two-hour fire resistant partitions separating the leased premises from adjacent service/exit corridors. Tenant shall reimburse Landlord as Tenant's share of the cost of such work $66.00 per lineal foot of said stud framing and gypsum wallboard. Tenant shall install two (2) layers of 5/8" firecode gypsum wallboard on Tenant's side of stud framing to underside of structure as required for a two-hour fire resistant separation. 3. All required interior partitioning, fire separations and doors, service exit door, ceiling work, floor coverings, commercial grade finish hardware, and painting and finishing work. 4. Covering and finishing of columns to achieve a one-hour fire resistant rating. 5. Toilet facilities. 6. Sign(s) and sign panel backgrounds. Exhibit B, page 2 of 11 50 7. Floors: a. In upper level Tenant spaces with a depressed structural concrete floor, concrete topping to achieve a finished floor elevation at the same elevation as the mall. b. Repairs as may be required to accommodate extension of under- ground utilities. c. All slabs on grade. Tenant shall provide sand fill and/or remove excess as required and compact same to 95% modified proctor and install a vapor barrier (minimum .004 mill visqueen) and a concrete minimum strength of 3,000 pounds with 6 x 6 No. 10 woven wire mesh (minimum thickness 4") in accordance with Standard Project Details, finished as required to receive floor finishes. d. Finished floor elevation at all store entrances shall be at the same elevation as adjacent areas. All carpet areas are to be depressed. E. Structural 1. Any alterations and/or additions and reinforcements to Landlord's structure required to accommodate Tenant's Work, all of which must be designed by a certified structural engineer at Tenant's expense. Performance of such work is subject to prior written approval of Landlord. F. Mechanical 1. All plumbing, heating, ventilating, and air conditioning systems within or directly related to Tenant's leased premises, proceeding from the points of connection to utilities as listed in Exhibit B-1, or modifications to existing mechanical systems, all in accordance with Landlord's design criteria. G. Electrical 1. All electrical and telephone systems within or directly related to the leased premises proceeding from points of connection to utilities as listed in Exhibit B-1 (or in other construction exhibits, if any, attached to this Lease), or modifications to existing systems, all in accordance with Landlord's design criteria. H. Fire Protection 1. A complete, hydraulically calculated fire protection sprinkler system, proceeding from the point of connection to Landlord's system or modifications or removal of existing fire protection sprinkler system and existing fire retardant materials in accordance with Landlord's design criteria. All such work shall be performed, at Tenant's sole cost and expense, by a qualified sprinkler contractor acceptable to Landlord. Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency thereof, and Tenant shall be solely responsible therefor. Tenant shall be responsible for the cost of the complete removal of all existing fire-retardant materials and all demolition associated with this removal. All work will be done in strict compliance with all local, state, and federal codes and requirements. All demolition and removal work will be performed by contractors under contract with the Landlord. See Attached Rider For Inserts All of the work performed pursuant to this Section III shall, for the purpose of the Lease to which this Exhibit is attached and made a part, be deemed to be improvements made to the leased premises by Tenant. SECTION IV. CRITERIA -- TENANT'S WORK. The requirements, criteria and/or outline specifications as set forth herein represent minimum standards for the preparation of working drawings, construction and finish of the leased premises by Tenant: A. Standard Project Details and Construction Information 1. Standard Project Details and Construction Information, issued by Landlord, as they pertain to Tenant's Work, shall govern with respect to such work. Such details shall be reviewed by Tenant and incorporated as required in Tenant's Working Drawings and Specifications for the leased premises. B. Design Loads 1. Structural loading imposed by any of Tenant's Work on a temporary or permanent basis shall not exceed the following allowable live loads: a. Stores located on supported slabs (levels other than on-grade): 75 lbs. per square foot. b. Common areas, mall courts, and galleries: 75 lbs. per square foot. c. On-grade slabs: 125 lbs. per square foot. d. Roof: 20 lbs. per square foot. Exhibit B, page 3 of 11 51 C. Architectural, Structural 1. Storefront work: a. The configuration of the storefront line, as established by Landlord, shall be considered the leaseline, beyond which no element of the storefront may extend. b. All storefront components, including head tracks for sliding doors, grille roller supports, guides and supports for side rolling grilles, etc., shall be structurally fastened and braced to the building structure. All aluminum storefront components which remain visible during business hours, such as sliding doors and other glazing sections, rolling grilles or ornamental metal shall have an anodized finish. c. Electronic surveillance or other shoplifting detection devices and security systems shall be incorporated and integrated within Tenant's storefront. Free-standing "boxes" or "columns" or other exposed equipment or decals shall be prohibited. 2. Ceilings: Non-combustible ceilings on a concealed metal suspension system shall be used throughout all Tenant's public areas. An exposed metal suspension system may be permitted only if the system consists of 2' x 2' tee grid with regressed lay-in acoustical tile in horizontal planes only; vertical or sloped use of exposed tees is prohibited. Taped, painted and/or plaster sprayed gypsum board ceilings shall be used in conjunction with all storefront soffits. The use of exposed wood or other combustible material above ceilings or in any other attic spaces is prohibited. 3. Walls: 5/8" Firecode (UL listed) gypsum board shall be used on all party walls where a one-hour fire resistant separation is required. All interior partitions shall have gypsum board finish on all sides. A one-hour fire resistant rating is required for all steel columns. 4. Floors: a. Carpeting and/or other quality floors, such as glazed or unglazed tiles or hardwood flooring shall be used in Tenant's public areas. The reuse of flooring materials not in compliance with the foregoing is prohibited. b. Toilet rooms and kitchens shall have waterproofed floors and door thresholds. 5. Service Exit Door: One hinged 3'-0" x 7'-0" x 1-3/4" prime coated, one-hour fire labeled, hollow metal service exit door, frame, and commercial grade hardware unless otherwise required by code. The service door shall be installed in a vestibule, by Tenant at its expense, if required by code. 6. Rubbish Storage: a. Food and beverage service Tenants shall provide rubbish and solid waste storage room(s) within leased premises. b. Floor area to be waterproofed with membrane approved in writing by Landlord. 7. General: a. Landlord shall have the right to locate, both vertically and horizontally, utility lines, air ducts, pipes, refrigerant lines, drains, sprinkler mains and valves, and such other facilities, including access panels for same, within the leased premises, as deemed necessary by engineering design and/or code requirements. Landlord's right to locate facilities within the leased premises shall include the facilities required by other tenants. Landlord shall also the right to locate mechanical and other equipment on the roof over the leased premises. b. Notwithstanding anything to the contrary contained in this Lease or in any of the exhibits attached thereto, all flashing, counter-flashing, roof penetrations, and roofing repairs shall conform to the project roofing specifications. Roof repairs or penetrations required by removal or relocation of existing equipment or installation of new equipment (cutting of roof and deck material and/or repair of same) shall be performed by Landlord's roofing contractor at Tenant's expense. Tenant shall enter into a direct contract with Landlord's roofing contractor. SEE ATTACHED RIDER FOR INSERTS Exhibit B, page 4 of 11 52 D. Mechanical 1. Plumbing: a. Plumbing fixtures and accessories shall be of commercial quality and shall be of water conserving type. b. Tenant shall provide a water meter (calibrated in gallons) in an easily accessible location (or, at Landlord's direction, Tenant will install a remote reader device). c. Floor drains shall be provided in toilet rooms and kitchens and/or food service areas. d. Tenant shall be obligated to pay to Landlord, at the time Tenant obtains its construction permit, any capital facility connection charge imposed by the governmental unit having jurisdiction, together with all other costs and expenses incurred or to be incurred by Landlord with respect to Tenant's construction of and connection to water and wastewater facilities, and with respect to particular plumbing fixtures, in accordance with all applicable ordinances in effect from time to time. Refer to Exhibit B-1 for additional criteria. 2. Heating, Ventilating and Air Conditioning: a. If Tenant elects to utilize existing HVAC system, said system shall be completely upgraded and repaired to like new condition at Tenant's sole cost and expense. b. If Tenant elects to install a new HVAC system or a supplement to an existing system, said systems, shall be installed in complete compliance with criteria presently established for the Shopping Center. Refer to Exhibit B-1 for additional criteria. 3. Fire Protection: Hydraulically calculated fire protection sprinkler system, fire hose cabinets, fire extinguishers and other equipment within the leased premises in accordance with Landlord's insurance underwriters' Fire Rating Inspection Bureau, and Code requirements. Since the entire fire protection system for the project is required to be an inter-related, centrally controlled installation, Tenant shall cause to be designed and installed, by a qualified sprinkler contractor acceptable to Landlord, said system within the leased premises in accordance with Landlord's requirements and shall submit shop drawings, specifications and hydraulic calculations for the sprinkler system to the Landlord's Insurance Underwriters' Fire Rating Inspection Bureau for approval. Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy of sufficiency thereof, and Tenant shall be solely responsible therefor. Said work shall be accomplished without interrupting fire service to remainder of Shopping Center during occupied hours. E. Electrical 1. Tenant, at its expense, shall furnish and install and/or modify the existing to provide a complete electrical service proceeding from the Landlord's point of connection as defined in Exhibit B-1 to a point within the leased premises. This work shall include, but not be limited to, furnishing and installing a fusible disconnect switch at Landlord's/utility company's distribution equipment and conduit and conductors of sufficient capacity for Tenant's requirements. All conductors shall be insulated copper wire type THW or THWN. 2. All fluorescent or incandescent lighting fixtures in Tenant's public areas, other than track type and decorative fixtures, shall be recessed. Fluorescent fixtures shall have low brightness, parabolic lenses or diffusers and be no larger than 2'0" x 2'0" in size. Bare lamp fluorescent or incandescent fixtures may not be used except in concealed areas and/or stock rooms. Connections to all devices in Tenant's public areas shall be concealed. 3. Emergency lighting shall be provided by Tenant per code to illuminate stock and/or sales areas and rear exitway during power outage, which lighting shall be battery-operated, twin-head light pack(s) and/or fluorescent fixtures. In public areas battery assembly for emergency lights shall be concealed. 4. Circuits serving signs shall be controlled by a time switch. 5. Audio systems installed by Tenant shall be designed such that sound shall be contained within the leased premises. Refer to Exhibit B-1 for additional criteria. See Attached Rider For Inserts Exhibit B, page 5 of 11 53 F. Tenant's Permanent Sign 1. General: Tenant shall submit quadruplicate copies of its sign drawings and specifications, including samples of materials and colors, for Landlord's approval, prior to fabrication of Tenant's sign. Such drawings shall show location of sign on storefront elevation drawing and shall clearly indicate color, materials, attachment devices, dimensions and construction details. 2. Criteria: Only the storefront of the leased premises facing malls and/or courts shall be identified by a sign. Tenant's sign shall be subject to the following requirements and limitations: a. The average height of sign letters or components shall not exceed twelve inches (12"). b. No part of the sign letters shall hang free of the background. c. Sign shall not project beyond the leaseline of the leased premises more than two inches (2") if less than eight feet (8') above finished floor line, or more than six inches (6") if above eight feet (8'). d. Signs shall be limited to the store name only as set forth in Section 16.01 of this Lease; reference to merchandise or activity is prohibited. e. Sign letters or components shall not have exposed neon or other lamps. All light source shall be concealed by translucent material. Surface brightness of translucent material shall be consistent in all letters and components of the sign. All edges and the backs shall be fully encased in metal. f. The storefront sign shall not employ the name of the Shopping Center as part of Tenant's store identification. g. The outer limits of sign letters, components or insignia shall fall within a rectangle, the two short sides of which must be at least twenty-four inches (24") from the side leaselines of the leased premises, the top side of which must be at least twelve inches (12") from the soffit of the mall fascia element. h. All electrical sign components must bear U.L. label. Such U.L. label must be inconspicuously placed. 3. The following types of signs or sign components are prohibited: a. Signs employing moving or flashing lights or any audible or moving components. b. Signs employing exposed raceways, ballast boxes or transformers. c. Signs exhibiting manufacturer's name, stamps or decals. d. Signs employing painted and/or non-illuminated letters. e. Signs employing luminous-vacuum formed plastic letters. f. Signs of box or cabinet type, employing transparent, translucent or luminous plastic background panels. g. Shadow-box type signs. h. Signs employing unedged or uncapped plastic letters with no returns. i. Any exposed fastenings whatsoever. j. Cloth, paper, plastic or cardboard signs, stickers, decals, or painted signs of any kind, hung around, on or behind storefront glass or within storefront space. k. Back-illuminated signs. l. Free-standing signs. 4. The service door of the leased premises shall be identified with a plastic sign, uniform to all Tenants, in accordance with Center Management criteria. SECTION V. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE COMPLETION OF PLANS AND SPECIFICATIONS BY TENANT. All prints, drawing information and other material to be furnished by Tenant to Landlord for approval as required in this Exhibit shall be addressed to Landlord at 200 East Long Lake Road, P.O. Box 200, Bloomfield Hills, Michigan 48303-0200. Approvals of such documents shall be deemed invalid unless given by Landlord in writing. Any approval given by Landlord with respect to Tenant's Work or any subsequent alterations by Tenant shall be effective only for a period of one hundred twenty (120) days following Landlord's notice to Tenant for such approval. If Tenant shall not have commenced construction with respect to such work or alterations within such one hundred twenty (120) day period (or shall not be diligently pursuing such work or alterations to completion), Tenant shall be required to resubmit the applicable plans and specifications to Landlord for re-approval prior to commencement or continuation of such work or alterations. All notices, drawing information and other material furnished by Landlord to Tenant under this Exhibit or pursuant to Sections 5.01 or 5.02 of the Lease may be effectively submitted to Tenant by mailing the same to Tenant at the address set forth on the Data Sheet on page 1 of the Lease or to Tenant's architect if Tenant has provided Landlord with such an address, notwithstanding any contrary or additional requirement contained in any other section of the Lease. Exhibit B, page 6 of 11 54 A. Space Layout Drawings 1. Following the execution of this Lease, Landlord shall furnish Tenant with one (1) set of prints of Space Layout Drawings giving technical and design information for the leased premises; provided that Landlord shall not be responsible for the accuracy, efficacy or sufficiency of said Space Layout Drawings and Tenant shall be solely responsible for all technical and other examinations of the leased premises and shall be exclusively responsible with respect to verification of actual field conditions and actual field measurements and a full review of all technical and engineering requirements with respect to the leased premises and Tenant's construction thereon. B. Working Drawings and Specifications 1. Within thirty (30) days from either of the following dates, whichever shall be the later to occur (a) receipt by tenant of Space Layout Drawings or (b) execution of this Lease by the parties hereto, Tenant shall engage an Architect registered in the state in which the Shopping Center is located for the purpose of preparing Working Drawings and Specifications for the leased premises. Working Drawings and Specifications shall be prepared in strict compliance with the Construction Criteria and requirements as set forth in Section IV of this Exhibit and shall adhere to the design as indicated in Section 5.01(b) of the Data Sheet of the Lease to which this exhibit is attached. 2. All Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant, in the form of one (1) set of reproducible prints (i.e., sepias) and one (1) set of prints, along with a Letter of Certification by Tenant's Architect that such drawings and specifications comply with Section 5.01(b) of the Data Sheet and Landlord's Construction Criteria. Any required revisions to such Working Drawings and Specifications shall be prepared and resubmitted by Tenant to Landlord within ten (10) days of receipt of notice from Landlord. 3. Tenant shall pay all fees of its Architect, and shall pay to Landlord for Coordination and Administrative Services a fee based on the floor area of the leased premises in accordance with the following schedule: Floor Area of Lease Premises Applicable Amount in $ ---------------------------- ----------------------- 1 to 500 sq. ft. [***] 501 to 750 sq. ft. [***] 751 to 1,500 sq. ft. [***] 1,501 to 3,500 sq. ft. [***] 3,501 to 6,000 sq. ft. [***] 6,001 to 10,000 sq. ft. [***] 10,001 sq. ft. and over 3,300.00 + [***] sq. ft. in excess of 10,000 sq. ft. Tenant's payment of the foregoing fee shall be payment to Landlord in connection with Landlord's review of the various plans and specifications submitted by Tenant and in connection with Landlord's facilitation and coordination of Tenant's actual construction in the leased premises; however, Landlord shall not be in any way responsible or liable with respect to the accuracy, sufficiency, or feasibility of Tenant's plans, and Tenant shall be totally responsible for same. C. Completion Schedule: 1. The following information regarding Tenant's completion schedule shall be completed by Tenant and delivered to Landlord upon Tenant's execution of this Lease: a. Working Drawings and Specifications submittal date after receipt of fully-executed Lease b. Submission of Working Drawings and Specifications to the local building department for building permit concurrent with submittal to Landlord (allow four (4) weeks for approval) c. Construction start date d. Merchandise date e. Store opening date f. Commencement date Notification may be sent by Landlord to Tenant, at Landlord's option, for completion of any of the preceding dates not listed on the Completion Schedule submitted by Tenant. Any such notification shall be returned completed to Landlord no later than twenty-one (21) days following Tenant's receipt thereof. See Attached Rider For Inserts *** Confidential treatment requested. Exhibit B, page 7 of 11 55 SECTION VI. PROCEDURE, SCHEDULES AND OBLIGATIONS FOR THE CONSTRUCTION OF THE LEASED PREMISES BY TENANT. A. Commencement of Construction 1. Tenant shall commence demolition and/or construction of its leased premises not later than fourteen (14) days from the date of approval by Landlord's Architect of the Working Drawings and Specifications referred to in Section V, C, 1 above, and shall carry such construction to completion with all due diligence. The failure of Tenant to comply with procedures and schedules set forth in this Exhibit, or to commence or complete the construction of the leased premises prior to the date of commencement of the term of the Lease to which this Exhibit is attached and made a part shall have no effect whatsoever upon the commencement of said term, which shall in any event commence at the time provided for in Section 1.02 of said Lease. B. General Requirements 1. Tenant shall submit to Landlord via Certified or Registered Mail, at least five (5) days prior to the commencement of construction, the following information: a. The names and addresses of the General, Mechanical and Electrical Contractors Tenant intends to engage in the construction of its leased premises. b. The date on which Tenant's construction work will commence, together with the estimated date of completion of Tenant's construction work and fixturing work, and date of Tenant's projected opening for business in the leased premises. c. Evidence of insurance as called for hereinbelow. d. Itemized statement of estimated construction costs, including architectural, engineering and contractor's fees. e. Tenant's Contractors' Performance and/or Labor and Material bonds, if so required by Landlord, or any other bond to be furnished by Tenant as may be required by Landlord to insure the faithful performance of the work in accordance with the Drawings and Specifications approved by Landlord. 2. Tenant shall engage the services of such bondable, licensed contractors who will work in harmony with Landlord's contractors and the contractors employed by the other tenants so that there shall be no labor disputes which would interfere with the operation, construction and completion of the Shopping Center or with any work being carried out therein. 3. Construction shall comply in all respects with applicable Federal, State, County and/or city statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the lased premises shall be obtained and paid for by Tenant. Landlord's review of Tenant's Working Drawings and Specifications shall be for the purpose of ascertaining compliance with the requirements of this Lease and Landlord's requirements, and shall in no event extend to any confirmation or authorization, express or implied, that Tenant's Working Drawings and Specifications have been prepared in accordance with the requirements of applicable laws, codes, ordinances and regulations, including, without out limitation, the Americans with Disabilities Act, and Tenant shall be solely responsible with respect to all necessary compliance with such laws, codes, ordinances and regulations. Tenant shall provide temporary heat if required. Tenant shall provide temporary electrical if required. Tenant shall apply and pay for all utility services. Tenant shall cause its Contractor to provide warranties for not less than one year against defects in workmanship, materials and equipment. 4. Tenant's Work shall be subject to the inspection of Landlord, its consultants, and its supervisory personnel. 5. Upon the expiration of one half (1/2) of the lease term, Tenant shall, within thirty (30) days after direction from Landlord, submit Working Drawings and Specifications as set forth in Section V of this Exhibit showing the work to be performed by Tenant to completely remodel and refurbish the leased premises. Tenant will cause such work to be performed not later than ninety (90) days following the date of Landlord's direction in accordance with Working Drawings and Specifications approved by Landlord specifying the remodeling work to be done by Tenant. All such work shall be subject to and shall be carried out in accordance with the provisions of this Lease, including, without limitation, the provisions of Section 5.01(b) governing construction of the leased premises and the remedies of Landlord in the event of noncompliance by Tenant, including, but not limited to, termination of this Lease as therein set forth. Without limiting the foregoing, in the event that Tenant shall fail to perform such remodeling work, or if Tenant shall fail to operate the leased premises as required in Exhibit B, page 8 of 11 56 the Lease or shall fail to surrender possession of the leased premises to Landlord as required in the Lease or under law, Landlord shall have the right to erect, at Tenant's expense, a storefront barricade in front of the leased premises, which barricade shall not be removed except upon Landlord's prior written consent and with Tenant paying the cost of such removal. C. Landlord's Right to Perform Work 1. Landlord shall have the right to perform, on behalf of and for the account of Tenant, subject to reimbursement of the cost thereof by Tenant, any and all of Tenant's Work which Landlord determines in its sole discretion should be performed immediately and on an emergency basis for the best interest of the project, including without limitation, work which pertains to structural components, mechanical, sprinkler and general utility systems, roofing and removal of unduly accumulated construction material and debris. D. Temporary Facilities During Construction 1. Tenant shall pay for all temporary utility facilities, and the removal of debris, as necessary and required in connection with the demolition and/or construction of the leased premises. Storage of Tenant's Contractors' construction material, tools, equipment and debris shall be confined to the leased premises and in areas which may be designated for such purposes by Landlord. In no event shall any material or debris be stored in the mall or in service or exit corridors. 2. During construction, Landlord may provide temporary electrical service in an area designated by Landlord. Tenant shall request, in writing, permission to connect temporary lines to the power source for service to its premises. The cost to Tenant for this service will be $450.00 per month or twenty-five cents (25 cents) per square foot of leased area per month, whichever is greater. Payment is to be remitted to Landlord by the first of each month after service is initiated. In the event that the leased premises presently contain a metered electrical service, Tenant shall utilize the existing service and reimburse Landlord on the metered basis. 3. During initial construction, Tenant fixturing and merchandise stocking, Landlord may require Tenant to utilize trash removal service from designated truck courts. Tenant is responsible for breaking down boxes and placing trash in containers in the designated truck court areas. The cost to Tenant for this service will be on a monthly basis and payment is to be remitted by the first of each month after service is initiated on the following basis:
Floor Area of Leased Premises Monthly Charge in $ ----------------------------- ------------------- 30,001 sq. ft. to 50,000 sq. ft. [***] 20,001 sq. ft. to 30,000 sq. ft. [***] 15,001 sq. ft. to 20,000 sq. ft. [***] 10,001 sq. ft. to 15,000 sq. ft. [***] 5,001 sq. ft. to 10,000 sq. ft. [***] 2,001 sq. ft. to 5,000 sq. ft. [***] 2,000 sq. ft. or less [***]
At any time, as determined by Landlord, Landlord may discontinue trash removal service and Tenant shall assume responsibility therefor. All such work shall be performed by contractors approved by Landlord. E. Construction Completion 1. A Letter of Certification by Tenant's Architect stating that the store has been satisfactorily completed in compliance with the Landlord Approved Working Drawings. Any deficiencies should be outlined and sent to Tenant's contractor for correction within thirty (30) days. F. Landlord's Letter of Acceptance 1. Upon the completion of Tenant's construction and fixturing work, and upon written request to Landlord from Tenant, Landlord shall issue a Landlord's Letter of Acceptance of said premises. The issuing of such a Letter shall be contingent upon Tenant satisfying all of the following conditions (which conditions shall, in any event, be satisfied by Tenant as a obligation hereunder): a. The satisfactory completion by Tenant of the work to be performed by Tenant under Section III of this Exhibit including correction of deficiencies and inconsistencies with approved Working Drawings and Specifications. b. Furnishing by Tenant to Landlord of all waivers of liens and sworn statements from all persons performing labor and/or supplying materials in connection with such work showing that all of said persons have been compensated in full. *** Confidential treatment requested. Exhibit B, page 9 of 11 57 c. Submittal by Tenant to Landlord of a detailed breakdown of Tenant's final and total construction costs. d. Submittal by Tenant to Landlord of warranties for not less than one (1) year against defects in workmanship, materials and equipment, if so required by Landlord. e. Full payment by Tenant of all sums due Landlord for items of work performed by Landlord on behalf of Tenant, as outlined in this Exhibit. f. The issuance of a Certificate of Occupancy by the Building and Safety Department of the local unit of government. 2. Upon written request from Tenant, Landlord shall also inspect that portion of Tenant's Work which shall have been completed up to the date of such request, and upon satisfaction of all of the foregoing conditions set forth in paragraph 1 above (other than issuance of a Certificate of Occupancy) with respect to the portion of Tenant's Work so completed, Landlord shall issue a Landlord's Letter of Acceptance with respect to such completed work. No payments, if any, required to be made by Landlord to Tenant shall be made unless and until Tenant shall have obtained a current Letter of Acceptance with respect to all of Tenant's Work completed as of the date of such required payment. G. Payments by Tenant 1. Tenant shall pay Landlord all sums due Landlord for items of work performed or expenses incurred by Landlord on behalf of Tenant within days after receipt by Tenant of a statement therefor from Landlord. Such item of work and expenses incurred include, but are not necessarily limited to, the following: a. All items called for as Tenant's cost obligations in this Exhibit. b. In the event that the leased premises are located in a retail development, or in an expansion wing of a retail development, which development or expansion wing shall not yet have opened for business to the public at the time of the commencement by Tenant of its construction hereunder, Tenant shall be obligated to pay to Landlord Tenant's pro rata share of costs and expenses incurred by Landlord in arranging for a final cleaning of and debris removal from the common areas and vacant premises in preparation for the grand opening of the retail development or of such expansion wing. Tenant's pro rata share shall be computed on the basis that the square footage of the leased premises bears to the square footage of gross leased and occupied area in the Shopping Center (or in the expansion wing of the Shopping Center, as applicable) as of the earlier of: the date of the opening of the Shopping Center (or the expansion wing, as applicable), or the date that Tenant is notified of its pro rata share of such costs and expenses. H. Insurance 1. Tenant shall secure, pay for and maintain, or cause its Contractor(s) to secure, pay for and maintain during construction and fixturing work within the leased premises, all of the insurance policies required herein, in the amounts as set forth below, and such insurance as may from time to time be required from city, county, state or federal laws, codes, regulations or authorities, together with such other insurance as is reasonably necessary or appropriate under the circumstances. Tenant shall not permit its Contractor(s) to commence any work until all required insurance has been obtained and certificates of such insurance have been Exhibit B, page 10 of 11 58 delivered to Landlord. 2. Tenant's General Contractor's and Subcontractors' Required Minimum Coverages and Limits of Liability. a. Worker's Compensation, as required by state law, and including Employer's Liability Insurance with a limit of not less than [***], and any insurance required by any Employee Benefit Acts or other statutes applicable where the work is to be performed as will protect the Contractor and Subcontractors from any and all liability under the aforementioned acts. b. Commercial General Liability Insurance (including Contractor's Protective Liability) in an amount not less than [***] for any one occurrence whether involving personal injury liability (or death resulting therefrom) or property damage liability or a combination thereof with an aggregate limit of [***]. Such insurance shall provide for explosion, collapse and underground coverage. Such insurance shall insure Tenant's General Contractor against any and all claims for personal injury, including death resulting therefrom and damage to or destruction of property of any kind whatsoever and to whomsoever belonging and arising from his operations under the Contract and whether such operations are performed by Tenant's General Contractor, Subcontractors, or any of their Subcontractors, or by any one directly or indirectly employed by any of them. c. Comprehensive Automobile Liability Insurance, including the ownership, maintenance, and operation of any automotive equipment, owned, hired, and non-owned, in the following amounts: (1) Bodily injury, per occurrence for personal injury and/or death ........................... [***] (2) Property Damage Liability ..................... [***] Such insurance shall insure the General Contractor and/or Subcontractors against any and all claims for personal injury, including death resulting therefrom and damage to the property of others caused by accident and arising from its operations under the Contract and whether such operations are performed by the General Contractor, Subcontractors, or by anyone directly or indirectly employed by any of them. 3. Tenant's Protective Liability Insurance. Tenant shall provide Owner's Protective Liability Insurance as will insure Tenant against any and all liability to third parties for damages because of personal injury liability (or death resulting therefrom) and property damage liability of others or a combination thereof which may arise from work in connection with the leased premises, and any other liability for damages which Tenant's General Contractor and/or Subcontractors are required to insure against under any provisions herein. Said insurance shall be provided in minimum amounts as follows: a. Bodily injury, per occurrence for personal injury and/or death ................................. [***] b. Property Damage Liability ........................... [***] 4. Tenant's Builder's Risk Insurance -- Completed Value Builder's Risk Material Damage Insurance. Coverage: Tenant shall provide an "All Physical Loss" Builder's Risk insurance policy on the work to be performed for Tenant in the leased premises as it relates to the building within which the leased premises is locate. The policy shall include Tenant, its Contractors and Subcontractors, Landlord, and the partners and agents of Landlord, as insureds as their interests may appear. The amount of insurance to be provided shall be 100% of the replacement cost. 5. All such insurance policies required under this Exhibit, except as noted above, shall include Landlord, its Managing Agent, its Architect, its General Contractor, and the partners and agents of Landlord, and the partners of such partners, and any other parties in interest designated by Landlord, as additional insureds; except Worker's Compensation Insurance, which shall contain an endorsement waiving all rights of subrogation against Landlord, its Managing Agent, its Architect, General Contractor, partners and agents, and the partners of such partners, and any other parties in interest designated by Landlord. Certificates of Insurance shall provide that no reduction in the amounts or limits of liability or cancellation of such insurance coverage shall be undertaken without prior thirty (30) day written notice to Landlord. The insurance required under this Exhibit shall be in addition to any and all insurance required to be procured by Tenant pursuant to Section 11.01 of the Lease to which this Exhibit is attached. [END OF TEXT OF STANDARD CONSTRUCTION EXHIBIT] *** Confidential treatment requested. Exhibit B, page 11 of 11 59 WOODFIELD EXHIBIT B-1 UTILITIES (Attached to and forming a part of Exhibit B; Section references correspond to the Section numbers set forth in Exhibit B.) SECTION II: LANDLORD'S WORK. A. BUILDING UTILITIES AND SERVICES 1. Points of connection, for Tenant's use, to the following utilities in location and sizes determined by Landlord. a. Sanitary sewer stub. b. Plumbing vent stub. c. Domestic cold water stub. d. Fire protection sprinkler system main. e. Central gas utility company metering manifolds. f. Central electric utility company distribution centers. g. Central telephone company distribution boards. h. Duct shafts containing fresh air, relief air and toilet exhaust ducts to serve first level tenants stubbed in central locations and terminating to the atmosphere. SECTION IV: CRITERIA - TENANTS'S WORK. The requirements, criteria, and/or outline specifications as set forth herein represent minimum standards for the design, construction, and finish of the mechanical and electrical systems installed by Tenant. A. MECHANICAL 1. Plumbing: a. Plumbing fixtures and accessories shall be of commercial quality and shall be of a water-conserving type. b. Water heaters shall be electric, except Food and Beverage Service Tenants where gas units may be permitted if gas is available. c. Floor drains shall be provided in toilet rooms, kitchens, and/or food service areas. d. Food and Beverage Service Tenants shall further provide: (i) Cast-iron grease traps located within the leased premises. (ii) Gas service and branch line extension from the gas meter center to and within the leased premises. e. Every space shall have at least one (1) toilet room. All spaces 3,000 square feet or larger must provide public accessible toilet rooms (male and female). Said toilet rooms must comply with the state of Illinois plumbing code. 3. Heating, Ventilating, and Air Conditioning: a. Tenant shall install an all-electric heating and air-conditioning system. (i) Each Tenant shall provide its own individual system (i.e., heating, ventilation and air-conditioning equipment and controls, ducts, insulation, water supply, venting and drainage, fresh air supply and return, exhaust and make-up air, dehumidification and humidification equipment, water saving equipment and all structural, plumbing and electrical work related thereto). (ii) All equipment shall be contained within Tenant's premises except rooftop air-cooled condensing units, make-up air units, and hood exhausters. Such equipment located on the roof shall only be located in areas designated by the Landlord to specified heights, and in accordance with Landlord's standard details for roof-mounted equipment. All refrigerant piping shall be installed in ceiling space and extended through roof adjacent to the equipment. Suction lines shall be insulated. (iii) Tenant's air handling units shall be floor-supported in Tenant's space independent of Landlord's structural system. b. Toilet rooms shall be exhausted per code. All roof mounted units for second level Tenants shall be of aluminum construction. Exhibit B-1, page 1 of 2 60 c. Ductwork: Fabricated of galvanized sheet metal per American Society of Heating, Refrigerating and Air-Conditioning Engineers' standards, as outlined for "Low Pressure Ducts" in the latest edition of their "Guide and Data Book". d. There shall be a provision to bring in 100% fresh air for cooling purposes anytime the outside temperature is below 60 degrees F. Such provision shall be operated by automatic temperature controls. e. All first level outside air, relief air, exhaust air and other ductwork requiring outdoor intake or venting except process requirements shall be extended by Tenant to the common tenant service shafts. All outside air, relief air and general exhaust (Toilet Room, Storage Room, etc.) ductwork shall connect with backdraft dampers to sheet metal housings provided at the base of the common shafts. f. All process exhausts, hood exhausts, equipment vents, and other contaminated exhausts permitted by Landlord shall discharge vertically to the atmosphere, and be located a minimum of 20 feet horizontally from any fresh air intakes, properly dispersing odors or fumes away from same. g. All supply and fresh-air ductwork shall be insulated, and all ductwork on all levels shall be installed in concealed space above ceilings. Space between ceiling and structure shall not be used as a return air plenum. h. All air supplied to Tenant's area by its equipment shall not migrate to the public mall or adjacent spaces. i. Standards of design and construction shall be in accordance with latest ASHRAE and SMACNA Guides. j. Tenant shall provide all process requirements, hood exhausts, make-up air supply, equipment vents and other contaminated exhausts. When permitted by Landlord they shall extend in ductwork through the roof. This ductwork shall be located in special shafts built by Tenant, at locations and of construction designated by Landlord. k. Ductwork which passes through service corridor and demising walls shall have U.L. approved fire dampers located in ductwork at wall. Provide approved access doors for such dampers. l. Tenant roof equipment shall be located in areas designated by Landlord to specified heights and in accordance with Landlord's standard details for equipment on the roof. (i) Should weight or location of equipment by Tenant require supports, screens, cat walks or roof hatch and ladder, they shall be provided by Tenant in accordance with standard details. Landlord shall determine when and where the above shall be required. (ii) All above equipment shall be finish painted in accordance with Landlord's paint schedule and specifications. (iii) Tenant's roof equipment shall be clearly identified with Tenant's name. B. ELECTRICAL 1. Power available for the leased premises shall consist of the following voltages: a. For tenants located in buildings "D, E, F, G, J and K": (i) Tenant spaces of 6,000 square feet and smaller will be provided with 120/208 volt, 3 phase, 4 wire. (ii) Tenant spaces in excess of 6,000 square feet will be provided with 277/480 volt, 3 phase 4 wire. b. For tenants located in buildings "L and N": (i) All tenants will be provided with 277/480 volt, 3 phase, 4 wire. 2. Installation or modification of the existing system shall conform to the following: a. Power for Tenant's heating, ventilating and air conditioning equipment (single and/or three phase), including electric duct heaters, unit heaters, strip heaters, etc. will be taken from 480 volt, 3 phase, 3-wire rain tight distribution panelboards located on the roof. Landlord will furnish and install a plug-in fusible switch (min. 60 amp) at Tenant's expense. Tenant shall furnish and install fuses, all wiring and conduit from rooftop panelboards, transformers, starters, relays, switches, connections, etc., required for Tenant's equipment. b. Dry type transformer (if required) shall be used for all 120/208 volt requirements. c. Panelboards shall be designed for 20% minimum spare ampacity (based on connected load) and 20% spare breaker space. d. All electrical wiring systems shall be in conduit. The use of "Bx" or "Romex" is not permitted. Exhibit B-1, page 2 of 2 61 STANDARD NASCAR SILICON MOTOR SPEEDWAY RIDER - -------------------------------------------------------------------------------- SECTION 1.01(b): At the end of the subsection, insert "Landlord shall grant Tenant an easement to install and maintain utility facilities exclusively serving the leased premises, within service areas and above Tenant's finished ceiling, in work areas permitted by Landlord, provided such facilities are permitted pursuant to the Working Drawings and Specifications approved by Landlord." SECTION 2.03: On page S3, line 8, after the word "sales", insert ", use, luxury, gross receipts,". At the end of the Section, insert "The term 'Gross Sales' shall not include: (i) any sums and/or credits received in the settlement of claims for loss of or damage to merchandise; (ii) a bulk sale of all or substantially all of Tenant's assets not in the ordinary course of Tenant's business; (iii) bulk sales of distressed merchandise to jobbers not in the ordinary course of Tenant's business; (iv) receipts from any permitted pay telephones and vending machines provided that no profit is intended or derived by Tenant; (v) interest, service or sales carrying charges or other charges, other than credit card company fees, however, denominated, paid by customers for extension of credit on sales, provided the same are separately stated and not included in the merchandise sales price and provided, further, that no profit is intended or derived by Tenant; (vi) sales of gift certificates until redeemed provided if the redemption does not occur within one (1) year of the sale then the sale of the gift certificate shall be included at such time; (vii) the amount of the discount on sales to employees at a discount provided the same shall not exceed two percent (2%) of Gross Sales per annum; (viii) reimbursement by customers for delivery, freight and/or postage charges rendered at no profit to Tenant solely for the convenience of Tenant's customers; (ix) bad debts when written off of the books of Tenant to the extent same shall not exceed one percent (1%) of Gross Sales per annum, provided any recoveries on account of such bad debts shall be included in Gross Sales when received by Tenant; (x) sales of used fixtures and equipment not in the ordinary course of Tenant's business and not to exceed one-half of one percent (0.5%) of Gross Sales per annum; (xi) the amount of the discount due to redemption of promotional discount coupons; (xii) credit card company fees paid to third party credit card companies (Visa, Mastercard, etc.) not to exceed one percent (1%) of Gross Sales per annum; nor (xiii) sums paid to, or other consideration received by, Tenant from third parties under agreements which permit such third parties to advertise their names, logos or products within all of Tenant's store locations." SECTION 2.05: At the end of the first paragraph, insert "Notwithstanding the foregoing, Tenant's obligation hereunder shall not include the payment of any Federal or State income tax, estate tax, inheritance tax, or real estate transfer tax of general applicability to be paid by Landlord, excepting that Tenant shall be obligated for such tax to the extent such tax is assessed in lieu of or in substitution for existing ad valorem taxes on real property which are hereafter modified, abolished or repealed in whole or in part. In the event Landlord elects to protest any real estate tax or assessment and achieves relief on account thereof, Tenant shall be credited to its proportionate share of such relief applicable to periods during the least term after deducting all of the costs and expenses incurred in connection therewith." On page S4, line 34, in place of the deleted language, insert "twenty (20)". SECTION 2.06: On page S4, line 53, in place of the deleted language, insert "twenty (20)". On page S4, line 53, after the word "whatsoever," insert "except for abatements expressly permitted by the terms of this Lease". On page S4, line 60, in place of the deleted language, insert [***]. SECTION 3.01: On page S5, line 8, in place of the deleted language, insert "sales". On page S5, line 11, after the word "limitation", insert "(to the extent maintained or compiled by Tenant in the ordinary course of Tenant's business);". SECTION 3.02: On page S5, line 31, in place of the deleted language, insert "sixty (60)". *** Confidential treatment requested. -1- 62 On page S5, line 32, in place of the deleted language, insert "officer of Tenant,". SECTION 4.01: On page S5, line 52, in place of the deleted language, insert "ten (10)". SECTION 4.02: On page S5, lines 54 and 59, in place of the deleted language, insert "ten (10)". On page S5, line 55, after the word "Landlord", insert "which auditor shall be an independent certified public accountant and shall be employing generally accepted auditing standards,". On page S5, line 63, in place of the first deletion, insert "understated". On page S5, line 63, in place of the second deletion, insert "three percent (3%)". On page S5, line 64, in place of the deleted language, insert "twenty (20)". On page S6, line 9, after the word "audit,", insert "Landlord shall use reasonable efforts to schedule an audit at a time and on a date which is mutually convenient for Landlord and Tenant." On page S6, line 13 after the word "auditor", insert "which auditor shall be an independent certified public accountant and shall be employing generally accepted auditing standards." On page S6, line 22, in place of the deleted language, insert "prompt refund". At the end of the Section, insert "Landlord agrees to use reasonable efforts to keep confidential any information acquired by Landlord pursuant to its examination or audit rights under this Articles III and IV except that Landlord shall be entitled to divulge such information to the following: (i) Landlord's attorney, accountant or tax advisor; (ii) any mortgagee or prospective mortgagee of all or any portion of Landlord's interest in the regional retail development; (iii) any governmental authority having competent jurisdiction and valid power or authority to compel such information; (iv) any court, person, agency or organization as a result of any actual litigation filed in connection with this Lease; (v) any prospective purchaser of all or any portion of Landlord's interest in the regional retail development; (vi) Landlord's managing agent or (vii) Landlord's partners, and the partners, shareholders or other interest holders of such partners." SECTION 5.01(b) On page S6, line 48, after the word "by", insert "ten (10) days' prior written". On page S6, line 49, after the word "Tenant", insert ", and opportunity for Tenant to cure or reconcile with Landlord during such ten (10) day period,". On page S6, line 52, after the word "upon", insert ten (10) days' prior written". On page S6, line 52, after the word "Tenant", insert ", and opportunity for Tenant to cure or reconcile with Landlord during such ten (10) day period,". On page S6, line 55, after the word "consent.", delete the period and insert "except Tenant may make minor deviations provided same shall not alter the design and specification criteria originally approved by Landlord." On page S6, line 67, after the word "upon", insert "ten (10) days' prior written", On page S6, line 67, after the word "Tenant", insert ", and opportunity for Tenant to cure or reconcile with Landlord during such ten (10) day period,". On page S7, line 12, after the word "thereof.", delete the period and insert "subject to defects or omissions in Landlord's Work which are disclosed in writing by -2- 63 Tenant to Landlord within thirty (30) days following delivery of possession of the leased premises to Tenant." At the end of the subsection, insert "Upon Tenant's written request, Landlord shall give Tenant a reasonably detailed explanation of any reason Landlord may have for rejecting Tenant's plans and specifications." SECTION 5.02(c): On page S7, line 39, after the word "possession.", delete the period and insert "except for defects in Landlord's Work of which Tenant notifies Landlord in writing within thirty (30) days from date of possession and (if the leased premises have not previously been occupied) latent defects in Landlord's Work of which Tenant notifies Landlord in writing within six (6) months from the date of taking possession." SECTION 6.01: At the end of the Section, insert "Notwithstanding the foregoing, Tenant shall be permitted to make minor, nonstructural alterations to the interior of the leased premises not to exceed Twenty-Five Thousand and 00/100ths Dollars ($25,000.00) during any twelve (12) month period, provided that such alterations shall not change the original design of the leased premises as originally approved by Landlord, and further provided, Tenant shall not be permitted to make any alterations whatsoever to the storefront, signage or configuration or size of the sales area without Landlord's prior written approval. Tenant shall give Landlord fifteen (15) days' written notice prior to undertaking any alterations which Tenant is permitted to make pursuant to this paragraph." SECTION 6.02: On page S8, line 14, after the word "improvements.", delete the period and insert "provided Tenant may remove the following types of trade fixtures upon expiration of the lease term if Tenant shall not be in default and repairs any damage caused by installation or removal of same: Tenant's automobile racing simulators (and support structures for such simulators), track lighting fixtures, theatrical lighting fixtures, theatrical lighting truss, theatrical lighting dimmers, television monitor mounts and monitors, satellite dish, telecommunications/ISDN premises equipment, telephone system, neon logo signage, cash/wrap registration desk, safe and fibre optic cabling. Furthermore, Tenant may, from time to time during the lease term, remove automobile racing simulators (and support structures for such simulators) from the leased premises on a temporary basis provided the leased premises shall be operated substantially as operated on the date of Tenant's initial opening in the Shopping Center." SECTION 6.03: At the end of the Section, insert "in exercising its rights under this Section 6.03, Landlord shall use reasonable efforts to minimize resulting interference with access to or visibility of the leased premises from the enclosed mall area. If, while exercising its rights under this Section, Landlord prevents Tenant from operating its business in the leased premises and Tenant actually closes for three (3) or more consecutive days due to no fault of Tenant, then commencing with expiration of such three (3) day period and continuing until Landlord's activities have ceased to the point where Tenant is able to reopen, minimum rent shall be abated as Tenant's sole remedy." SECTION 7.02: On page S8, line 57, after the word "merchandise.", delete the period and insert ", subject to the provisions of Section 27.04. Notwithstanding anything to the contrary contained in this Section, Tenant shall be permitted to close the leased premises for two (2) periods of one-half (1/2) day each during each lease year for purposes of conducting inventory provided in no event shall Tenant close for inventory on a weekend day, nor on a national holiday nor during the period November 1 through January 1, and Tenant shall be permitted to close its business to the extent Tenant's closing is necessary in connection with a required or permitted remodeling or repair." On page S8, line 58, after the word "and", insert ", Tenant shall not be continuously operating its business in the leased premises for three (3) consecutive business days or more,". On page S9, line 2, after the word "improvements", insert "excluding structural changes or improvements to the roof, foundation or support structures of the Shopping Center buildings or to common area facilities, which are Landlord's obligation to maintain under this Lease, provided Tenant shall be obligated for the full cost of same if same are necessitated by Tenant's particular manner of use of the leased premises or by the acts or negligence of Tenant, its agents, employees or contractors)". On page S9, line 11, after the word "discretion.", insert "The foregoing restriction shall not extend to hazardous substances typically found within first class enclosed regional Shopping Centers so long as (i) such substances and any equipment which generates such substances are maintained only in such quantities as are reasonably necessary for -3- 64 Tenant's operations in the leased premises, (ii) such substances are used strictly in accordance with the manufacturers' instructions therefor, (iii) such substances are not disposed of in or about the Shopping Center in a manner which would constitute a release or discharge thereof, (iv) all such substances and any equipment which generates such substances are removed from the Shopping Center by Tenant upon the expiration or earlier termination of this lease, and (v) any use, storage, generation, disposal, release or discharge by Tenant of hazardous materials in or about the Shopping Center as is permitted pursuant hereto shall be carried out in compliance with all applicable federal, state and local laws, ordinances, rules and regulations and the requirements of Landlord's insurance carriers and mortgagees; Tenant's covenants set forth in this paragraph shall survive expiration of the lease term or sooner termination of the Lease." On page S9, line 28, after the word "Lease.", insert "Notwithstanding the foregoing, the normal sounds associated with Tenant's business operations shall be permitted provided such sounds shall not travel into any other leased or licensed premises." On page S9, line 31, in place of the first deletion, insert "three feet (3')". On page S9, line 39, after the word "development.", insert "Notwithstanding anything contained in this Lease to the contrary, Landlord shall permit the installation of a communications antenna and satellite dish ('device') on the roof of the building containing the leased premises for use by Tenant exclusively in connection with Tenant's business described in Section 7.01 provided (1) Tenant shall be continuously complying with all governmental laws, ordinances and regulations regarding installation, operation, removal and maintenance of such device; (2) if installation of the device is to penetrate the roof, Tenant shall retain only Landlord's roofing contractor for purposes of installation; (3) the size, visual screening, type and location of such device shall be subject to Landlord's prior approval; (4) upon expiration of the lease term Tenant shall, following direction from Landlord, remove such device and repair all damage to the Shopping Center caused by installation or removal; (5) Landlord's roofing contractor shall not be deemed to be Landlord's agent for such purposes and Tenant shall indemnify and hold harmless Landlord and the other parties identified in Section 11.03 of this Lease from any damages, expenses, costs, reasonable attorneys' fees, etc. arising in connection with the installation, removal and operation of such device, which indemnification shall otherwise be pursuant to the provisions of Section 11.03; (6) Tenant shall give Landlord at least thirty (30) days prior written notice of its intention to install such device; and (7) any revenues paid to Tenant by other occupants of the regional retail development in connection with the use of such device shall be immediately payable and remitted to Landlord as additional rent. Landlord shall have the right to relocate such device at Tenant's expense if such relocation is necessary in order for Landlord to exercise its rights pursuant to Sections of this Lease provided Landlord shall endeavor to provide Tenant with at least three (3) days' advance notice of such relocation (except in the event of an emergency in which event no notice shall be required)." SECTION 7.05: On page S10, line 34, after the word "require.", insert "The rates charged by such contractors shall be competitive with those charged by other solid waste disposal contractors doing business in the vicinity of the Shopping Center." On page S10, line 36, in place of the deleted language, insert "twenty (20)". SECTION 8.01: On page S10, line 43, after the word "Center.", delete the period and insert "generally in a first class manner." On page S10, line 43, after the word "The", insert "particular". SECTION 8.02: On page S11, line 14, after the word "charges.", insert "Landlord shall give one (1) hours' prior oral notice to the individual then apparently in charge at the leased premises on the first occasion of a parking violation during a twelve (12) month period prior to exercising its rights set forth above." On page S11, line 19, after the word "towed." delete the period and insert "except to the extent of the negligence or wrongful acts of Landlord, its agents or employees." SECTION 8.03: At the end of the subsection, insert "The foregoing costs and expenses shall not include: (i) Landlord's long term debt and permanent mortgage payments to the extent such payments relate to payment of the cost of the original construction of buildings -4- 65 within the Shopping Center and/or regional retail development; (ii) the cost of constructing new (not previously existing) buildings in the Shopping Center or building additions to existing buildings; (iii) ground rent payments; (iv) brokerage commissions or legal fees incurred in connection with the leasing of space in the Shopping Center; (v) costs which are reimbursed to Landlord through insurance proceeds, warranty or suit against third parties; (vi) construction allowances or similar disbursements solely for the benefit of a particular Shopping Center tenant; (vii) accounting or auditing fees in connection with the examination or audit of individual tenant sales records; (viii) legal fees of enforcing provisions in individual tenant leases, provided legal fees incurred in connection with the common areas or enforcement of Shopping Center rules and regulations shall be included; (ix) promotional expenses; (x) costs of acquiring additional land for the Shopping Center; nor (xi) charges payable by Tenant pursuant to other Sections of this Lease." SECTION 8.03(b): On page S12, line 17, in place of the deleted language, insert "twenty (20)". SECTION 9.01: On page S12, line 34, in place of the deleted language, insert "three (3)". On page S12, line 39, after the word "premises.", delete the period and insert ", provided Tenant shall be permitted to relocate readily moveable displays within the leased premises to the extent the overall design and appearance of the leased premises as originally approved by Landlord is not altered." At the end of the Section, insert "Landlord shall not unreasonably withhold its approval of Tenant's interior professionally prepared and printed signage provided same is consistent with that employed in Tenant's other first class enclosed regional shopping center locations." SECTION 10.01: On page S12, line 51, after the word "MAINTENANCE,", insert "In addition to Landlord's obligations pursuant to Section 8.01,". On page S12, line 52, after the word "the", insert "roof, foundation, support structures and". At end of the Section, insert "Except to the extent covered or required to be covered by Tenant's insurance, Landlord shall either (at Landlord's option) repair, or reimburse Tenant for the reasonable costs of repairing, damage, to Tenant's leasehold improvements caused by the negligent or wrongful acts of Landlord, its agents or employees." SECTION 10.02(a): On page S12, line 68, after the word "premises", insert "provided same shall be exclusively serving the leased premises)". SECTION 10.02(b): On page S13, line 11, after the word "repair.", delete the period and insert ", reasonable wear and tear and damage by fire or other casualty excepted." At the end of the subsection, insert "Tenant shall not be obligated to undertake changes to the roof, foundation or support structures or common area facilities of the Shopping Center necessitated by governmental laws, ordinances or regulations, however Tenant shall be obligated for the cost of same if the changes area required due to Tenant's particular manner of use of the leased premises or the acts or negligence of Tenant, its agents, employees or contractors." SECTION 10.02(c): On page S13, line 16, in place of the deleted language, insert "thirty (30)". On page S13, line 24, in place of the deleted language, insert "twenty (20)". SECTION 10.02(d): On page S13, line 29, after the word "modified", insert "and the failure to so modify such system shall result in an increase in insurance rates at the Shopping Center,". On page S13, line 31, in place of the deleted language, insert "twenty (20)". SECTION 10.02(g): On page S13, line 64, in place of the deleted language, insert "twenty (20)". -5- 66 On page S13, line 67, after the word "shall", insert "(subject to Article XIX hereof)". SECTION 11.01(a): On page S14, line 27, in place of the deleted language, insert [***]. SECTION 11.01(d): On page S14, line 68, in place of the deleted language, insert "twenty (20)". SECTION 11.02(a): On page S15, lines 15 and 16, in place of the deleted language, insert "statement". On page S15, line 17, in place of the first deletion, insert "officer of Tenant." On page S15, line 17, in place of the second deletion, insert "statement". At the end of the subsection, "To the extent generally available to landlords of super regional and regional shopping centers located in the State, the insurance carried by Landlord pursuant to this subsection 11.02(a) shall contain a waiver by the insurer of any right of subrogation against Tenant, its agents, employees or representatives." SECTION 11.02(b): On page S15, line 37, in place of the deleted language, insert "twenty (20)". SECTION 11.03: On page S15, line 49, after the word "Landlord", insert "it's agents or employees". On page S15, line 50, after the word "including", insert "reasonable". On page S15, line 54, after the word "customers," insert "(to the extent the act of the customer took place within the leased premises)". On page S15, line 55, after the word "same", insert "(to the extent used by Tenant)". On page S15, line 55, after the word " area", insert "exclusively". On page S15, line 58, in place of the deleted language, insert "reasonable". On page S15, line 60, after the word "then", insert "Landlord may do so upon at least five (5) days advance notice to Tenant and". On page S15, line 61, after the word "and", insert ", Tenant shall not have prevailed in such action,". On page S15, line 65, after the word "State.", insert "Tenant shall not be obligated to defend Landlord from any claims or actions described in this Section to the extent in which Landlord shall have engaged its own attorneys for such defense, provided Tenant shall remain obligated for payment of Landlord's attorneys' fees as herein set forth." At the end of the Section, insert "Landlord covenants to indemnify Tenant, and save it harmless (except for loss or damage resulting from the negligence of Tenant, its agents or employees) from and against any and all claims, actions, damages, liability and expense, including attorneys' fees, in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence (other than any occurrence caused by Tenant, its agents or employees or arising in connection with Tenant's business operations) in the common ares of the Shopping Center." SECTION 12.01(a): On page S16, lines 12 and 26, in place of the deleted language, insert "twenty (20)". SECTION 12.01(i): At the end of the subsection, insert "Notwithstanding the foregoing, if utility service to the leased premises is interrupted due solely to the acts or negligence of Landlord, its agents or employees (as determined by a court of competent jurisdiction or by agreement between the parties) and such interruption in service prevents Tenant from operating its business and Tenant closes its business for more than three (3) consecutive business days, then commencing with expiration of such three (3) business day period and continuing until utility service is restored to the point where Tenant can reopen, minimum rent shall be abated as Tenant's sole remedy. In the event of a conflict between the provisions of this paragraph and the abatement provisions of Section 17.01, the provisions of Section 17.01 shall control. Furthermore, if utilities are interrupted to the point where Tenant can not operate, then Tenant shall receive a rent abatement to the extent in which Landlord receives rental interruption insurance covering Tenant's rent abatement." *** Confidential treatment requested. -6- 67 SECTION 13.01: On page S17, line 65, in place of the deleted language, insert "twenty (20)". On page S18, line 1, after the word "certifying", insert "to the best of Tenant's knowledge:". At the end of the Section, insert "Landlord shall supply to Tenant a similar statement within thirty (30) days following Tenant's written request." SECTION 13.02: On page S18, line 18, after the word "Lease.", delete the period and insert ", provided that such successor shall in turn thereafter recognize Tenant's rights as the tenant hereunder." SECTION 13.04: On page S18, lines 36 and 40, in place of the deleted language, insert "twenty (20)". On page S18, line 41, in place of the deleted language, insert [***]. SECTION 14.01: At the end of the Section, insert "Notwithstanding the provisions of this Section 14.01 to the contrary, Tenant may assign this Lease (by merger, consolidation or otherwise) to another entity simultaneously acquiring a controlling interest in Tenant's stock or all or substantially all of Tenant's assets, including, without limitation, the entire chain of stores conducted under the trade name herein set forth, provided that: (1) the assignee shall simultaneously be acquiring control of the entire chain of stores conducted under the trade name herein set forth, (2) Tenant shall not at the time of such assignment be in default under any of the terms, covenants and conditions of this Lease beyond any applicable grace or cure period set forth on this Lease, (3) such assignee shall, as of the date immediately prior to the effective date of the assignment, have a net worth (based on assets contained within the United States) equal to or greater than the combined net worth of Tenant and Tenant's Guarantor (if any) as of the date of Tenant's execution of this Lease or as of the date immediately preceding the effective date of such transfer, whichever of such net worth amounts shall be the greater, (4) such assignee (and any person or entity acquiring a controlling interest in Tenant's stock) shall agree in writing to perform all of the unperformed terms, covenants and conditions of this Lease (whether accruing prior to, on, or after the effective date of the assignment), (5) Tenant and Tenant's Guarantor (if any) shall agree in writing to at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease, (6) the assignee shall deposit with Landlord a sum equal to two (2) months' minimum rent (at the then current rate) which Landlord may apply against any monetary obligations of Tenant which are not satisfied as of the effective date of the assignment (any portion of such sum which has not been so applied within fourteen (14) months following the effective date of the assignment shall be promptly returned to the assignee), (7) such assignee shall have, or shall have hired, some management personnel experienced in business operations similar to that described in Section 7.01, and (8) no later than thirty (30) days prior to the effective date of the assignment, Tenant shall have supplied Landlord with all back-up information reasonably required by Landlord to establish that all of the foregoing conditions have been satisfied. Notwithstanding the foregoing, the issuance or trading of stock on a U.S. Government regulated and recognized exchange or on the NASDAQ over the counter market shall not be deemed to result in a prohibited assignment hereunder. Further, notwithstanding the foregoing, an assignment of this Lease to a parent corporation of Tenant, to a wholly owned subsidiary of Tenant or to any entity which is under common ownership and control with Tenant, shall be permitted provided (1) Tenant shall not at the time of such assignment be in default under any of the terms, covenants and conditions of this Lease, (2) such assignee shall agree in writing to perform all of the unperformed terms, covenants and conditions of this Lease (whether accruing prior to, on, or after the effective date of the assignment), and (3) Tenant and Tenant's Guarantor (if any) shall agree in writing to at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease. As used in this paragraph, the term 'control' shall mean the ownership of and the power to vote more than fifty percent (50%) of the voting stock of a corporation or more than fifty percent (50%) of the ownership interests in any partnership or other business entity." SECTION 16.01: On page S19, lines 52 and 54, in place of the deleted language, insert "list (provided Landlord's listing does not suggest any sponsorship, association or affiliation between Landlord and NASCAR)". On page S19, line 54, after the word "manner.", insert "The NASCAR name may be used by Landlord only to list Tenant's trade name as follows: "NASCAR Silicon Motor Speedway." *** Confidential treatment requested. -7- 68 SECTION 16.03(a): On page S20, line 17, in place of the deleted language, insert "twenty (20)". SECTION 17.01: On page S20, line 67, after the word "reduced.", insert "For purposes hereof, the leased premises shall be deemed to be 'untenantable' to the extent same cannot be used generally for the use described in Section 7.01 hereof." On page S20, line 68, in place of the deleted language, insert "sixtieth (60th)". On page S21, line 5, in place of the deleted language, insert "one hundred thirtieth (130th)". On page S21, line 11, after the word "Landlord.", insert "In no event shall Tenant be obligated to undertake work other than: (i) previously undertaken by Tenant pertaining the leased premises and (ii) any other work encompassing Tenant's Work in Section 5.01(b) and the exhibits attached hereto." On page S21, line 25, in place of the deleted language, insert "twenty (20)". At the end of the Section, insert "If more than twenty-five percent (25%) of the floor area of the leased premises is destroyed by casualty during the last two (2) years of the lease term, then Tenant may, during the ensuing thirty (30) day period, terminate this Lease upon sixty (60) days prior written notice to Landlord. Tenant may open a temporary location within the radius area referenced in Section 7.03 and the provisions of Section 7.03 shall not apply to such location during any period that Tenant is unable to operate in the leased premises due to casualty provided Tenant must close the temporary location by the date Tenant is obligated to reopen within the leased premises." SECTION 17.02: At the end of the Section, insert "The insurance carried by Landlord pursuant to Section 11.02(a) shall contain a waiver of subrogation clause for the benefit of Tenant, its agents and employees." SECTION 18.02(a): On page S21, line 62, in place of the deleted language, insert "thirty (30)". SECTION 18.03: On page S22, line 29, after the word "fixtures.", delete the period and insert "nor (subject to the rights of Landlord's mortgagee[s]) to any award specifically designated as compensation to Tenant for relocation expenses (to the extent the award for relocation expenses would not reduce the award which would otherwise have been received by Landlord in the absence of any award to Tenant for relocation expenses)." SECTION 19.01(a): On page S22, line 34, in place of the deleted language, insert "within ten (10) days after written notice that same are". On page S22, line 35, in place of the deleted language, insert "by the date ten (10) days following the". On page S22, line 35, after the word "fail", insert "(following ten [10] days' notice to Tenant and opportunity for Tenant to cure during such ten [10] day period)". On page S22, line 38, after the word "default", insert "('Cross Default')". On page S22, line 47, after the word "Tenant", insert "(provided, however, such period shall be extended for an additional reasonable period if the default is of such a nature that it cannot be cured within thirty [30] days and Tenant has diligently commenced the curing of such default and is diligently pursuing the same to completion);". SECTION 19.01(b): On page S22, line 63, in place of the deleted language, insert "the same". On page S22, line 65, after the word "Tenant", insert "of the same kind". On page S22, line 65, in place of the deleted language, insert "such twelve (12) month period". -8- 69 On page S23, line 2, in place of the second deletion, insert "and". On page S23, line 8, in place of the deleted language, insert "twenty (20)". SECTION 19.02: At the end of the Section, insert "Landlord shall use reasonable efforts to relet the leased premises following termination of this Lease as a result of Tenant's default, provided Tenant acknowledges and agrees that Landlord may refuse to relet if Landlord determines (in its sole discretion) that the proposed use or quality of the prospective tenant's operation is not then appropriate for the Shopping Center or if the proposed rent is below market; in reletting, Landlord shall not be obligated to give preference to reletting the leased premises over other vacant space." SECTION 19.04: On page S24, line 1, after the word "any", insert "noncompulsory". SECTION 21.01: On page S25, line 24, after the word "times", insert "upon prior oral notice to the individual apparently then in charge at the leased premises,". On page S25, line 25, after the word "time", insert "upon prior oral notice to the individual then in charge at the leased premises,". On page S25, line 30, after the word "time", insert "during the last fifteen (15) months of the lease term (or at any time that Tenant shall be in default hereunder)". At the end of the Section, insert "In exercising its rights under this Section, Landlord shall use reasonable efforts to minimize any resulting interference with the operation of Tenant's business. In the event Landlord shall enter the leased premises under non-emergency situations in order to perform alterations, improvements, additions or repairs to other portions of the Shopping Center (including the leased premises), and the same are not necessitated by Tenant's act, neglect or breach of this Lease, and as a result thereof Tenant cannot, in the exercise of reasonable business judgment, operate its business and in fact closes the entire premises to the public, and if such closing continues for a period of three (3) business days or more, Landlord agrees that minimum rent shall be abated as Tenant's sole remedy commencing with expiration of such three (3) business day period and continuing until such time as the condition giving rise to the Tenant closing has been corrected at which time Tenant shall resume the payments." SECTION 22.02: On page S25, line 59, after the word "whatsoever.", delete the period and insert "except to the extent of damage to Tenant's tangible personal property caused by Landlord's negligence (provided in no event shall Landlord be liable for indirect or consequential damages including, without limitation, lost profits and in no event shall Landlord be liable to the extent the damage is covered by Tenant's insurance or is required to be covered by the insurance which Tenant is obligated to maintain under this Lease [inclusive of self insurance and deductibles which are Tenant's risk])." SECTION 22.03: On page S25, line 61, in place of the deleted language, insert "prompt". SECTION 23.01: On page S26, line 4, in place of the deleted language, insert "one-ninth (1/9)". SECTION 25.02: On page S26, line 44, after the word "shall," insert "not." On page S26, line 44, in place of the deleted language, insert "or against Landlord, as a matter of law." SECTION 27.04: On page S28, line 8, after the word "hereof.", delete the period and insert ", provided Tenant shall be excluded from continuously operating its business during those days and hours during which Tenant and other tenants in the Shopping Center are simultaneously forced to close as a result of a power failure, casualty or other occurrence beyond their control." On page S28, line 9, after the word "Lease", insert "for a period in excess of sixty (60) days". SECTION 27.05: On page S28, line 22, in place of the deleted language, insert "receipt (or refusal of receipt):". -9- 70 On page S28, line 26, in place of the deleted language, insert "and at". At the end of the Section, insert "Notwithstanding anything contained above. Landlord and Tenant may send notice with a reliable air courier service, marked and prepaid for overnight delivery, and such notice shall be deemed given one (1) day following deposit with such air courier." SECTION 27.10: At the end of the Section, insert "in exercising its rights under this Section, Landlord shall use reasonable efforts to minimize any resulting interference with the operation of Tenant's business." SECTION 27.12(b): On page S29, line 20, after the "20,000", insert "contiguous". On page S29, line 20, after the word "entity.", insert "as a single integrated operation". On page S29, line 29, after the word "same.", insert "Landlord shall not permit any retail kiosks within an area bounded by the storefront leaseline, a line parallel to the storefront leaseline and located eight (8) feet therefrom and by two (2) lines perpendicular to the storefront leaseline extended from each side demising wall of the leased premises into the enclosed mall." SECTION 27.13: On page S29, line 34, in place of the second deletion, insert "of [***] above the prime rate then charged by a plurality of FDIC member banks headquartered in the State". SECTION 27.16: On page S30, line 7, after the word "irrevocable.", delete the period and insert "for a period of twenty-one (21) days; thereafter Tenant may revoke its execution prior to Landlord's execution upon prior written notice to Landlord." SECTION 27.21: On page S30, line 49, after the word "entity.", delete the period and insert "provided Tenant may disclose the contents of this Lease (i) to comply with any governmental orders, laws, rules or regulations applicable to it or its principals, (ii) to professionals assisting Tenant to so comply, (iii) to any potential investors in, lenders to or purchasers of Tenant's business; provided however Tenant warrants to Landlord that all of the individuals who, and entities which, are recipients of such information shall comply with the confidentiality provisions of this Section, and (iv) to NASCAR and its successors and assigns." EXHIBIT B: On page 3, line 44, after the word "Landlord.", insert "Notwithstanding anything contained to the contrary in this Lease or the exhibits hereto, if within fifteen (15) days after Landlord gives Tenant Landlord's Notice of Availability (as provided in Section 5.02) and prior to Tenant's commencement of any construction in the leased premises, (x) Tenant gives Landlord written notice of any asbestos containing materials (ACM) in the leased premises which notice shall specify in detail the location, nature and quantity of the ACM in the leased premises, and (y) the ACM shall have been installed by Landlord, and (z) the applicable governmental authorities require the removal or encapsulation of the ACM, then Landlord shall remove or encapsulate such ACM and the commencement date set forth in the Data Sheet shall be extended for the period from the date of Tenant's notice to Landlord of the existence of ACM in the leased premises through completion of removal or encapsulation. Tenant agrees not to bring or assert any claim whatsoever against Landlord on account of the presence or condition of any ACM in the leased premises. Landlord shall not be responsible for any ACM installed by Landlord which is not identified by Tenant in Tenant's notice to Landlord and in no event shall the existence of any ACM be deemed to be a defect (latent or otherwise) in Landlord's Work, it being understood that, except as otherwise herein set forth, Tenant accepts the leased premises in an "as is" condition without representation by Landlord, or any person or entity on behalf of Landlord, as to the condition thereof. Tenant shall disclose the existence of any ACM only to Landlord, its agents and representatives and shall otherwise keep confidential any information obtained regarding ACM in the leased premises. Notwithstanding the foregoing, if Tenant gives timely notice pursuant to clause (x) of the preceding paragraph and such notice describes ACM installed by a prior tenant of the leased premises ("tenant-ACM"), and if the applicable governmental authorities require the removal or encapsulation of the tenant-ACM, and if the cost to remove or encapsulate the tenant-ACM is estimated by Tenant (in good faith) to exceed Ten Thousand and 00/100ths Dollars ($10,000.00), then in lieu of Tenant having to expend more than Ten Thousand and 00/100ths ($10,000.00) to remove or encapsulate the tenant-ACM, Tenant may elect to terminate this Lease by written notice received by Landlord within thirty-five (35) days after Landlord gives Tenant Landlord's Notice of Availability, provided, however, that Landlord may vitiate such termination by Tenant by agreeing to pay such costs over *** Confidential treatment requested. -10- 71 $10,000.00 by notice sent to Tenant no later than ten (10) days following Landlord's receipt of Tenant's notice of termination." On page 4, line 56, after the word "premises.", insert "Landlord shall use reasonable efforts to locate such facilities below the floor, above Tenant's finished ceiling, and/or abutting dividing walls." On page 5, line 61, after the word "shall," insert "substantially." On page 5, line 62, after the word "premises.", insert "The normal sounds associated with Tenant's business operations shall be permitted provided such sounds shall not travel into any other leased or licensed premises." On page 7, line 54, in place of the deleted language, insert "forty-five (45)". [End of text of the Rider; signature and acknowledgment pages appear at end of Data Sheet on the pages immediately preceding the Addendum.] -11- 72 EXHIBIT B 1. Packaged Chips 2. Packaged Candy 3. Soft Drinks 4. Popcorn 5. Pretzels 6. Cookies 7. Peanuts 8. Ice Cream - products 9. Hot Dogs EX-10.16 18 LEASE,CONCORD MILLS 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Exhibit 10.16 --- LEASE SILICON ENTERTAINMENT, INC., a California corporation ________________________________________ Tenant NASCAR SILICON MOTOR SPEEDWAY and/or SILICON MOTOR SPEEDWAY _________________________________________ Trade Name NONE _________________________________________ Guarantor Concord Mills 2 TABLE OF CONTENTS PAGE ARTICLE I......................................................... 4 GRANT AND TERM............................................... 4 Section 1.1. Leased Premises............................ 4 Section 1.2. Term....................................... 6 Section 1.3. Opening.................................... 8 Section 1.4. Late Opening............................... 8 ARTICLE II........................................................ 8 RENT AND DEPOSIT............................................. 8 Section 2.1. Minimum Rent............................... 8 Section 2.2. Percentage Rent............................ 9 Section 2.3. Payments By Tenant......................... 12 Section 2.4. Security Deposit........................... 12 Section 2.5. Late Charge................................ 12 ARTICLE III....................................................... 13 PREPARATION OF LEASED PREMISES............................... 13 Section 3.1. Landlord's Work............................ 13 Section 3.2. Delivery of Possession..................... 13 Section 3.3. Tenant's Work.............................. 14 Section 3.4. Alterations by Tenant...................... 16 Section 3.5. Removal by Tenant.......................... 16 ARTICLE IV........................................................ 16 CONDUCT OF BUSINESS.......................................... 16 Section 4.1. Use and Trade Name......................... 16 Section 4.2. Operation of Business...................... 17 Section 4.3. Sign....................................... 18 Section 4.4. Tenant's Warranties........................ 19 Section 4.5. Storage and Office Space................... 19 Section 4.6. Care of Premises........................... 20 Section 4.7. Notice by Tenant........................... 20 Section 4.8. Radius..................................... 20 ARTICLE V......................................................... 20 COMMON AREA.................................................. 20 Section 5.1. Use of Common Area......................... 20 Section 5.2. Common Area Maintenance Expenses........... 21 ARTICLE VI........................................................ 24 REPAIRS AND MAINTENANCE...................................... 24 Section 6.1. Repairs and Maintenance by Landlord........ 24 Section 6.2. Repairs and Maintenance by Tenant.......... 24 ARTICLE VII....................................................... 25 TAXES........................................................ 25 Section 7.1. Tax Liability.............................. 25 Section 7.2. Method of Payment.......................... 26 ARTICLE VIII...................................................... 26 INSURANCE, INDEMNITY AND LIABILITY........................... 26 Section 8.1. Landlord's Insurance Obligations........... 26 Section 8.2. Tenant's Insurance Obligations............. 27 Section 8.3. Mutual Covenant............................ 28 i 3 Section 8.4. Covenant to Hold Harmless............................28 Section 8.5. Loss and Damage .....................................29 ARTICLE IX..................................................................29 DESTRUCTION OF LEASED PREMISES.........................................29 Section 9.1. Continuance of Lease.................................29 Section 9.2. Reconstruction.......................................30 ARTICLE X...................................................................31 CONDEMNATION...........................................................31 Section 10.1. Eminent Domain......................................31 Section 10.2. Rent Apportionment..................................31 Section 10.3. Temporary Taking....................................31 ARTICLE XI..................................................................31 ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE...........................31 Section 11.1. No Assignment, Subletting or Encumbering of Lease...31 Section 11.2. Assignment or Sublet................................35 Section 11.3. Transfer of Landlord's Interest.....................35 ARTICLE XII.................................................................35 SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE..........35 Section 12.1. Subordination.......................................35 Section 12.2. Attornment..........................................36 Section 12.3. Financing...........................................36 Section 12.4. Estoppel Certificate................................36 Section 12.5. Remedies............................................36 ARTICLE XIII................................................................37 ADVERTISING AND PROMOTION..............................................37 Section 13.1. Promotion Fund......................................37 Section 13.2. Promotion Fund Contribution.........................37 Section 13.3. Advertisements [Intentionally Deleted]..............37 Section 13.4. Network.............................................37 ARTICLE XIV.................................................................38 DEFAULT AND REMEDIES...................................................38 Section 14.1. Elements of Default.................................38 Section 14.2. Landlord's Remedies.................................39 Section 14.3. Bankruptcy..........................................41 Section 14.4. Additional Remedies and Waivers.....................41 Section 14.5. Landlord's Cure of Default..........................41 Section 14.6. Security Interest...................................42 ARTICLE XV..................................................................42 RIGHT OF ACCESS........................................................42 ARTICLE XVI.................................................................43 DELAYS.................................................................43 ARTICLE XVII................................................................43 END OF TERM............................................................43 Section 17.1. Return of Leased Premises...........................43 Section 17.2. Holding Over........................................43 ARTICLE XVIII...............................................................44 COVENANT OF QUIET ENJOYMENT............................................44 ii 4 ARTICLE XIX................................................................44 UTILITIES..............................................................44 Section 19.1. Utilities............................................44 Section 19.2. Electricity..........................................44 Section 19.3. Trash and Garbage Removal............................44 Section 19.4. Water and Sewer......................................45 Section 19.5. Grease Interceptors..................................45 ARTICLE XX.................................................................45 MISCELLANEOUS..........................................................45 Section 20.1. Entire Agreement.....................................45 Section 20.2. Notices..............................................45 Section 20.3. Governing Law........................................45 Section 20.4. Successors...........................................46 Section 20.5. Liability of Landlord................................46 Section 20.6. Brokers..............................................46 Section 20.7. Transfer by Landlord.................................46 Section 20.8. No Partnership.......................................46 Section 20.9. Waiver of Counterclaims..............................46 Section 20.10. Waiver of Jury Trial.................................46 Section 20.11. Severability.........................................46 Section 20.12. No Waiver............................................46 Section 20.13. Consumer Price Index.................................47 Section 20.14. Interest.............................................47 Section 20.15. Excavation...........................................47 Section 20.16. Rules and Regulations................................47 Section 20.17. Financial Statements.................................47 Section 20.18. General Rules of Construction........................47 Section 20.19. Recording............................................48 Section 20.20. Effective Date.......................................48 Section 20.21. Headings.............................................48 Section 20.22. Managing Agent.......................................48 EXHIBITS: Exhibit A Site Plan Exhibit B Measurement of Leased Premises Exhibit C Landlord's Work Exhibit D Tenant's Work Exhibit E Sign Criteria Exhibit F Commencement and Expiration Date Declaration Exhibit G Waiver of Sales Tax Confidentiality Exhibit H Agreement of Subordination Non-Disturbance and Attornment Exhibit H-1 Tenant Estoppel Certificate Exhibit I Menu iii 5 THIS LEASE dated as of this 30th day of June, 1999 (the "Lease") by and between CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, the address of which is c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209 (hereinafter referred to as "Landlord") and SILICON ENTERTAINMENT, INC., a California corporation, the address of which is 210 Hacienda Avenue, Campbell, California 95008 (hereinafter referred to as "Tenant"). RECITAL Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord, the Leased Premises, for the Term commencing on the Commencement Date, subject to the terms, covenants, conditions and provisions of this Lease. Landlord shall have the right, at any time prior to the Delivery of Possession Date of the Leased Premises, by written notice to Tenant, to relocate the Leased Premises in either direction (from side to side from the outside boundary of the Leased Premises) by not more than forty (40) feet, and upon any such relocation, the size and description of the Leased Premises shall be appropriately modified to reflect any resulting proportional adjustment in the Rent based upon the change in size of the Leased Premises. If the Commencement Date is not the first day of a month, Minimum Rent for the month in which the Commencement Date occurs shall be prorated to the end of the month and paid as the second monthly installment of Minimum Rent on the first day of the next month and, after the expiration of the number of years in the Term, the Term shall expire on the last day of the same month in which the Commencement Date of the Term occurred, it being the intention of the parties that the Term expire on the last day of a month. Neither this Lease nor the obligations of Tenant hereunder shall be affected by a postponement and Landlord shall not be subject to any liability for failure to make possession of the Leased Premises available on the Commencement Date. When the Commencement Date has been determined, Landlord and Tenant shall execute, acknowledge and deliver a written statement in recordable form specifying the Commencement and Expiration Dates of the Term and, if there shall have been any changes in the floor area of the Leased Premises, such statement shall reflect such change or changes. Said statement upon execution and delivery shall be deemed to be a part of this Lease. 6 DATA SHEET The following references furnish data to be incorporated in the specified Sections of this Lease and shall be construed to incorporate all of the terms of the entire Section as stated in this Lease; (1) SECTION 1.1: DESCRIPTION OF LEASED PREMISES: Store number: 202, consisting of approximately 7,865 square feet of floor area as shown on Exhibits A and B attached hereto and made a part hereof. (2) SECTION 1.2: TERM: COMMENCEMENT DATE: The earlier of (i) the later of (A) the Grand Opening, or (B) the date following the expiration of a one hundred twenty (120) day fixturing period ("Fixturing Period") following the Delivery of Possession Date (as defined in Section 3.2), or (ii) the date the Leased Premises is open for business to the public. It is estimated that the Delivery of Possession Date will be May 16, 1999. Original Term: Five (5) Years. OPTION PERIOD: Five (5) years, provided Tenant's Gross Sales for the twelve (12) month period ending two hundred ten (210) days prior to the Expiration Date exceed [***] per square foot. (3) SECTION 2.1: MINIMUM RENT: Original Term: From the Commencement Date and continuing through the expiration of the Original Term, the sum of [***] annually ([***] psf), payable in equal consecutive monthly installments of [***] each. Option Period: Beginning with the first (1st) year and continuing through the expiration of the Option Period, the sum of [***] annually ([***] psf), payable in equal consecutive monthly installments of [***] each. (4) SECTION 2.2: PERCENTAGE RENT: Percentage Factor: [***] Sales Break Point for the Original Term: From the Commencement Date through the expiration of the Original Term: [***]. Sales Break Point for the Option Period: Beginning with the first (1st) year and continuing through the expiration of the Option Period: [***]. (5) SECTION 2.4: SECURITY DEPOSIT: [***] (6) SECTION 4.1: PERMITTED USE: Tenant shall use the Leased Premises for the use set forth below and for no other purpose: *** Confidential treatment requested. 2 7 Conducting an interactive entertainment center featuring among other things, racing simulators and other related retail and entertainment uses. Such uses may include but shall not be limited to the installation and operation of simulators and the sale of auto racing, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR; and for the sale of snack food items only and hot and cold non-alcoholic beverages (selections to be based on Landlord's approval) for on-the-premises consumption, provided said snack food and beverage service shall not be operated or licensed by a nationally-recognized fast-food chain. See menu referred to as Exhibit I attached hereto and made a part hereof. Tenant shall have the right to conduct group sales events ("Events") from the Leased Premises at which time a portion of the Leased Premises may be closed to the general public. During Events Tenant may retain an outside catering service (giving preference to restaurant operators within the Retail Development) to provide food and beverage service (including alcoholic beverage service if Tenant or the caterer obtains all necessary permits) with food items that are not reflected on Exhibit I. TRADE NAME: NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway (7) SECTION 13.2: FUND CONTRIBUTION: [***] psf of floor area in the Leased Premises GRAND OPENING FEE (INITIAL CONTRIBUTION): [***] psf of floor area in the Leased Premises (8) GUARANTOR: N/A ADDRESS: (9) GRAND OPENING DATE: September 16, 1999 (10) TEMPORARY CHARGES: [***] psf of floor area in the Leased Premises (11) CONSTRUCTION CHARGEBACKS: $ N/A (12) CONSTRUCTION ALLOWANCE: [***] *** Confidential treatment requested. 3 8 ARTICLE I GRANT AND TERM SECTION 1.1. LEASED PREMISES. (a) Landlord, in consideration of the Rent (as defined in Section 2.3) to be paid and the covenants to be performed by the Tenant, does hereby lease and demise to Tenant, and Tenant hereby rents and hires from Landlord for the Term herein set forth, the Leased Premises which are described as set forth in the Data Sheet attached hereto, in the retail development designated as Concord Mills or by such other name as Landlord may from time to time hereafter designate (hereinafter "Retail Development"). The term "State" as used herein shall mean the State or Commonwealth of North Carolina. For all purposes in this Lease, a "Major Tenant" is any occupant of 20,000 square feet or more of floor area in the Retail Development and a "Major Tenant Space" is any space in the Retail Development containing 20,000 square feet or more. It is agreed that, wherever the term "Shopping Center" is used herein, it shall mean the Retail Development excluding the Major Tenant Spaces, except as otherwise specifically stated herein. Exhibit A sets forth the general layout of the Retail Development. Landlord does not warrant or represent that the Retail Development or the Leased Premises will be constructed exactly as shown thereon or that it will be completed by a specific date, but Landlord does warrant that the Leased Premises and the Retail Development will have the general configuration shown on Exhibit A. Notwithstanding anything contained in this Lease to the contrary, Landlord shall have the right, at any time and from time to time, without notice to or consent of Tenant, and without in any manner diminishing Tenant's obligations under this Lease, to make alterations or additions to, and build additional stories on the building in which the Leased Premises are located and to build adjoining the same, to construct other buildings and improvements of any type in the Retail Development or the common areas, or any part thereof, including the right to locate and/or erect thereon permanent or temporary kiosks and structures, to enlarge the Retail Development, and to make alterations therein or additions thereto (provided in no event will any kiosk or other structure be located directly in front of the registration desk within the Leased Premises other than the information booth which has been previously disclosed to Tenant), to build additional stories on any building or buildings within the Retail Development, and to build adjoining thereto, to construct decks or elevated parking facilities and free standing buildings within the parking lot areas of the Retail Development, and to change the size, location, elevation and nature of any of the stores in the Retail Development or the common areas or any part thereof. In exercising its options hereunder, Landlord agrees to use reasonable efforts (in light of the then existing circumstances) not to materially and unreasonably interfere with the visibility of and access to the Leased Premises from the enclosed mall: it being understood that any structure placed in the common areas shall not block Tenant's signage located on the storefront signband. In the event Landlord elects to enlarge the Retail Development, or any part thereof, any additional area may be included by Landlord in the definition of the Retail Development for purposes of this Lease. Landlord shall also have the general right from time to time to include within and/or to exclude from the defined Shopping Center any existing or future areas and the floor area of the Shopping Center shall be accordingly adjusted. The premises leased to Tenant are herein referred to as the "Leased Premises". The approximate location of the Leased Premises is cross-hatched on the lease plan of the Retail Development attached hereto and made a part hereof as Exhibit A. This Lease of the Leased Premises is subject to all applicable building restrictions, planning and zoning ordinances, governmental rules and regulations, existing underlying leases, and all other encumbrances, covenants, restrictions, easements and agreements affecting the Retail Development and the terms and provisions of certain master declaration, reciprocal easement and operating agreements now or hereafter entered into by Landlord. Landlord acknowledges that Tenant's customers shall be permitted to queue in the common areas in front of the Leased Premises while waiting for access to the Leased Premises ("Waiting Area"). The Waiting Area shall be in a location designated by Landlord and reasonably approved by Tenant, provided said Waiting Area permits Tenant's customers to queue in an orderly manner without obstructing pedestrian traffic in the common areas and/or unreasonably disturbing the operation of other tenants in the Retail Development. In addition to the Leased Premises, Landlord shall grant Tenant a license for a location in the common area of the Shopping Center which shall be used by Tenant for the display of a full size stockcar, including sign tripods ("Display Area"). The location of the Display Area shall be selected 4 9 by Landlord, but such location shall always be with in the area labeled on Exhibit A-1 as "Display Area". In no event shall Tenant be obligated to pay additional Rent for use of the Display Area; provided, however, that any utility costs associated with the illuminated display shall be the sole responsibility of Tenant. Tenant shall, at its sole cost and expense, construct the illuminated display in accordance with approved plans and specifications, which plans and specifications shall be submitted to Landlord for approval pursuant to the submittal requirements and process outlined in the Tenant Handbook. During the Term, Tenant shall repair and maintain the Display Area in accordance with Section 6.2 of this Lease. In addition, Tenant shall be required to carry insurance for the Display Area providing for the coverage set forth in Section 8.2(a) of this Lease. Upon the Expiration Date (hereinafter defined) or the earlier termination of this Lease, Tenant shall be responsible for the complete removal of the display and shall make any necessary repairs to the Display Area in accordance with Tenant's obligations set forth in Section 17.1 of this Lease. Subject to the provisions of Section 5.1, Tenant shall enjoy a non-exclusive easement, right and privilege for Tenant and its customers, employees and invitees and the customers, employees and invitees of any assignee, sublessee, concessionaire or licensee of Tenant, to use the common areas of the Shopping Center, with Landlord and the other tenants and occupants of floor area within the Shopping Center and their respective customers, employees and invitees. Furthermore, Landlord agrees that any additions, alterations or modifications to the Shopping Center by Landlord shall not adversely affect access to, or visibility of the Leased Premises and, except as otherwise provided for herein, Tenant shall retain substantially the same relative position with respect to Major Tenants of the Shopping Center as of the Commencement Date. (b) After the Commencement Date (as defined in Section 3.2), Landlord reserves the right to relocate Tenant for the purpose of (i) the addition or expansion of a Major Tenant or (ii) the redevelopment or expansion of the Retail Development involving the addition of a minimum of 100,000 square feet of GLA. Landlord shall provide Tenant with not less than sixty (60) days written notice of such relocation (the "Relocation Period") during which Landlord shall offer to Tenant such alternative location(s) (with approximately the same floor area, configuration and at least fifty feet (50') of frontage) as may be available within that area of the Retail Development labeled "Relocation Zone" on Exhibit A-2. In the event the parties agree on a specific location, then this Lease shall be amended by substituting the new location for the present location and the square footage, Minimum Rent and Sales Break Point shall be proportionately adjusted based upon the change in the size of the Leased Premises and Landlord and Tenant shall agree upon a mutually acceptable timeframe for the completion of work in the new premises and the relocation of the Tenant to the new premises. Landlord shall, at Landlord's cost and expense, complete the leasehold improvements to the new location in accordance with the working drawings originally approved by Landlord with respect to Tenant's Work in the original Leased Premises (including, without limitation finish work and the installation of fixtures, simulators and other merchandise) and Tenant shall relocate to the new location and, within sixty (60) days after delivery of the new location to Tenant ("Relocation Fixturing Period"), open for business in the new location ("Relocation Date"). Since Tenant will need to move its equipment, including simulators from one space to the other, Tenant shall be permitted to close for a period not to exceed ten (10) days for the purpose of moving the equipment and installing it in the new leased premises ("Relocation Closure"), and during such Relocation Closure Tenant's Rent shall abate. In the event that Tenant is not able to operate in either the original or the relocated Leased Premises during the Relocation Fixturing Period because of the removal and installation of the simulators and other equipment, Rent shall abate until Tenant reopens but in no event after the expiration of the Relocation Fixturing Period. Notwithstanding the foregoing, Tenant may elect to have Landlord construct the relocated space under a new prototype design, but Tenant shall bear the additional costs required as a result of the election of the new design. Landlord recognizes that the installation of simulators is a specialized task for which Tenant's experts will be required and Landlord shall reimburse Tenant for the reasonable internal costs of using Tenant's personnel for the completion of such work. In the event Landlord offers to Tenant at least one alternative location with approximately the same floor area, configuration and at least fifty feet (50') of frontage and Landlord and Tenant are unable to agree on an alternative location, then within thirty (30) days after the expiration of the sixty (60) day period set forth above Landlord shall either (A) terminate this lease by providing Tenant ninety (90) days prior notice, which termination shall be effective on the later of (i) ninety (90) days after notice from Landlord of the termination or (ii) the date that Tenant actually vacates 5 10 the Leased Premises ("Termination Date") or (B) withdraw the request for relocation. In the event of such termination, Landlord shall pay to Tenant, within thirty (30) days following the Termination Date, a sum equal to the then unamortized cost of Tenant's leasehold improvements which have been paid for by Tenant, such amortization to be on a straight line basis over the Original Term less the value of all simulators equipment removed by Tenant for re-use plus all reasonable costs associated with the moving and storage for up to three (3) months of the simulators and other equipment in the Leased Premises, provided Tenant shall furnish to Landlord such backup information as Landlord may reasonably require. Tenant shall deliver possession of the Leased Premises to Landlord on or before the Termination Date and/or the Relocation Date in "as is" condition excepting the provisions of Sections 3.5 and 17.1. Tenant shall pay all charges which are due and owing or which shall accrue up to such Termination Date or Relocation Date (which charges shall be paid to Landlord within thirty (30) days of such Termination Date or Relocation Date) and Tenant shall be released from any and all further obligations pursuant to this Lease accruing after such Termination Date or Relocation Date with respect to the vacated Leased Premises, except as otherwise provided in Articles V and VII; however, in the event of relocation, Tenant shall remain liable for all obligations accruing under this Lease after the Relocation Date. (c) The square footage of the Leased Premises (sometimes herein referred to as the gross leasable floor area or GLA) shall be measured as defined in Exhibit B. The actual square footage in the Leased Premises shall be determined by Landlord's architect. If Tenant disagrees with the square footage so determined, Tenant may advise Landlord in writing within ten (10) days that it contests the same and retain an architect to remeasure the Leased Premises. If Landlord's architect and Tenant's architect do not agree, then the two architects shall retain a third architect whose decision shall be final and binding. The agreed to square footage shall be binding upon both parties hereto, and such determined square footage shall be used in all calculations based on square footage throughout this Lease. If the floor area determined in accordance with the preceding sentence varies from the square foot floor area originally set forth in the Data Sheet, the Minimum Rent set forth in Section 2.1 hereof shall be adjusted by multiplying the Minimum Rent by a fraction, the numerator of which is the square foot floor area determined by Landlord's architect and the denominator of which is the square foot floor area originally set forth in the Data Sheet, and Tenant shall be obligated to pay such Minimum Rent, as adjusted, from the Commencement Date, subject to further adjustments as provided in this Lease but in no event shall Tenant be obligated to pay Minimum Rent on more than one hundred ten (110) additional square feet of GLA. Each monthly installment provided for in Section 2.1 shall be recomputed and shall be that dollar amount which results from dividing the adjusted Minimum Rent by twelve (12). Any and all references in this Lease to Minimum Rent (or the monthly installments thereof) shall be deemed to be references to the Minimum Rent as computed by application of this Section 1.1, subject, however, to the adjustments set forth elsewhere in this Lease. For purposes of this Lease, in determining the gross leasable floor area or the gross leased and occupied floor area of the Shopping Center, there shall be excluded therefrom project areas and offices, common areas and/or areas under Landlord's control (e.g., electrical/utility rooms, etc.). The exterior walls, roof, storefront and the area beneath the Leased Premises are not demised hereunder, and the use thereof, together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires, people counters, tunnels, sewers and structural elements leading through the Leased Premises in locations which will not materially interfere with Tenant's use thereof and serving other parts of the Retail Development are hereby reserved to Landlord. Landlord reserves an easement above Tenant's finished ceiling or light line to the roof for general access purposes and in connection with the exercise of Landlord's other rights under this Lease. Notwithstanding anything contained in this Lease to the contrary, if as a result of Landlord's exercise of the foregoing rights Tenant is prevented from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. SECTION 1.2. TERM. The Term of this Lease shall be for a period commencing on the Commencement Date, and expiring at 11:59 p.m. local time on the final day of the month in which the Original Term or the Option Period, if exercised, expires or other specified date as set forth in the Data Sheet, unless sooner terminated in accordance with the provisions hereof (the "Expiration Date"). Unless otherwise specified in this Lease, the use of the word "Term" shall be deemed to include both the Original Term and the Option Period, if exercised. The term "full year" and "year" as used in this Lease shall mean consecutive periods of twelve (12) months each following the 6 11 Commencement Date. For all purposes of this Lease, the term "Lease Year" shall have the following meaning: the first Lease Year shall be a period beginning with the Commencement Date and ending on the 31st day of December next following the Commencement Date, and after the first Lease Year, the term Lease Year shall mean a fiscal period of twelve (12) consecutive calendar months commencing on January 1 of each calendar year, except that the last Lease Year shall terminate on the Expiration Date or sooner termination of this Lease. Lease Years containing 365 days or more shall be referred to as "full Lease Years." If the Leased Premises are not delivered to Tenant on or before the expiration of twelve (12) months after the date of Landlord's execution of this Lease then either party may cancel and terminate this Lease upon sixty (60) days prior written notice to the other, in which event neither party shall have any further obligation or liability to the other; provided, however, that if Landlord has commenced construction of the Shopping Center, then Landlord shall not be permitted to terminate in the foregoing manner. Following the Commencement Date of this Lease, Landlord may submit to Tenant a Commencement and Expiration Date Declaration in the form attached hereto as Exhibit F, specifying the information called for in said form, and Tenant shall execute such Declaration within thirty (30) days following submission for purposes of certifying such information; provided, however, that the Declaration shall not be rendered ineffective by Tenant's failure to execute same. Provided Tenant is not in default (after expiration of any cure or grace period provided herein) as of the date of exercise hereof. Tenant shall have the option to extend the Term hereof (the "Option") for one (1) additional period of five (5) years (the "Option Period"). The Option shall be exercised, if at all, by written notice to Landlord ("Notice") at least one hundred eighty (180) days prior to the expiration of the Original Term. All terms and conditions of this Lease shall apply during the Option Period except the Minimum Rent and Sales Break Points shall be as scheduled in Sections 2.1 and 2.2 hereof. In the event that Tenant does not exercise the Option by the required date, then such Option shall become null and void and be of no further force or effect. In addition, if this Lease is transferred or assigned, in whole or in part, as permitted in Section 11.1 hereof, or if the Leased Premises or any part thereof be sublet or occupied by any person or entity other than Tenant, then such Option shall become null and void and be of no further force or effect, unless the Lease has been transferred with the prior written consent of Landlord or pursuant to a transfer of substantially all of the assets of Tenant not requiring the approval or consent of Landlord. If Tenant's Gross Sales during the twelve (12) month period ending two hundred ten (210) days prior to the Expiration Date do not exceed [***] per square foot of floor area in the Leased Premises, then any Notice by Tenant of the Option shall be null and void and Tenant's Notice shall have no force or effect. Tenant shall furnish to Landlord, concurrently with its Notice, a statement certified by an authorized representative or financial officer of Tenant setting forth the amount of Tenant's Gross Sales for the said twelve (12) month period. Notwithstanding the foregoing, in the event Tenant does not achieve Gross Sales (as hereinafter defined) of at least [***] per square foot during the third year of the Term hereof, then Landlord and Tenant for a period of thirty (30) days following the end of the third year, shall each have the option, upon one hundred eighty (180) days prior written notice to the other party, of terminating this Lease ("Termination Option") provided, however, that Tenant shall not be entitled to terminate this Lease if Tenant is in default of this Lease. In the event Tenant fails to submit a certified report of annual Gross Sales within twenty (20) days after written notice of its failure to submit such report within the time period required pursuant to Section 2.2 of this Lease, then Landlord may use such information as Landlord shall have available to permit Landlord to make a determination as to the amount of Gross Sales achieved by Tenant during the period covered by Landlord's option to terminate, and such information shall be the basis for Landlord exercising its Termination Option and Tenant shall not be permitted to reinstate this Lease after termination for any reason or cause whatsoever, including, but not limited to, the submittal by Tenant of a subsequent sales report either certified or uncertified. In the event that neither party exercises its Termination Option within the required time period, then each such Termination Option shall, upon expiration of the applicable period, become null and void and be of no further force or effect. In the event either party exercises the foregoing Termination Option within the required time period, this Lease shall terminate upon expiration of the one hundred eighty (180) day period subject, however, to the payment by Tenant to Landlord of all sums then due and owing or having accrued to Landlord. In the event that Tenant exercises the Termination Option *** Confidential treatment requested. 7 12 provided for herein. Tenant shall pay to Landlord the unamortized portion of the Construction Allowance (as hereinafter defined). In the event that Tenant can prove that Tenant's Gross Sales are below [***] per square foot as the result of an act or omission on the part of Landlord, then Landlord shall not be permitted to exercise the Termination Option provided in the immediately preceding paragraph. SECTION 1.3. OPENING. Subject to delays as described in Article XVI. Tenant covenants and agrees to complete its construction within the Leased Premises in accordance with the provisions of this Lease, to satisfy the requirements for issuance of a certificate of acceptance pursuant to Exhibit D attached hereto and made a part hereof, and to open its store for business to the public not later than the Commencement Date. Notwithstanding the foregoing, Landlord hereby notifies Tenant that the anticipated date of the grand opening of the Shopping Center (the "Grand Opening") is the date set forth on the Data Sheet, Tenant shall be obligated to open its store for business to the public on or before the later of (a) the expiration of the Fixturing Period or (B) the Grand Opening. Tenant shall not be permitted to open for business to the public prior to the Grand Opening without the prior written consent of Landlord which consent shall be at Landlord's sole discretion. SECTION 1.4. LATE OPENING. In the event Tenant shall fail to open its store for business to the public upon the Commencement Date for reasons other than Delays as described in Article XVI, or delays created by Landlord, then in order to compensate Landlord for its loss, Tenant shall pay to Landlord as additional rent (as defined in Section 2.3) over and above the Minimum Rent and all other charges to be paid by Tenant to Landlord pursuant to this Lease, a sum in an amount equal to [***] per day for the Commencement Date and each day after the Commencement Date that Tenant shall have failed to open its store for business. This remedy shall be in addition to any and all other remedies provided for in this Lease in the event of such failure to open. Such additional late opening rent shall be deemed to be in lieu of any Percentage Rent that might have been earned during the period of Tenant's failure to open. ARTICLE II RENT AND DEPOSIT SECTION 2.1. MINIMUM RENT. During the entire Term of this Lease, Tenant shall pay annual minimum rental ("Minimum Rent") for the Leased Premises from the Commencement Date of this Lease in the amount set forth in the Data Sheet attached hereto, which sum shall be payable by Tenant in equal consecutive monthly installments in the sum set forth in the Data Sheet attached hereto, on or before the first day of each month, in advance. The Minimum Rent and each of the monthly installments called for hereunder shall be payable to Landlord, without demand, deduction, set-off or counter-claim, except as otherwise provided herein or permitted by applicable law. The first installment of Minimum Rent shall be paid by Tenant on or before the Commencement Date. If the Commencement Date occurs on other than the first day of a month, the second installment of Minimum Rent shall be prorated at a daily rate on the basis of a thirty (30) day month. On the Commencement Date, if either of the following conditions have not been satisfied: (1) at least five (5) Major Tenants are open or ready to open for business: or (2) the "Required Occupancy Level" (as hereinafter defined) has been achieved, then Tenant's obligation for payment of Minimum Rent shall abate and Tenant shall pay to Landlord, in lieu thereof, Interim Rent on the basis of the lesser of (A) the scheduled Minimum Rent and (B) [***] of all of Tenant's Gross Sales (as defined in Section 2.2 of this Lease) until both of the conditions in (1) and (2) above have been initially satisfied; provided, however, Tenant shall not be entitled to such abatement of Minimum Rent if Tenant fails to open its store in the Leased Premises to the general public on or before the Commencement Date of the Term hereof or if Tenant shall otherwise be in default of this *** Confidential treatment requested. 8 13 Lease. Said Interim Rent shall be paid to Landlord within ten (10) days following the end of each calendar month, at which time Tenant shall also be required to submit an unaudited statement of Tenant's Gross Sales for such calendar month and for the Lease Year to date. All other terms and conditions of this Lease shall be applicable during such period. For purposes of this paragraph, the term 'Required Occupancy Level' shall mean occupants of at least sixty-five percent (65%) of the gross leasable floor area of the Shopping Center are open for business, or instead, at Landlord's sole option. 'Required Occupancy Level' shall mean sixty five percent (65%) of the total number of stores shown on the then existing lease plan for the Shopping Center, are occupied and are open or ready to open for business. In addition, Landlord hereby represents and warrants to Tenant that it has a fully executed lease for a Bass Pro facility, Jillian's and a multi-plex theater at the Retail Development ("Key Stores"). In the event that less than two of the Key Stores have opened for business within six (6) months of the Commencement Date then Tenant's obligation for payment of Minimum Rent shall abate and Tenant shall pay to Landlord, in lieu thereof, Interim Rent on the basis of the lesser of (A) [***] and (B) [***] (as defined in Section 2.2 of this Lease) until at least two (2) of the Key Stores are initially open for business; provided, however, Tenant shall not be entitled to such abatement of Minimum Rent if Tenant fails to open its store in the Leased Premises to the general public on or before the Commencement Date or if Tenant shall otherwise be in default of this Lease. Said Interim Rent shall be paid to Landlord within ten (10) days following the end of each calendar month, at which time Tenant shall also be required to submit an unaudited statement of Tenant's Gross Sales for such calendar month and for the Lease Year to date. All other terms and conditions of this Lease shall be applicable during such period. In the event that at least two (2) of the Key Stores have not initially opened for business within eighteen (18) months after the Commencement Date, then at the end of such eighteen (18) moth period. Tenant may elect to terminate this Lease by providing Landlord within thirty (30) days of the end of such eighteen (18) month period, written notice of its intention to so terminate the Lease ("Key Store Termination Notice") or Tenant may elect to remain in the Leased Premises but must commence paying the then applicable scheduled Minimum Rent as provided for in the Data Sheet of this Lease. In the event that Tenant timely delivers the Key Store Termination Notice, this Lease shall terminate one hundred and eighty (180) days from the date of the Key Store Termination Notice or on such earlier date as may be mutually agreed to between the parties and this Lease and all of the unaccrued rights and obligations of the parties to it shall cease and terminate, as fully and effectively as though the date agreed to were the Expiration Date. In such event, Landlord and Tenant shall execute a Termination Agreement setting forth the terms of such termination. SECTION 2.2. PERCENTAGE RENT. (a) During and for each Lease Year, Tenant shall pay annual percentage rent ("Percentage Rent") equal to the Percentage Factor (see Data Sheet) multiplied by all "Gross Sales" resulting from business conducted in, on or from the Leased Premises during such Lease Year in excess of the applicable Sales Break Point set forth in the Data Sheet. In any Lease Year where there is more than one applicable Sales Break Point, for purposes of computing annual Percentage Rent the following calculation shall be used: each Sales Break Point which was effective during any such Lease Year shall be multiplied by a fraction, the numerator of which is the number of days in the Lease Year that such Sales Break Point was effective and the denominator of which is the actual number of days in such Lease Year (herein the "Adjusted Break Point") and the sum of the Adjusted Break Points shall be the Sales Break Point for such Lease Year. "Gross Sales" is defined to mean the total amount of the actual sales price, whether for cash or otherwise, of all sales of merchandise or services arising out of or payable on account of (and all other receipts or amounts receivable whatsoever with respect to) all the business conducted in, on, or from the Leased Premises by or on account of Tenant or any sublessee, assignee or concessionaire of Tenant for cash or otherwise, including all orders for merchandise taken from or filled at or from the Leased Premises, including all deposits not refunded to customers. A "sale" shall be deemed to have been consummated for purposes of this Lease, and the entire amount of the sale price shall be included in Gross Sales, at such time as (i) the transaction is initially reflected in the books or records of Tenant, or any sublessee, assignee or concessionaire of Tenant, or (ii) Tenant or such other entity receives all or any portion of the sales price, or (iii) the applicable goods or services are delivered to the customer, whichever first occurs. Tenant shall record at the time of each sale or transaction, in the presence of the customer, all receipts from such sale or other *** Confidential treatment requested. 9 14 transaction, whether for cash, credit or otherwise, in a cash register or cash registers having a cumulative total, which shall be sealed in a manner approved by Landlord and which shall possess such other features as shall be required by Landlord. There shall be no deduction allowed for direct or indirect discounts, rebates, or other reductions on sales, unless generally offered to the public on a uniform basis. Tenant may deduct from Gross Sales discount sales to employees, bad debts when written off the books of Tenant and charges paid to credit card companies, as otherwise provided below. Tenant may also exclude from Gross Sales any transfer of goods between Tenant's other stores and returns to shippers or manufacturers. The term "Gross Sales" shall exclude, however, proceeds from any sales tax, gross receipts tax or similar tax, by whatever name called which are separately stated and in addition to the purchase price, bona fide transfers of merchandise from the Leased Premises to any other stores or warehouses of Tenant, refunds given to customers for merchandise purchased at the Leased Premises and returned or exchanged, and sales of Tenant's fixtures and equipment not in the ordinary course of Tenant's business. The term "merchandise" as used in this Lease shall include food and beverages if Tenant is permitted to sell such items pursuant to Section 4.1 hereof. The term "Gross Sales" shall not include, however, the following: (i) the sales price of all merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon; (ii) the sums and credits received in settlement of claims for loss or damage to merchandise, (iii) the consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee; (iv) sales taxes, so-called luxury taxes, excise taxes, gross receipt taxes, and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of the merchandise or services and collected from customers or included in the retail selling price; (v) receipts from public telephones, vending machines, sales of money orders, and the collection of public utility bills; (vi) bankcard discounts (e.g., Visa, MasterCard, etc.), interest, carrying charges, or other finance charges in respect of sales made on credit; (vii) sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail; (viii) sales to senior citizens at discount; (ix) revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers; (x) Tenant's accounts receivable, not to exceed five percent (5%) of Gross Sales, which have been determined to be uncollectible for federal income tax purposes during the applicable lease year, provided however, that if such accounts are actually collected in a later lease year, the amount shall be included in the Gross Sales for such later lease year; (xi) rents, subrents or other consideration received in connection with a permitted assignment, sublease, license, concession or other transfer of any portion of the store (however, Gross Sales of any such transferee shall be included) and license fees otherwise received by Tenant in connection with a third party license agreement; (xii) amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in the store; (xiii) discounts given for promotional coupons that are redeemed from time to time (xiv) amounts received in connection with remote site promotional activities; (xv) promotional fees earned by Tenant with respect to goods or services offered for sale; and (xvi) amount required to be paid by Tenant under any agreement related to Tenant's use of the NASCAR name, not to exceed two percent (2%) of Gross Sales. (b) Tenant shall keep at the Leased Premises or at Tenant's executive offices within the continental United States a full and accurate set of books and records adequately showing the amount of Gross Sales in each Lease Year. The books and records to be kept by Tenant shall include, without limitation, (i) cash register tapes, including tapes from temporary registers; (ii) serially pre-numbered sales slips; (iii) detailed original records of any exclusions or deductions from Gross Sales; (iv) sales tax records; and (v) such other records, if any, which would normally be examined by an independent accountant pursuant to accepted auditing standards in performing an audit of Tenant's sales. Such books and records shall be kept in accordance with generally accepted accounting principles and practices, may be saved in microfiche or an electronic storage medium, and shall be retained by Tenant for a period of not less than two (2) years following the end of the Lease Year to which they have reference. When and as Landlord may reasonably require (but no more than once per Lease Year following the first Lease Year (if the first year is a partial Lease Year) unless required by the city, county or State), Tenant shall also furnish to Landlord any and all 10 15 statements, information, and copies of sales tax reports and returns which separately show financial data for the Leased Premises, and inventory records and other data evidencing Gross Sales. Within twenty (20) days following the end of each calendar month of the Term hereof Tenant shall submit to Landlord an unaudited statement of Gross Sales for such calendar month. Within twenty (20) days following the end of the month in which Tenant's Gross Sales for the Lease Year to date exceed the Sales Break Point, and each month thereafter, Tenant shall pay to Landlord Percentage Rent and shall submit to Landlord a statement certified by Tenant setting forth the Gross Sales for each such period. Within forty-five (45) days after the close of each Lease Year, Tenant shall furnish to Landlord a statement certified by an authorized representative or financial officer of Tenant setting forth the amount of Gross Sales during such Lease Year and showing the amount of Percentage Rent required to be paid by Tenant for such Lease Year. The full amount of the Percentage Rent due shall be paid to Landlord no later than sixty (60) days after the end of each Lease Year and any excess Percentage Rent paid shall be credited against Tenant's next due Rent payment, except for the final Lease Year of the Term for which any excess shall be refunded to Tenant. Landlord and/or Landlord's auditor shall have the right, at any time after thirty (30) business days notice but no more than once per Lease Year after the first Lease Year (if the first Lease Year is a partial Lease Year), to inspect and/or audit the records of Tenant relating to Gross Sales. If the Gross Sales exceed those reported, Tenant shall immediately pay any deficiency in Percentage Rent owing to Landlord. If Gross Sales vary from those reported by three percent (3%) or more, Tenant shall pay Landlord's cost of inspection and audit. If Gross Sales vary from those reported by (i) five percent (5%) or more in any one (1) Lease Year, or (ii) three percent (3%) or more for any two (2) Lease Years out of any five (5) Lease Years, then Landlord shall have the right, at its sole option, to terminate this Lease, with Tenant remaining liable for sums due and owing under this Lease for the balance of the Term provided, however, that Landlord shall be permitted to terminate this Lease if Landlord can prove that such misstatement was a deliberate act. Tenant agrees that in the event Tenant shall fail to timely submit a Gross Sales statement as required by this Section 2.2(b), Tenant shall pay on demand a late fee of Fifty and 00/100ths Dollars ($50.00) per late statement, as additional rent. (c) In the event that Tenant shall fail to operate its business in the Leased Premises in the manner and on each day as required pursuant to Article IV hereof, then, for the purpose of computing the Percentage Rent for such Lease Year affected by Tenant's failure to operate, the Sales Break Point for such Lease Year shall be adjusted by multiplying the Sales Break Point otherwise applicable for such Lease Year by a fraction, the numerator of which shall be the actual number of days in such short Lease Year or the actual number of days in such Lease Year during which Tenant was open for business and operating in accordance with Article IV, and the denominator of which shall be "360". In the event that the first Lease Year is less than six (6) months in length, then the Percentage Rent covering such Lease Year shall be paid on Gross Sales in excess of the Sales Break Point computed on a pro rated basis for the period beginning on the Commencement Date of the Term and ending on the succeeding December 31st. 11 16 SECTION 2.3. PAYMENTS BY TENANT. Throughout the Term of this Lease, Tenant shall pay to Landlord, without demands, deductions, set-offs or counterclaims (except as otherwise provided for herein or permitted by applicable law), the Rent, which is hereby defined as the sum of the Minimum Rent, Percentage Rent and all additional rent, when and as the same shall be due and payable hereunder. Unless otherwise stated, all sums of money or charges of any kind or nature, in addition to Minimum Rent and Percentage Rent, payable by Tenant to Landlord pursuant to this Lease or the Exhibits attached hereto are defined as "additional rent" and are due thirty (30) days after the rendering of an invoice therefor, without any deductions, set-offs or counterclaims, and failure to pay such sums of money or charges shall carry the same consequences as Tenant's failure to pay Rent. All payments and charges required to be made by Tenant to Landlord hereunder shall be payable in United States funds, at the address indicated on page 1 of this Lease, unless otherwise specified by written notice from Landlord to Tenant. No payment by Tenant or receipt by Landlord of a lesser amount than the correct Rent shall be deemed to be other than a payment on account and no endorsement or statement on any check or other communication accompanying a check for payment of any amounts payable hereunder shall be deemed an accord and satisfaction, and Landlord may accept such check in payment without prejudice to Landlord's right to recover the balance of any sums owed by Tenant hereunder or to pursue any other remedy available in this Lease, or under law, against Tenant. SECTION 2.4. SECURITY DEPOSIT. The amount set forth in the Data Sheet as a security deposit is payable by Tenant to Landlord upon Tenant's execution of this Lease, which sum shall be held by Landlord as security against any default by Tenant in the performance of the covenants, conditions and agreements of this Lease. The security deposit may, at Landlord's option, be applied by Landlord against any default in any of the terms, provisions or conditions of this Lease. Landlord shall not be obligated to keep such security deposit in a separate fund but may commingle the security deposit with its own funds. A mortgagee-in-possession of the Leased Premises, or any interest therein, through public or private foreclosure or the acceptance of a deed in lieu thereof, shall have no liability to Tenant for return of all or any portion of the security deposit, unless, and then only to the extent that, such mortgagee has actually received all or any portion of Tenant's security deposit. In the event Landlord applies the security deposit in whole or in part against a default by Tenant, Tenant shall, upon demand by Landlord, deposit sufficient funds to maintain the security deposit in the initial amount. The failure of Tenant to maintain the security deposit in the initial amount as stated shall constitute a failure to pay Rent and shall carry with it the consequences set forth under Article XIV hereof. Upon the expiration of the Term hereof, the security deposit, if not applied toward the payment of Rent in arrears or toward the payment of damages suffered by Landlord by reason of Tenant's breach of this Lease, is to be returned to Tenant without interest, except as provided by law, but in no event is such security deposit to be returned until Tenant has vacated the Leased Premises, delivered possession thereof to Landlord, and fully satisfied Tenant's obligations under this Lease. Notwithstanding the acceptance by Landlord of Tenant's security deposit, this Lease shall not be deemed effective until the Effective Date (as defined in Section 20.20). SECTION 2.5. LATE CHARGE. In the event any Rent or sums required hereunder to be paid are not received on or before the fifth (5th) calendar day after the same are due, then, for each and every late payment, Tenant shall immediately pay, as additional rent, a late charge equal to the greater of (a) [***], (b) [***] per day for each day after the date due that such payment has not been received by Landlord or (c) [***] per month of the total receivable balance of Tenant outstanding. In the event of Tenant's failure to pay the foregoing late charge, Landlord may deduct said charge from the Security Deposit set forth in Section 2.4 hereof. The provisions herein for late charges shall not be construed *** Confidential treatment requested. 12 17 to extend the date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligation to pay all such sums at the time or times herein stipulated. Notwithstanding the imposition of such late charges pursuant to this Section 2.5, Tenant shall be in default under this Lease if any or all payments required to be made by Tenant are not made on or before the time due and as stipulated in Article XIV, and neither the demand for, nor collection by, Landlord of such late charges shall be construed as a cure of such default on the part of Tenant. It is agreed that the said late charge is a fair and reasonable charge under the circumstances and shall not be construed as interest on a debt payment. In the event any charge imposed hereunder or under any other section of this Lease is either stated to be or construed as interest, then no such interest charge shall be calculated at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Lease. ARTICLE III PREPARATION OF LEASED PREMISES SECTION 3.1. LANDLORD'S WORK. Landlord shall construct the building wherein the Leased Premises are to be located and perform the work described in Exhibit C attached hereto and made a part hereof ("Landlord's Work") at Landlord's cost and expense, except as otherwise provided in Exhibit C. Landlord's work shall be completed in a good and workmanlike manner, free of material defects and in compliance with applicable building codes, and zoning and subdivision laws relating to general retail use. All work, in excess of the work described in Exhibit C, done by Landlord at Tenant's written request shall be paid for by Tenant within thirty (30) days after the presentation to Tenant of a bill for such work. Any items of Landlord's Work which are not completed as of delivery of possession shall be identified by Tenant on a punch list to be submitted to Landlord within thirty (30) days after the date of possession and Landlord shall thereafter complete the same. Any items of Landlord's Work which are not timely identified on such a punch list shall be deemed completed, other than latent defects as provided for in Section 6.1 hereof. SECTION 3.2. DELIVERY OF POSSESSION. (a) Landlord, or Landlord's supervising architect, shall give Tenant at least thirty (30) days' prior written notice of the date on which Landlord's Work will be substantially completed in accordance with Exhibit C and the Leased Premises will be available for the performance of Tenant's Work (as defined in Section 3.3) to the extent that Tenant shall be able to perform its work in the Leased Premises without substantial interference resulting from the conduct of Landlord's Work ("Delivery of Possession Date"). Tenant covenants and agrees to take physical possession of the Leased Premises on the Delivery of Possession Date provided that Landlord's Work is "substantially complete." The term "substantially complete" shall mean that Landlord can give Tenant beneficial occupancy of the Leased Premises so that Tenant can begin the performance of Tenant's Work in safety. Landlord and Tenant acknowledge that Landlord and Tenant will be working simultaneously to complete the Leased Premises and that Landlord will be continuing the completion of Landlord's Work during the thirty (30) day period after the Delivery of Possession Date. Landlord and Tenant agree to cooperate so as to avoid interference with each other so that Landlord's Work and Tenant's Work may be completed in a timely manner. The Delivery of Possession Date shall be subsequently confirmed by Landlord, or Landlord's supervising architect, by written notice to Tenant. Failure of Landlord to deliver possession of the Leased Premises within the time and in the condition provided for in this Lease will not give rise to any claim for damages by Tenant against Landlord or permit Tenant to rescind or terminate this Lease except as may be provided in Section 1.2 hereof. (b) Tenant may, provided Tenant shall not interfere with the conduct of Landlord's Work, and subject to Landlord's reasonable rules and regulations, enter the Leased Premises during normal working hours during the course of Landlord's Work for the purpose of inspecting the Leased 13 18 Premises and making measurements. At such time prior to the Delivery of Possession Date that Landlord's Work has progressed sufficiently to permit Tenant to perform its work without interfering with Landlord's Work, Landlord may, but shall not be required to, notify Tenant of the same, and Tenant may then enter the Leased Premises in order to begin to install its store fixtures and perform such other work as may be required under the provisions of this Lease in order to ready the store for opening. Throughout the period of Tenant's Work, Tenant shall schedule its work so as not to interfere with any work being performed by Landlord or by any other tenant in the Shopping Center. SECTION 3.3. TENANT'S WORK. (a) Tenant agrees, prior to the commencement of the Term of this Lease, at Tenant's sole cost and expense, to diligently perform all work of whatever nature in accordance with Tenant's obligations set forth in Exhibit D ("Tenant's Work") and all other related work necessary to prepare for the opening to the public of Tenant's store in the Leased Premises in accordance with the provisions of this Lease. Tenant agrees to furnish to Landlord the Store Design Drawings and Working Drawings and Specifications with respect to the Leased Premises prepared in the manner and within the time periods required in Exhibit D. If such Store Design Drawings or Working Drawings and Specifications are not furnished by Tenant to Landlord within the required time period(s) in form to permit approval by Landlord, then the Fixturing Period (as described in the Data Sheet) shall be reduced by one (1) day for each day of delay by Tenant in submitting said Store Design Drawings or Working Drawings and Specifications. Landlord shall respond to such Store Design Drawings or Working Drawings and Specifications submitted by Tenant pursuant to this Lease within seven (7) business days following Landlord's receipt from Tenant. In the event of Landlord's failure to respond within such seven (7) business day period or there are other delays created by Landlord, the Fixturing Period as described in the Data Sheet shall be extended by one (1) day for each day of additional delay by Landlord. No material deviations from the final Store Design Drawings or Working Drawings and Specifications, once approved by Landlord, shall be permitted unless necessary to comply with applicable governmental requirements or unless otherwise approved by Landlord. Landlord's approval of Tenant's Store Design Drawings and Working Drawing and Specifications shall not constitute the assumption of such items. Tenant's Work shall include the installation of fixtures and equipment and the stocking of the Leased Premises with suitable merchandise. Tenant covenants that all such fixtures and equipment visible to customers shall be new (or like-new) and otherwise reasonably acceptable to Landlord in appearance. In addition to conforming to the requirements specified in Exhibit D, all work performed by Tenant shall comply with such rules and regulations as Landlord and its representatives may make, provided that such rules and regulations are uniformly applied to all similarly situated Shopping Center tenants under construction. Unless Landlord otherwise directs in writing, Tenant shall not open the Leased Premises for business until all construction has been completed pursuant to the provisions of Exhibit D. It is further understood and agreed that: (i) Landlord shall have no responsibility or liability whatsoever for any loss of, or damage to, any fixtures, equipment, merchandise, or other property belonging to Tenant, installed or left in the Leased Premises except to the extent resulting from the negligence or intentional acts of Landlord, its agents or employees; and (ii) Tenant's entry upon and occupancy of the Leased Premises prior to the Commencement Date shall be governed by and subject to all the provisions, covenants and conditions of this Lease. Tenant shall obtain at its sole cost and immediately thereafter furnish to Landlord all certificates and approvals with respect to work done and installations made by Tenant that may be required for the issuance of a certificate of occupancy for the Leased Premises, so that such certificate of occupancy shall be issued and the Leased Premises shall be ready for the opening of Tenant's business on the Commencement Date. Upon the issuance of the certificate of occupancy, a copy thereof shall be immediately delivered to Landlord. Promptly upon the completion of its work, Tenant, at Tenant's cost, shall repair, clean and restore all portions of the Shopping Center affected by Tenant's Work to their prior condition. To the extent approved by the proper governing authorities, Tenant shall have the right to install atop the roof of Landlord's building in which the Leased Premises are located one (1) antenna and/or one (1) satellite dish and the equipment necessary for Tenant's communications and data transmission network system. The satellite dish shall not be larger than five (5) feet in diameter. The antenna or satellite dish on such roof shall be at a location designated by Landlord and reasonably approved by Tenant. Tenant shall submit to Landlord for its approval plans for the installation of such antenna or satellite dish and necessary equipment, such approval not to be unreasonably withheld, delayed or conditioned. Tenant shall also provide Landlord with copies of *** Confidential treatment requested. 14 19 all permits required by the proper governmental authorities regarding such installation, which shall be obtained by Tenant at its sole cost and expense. Landlord's contractor shall cut the roof and patch it (if necessary) at Tenant's expense, and Tenant's contractor shall be subject to Landlord's prior approval, which approval shall not be unreasonably withheld, delayed, or conditioned. Tenant shall be responsible for the cost of repairing any damage to Landlord's building arising from such installation, except to the extent caused by Landlord's contractors. Upon prior written notice to Landlord (except in case of an emergency), Tenant shall have access to the antenna or satellite dish and related equipment for the purpose of maintaining, repairing, replacing and operating the antenna or satellite dish. Any utility costs related to the installation and operating of the antenna or satellite dish shall be the sole responsibility of Tenant. Provided Tenant is not in default hereof, Landlord hereby agrees to contribute towards the cost of Tenant's Work a Construction Allowance of [***]. The aforesaid Construction Allowance shall be paid as follows: [***] after [***] of Tenant's Work is completed; [***] upon [***]; and [***] upon [***]. In the event that this Lease is terminated prior to the expiration of the Term hereof as a result of a default on the part of Tenant, Tenant shall repay said Construction Allowance to Landlord in cash upon termination; provided, however, that Tenant's liability for said Construction Allowance shall be reduced at the rate of one-sixtieth (1/60th) at the end of each full calendar month during the Term hereof. (b) The interest of Landlord in the Leased Premises and the Retail Development shall not be subject to liens for improvements made by or on behalf of Tenant. Nothing contained in this Lease shall be construed as a consent on the part of Landlord to subject Landlord's estate in the Leased Premises or the Retail Development to any lien or liability under applicable law. In the event that any mechanic's, materialman's or other lien or any notices of claim, including without limitation, stop notices (herein "lien") is filed against the Leased Premises or Retail Development as a result of any work, labor, services or materials performed or furnished, or alleged to have been performed or furnished to or for Tenant (excluding work performed by or on behalf of Landlord) or to or for anyone holding the Leased Premises through or under Tenant, Tenant, at its expense, shall cause the lien to be discharged or fully bonded to the satisfaction of Landlord within thirty (30) days after notice of the filing thereof. If Tenant fails to discharge or bond against said mechanic's, materialman's or other lien, Landlord may, in addition to any other remedies Landlord may have, but without obligation to do so, bond against or pay the lien without inquiring into the validity or merits of such lien and all sums so advanced, including reasonable attorney fees incurred by Landlord in defending against such lien, procuring the bond or in the discharge of such lien, shall be paid by Tenant on demand as additional rent. It shall be Tenant's continuing obligation to keep and maintain the Leased Premises and all other parts of the Retail Development free from any and all liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant in connection with the Leased Premises. In addition, Tenant shall replace any bonds posted by Landlord pursuant hereto with a suitable bond of equivalent amount within twenty (20) days after Landlord's demand therefor. (c) During the Term of this Lease, Tenant agrees to repair, refurbish or replace the interior portions of the Leased Premises that are visibly worn or damaged so as to maintain the condition of the Shopping Center as a first class super-regional discount specialty retail mall. *** Confidential treatment requested. 15 20 SECTION 3.4. ALTERATIONS BY TENANT. Tenant shall not make or cause to be made any alterations, repairs, additions or improvements in or to the Leased Premises (for example, but without limiting the generality of the foregoing, Tenant shall not install or cause to be installed any exterior signs or interior signs visible from the exterior except as permitted by Section 4.3 hereof, floor covering, interior or exterior lighting, plumbing fixtures, shades, canopies or awnings or make any changes to the storefront, mechanical, electrical or sprinkler systems) without the prior written consent thereto by Landlord. Tenant shall submit to Landlord plans and specifications for such work at the time consent is sought, in accordance with the criteria and procedures as provided in Exhibit D. In the event Landlord grants such consent, such alterations, repairs, additions or improvements shall be performed in good and workmanlike manner and in accordance with all applicable legal and insurance requirements and all drawings or specifications approved by Landlord, and in accordance with the provisions of this Lease, including the provisions of Section 3.3 governing construction of the Leased Premises. Any work performed by Tenant shall be subject to Landlord's inspection and approval after completion to determine whether the same complies with the requirements of this Lease. Prior to the commencement of any such work by Tenant, Tenant shall obtain the insurance required in Section 8.2. Tenant may from time to time make non-structural alterations to the Leased Premises without Landlord's prior written approval, the aggregate total cost of which shall not exceed [***] in any Lease Year; provided, however, that Tenant shall not be permitted to alter the exterior storefront sign or the exterior of the storefront (other than for repairs) without the prior written consent of Landlord, and provided further that any such non-structural alterations shall not change the overall appearance of the Leased Premises as originally approved by Landlord. SECTION 3.5. REMOVAL BY TENANT. All repairs, alterations, decorations, additions and improvements made by Tenant shall be deemed to be attached to the leasehold and to have become the property of Landlord upon such attachment, and, upon the Expiration Date or sooner termination of this Lease, Tenant shall not remove any of such alterations, decorations, additions and improvements; provided that trade fixtures, simulators, and other items noted as "To Be Removed" on Tenant's Construction Documents and Specifications installed by Tenant may be removed if all Rent due herein are paid in full and Tenant is not otherwise in default hereunder; provided further, however, that Landlord may designate by written notice to Tenant given at the time such improvements are installed those alterations, decorations, additions and improvements which shall be removed by Tenant at the Expiration Date or sooner termination of this Lease and Tenant shall, at Tenant's cost, promptly remove the same and repair any damage to the Leased Premises caused by such removal. ARTICLE IV CONDUCT OF BUSINESS SECTION 4.1. USE AND TRADE NAME. Except as otherwise provided herein, Tenant shall continuously use and occupy the Leased Premises during the Term solely for the purpose of conducting the business specifically set forth in the Data Sheet and for no other purpose or purposes. Throughout the Term hereof, Tenant shall (a) operate its business in the Leased Premises under the Trade Name specifically set forth in the Data Sheet and under no other so long as such name shall not be held to be in violation of any applicable law, (b) not change the advertised name or character of the business operated in the Leased Premises, (c) refer to the Shopping Center by name in designating the location of the Leased Premises in all newspaper and other advertising within the Shopping Center market area and in all other references to the location of the Leased Premises, and (d) during the period from the Delivery of Possession Date through sixty (60) days following the Commencement Date, include in all Tenant's newspaper advertising within the Shopping Center market area the designation that Tenant is opening for business in the Shopping Center. If any *** Confidential treatment requested. 16 21 governmental license(s) or permit(s) shall be required for the proper and lawful conduct of Tenant's business or other activity carried on in the Leased Premises, or if a failure to procure such a license or permit might or would in any way, adversely affect Landlord or the Shopping Center, then Tenant, at Tenant's expense, shall duly procure and thereafter maintain such license(s) or permit(s) and submit the same for inspection by Landlord. Tenant, at Tenant's expense, shall at all times, comply with the requirements of such license(s) or permit(s). Except as provided in Section I.3, Tenant shall open its store in the Leased Premises for business to the public on the Commencement Date, and shall thereafter diligently conduct its regular business operations in the Leased Premises as required by the terms of this Lease. No symbol, design, name, mark or insignia adopted by Tenant shall be used without the prior written approval of Tenant. During the Term of this Lease, and provided Tenant shall not be in default hereof, Landlord agrees that Landlord will not lease space in the Retail Development (other than with respect to spaces leased or to be leased to Major Tenants and presently executed non-Major Tenant leases), to any tenant whose primary use is the entertainment use of auto-racing simulators. In addition, with respect to any non-Major Tenant lease, Landlord shall not be permitted to modify any such lease, either through amendment or assignment, so as to permit the occupant of the space leased thereby to have as its primary use the entertainment use of auto-racing simulators. Landlord hereby represents and warrants to Tenant that Tenant's use of the Leased Premises as contemplated in the Data Sheet does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other Tenant of the Shopping Center, and Landlord shall indemnify, defend, protect and hold harmless Tenant from any loss, liability, cost, expense, judgement, action, or claim of any such party arising from the inaccuracy of such representation and warranty. If the trade name of all or substantially all other stores operating under the same trade name as set forth in this Section 4.1 shall be changed, then Tenant, with prior written notice to Landlord, may likewise change its trade name herein set forth to such other name as adopted for all or substantially all such other stores in first class regional malls or super-regional malls. Notwithstanding the foregoing, in no event shall Tenant's trade name duplicate any other trade name in the Retail Development. SECTION 4.2. OPERATION OF BUSINESS. Tenant shall open for business in the Leased Premises and remain open during the entire Term and continuously operate its business in the entire area of the Leased Premises during the entire Term. Tenant shall conduct its business at all times in a high class and reputable manner, maintaining at all times a full staff of employees and a complete stock of merchandise. Tenant shall install and maintain at all times a display of merchandise in the display windows (if any) of the Leased Premises and shall keep the Leased Premises well lighted during all hours that the Shopping Center is open to the public and during such other hours as may be reasonably designated by Landlord but in no event more than one (1) hour after the close of business. In no event shall Tenant conduct or advertise any auction, fire sale, going out of business sale, or bankruptcy sale in or about the Leased Premises without Landlord's prior written consent in each instance, which consent may be withheld by Landlord in its sole and absolute discretion. Tenant shall conduct its business in the Leased Premises in a lawful manner and in good faith during all days and hours specified by Landlord from time to time as the published operating hours for the Shopping Center. Tenant shall not use or allow the Leased Premises to be used for any improper, immoral or objectionable purposes, as determined by Landlord, and Tenant shall not do any act tending to injure the reputation of the Shopping Center as determined by Landlord. Tenant may (but shall not be required), from time to time, upon written notice to Landlord, remain open for business beyond the normal operating hours of the Shopping Center on a daily basis, but such hours of operation shall not extend beyond the time permitted by applicable law or regulations, and in no event beyond the time that is one hour after the release of the last movie from the Theater or 1:00 a.m., whichever is later. In addition, in the event that there is an exterior entrance serving only the Leased Premises, which provides ingress and egress to the general public and such ingress and egress has been approved by the local jurisdiction for non-emergency use, then Tenant shall be permitted to remain open for business during the same days and hours that Jillian's or its replacement is open for business. Tenant agrees to reimburse Landlord for all reasonable costs directly relating to all additional hours of operation beyond the normal operating hours of the Shopping Center, which 17 22 costs include, without limitation, electricity for parking lot lighting and salaries for security personnel. Notwithstanding any provision hereof to the contrary, Tenant shall not be obligated to continuously operate from the Leased Premises during periods in which (i) Tenant is carrying on remodeling activities (but in no event for more than thirty (30) days in any lease year and no more than twice in any five (5) year period), (ii) Tenant is closed for the taking of inventory (but in no event for more than two (2) days in any lease year), (iii) Tenant is unable or reasonably unwilling to operate as a result of casualty or natural disaster, condemnation, interruption of utilities or services, extremely inclement weather, civil unrest, operation of the business would expose Tenant's employees, agents or invitees to an unreasonably risk of physical injury or property damage, or other force majeure events, (iv) Tenant's use and occupancy of the Leased Premises is prohibited by any law, ordinance, order or other act of any judicial governmental or quasi-governmental authority, (v) there exists a substantial and material hardship to Tenant or its employees, provided Tenant's failure to continuously occupy under this clause (v) for any such occurrence shall be excused only for a period of forty-eight (48) hours, (vi) Thanksgiving and Christmas, and (vii) during periods in which the Leased Premises are temporarily closed in connection with group sales activities being conducted and the Leased Premises are temporarily closed to the public (as permitted pursuant to Section 4.1 of the Data Sheet). Landlord hereby consents to Tenant's use of hydraulic oil in connection with the operation of the simulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled and disposed of in accordance with applicable laws, Landlord hereby acknowledges that such materials are approved. Landlord recognizes that Tenant's prototype incorporates an open storefront design. Tenant shall be permitted to incorporate the open storefront element into the design of the Leased Premises provided that Tenant, at Tenant's expense shall construct Tenant Work in a manner that does not cause the ambient noise level in adjacent tenant spaces and common areas to exceed 45 db(A). Similarly, Tenant installed equipment within the Leased Premises shall be isolated in a manner that eliminates the transfer of any and all vibrations to adjacent tenant spaces and common areas. Landlord shall be given the opportunity to review and approve Tenant's intended construction methods to isolate such noise and vibrations, which will be included in Tenant's Store Design Drawings submission (as provided for in Exhibit D). Landlord's review and approval of Tenant's Store Design Drawings shall not relieve Tenant of its obligation to limit the ambient noise level and eliminate the transfer of vibrations as required herein. SECTION 4.3. SIGN. Tenant shall install and maintain one (1) sign affixed to the front of the Leased Premises, subject to the prior written approval of Landlord as to design and location and conforming to all applicable legal and insurance requirements. Tenant's sign shall conform to the specifications and requirements contained in Exhibit E attached hereto. Tenant shall keep its approved storefront sign lighted during all hours that the Shopping Center is open to the public and during such other hours as may be reasonably designed by Landlord but in no event more than one (1) hour after the close of business. Tenant shall pay for all costs in connection with such sign and shall be responsible for the cost of proper installation and removal thereof and any damage caused to the Leased Premises thereby. In the event Landlord deems it necessary to remove such sign, then Landlord shall have the right to do so, provided, however, that if the sign has received Landlord's prior written approval and is consistent with the specifications and requirements of Exhibit E, Landlord shall replace said sign as soon as practical. Except as mentioned above, Tenant shall not place or cause to be placed, erected or maintained on any exterior door, wall or window of the Lease Premises, or the glass of any window or door of the Leased Premises, or on any sidewalk or within any display window space in the Leased Premises, or within five (5) feet of the front of the storefront lease line or opening, or within any entrance to the Leased Premises any sign (flashing, moving, hanging, handwritten or otherwise), decal, placard, flashing, moving or hanging lights, lettering or any other advertising matter of any kind or description. No symbol, design, name, mark or insignia adopted by Landlord for the Retail Development shall be used without the prior written approval of Landlord. Any interior signs must be in good taste and prepared professionally (not hand-lettered) so as not to detract from the appearance of the Leased Premises or the Shopping Center. Any sign or display visible from the exterior of the Leased Premises which does not meet the above criteria may be removed at any time 18 23 by Landlord without Landlord incurring any liability therefor, and without such removal constituting a breach of this Lease or entitling Tenant to claim damages on account thereof. Tenant shall be permitted to install a video wall within the Leased Premises (but not within five (5) feet of the storefront leaseline), which video wall may be visible from outside the Leased Premises. Landlord and Tenant agree to use commercially reasonable good faith efforts to cooperate in the development of a storefront design to permit the incorporation of a stock car replica above the storefront so long as the installation complies with applicable codes and is reasonably in keeping with the design criteria for entertainment uses in the Retail Development. SECTION 4.4. TENANT'S WARRANTIES. Tenant warrants, represents, covenants and agrees that, in the operation of its business within the Leased Premises, Tenant shall: (a) pay before delinquency any and all taxes, assessments and public charges levied, assessed or imposed upon Tenant's business, or upon Tenant's fixtures, furnishings or equipment in the Leased Premises, or upon any leasehold interest or personal property of any kind, owned by or placed in or about the Leased Premises by Tenant or by anyone claiming by, through or under Tenant, including, without limitation, any transfer taxes, and pay when and as due all license fees, permit fees and charges of a similar nature required for the conduct by Tenant or any subtenant or concessionaire of any business or undertaking authorized hereunder to be conducted in or from the Leased Premises; (b) observe all reasonable requirements promulgated by Landlord at any time and from time to time relating to delivery vehicles, the delivery of merchandise, and the storage and removal of trash and garbage; (c) not use any space outside the Leased Premises for sale, storage or any other undertaking except as provided herein; (d) not use the plumbing facilities in the Leased Premises for any purpose other than that for which they were constructed, nor dispose of any foreign substances therein; (e) not use any advertising medium or sound devices inside or adjacent to the Leased Premises which produce or transmit sounds which are intended to be audible beyond the interior of the Leased Premises it being expressly understood that Tenant shall be required to soundproof the Leased Premises so as to minimize the impact of the noise created by the Permitted Use on other tenants and patrons of the Retail Development; (f) not permit any odor to emanate from the Leased Premises which is objected to by Landlord or by any tenant or occupant of the Retail Development (and, upon written notice from Landlord, Tenant shall immediately cease and desist from causing such odor, and Landlord may deem the failure by Tenant to do so, a material breach of this Lease); (g) keep the Leased Premises and any platform, loading dock or service area used by Tenant in a neat, clean, safe and sanitary condition; (h) promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction, and observe and comply with all covenants and restrictions of record and all notices from Landlord's mortgagee, affecting or applicable to the Retail Development or affecting or applicable to the Leased Premises or the cleanliness, safety, occupancy and use of the same, whether or not any such law, ordinance, order, rule, regulation, covenant, restriction, or other requirement is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate structural changes or improvements (provided, however, that Tenant shall not be required to make any structural changes or improvements required pursuant to this Section 4.4(h) with respect to the structural portions of the Leased Premises originally constructed by Landlord, unless such change shall be required by virtue of Tenant's use of the Leased Premises), shall interfere with the use or enjoyment of the Leased Premises, or shall be directed to or imposed upon Tenant or Landlord, and Tenant shall hold Landlord harmless from any and all cost or expense on account thereof (as used in this Lease, the term "legal requirements" shall include the requirements set forth in this subparagraph); (i) not use the parking areas or sidewalks, common areas or any space on or about the Retail Development (outside the Leased Premises) for display, sale, handbilling, advertising, solicitation, or any other similar undertaking; (j) maintain and operate the heating, ventilating and air conditioning system and equipment servicing the Leased Premises so as to adequately heat and cool the same and to maintain at all times, whether or not Tenant is open for business, temperatures in the Leased Premises which will not drain heat or ventilation or air conditioning from the enclosed mall or other interior areas into the Leased Premises and shall not discharge heat, ventilation or air conditioning from the Leased Premises into the enclosed mall or other interior areas; and (k) be authorized to do business in the State, evidence of which must be delivered to Landlord on or before the earlier of (I) the Commencement Date or (II) the date that Tenant opens for business in the Leased Premises. SECTION 4.5. STORAGE AND OFFICE SPACE. Tenant shall store or stock in the Leased Premises only such goods, wares and merchandise as Tenant intends to offer for sale at, in, from, or upon the 19 24 Leased Premises or as are required to repair and maintain the improvements and simulators in the Leased Premises. This shall not preclude occasional emergency transfers of merchandise to the other stores of Tenant, if any, not located in the Shopping Center. Tenant shall use for office, clerical or other non-selling purposes only such space in the Leased Premises as is from time to time reasonably required for Tenant's business therein, and Tenant shall not perform any office or clerical function in the Leased Premises for any store located elsewhere. SECTION 4.6. CARE OF PREMISES. Tenant shall keep the Leased Premises (including the exterior and interior portions of all windows, doors and all other glass and signs) orderly, neat, safe and clean and free from rubbish or dirt at all times and shall store all trash and garbage only in the areas reasonably designated by Landlord for such storage and accumulation. Tenant shall not move any safe, heavy machinery, heavy equipment, or fixtures into or out of the Leased Premises without Landlord's prior written consent, except that, during hours when the Shopping Center is not open to the public, Tenant shall be permitted to move equipment associated with its Permitted Use provided that Tenant uses its best efforts to protect the common area improvements from damage and agrees to assume responsibility for any damage resulting from the same. Tenant agrees that it will not place a load on any floor exceeding the floor load per square foot which such floor was designed to carry, and will not install, operate or maintain in the Leased Premises any heavy equipment except in such manner as to achieve a proper distribution of weight. Landlord and Tenant shall cooperate in their efforts to insure that the Leased Premises are designed to accommodate the Permitted Use. SECTION 4.7. NOTICE BY TENANT. Tenant shall give immediate notice to Landlord in case of fire or accidents in the Leased Premises, or in the building of which the Leased Premises are a part of, or of defects therein or in any fixtures or equipment. SECTION 4.8. RADIUS. Tenant acknowledges that the Retail Development draws it customers from a large geographic area, relying in part on regional and international tourism, and that the success of the Retail Development and income of the Landlord therefrom are dependent upon maximum customer traffic within the Retail Development. In addition, Tenant acknowledges that Landlord is relying on the generation of Percentage Rent from Tenant's Gross Sales at the Leased Premises. During the Term, in the event Tenant, or any person, firm or corporation who or which controls or is controlled by Tenant (an "Affiliate") shall directly or indirectly, either individually or as a partner or stockholder or otherwise, own, operate, or obtain a controlling interest (i.e. own more than fifty percent (50%) of the shares or interest) in any business similar to or in competition with the business of Tenant described in Article IV ("competing business"), which business is conducted within the Area (as said term is herein defined), then the Gross Sales (as said term is defined in this Lease) of any such competing business within said Area shall be included in Tenant's Gross Sales made from the Leased Premises and the Percentage Rent hereunder shall be computed upon the aggregate of Tenant's Gross Sales made from the Leased Premises and made from each such competing business then conducted within said Area. Tenant shall be obligated to provide Landlord with full and complete Gross Sales information and reports with respect to any competing business within the Area in accordance with the requirements of Article II of this Lease and Tenant shall be obligated to include the applicable portion of the Gross Sales of such competing business with the Gross Sales of the Leased Premises and to pay Percentage Rent thereon in accordance with the terms of this Lease. The "Area" shall be defined as the area falling within a radius of ten (10) miles measured from the outside boundary of the Retail Development. This Section 4.8 shall not apply to any competing business which is open and is being operated by Tenant within said Area on the Effective Date. ARTICLE V COMMON AREA SECTION 5.1. USE OF COMMON AREA. Landlord agrees to cause to be operated, managed and maintained during the Term all of the common areas of the Shopping Center. The term "common areas", as used in this Lease, shall mean the parking areas, pedestrian sidewalks and bridges, truckways, loading docks, delivery areas, park areas, pedestrian malls and courts, elevators and escalators, if any, and stairs not contained in leased areas, public restrooms and comfort stations, if 20 25 any, service areas, fire, service and exit corridors, passageways, landscaped areas, berms and all other areas or improvements which may be provided for the convenience and use of the occupants and tenants of the Retail Development and their respective agents, employees, customers, invitees, and the licensees and invitees of Landlord. The use and occupancy by Tenant of the Leased Premises shall include the non-exclusive use, in common with all others to whom Landlord has or may hereafter grant rights to use the same (including, but not limited to, the owners, tenants and occupants of the Shopping Center), of the common areas and of such other facilities as may be designated by Landlord from time to time; subject, however, to rules and regulations for the use thereof which will be uniformly applicable to all Shopping Center tenants as prescribed from time to time by Landlord. In particular, Tenant and its employees shall park their cars only in the areas specifically designated from time to time by Landlord for that purpose. Tenant covenants that it will enforce the parking by its employees in such designated areas. Automobile license numbers of employees' cars shall be furnished by Tenant to Landlord within five (5) days after Landlord's request. In the event any vehicle is parked by an employee of Tenant in a non-employee parking area, Landlord shall have the right to cause the vehicle to be towed to a location designated by Landlord and Tenant shall be obligated to reimburse Landlord for all towing charges. Landlord may at any time close temporarily any common area to make repairs or changes, to prevent the acquisition of public rights in such areas and to discourage non-customer use, provided the same shall not materially adversely affect access to or visibility of the Leased Premises. In addition, Landlord may modify, from time to time, the traffic flow pattern and layout of parking spaces and the entrances-exits to adjoining public streets or walkways, utilize portions of the common areas for entertainment, displays and charitable activities and may do such other acts in and to the common areas as in its judgment may be desirable to improve the convenience or attraction thereof. Landlord agrees to maintain all common areas of the Shopping Center in good order, condition and repair and in a safe, clean, sightly and sanitary condition in accordance with good and accepted shopping center practices. The maintenance obligations of Landlord shall include, without limitation, the re-striping of parking areas when required, repairing of common areas and adequate lighting of all exterior common areas during all hours of darkness during which Tenant shall be open for business and for one (1) hour thereafter. SECTION 5.2. COMMON AREA MAINTENANCE EXPENSES. (a) Tenant agrees to pay to Landlord each Lease Year, in the manner hereinafter provided, Tenant's proportionate share of all costs and expenses (the "Common Area Maintenance Expenses") of every kind and nature paid or incurred by Landlord, or for which Landlord is obligated, during each Lease Year, for operating, equipping, policing and protecting, heating, air conditioning, providing sanitation and sewer and other services, lighting, insuring, repairing, replacing and maintaining (i) the common areas, and (ii) all buildings and roofs within the Retail Development, and (iii) all other areas, facilities and buildings used in connection with the maintenance and/or operation of, and whether located within or outside of, the Retail Development, including without limitation, all roads and driveways serving the Retail Development which are maintained or repaired by Landlord or at Landlord's expense. The Common Area Maintenance Expenses shall include, but are not limited to, costs and expenses of: water, gas, sewage, electricity, refuse disposal, air conditioning, heating and other utilities (without limitation), including all usage, service, hook-up, connection, availability and/or standby fees or charges pertaining to same, and the utility costs; illumination and maintenance of signs, whether located on or off the Retail Development property; salaries of all management, personnel; maintenance, repair and replacement of directories, electronic or otherwise, cleaning, lighting, snow removal and landscaping; security control and fire protection; uniforms for maintenance, administrative and security personnel for the Retail Development; management fees; maintenance for wooded areas, retention ponds, wetlands, rivers and riverbank areas; premiums for insurance to the extent maintained by Landlord, for liability, casualty and property damage, including, without limitation, insurance against vandalism, plate glass breakage, fire and extended coverage insurance and such other coverage as determined by Landlord, and liability for defamation and claims of false arrest occurring in and about such areas; personal property taxes; maintaining and replacing the equipment, if any, supplying music to such areas; the reasonable depreciation of equipment used in the operation and maintenance of such areas; total compensation and benefits (including premiums for workers' compensation and other insurance) paid to or on behalf of persons involved in the performance or administration/technical support of the work specified in this Section 5.2; repair, maintenance and 21 26 cleaning of such areas; operation, repair, maintenance and reasonable depreciation of all temporary and permanent utility systems for the Retail Development, including, without limitation, heating, ventilating and air conditioning systems (HVAC systems), gas system(s), plumbing system(s), electrical equipment and irrigational pumping system(s); operation, repair, maintenance and reasonable depreciation of emergency water and sprinkler main system(s) and security alarm system(s); operation maintenance, repair and replacement of mechanical equipment including any automatic door openers, elevators, escalators, lighting fixtures (including replacement of poles, tubes and bulbs) and all other items of equipment used in connection with such areas; paper supplies in restrooms located in or about such areas, cleaning, lighting striping and landscaping, curbs, gutters, sidewalks, drainage and irrigation ditches, conduits, pipes and canals serving the Retail Development; and there shall also be added to the foregoing costs and expenses an amount equal to [***] of the total of all of the ongoing costs and expenses as Landlord's administrative fee. As stated throughout this Lease, whenever Tenant is obligated to pay its "proportionate share" of a cost, expense or Taxes (as hereinafter defined) such share shall be based on gross leased and occupied floor area in the Shopping Center, and Tenant's proportionate share shall be that fraction, the numerator of which is the total square footage of floor area in the Leased Premises, and the denominator of which is the total square footage of gross leased and occupied floor area (including the Leased Premises) in the Shopping Center. As used throughout this Lease, the "gross leased and occupied floor area" in effect for the whole of any Lease Year shall be the average of the gross leased and occupied floor area in effect on the first day of each calendar month in such Lease Year. Prior to the proration of such Common Area Maintenance Expenses to Tenant, there shall be deducted from the total of such Common Area Maintenance Expenses any amounts specifically contributed by the Major Tenants toward such Common Area Maintenance Expenses. It is further agreed that in no event shall Tenant be obligated for the capital costs of initially constructing the Retail Development or the capital costs of subsequent expansion construction for the Retail Development (i.e., adding new Major Tenants to the development or expanding the Shopping Center or the common areas). Notwithstanding anything contained in this Lease to the contrary, the following shall be excluded from Common Area Maintenance Expenses in calculating Tenant's proportionate share: (i) the capital costs of initially constructing the Retail Development or the capital costs of subsequent expansion construction for the Retail Development; (ii) executive salaries (employees senior to management personnel); (iii) leasing commissions and the expense of preparing leases; (iv) debt service and amortization under any mortgage encumbering the Shopping Center and charges and fees incurred by Landlord in connection with the procurement and recording of such mortgages or rental under any ground lease or other underlying lease; (v) the costs of Landlord's Work in connection with preparing any tenant's space (vi) any costs for which Landlord is reimbursed by insurance proceeds or condemnation awards; (vii) costs for which Landlord is reimbursed by individual tenants of the Shopping Center (viii) to the extent that any employee of Landlord performs work or services other than for the Retail Development, the portion of his salary allocable to work not performed in connection with the Retail Development; (ix) the costs of correcting defects in or inadequacies of the initial design or construction of the Shopping Center, or repair and/or replacement of any of the original materials or equipment required as a result of such defects or inadequacies; (x) any expense resulting from the negligence of Landlord, its agents, servants or employees, or any expense incurred as a direct result of Landlord's failure to use reasonable efforts to minimize expenses to the extent possible without detracting from the standards of a first class Shopping Center; (xi) the cost of any repair to remedy damage caused by or resulting from the negligence of any other tenant(s) in the Shopping Center, including their agents, servants or employees; (xii) repairs or other work occasioned by casualty or the exercise of the right of eminent domain; (xiii) expenses incurred in build out, renovation or other improvement or decoration, painting or redecoration of any leasable area; (xiv) costs incurred due to the violation by Landlord or any tenant or occupant of any term or condition of any lease or rental arrangement covering space in the Shopping Center; (xv) any interest or penalties incurred as a result of Landlord's failure to pay any bill as the same shall become due; (xvi) any and all costs associated with the operation of the business of the entity which constitutes Landlord, intending by this exclusion to distinguish the costs of operation of the common areas (excluded items shall specifically include but shall not be limited to formation of the entity, internal accounting and legal matters, including, but not limited to preparation of tax returns and financial statements and gathering of data therefor, costs of defending any lawsuits, except as the actions of Tenant may be an issue, costs of selling, syndication, financing mortgaging or hypothecating any of Landlord's interest in the *** Confidential treatment requested. 22 27 Shopping Center, and costs of any disputes between Landlord and its employees); (xvii) advertising and promotional expenditures or customer services, (xviii) costs, fines, or fees incurred by Landlord due to violations of any federal, state or local law, statute or ordinance, or any rules, regulations, judgment or decree of any governmental rule or authority; (xix) the cost of any work or services performed for any facility other than the Shopping Center. Replacements of existing improvements, facilities, and equipment (including, by way of example, parking lot repairs, structural repairs, replacement of HVAC or mechanical equipment) otherwise chargeable as Common Area Maintenance Expenses having a useful life of more than one year shall be amortized over the useful life of the replacement, and only the reasonably amortized portion thereof shall be included in Common Area Maintenance Expenses. Tenant's proportionate share of Common Area Maintenance Expenses from the Commencement Date through December 31, 2000 shall not exceed [***] per square foot of floor area in the Leased Premises per Lease Year (proportionately reduced for a partial Lease Year). From January 1, 2001 through December 31, 2001. Tenant's proportionate share of Common Area Maintenance Expenses shall not exceed [***] per square foot of floor area in the Leased Premises per Lease Year (proportionately reduced for a partial Lease Year). Beginning January 1, 2002 and continuing through the expiration of the Original Term and Option Period, if any, Tenant's proportionate share of Common Area Maintenance Expenses shall not be increased by more than [***] per Lease Year. It is hereby agreed that at such times as there are tenants occupying less than eighty-five percent (85%) of the gross leasable floor area of the Shopping Center, Tenant's proportionate share of the foregoing Common Area Maintenance Expenses shall be computed as if the Shopping Center were eight-five percent (85%) leased and occupied. (b) Tenant's proportionate share of such Common Area Maintenance Expenses for each Lease Year shall be paid in advance, in equal monthly installments, in the same manner and at the same time as the monthly installments of Minimum Rent are payable hereunder without deduction, offset or diminution of any kind, based on an amount estimated in advance from time to time by Landlord to be Tenant's obligation under this Section 5.2. Notwithstanding the above, in the event Landlord at any time determines that the amount of Common Area Maintenance Expenses actually being paid or incurred by Landlord exceeds the estimate upon which Tenant's proportionate share of Common Area Maintenance Expenses was computed, then Tenant, following a request from Landlord, shall commence to pay with the next monthly installment of Minimum Rent due an amount sufficient to result in Tenant's paying its full proportionate share of Common Area Maintenance Expenses as computed on the basis of Landlord's revised estimate of Common Area Maintenance Expenses. Subsequent to the end of each Lease Year, Landlord shall furnish Tenant with a statement of the actual amount of Tenant's proportionate share of such Common Area Maintenance Expenses for such period which statement shall be in reasonable detail, provided, however, Landlord shall be permitted to describe areas of expenditure by category and shall not be obligated to enumerate each specific expenditure. Upon Tenant's written request therefore, but no more frequently than once per Lease Year, Landlord shall provide Tenant written evidence substantiating up to three (3) particular items included in Tenant's share of Common Area Maintenance Expenses. Landlord shall make reasonable good faith efforts to answer or resolve Tenant's legitimate questions about the Common Area Maintenance Expenses. If the total amount paid by Tenant under this Section 5.2 for any Lease Year shall be less than the actual amount due from Tenant for such Lease Year as shown on such statement, Tenant shall pay Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such Lease Year shall exceed the actual amount due from Tenant for such Lease Year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section 5.2. *** Confidential treatment requested. 23 28 ARTICLE VI REPAIRS AND MAINTENANCE SECTION 6.1. REPAIRS AND MAINTENANCE BY LANDLORD. Landlord agrees to keep in good order, condition and repair the roof (including keeping the roof watertight), foundations, exterior (including exterior painting and finish), all structural portions of the Leased Premises (and of the building in which the Leased Premises are located) and all plumbing and utility lines not exclusively serving the Leased Premises. Should any repairs, modifications or alterations be required by reason of applicable law, the same shall be made by Landlord at Landlord's cost and expense unless the need for such repairs, modifications or alterations shall result from Tenant's failure to perform its obligations under this Lease or from Tenant's use of the Leased Premises for other than general merchandising purposes. In addition, for the first twelve (12) months only following the Delivery of Possession Date, Landlord shall, upon written notice from Tenant of the necessity therefor, correct any defects in Landlord's Work within the Leased Premises. All costs and expenses incurred by Landlord under this Section 6.1 shall be included in Common Area Maintenance Expenses, other than costs and expenses for Landlord's correction of defects in Landlord's Work or other amount that may be excluded as Common Area Maintenance Expenses pursuant to a specific exclusion contained in Section 5.2 hereof. SECTION 6.2. REPAIRS AND MAINTENANCE BY TENANT. (a) Except for the repairs and maintenance that Landlord is specifically obligated to make or perform pursuant to Section 6.1 above, throughout the entire Term of this Lease, Tenant, at its expense, shall promptly make all repairs and replacements and perform maintenance in and to the Leased Premises and all equipment and fixtures therein or appurtenant thereto, that are necessary or desirable in order to keep the Leased Premises in good order, condition and repair and in safe, dry and tenantable condition. Without limiting the generality of the foregoing, Tenant, at its expense, shall maintain and promptly make any and all necessary repairs to or replacements of: (i) that portion of any pipes, lines, ducts, wires or conduits that exclusively serve the Leased Premises; (ii) the glass windows, plate glass doors, and all fixtures or appurtenances composed of glass that are located in or about the Leased Premises; (ii) Tenant's signs; (iv) the floors and floor coverings, doors and door frames, windows and window frames, walls, storefront including security gates, grilles or enclosures, locks and closing devices, partitions and ceilings in the Leased Premises; (v) heating, ventilating, air conditioning, electrical and plumbing system(s) equipment and fixtures (whether contained within or outside the Leased Premises) which are installed by Tenant or which exclusively serve the Leased Premises; and (vi) the Leased Premises or any part of the Shopping Center when repairs thereto are necessitated by any act or omission (negligent or otherwise) of Tenant or any of Tenant's agents, employees or invitees, or by the failure of Tenant to perform any of its obligations under this Lease. Notwithstanding the foregoing, Landlord shall be responsible for repairs and maintenance necessitated by the negligence or intentional acts of Landlord, its agents or employees. Notwithstanding any contrary provision of this Article VI, Tenant, at its expense, shall make any and all repairs to the Leased Premises as may be necessitated by any break-in, forcible entry or other trespass into or upon the Leased Premises, regardless of whether or not such entry and damage is caused by the negligence or fault of Tenant or occurs during or after business hours. Tenant, at its expense, shall change all air conditioning filters at lease five (5) times per year and shall have the air conditioning system professionally inspected and generally serviced at lease twice per year. (b) Tenant shall keep and maintain the Leased Premises in a clean, sanitary and safe condition in accordance with the laws of the State and in accordance with all directions, rules and regulations of the health officer, building inspector, the National Fire Protection association and any other officials of the governmental agencies having jurisdiction, at the sole cost and expense of Tenant, and Tenant shall comply with all requirements of laws, ordinances, rules, regulations and orders of any lawful authority having jurisdiction affecting the Leased Premises or Tenant's use thereof. Tenant, at its expense, shall install and maintain fire extinguishers and other fire protection devices as may be required by reason of the conduct of Tenant's business, from time to time by any agency having jurisdiction or the underwriters insuring the building in which the Leased Premises are located. If any bureau, department or official of the Federal or State government requires or recommends the installation of any changes, modifications or alterations in the sprinkler system or additional sprinkler heads or other equipment (hereinafter in this subsection (b) collectively 24 29 "changes") by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the Leased Premises, or for any other reason, or if any such changes become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rates set by any fire insurance company, Tenant, at Tenant's expense, shall promptly make such changes as required. (c) Tenant agrees that Tenant's use of electrical current will at no time exceed the capacity of the electric distribution system and that Tenant will not make any alteration or addition to Tenant's electrical system without Landlord's prior written consent. If Tenant installs any electrical equipment that overloads the electrical lines in the Leased Premises or the Retail Development, Tenant shall, at Tenant's sole cost and expense, be required to make whatever changes to such electrical equipment and in the electric wiring in the Leased Premises (but only after obtaining Landlord's written approval) as may be necessary in order to remedy such overloading and be in compliance with all insurance and legal requirements. All changes required to be made hereby shall result in the continued conformance with the provisions of Exhibit D and this Lease. (d) If Tenant refuses or neglects to properly maintain the Leased Premises, or to commence or to complete repairs promptly and adequately, or if Landlord finds it necessary to make any repairs or replacements otherwise required to be made by Tenant, then Landlord may, after ten (10) days prior written notice to Tenant (except in the event of an emergency in which event no notice shall be required) with Tenant having the opportunity to cure or to commence to cure during such ten (10) day period (in which event Landlord shall not take action so long as Tenant is diligently pursuing such cure to completion), in addition to all other remedies, but without obligation to do so, enter the Leased Premises and proceed forthwith to have such maintenance, repairs or replacements made and Tenant shall pay to Landlord, on demand, the cost and expenses therefor plus a charge of fifteen percent (15%) of such costs and expenses. ARTICLE VII TAXES SECTION 7.1. TAX LIABILITY. Tenant agrees to pay to Landlord Tenant's proportionate share of all taxes and assessments and service payments in lieu of taxes of every nature and kind which may be levied or assessed by, or payable to, any lawful authority during or with respect to each fiscal tax year falling in whole or in part during the Term of this Lease against any or all or any part of the land, buildings and improvements comprising the Retail Development and any other taxes which Landlord becomes obligated to pay with respect to the Retail Development, whether or not the same are assessed as real or personal property or are payable in advance or in arrears (the "Taxes"). If due to a future change in the method of taxation, any tax, excise or assessment shall be levied or assessed against Landlord, directly or indirectly, in lieu of, in substitution for or as a supplement to any present Taxes or future (real estate or personal property) tax, in whole or in part, including any new tax, excise or assessment upon rentals payable to Landlord by occupants of the Retail Development or upon gross receipts or other income of Landlord derived by Landlord from or upon the interest in the Retail Development of Landlord (or any individuals or entities comprising Landlord), such tax, excise or assessment shall constitute a tax respecting which Tenant is obligated to pay its proportionate share to Landlord as provided herein. If any Taxes or assessed valuation(s) are contested by Landlord, then Tenant's proportionate share of Taxes shall also include Tenant's proportionate share of the cost and expense of consultation services incurred in evaluating and contesting such Taxes or assessed valuation(s). The term "Taxes" shall also include any form of assessment, special assessment, license fee, license tax, business license fee, business license tax, commercial rental tax, levy, charge, tax or similar imposition, imposed by any authority having the direct power to tax, including without limitation any city, county, State or Federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district or any other agency or other public body, whether or not consented to or joined in by Landlord and whether or not retroactive, payable by Landlord thereof as against the land and improvements comprising, or any legal or equitable interest of the Landlord in, the Retail Development. Notwithstanding anything to the contrary 25 30 contained in this Section 7.1, Tenant shall not be obligated, pursuant to this Section 7.2, to pay Landlord its proportionate share of any inheritance, estate, succession, transfer, gift or franchise tax, levy assessment or surcharge that may be imposed on Landlord or the individuals or entities which constitute the partners of the partnership which is Landlord, unless the same is imposed by way of substitution for all or any part of the "Taxes" otherwise required to be paid in whole or in part by Tenant pursuant to this Lease; the foregoing shall not exempt or exclude from the Taxes to be prorated among Shopping Center tenants (including Tenant) levies, taxes, assessments or surcharges based on the rentals or other revenues or gross income of Landlord derived from the Shopping Center (as opposed to Landlord's net income) or other charges payable to Landlord by Tenant or other tenants in or occupants of the Shopping Center. SECTION 7.2. METHOD OF PAYMENT. Tenant's proportionate share of Taxes shall be paid, in advance, in monthly installments on or before the first day of each calendar month, in the same manner and at the same time as the monthly installments of Minimum Rent are payable hereunder without deduction, offset or diminution of any kind, based on an amount estimated by Landlord. Following receipt of all bills for Taxes attributable to any calendar or fiscal year during the Term hereof, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's proportionate share of Taxes for such year. If any bill for any such Taxes is not available, Landlord will estimate the amount of such tax. If the total amount paid by Tenant hereunder for any calendar or fiscal year during the Term of this Lease shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after demand therefor by Landlord; and if the total amount paid by Tenant hereunder for any such calendar or fiscal year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment of Taxes due from Tenant to Landlord hereunder. For the calendar or fiscal years in which this Lease commences and terminates, Tenant's liability for its proportionate share of any Taxes for such years shall be subject to a pro rata adjustment based on the number of days of said calendar or fiscal years during which the Term of this Lease is in effect. A copy of any such bill for Taxes shall at all times be sufficient evidence of the amount of Taxes assessed or levied against the property to which such bill relates. Prior to or at the commencement of the Term of this Lease and from time to time thereafter throughout the Term hereof, Landlord shall notify Tenant in writing of Landlord's estimate of Tenant's monthly installments due hereunder. Tenant's obligations under this Article VII shall survive the Expiration Date or sooner termination of this Lease. ARTICLE VIII INSURANCE, INDEMNITY AND LIABILITY SECTION 8.1. LANDLORD'S INSURANCE OBLIGATIONS. Landlord agrees to obtain and maintain during the Term hereof, to the extent the same is available, fire and extended coverage insurance, in amounts and coverages and with such special endorsements as Landlord shall determine from time to time, insuring the building in which the Leased Premises are located and the improvements to the Leased Premises provided by Tenant pursuant to this Lease (exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment, plate glass, signs and personal property of Tenant). Landlord shall also carry rental interruption insurance in amounts at least equal to [***]. Landlord will maintain during the Term of this Lease, commercial general liability insurance, insuring against any and all claims for personal injury, bodily injury, death, or property damage, accruing in, on or about the common areas and other portions of the Shopping Center not leased to tenants, with limits of not less than [***] with respect to bodily injury and death and [***] with respect to property damage. Further Landlord shall maintain fire and extended coverage insurance insuring the improvements located within the Shopping Center (except for Tenant's trade fixtures, furnishings, operating equipment and personal property) for [***] of the full replacement cost thereof. Tenant acknowledges that such coverage may be provided pursuant to a blanket policy for centers managed by Managing Agent (as defined in Section 20.22 hereof). Tenant shall reimburse Landlord for its proportionate share of the insurance *** Confidential treatment requested. 26 31 costs incurred by Landlord under this Section 8.1 as part of Tenant's Common Area Maintenance Expenses as provided in Section 5.2 hereof. SECTION 8.2. TENANT'S INSURANCE OBLIGATIONS. (a) Provided Tenant is the Tenant named on the Recital Page and a wholly-owned subsidiary of the Guarantor, if any, and Tenant's and Guarantor's, if any, combined net worths are or Tenant's net worth is at least equal to [***]. Tenant shall have the right to self-insure for any loss or damage of the type covered by standard fire and extended coverage insurance with respect to personal property located on or within the Leased Premises including alterations and improvements made by Tenant to the extent the same are not covered by Landlord's fire and extended coverage insurance. Tenant and Guarantor shall at their sole expenses, without regard to fault on the part of any person, make and perform any repairs or restorations which are required as a result of a casualty which would be covered by insurance of the type described in this Section 8.2(a). Tenant, at Tenant's sole cost and expense, shall obtain and maintain in effect commencing with the Delivery of Possession Date and continuing throughout the Term of this Lease, insurance policies providing for the following coverage: (i) all risk property insurance against fire, theft, vandalism, malicious mischief, sprinkler leakage and such additional perils as now are or hereafter may be included in a standard extended coverage endorsement from time to time in general use in the State, insuring Tenant's merchandise, trade fixtures, furnishings, equipment and all items of personal property of Tenant and of anyone claiming by, through or under Tenant located on or in the Leased Premises, and the amount of such insurance will be set forth in an "agreed value endorsement" to the policy of such insurance, not less than [***] of the full replacement value thereof without deduction for depreciation, and with a deductible amount of not more than [***], provided, however, any and all proceeds of such insurance, so long as this Lease shall remain in effect, shall be used only to repair or replace or pay for the items so insured; (ii) a commercial general liability policy, including insurance protecting against any and all claims for injury to persons or property occurring in or about the Leased Premises and protecting against assumed or contractual liability under this Lease with respect to the Leased Premises and the operations of Tenant and any subtenant of Tenant in, on or about the Leased Premises, with such policy to be in the minimum amount of [***] single limit coverage; (iii) products liability insurance for merchandise offered for sale or lease from the Leased Premises, including (if this Lease covers leased premises in which food and/or beverages are sold and /or consumed) liquor liability coverage (if applicable to Tenant's business) and coverage for liability arising out of the consumption of food and/or alcoholic beverages on or obtained at the Leased Premises, of not less than [***] per occurrence for personal injury and death and property damage; (iv) workers' compensation coverage as required by law; (v) with respect to alterations, improvements and the like required or permitted to be made by Tenant hereunder, contingent liability and builders risk insurance in amounts satisfactory to Landlord; and (vi) the insurance required under Exhibit D. (b) All insurance policies herein to be procured by Tenant shall: (i) be issued by insurance companies reasonably satisfactory to Landlord and authorized to do business in the State; (ii) be written as primary policy coverage and non-contributing with respect to any coverage which Landlord may carry and that any coverage carried by Landlord shall be excess insurance; (iii) insure and name Landlord, Landlord's managing agent, any mortgagee of the Shopping Center and any parties in interest designated by Landlord as additional insured, as their respective interests may appear (except with respect to workers' compensation insurance); and (iv) contain any express waiver of any right of subrogation by the insurance company against Landlord, Landlord's managing agent and their respective agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives. Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to Tenant's insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease. With respect to each and every one of the insurance policies herein required to be procured by Tenant, on or before the Commencement Date and at least thirty (30) days before any such insurance policy shall expire, Tenant shall deliver to Landlord upon Landlord's written request a duplicate original or certified copy of each such policy or a certificate of the insurer, certifying that such policy has been issued, providing the coverage required by this Section 8.2 and containing provisions specified herein, together with evidence of payment of all applicable premiums. Any insurance required to be carried hereunder may be carried under a blanket policy covering the Leased Premises and other locations *** Confidential treatment requested. 27 32 of Tenant. Each and every insurance policy required to be carried hereunder by or on behalf of Tenant shall provide (and any certificate evidencing the existence of each such insurance policy shall certify) that, unless Landlord shall first have been given thirty (30) days' prior written notice thereof, the insurer will not cancel, materially change or fail to renew the coverage provided by such insurance policy. The term "insurance policy" as used herein shall be deemed to include any extensions or renewals of such insurance policy. In the event that Tenant shall fail to promptly furnish any insurance coverage hereunder required to be procured by Tenant, Landlord, at its sole option, shall have the right after ten (10) days prior written notice to Tenant to obtain the same and pay the premium therefor for a period not exceeding one (1) year in each instance, and the premium so paid by Landlord shall be immediately due and payable by Tenant to Landlord as additional rent. (c) Tenant shall not do or permit to be done any act or thing upon the Leased Premises that will invalidate or be in conflict with fire insurance policies covering the building containing the Leased Premises or any part thereof, including all common areas, or fixtures and property therein, or any other insurance policies or coverage referred to above in this Article VIII; and Tenant shall promptly comply with all rules, orders, regulations, or requirements relating to such insurance policies, and shall not do, or permit anything to be done, in or upon the Leased Premises, or bring or keep anything therein, which shall increase the rate of fire insurance on the building in which the Leased Premises are located or on any property, including all common areas, located therein, or increase the rate or rates of any other insurance referred to hereinabove. If any act or omission of Tenant, its agents, employees or contractors shall result in any increase in the premium rates applicable to any such insurance policies carried by Landlord, or other increased costs to Landlord in connection therewith, then Tenant shall reimburse Landlord on demand as additional rent for the amount of any such increased rates or costs. In particular, if Tenant uses the "Leased Premises for the preparation of food, Tenant shall reimburse Landlord on demand, for any part of the premium for insurance coverage under Section 8.1 hereof required to be paid on account of such use of the Leased Premises. SECTION 8.3. MUTUAL COVENANT. Notwithstanding any provision of this Lease to the contrary, Landlord and Tenant each hereby releases the other, its officers, directors, employees, and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty for which insurance containing a waiver of subrogation is carried by the injured party at the time of such loss, damage or injury regardless of the extent of any recovery by the injured party under such insurance. Both parties agree to carry casualty insurance containing such waiver of subrogation. Additionally, during any time when Tenant is self-insuring its insurance obligations hereunder, Tenant hereby releases the Landlord, its officers, directors, employees and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty, even if such loss, damage or casualty is caused in whole or in part by Landlord or by any party for whom Landlord may be responsible. SECTION 8.4. COVENANT TO HOLD HARMLESS. Except with respect to the gross negligence or wilful misconduct of Landlord, its agents or employees (unless covered or required to be covered by Tenant's insurance). Tenant hereby indemnifies and agrees to hold harmless Landlord, its officers, directors, partners, employees and agents and any mortgagee or master lessor of the Shopping Center, from and against any and all claims, actions, damages, liabilities, costs and expenses, including attorneys' fees, that (i) arise from or are in connection with the possession, use, occupancy, management, repair, maintenance or control of the Leased Premises, or any portion thereof, or (ii) arise from or are in connection with any negligent or wrongful act or omission of Tenant or Tenant's agents, employees, contractors, licensees or invitees, or (iii) result from any default, breach, violation or nonperformance of this Lease or any provision hereof by Tenant, or (iv) result from injury to person or property or loss of life sustained in the Leased Premises or outside of the Leased Premises resulting from acts or omissions within the Leased Premises. Tenant shall, at its own cost and expense, defend any and all actions, suits and proceedings which may be brought against Landlord or any mortgagee or master lessor of the Shopping Center with respect to the foregoing. Tenant shall pay, satisfy and discharge any and all judgments, orders and decrees which may be received against Landlord or any such mortgagee or master lessor in connection with the foregoing. In the event Landlord or any other party so indemnified, shall, without fault, be made a party to any litigation commenced by or against Tenant, or if Landlord or any such party shall, in its sole 28 33 discretion, intervene in such litigation to protect its interest hereunder, then Tenant shall protect and hold them harmless and shall pay all costs, expenses and attorneys' fees incurred or paid by such party(ies) in connection with such litigation. Landlord hereby indemnifies and agrees to save harmless Tenant, its officers, directors, partners, employees and agents from and against any and all claims, actions, damages, liabilities, costs and expenses including attorneys' fees, in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in the common areas of the Shopping Center unless caused by the negligence or default of Tenant, its agents, contractors, employees, officers, directors, partners, subtenants or concessionaires. SECTION 8.5. LOSS AND DAMAGE. All Tenant's property of every kind and description which may at any time be in the Leased Premises shall be kept at Tenant's sole risk, and Landlord shall not be liable except to the extent resulting from the negligence or intentional acts of Landlord, its agents or employees to Tenant, its agents, employees or customers, for any damage, loss, compensation, accident, or claims whatsoever resulting to Tenant or its property from the necessity of repairing any portion of the Shopping Center; any interruption in the use of the Leased Premises; the use or operation (by Landlord, Tenant, or any other person or persons whatsoever) of any elevators, heating, cooling, electrical or plumbing equipment or apparatus; the termination of this Lease by reason of the destruction of the Leased Premises; any fire, robbery, theft, or any other casualty; any leakage in any part or portion of the Leased Premises or the Shopping Center; any water, wind, rain or snow that may leak into, or flow from part of the Leased Premises or the Shopping Center; any acts or omissions of any occupant of any space adjacent to or adjoining all or any part of the Leased Premises or any part of the building of which the Leased Premises are a part; any explosion, casualty, utility failure or malfunction, or falling plaster; the bursting, stoppage or leakage of any pipes, sewer pipes, drains, conduits, appliance or plumbing works; or any other cause whatsoever. ARTICLE IX DESTRUCTION OF LEASED PREMISES SECTION 9.1. CONTINUANCE OF LEASE. In the event of any damage to the Leased Premises by fire or other casualty, this Lease shall not be terminated or otherwise affected; except that, (a) if more than twenty-five percent (25%) of the square footage of the Leased Premises shall be damaged by any such fire or other casualty during the last three (3) years of the Term of this Lease (not including any Option Periods) or during any renewal or extension of the Term hereof and the cost of repair or restoration exceeds One Million and 00/100ths Dollars ($1,000,000.00) as estimated by Landlord, or (b) if Landlord is unable to rebuild any portion of the building in which the Leased Premises are located or of the Shopping Center due to any inability (after Landlord uses commercially reasonable efforts) to obtain any required governmental approval in connection therewith, or (c) if more than thirty-five percent (35%) of the floor area of the building in which the Leased Premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (d) if twenty-five percent (25%) or more of the building in which the Leased Premises are located or if twenty-five percent (25%) or more of the Shopping Center or the Leased Premises shall be damaged or destroyed at any time by the occurrence of any risk not insured under the insurance required to be carried under Article VIII hereof, then Landlord shall have the option to terminate this Lease within seventy-five (75) days following the occurrence of such fire or other casualty by giving written notice to Tenant during such period. In the event Landlord exercises any of the foregoing options to terminate, this Lease shall immediately terminate upon Landlord's written notice to Tenant and (i) the entire proceeds of the insurance provided for in Section 8.1 hereof shall be paid by the insurance company or companies directly to Landlord and shall belong to, and be the sole property of Landlord, (ii) the portion of the proceeds of the insurance provided for in Section 8.2 which is allocable to equipment, fixtures and other items, which, by the terms of this Lease, rightfully belong to Landlord upon the termination of this Lease by whatever cause, shall be paid by the insurance company or companies directly to Landlord, and shall belong to, and be the sole property of, Landlord, and (iii) Landlord and Tenant shall be relieved from any and all further liability or obligation accruing under this Lease from and after the date of such termination. 29 34 Further, if Landlord cancels this Lease by virtue of the fact that it is during the last three years of the Lease term, Tenant may nullify Landlord's cancellation within thirty (30) days after receipt thereof by giving notice to Landlord that Tenant elects to extend the term of the Lease pursuant to any such right contained in this Lease, in which event the parties shall proceed to restore in accordance with Section 9.2. SECTION 9.2. RECONSTRUCTION. If the Leased Premises are damaged by fire or other casualty and this Lease is not terminated in accordance with Section 9.1 hereof, then all fire and extended coverage insurance proceeds from policies carried pursuant to Section 8.1 hereof, however recovered, shall be held in escrow and made available for payment of the cost of repairing, replacing and rebuilding the Leased Premises. Within seventy (75) days after the casualty Landlord shall provide Tenant with a good faith estimate of the date on which the reconstruction of the Leased Premises will be completed. The Minimum Rent and other charges payable by Tenant to Landlord shall be abated in proportion to the floor area of the Leased Premises rendered untenantable, and the Sales Break Point shall likewise be proportionately reduced. Payment of Minimum Rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business ninety (90) days following the date that Landlord advises Tenant that the Leased Premises are tenantable and Landlord has substantially completed Landlord's Reconstruction Work, unless Tenant opens at an earlier time in the damaged area or remains open in such area following destruction or damage, in which event there shall be no abatement or any such abatement shall terminate as of the date of Tenant's earlier reopening. Landlord shall be obligated to commence Landlord's Reconstruction Work and shall diligently pursue the completion of Landlord's Reconstruction Work and shall cause the same to be completed as soon thereafter as possible under the attendant circumstances, but in any event all such Landlord's Reconstruction Work shall be completed and the Leased Premises reopened for business within one hundred eighty (180) days following such fire or casualty. After Landlord has completed Landlord's Reconstruction Work, Tenant shall commence Tenant's Reconstruction Work, at its expense. Tenant shall comply with all laws, ordinances and governmental rules or regulations, and shall perform all work or cause such work to be performed with due diligence and in a first-class manner. All permits required in connection with said repairs, restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost and expense. Any amount expended by Tenant in excess of any insurance proceeds received by Tenant shall be the sole obligation of Tenant. Landlord shall reconstruct such Leased Premises in accordance with the working drawings originally approved by Landlord or with (at Landlord's sole election) new drawings prepared by Tenant and acceptable to Landlord and Tenant ("Landlord's Reconstruction Work"). In no event shall Landlord be required to repair or replace Tenant's merchandise, trade fixtures, furnishings or equipment. If Landlord repairs or rebuilds, Tenant, at Tenant's sole cost, shall repair or replace Tenant's merchandise, trade fixtures, furnishings and equipment in a manner and to at least a condition equal to that prior to the damage or destruction thereof ("Tenant's Reconstruction Work"). Except as may be specifically set forth in this Article IX, Landlord shall not be liable or obligated to Tenant to any extent whatsoever by reason of any fire or other casualty damage to the Leased Premises, or any damages suffered by Tenant by reason thereof, or the deprivation of Tenant's possession of all or any part of the Leased Premises. In the event Landlord has not commenced restoration or rebuilding of the Leased Premises within ninety (90) days of the date of such fire or casualty loss, or if the Leased Premises are not restored/rebuilt to its former condition prior to such fire or casualty loss within one hundred eighty (180) days of the date of such fire or casualty loss, Tenant will have the right, in either case, to terminate this Lease by providing Landlord notice of such election and Tenant will vacate and surrender the Leased Premises pursuant to Section 17.1. 30 35 ARTICLE X CONDEMNATION SECTION 10.1. EMINENT DOMAIN. If fifty percent (50%) or more of the floor area of the Leased Premises shall be taken or condemned by any governmental authority (including, for purposes of this Article X, any purchase by such governmental authority in lieu of a taking), then either party may elect to terminate this Lease by giving notice to the other party not more than ninety (90) days after the date on which such title shall vest in the authority. If the parking facilities are reduced below the minimum parking requirements imposed by the applicable authorities, Landlord may elect to terminate this Lease by giving Tenant notice within one hundred eighty (180) days after such taking. In addition, if any Major Tenant shall terminate its lease with Landlord, pursuant to a taking of its store, Landlord may terminate this Lease by written notice to Tenant within ninety (90) days after notice to Landlord that such Major Tenant is terminating its lease. In the case of any taking or condemnation, whether or not the Term of this Lease shall cease and terminate, the entire award shall be the property of Landlord; provided, however, Tenant shall be entitled to any award as may be made for trade fixtures and other equipment (not including any Tenant's Work required or permitted under this Lease) which under the terms of this Lease would not have become the property of Landlord; further provided, that any such award to Tenant shall not be in diminution of any award otherwise to be made to Landlord in the absence of such award to Tenant. SECTION 10.2. RENT APPORTIONMENT. In the event of any taking or condemnation, the then current Minimum Rent, Sales Break Point and the square foot floor area in the Leased Premises as determined pursuant to Section 1.1 shall be apportioned as of the date when possession of the Leased Premises is required to be delivered to the condemning authority or termination of this Lease, as the case may be, and, if the Term of this Lease shall not have ceased and have been terminated as of said date, Tenant shall be entitled to a pro rata reduction in the Minimum Rent payable and Sales Break Point hereunder, or, if Tenant has prepaid Minimum Rent, Tenant shall be entitled to a pro rata credit for the Minimum Rent paid hereunder, based on the proportion which the floor area taken from the Leased Premises bears to the entire floor area of the Leased Premises immediately prior to such taking. SECTION 10.3. TEMPORARY TAKING. Notwithstanding anything to the contrary in this Article X, the requisitioning of the Leased Premises or any part hereof by military or other public authority for purposes arising out of a temporary emergency or other temporary situation or circumstances shall constitute a taking of the Leased Premises by eminent domain when the use or occupancy by the requisitioning authority is expressly provided to continue, or shall in fact have continued, for a period of one hundred eighty (180) days or more, and if this Lease is not thereafter terminated under the foregoing provisions of this Article X, then for the duration of any period of use and occupancy of the Leased Premises by the requisitioning authority, all the terms and provisions of this Lease and obligations of Tenant hereunder shall remain in full force and effect, except that the Minimum Rent and Sales Break Point shall be reduced in the same proportion that the floor area of the Leased Premises so requisitioned bears to the total floor area of the Leased Premises, and Landlord shall be entitled to whatever compensation may be payable from the requisitioning authority for the use and occupation of the Leased Premises for the period involved. ARTICLE XI ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE SECTION 11.1. NO ASSIGNMENT, SUBLETTING OR ENCUMBERING OF LEASE. (a) Except as otherwise provided in this Article XI and notwithstanding any references to assignees, subtenants, concessionaires or other similar entities in this Lease, Tenant shall not (i) assign or otherwise transfer, or mortgage or otherwise encumber, this Lease, in whole or in part, or any of its rights hereunder, (ii) sublet the Leased Premises or any part thereof, or permit the use of the Leased Premises or any part thereof by any persons other than Tenant or its agents. Any such attempted or purported transfer, assignment, mortgaging or encumbering of this Lease or any of Tenant's interest 31 36 hereunder and any attempted or purported subletting or grant of a right to use or occupy all or a portion of the Leased Premises in violation of the foregoing sentence, whether voluntary or involuntary or by operation of law or otherwise, shall be null and void and shall not confer any rights upon any purported transferee, assignee, mortgagee, or occupant, and shall, at Landlord's option, result in a "default" under this Lease. Nothing contained elsewhere in this Lease shall authorize Tenant to enter into any franchise, concession, license, permit, subtenancy, departmental operation arrangements or the like, except pursuant to the provisions of this Article XI. Notwithstanding anything to the contrary set forth in this Article XI, the following shall govern with respect to certain types of transfers, it being understood that Tenant shall have the right to assign, sublease or otherwise transfer its rights under this Lease provided that the conditions and requirements applicable to the particular assignment, sublease or other transfer that are specified in subparagraphs (A), (B), (C), OR (D) below are satisfied: (A) INTRA-ORGANIZATIONAL TRANSFER: Tenant shall have the right, without Landlord's consent but with prior written notice to Landlord, to assign this Lease or sublet the Leased Premises to its parent corporation or any of its wholly-owned subsidiaries, or any affiliate or subsidiary of Tenant's parent corporation provided that Tenant shall at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease. (B) ASSIGNMENT AS PART OF A TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF TENANT (Same Use): Landlord's consent shall not be unreasonably withheld or delayed to an assignment of this Lease (by merger, consolidation or otherwise) or a sublease for all or any portion of the Leased Premises to another entity (the "Transferee") to which Tenant shall simultaneously be transferring all or substantially all of its stock or all or substantially all of its assets, provided that the following criteria are met: (1) Tenant shall not at the time of such transfer be in default under any of the terms, covenants and conditions of this Lease beyond any applicable grace period, (2) such Transferee shall agree in writing to perform all of the unperformed terms, covenants and conditions of this Lease, (3) Tenant shall at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease and (4) the number of stores being transferred must consist of at least three (3) stores. (C) ASSIGNMENT AS PART OF A TRANSFER OF LESS THAN ALL OR SUBSTANTIALLY ALL OF TENANT'S ASSETS (Same Use): Landlord shall not unreasonably withhold its consent to an assignment, sublease or other transfer ("Transfer") of this Lease to an entity to whom Tenant is transferring less than substantially all of Tenant's assets ("Transferee") provided that the following requirements and conditions shall be satisfied prior to any such Transfer: (i) at the time of such proposed Transfer, Tenant is not in default of any of the terms, covenants or conditions of this Lease and shall at such time be operating the Leased Premises pursuant to Article IV of this Lease; (ii) the proposed Transferee shall agree in writing to assume all of the terms, covenants and conditions to be performed by Tenant hereunder, including, but not limited to, the obligation to continue to operate the Leased Premises in accordance with Article IV of this Lease; (iii) effective as of the date of such Transfer, the applicable Minimum Rent as provided for in Section 2.1 shall be increased to [***]; (iv) at the time of such Transfer, the proposed Transferee shall have a net worth equal to or greater than [***][in 1999 Dollars] as shown in current certified financial statements; and (v) the proposed Transferee has proven expertise and experience in operating and managing an entertainment use in a shopping center environment. In addition to Landlord's right to deny Tenant's proposed Transfer on the grounds that the items enumerated in (i) through (v) of Section 11.1(a)(C) have not been met, within fifteen (15) days after Landlord's receipt of notice from Tenant of its intention to complete the Transfer as provided for in this Section 11.1(a)(C). Landlord may elect by notice (hereinafter called the "Same Use Recapture Notice") in writing to Tenant to terminate this Lease and recapture the Leased Premises, in which event this Lease shall automatically terminate on the ninetieth (90th) day (hereinafter called the "Same Use Recapture Date") following Tenant's receipt of the Recapture Notice with the same *** Confidential treatment requested. 32 37 force and effect as if said Same Use Recapture Date had been designated as the expiration date of this Lease, and Landlord and Tenant shall upon such Same Use Recapture Date be released from any and all liabilities thereafter accruing hereunder, provided, however that Landlord shall be obligated to repay to Tenant [***] on or before the Same Use Recapture Date. All Minimum Rent, Percentage Rent and additional rent payable by Tenant hereunder shall be apportioned as of the Same Use Recapture Date and Tenant shall promptly pay to Landlord any amounts so determined to be due and owing by Tenant to Landlord, and conversely Landlord shall promptly reimburse Tenant for any amounts prepaid by Tenant for periods subsequent to the Same Use Recapture Date. Notwithstanding any Same Use Recapture Notice given to Tenant by Landlord within the aforesaid fifteen (15) day period, Tenant shall have the right within fifteen (15) days after its receipt of the Same Use Recapture Notice to give Landlord notice (hereinafter called the "Same Use Recision Notice") of its recision of its intention to assign, transfer or sublease, and upon Landlord's receipt of the Same Use Recision Notice the Same Use Recapture Notice previously given by Landlord shall be deemed null and void; in such event. Tenant shall not assign this Lease or sublet the Leased Premises as proposed in the notice of its intention to assign or transfer the Lease or sublet the Leased Premises. (D) ASSIGNMENT WITH PROPOSED CHANGE IN USE: Landlord's consent to an assignment, transfer or sublease which results in a change in use shall not be unreasonably withheld provided that the following criteria are met: (i) the net worth of the assignee, transferee or sublessee shall be equal to or greater than [***] [in 1999 Dollars] as shown in current certified financial statements; (ii) the proposed assignee, transferee or sublessee has proven experience in the retail business to be conducted in the Leased Premises; (iii) the proposed assignment, transfer or sublease applies to the entire Leased Premises; and (iv) the business to be conducted in the Leased Premises shall (A) not violate an existing exclusive or restriction granted for the benefit of another tenant in the Retail Development or (B) complement the merchandising mix and program for the Retail Development being promoted at the time of the proposed assignment (i, ii, iii and iv being collectively referred to as the "Criteria"). In the event Tenant proposes to assign its interest in this Lease or sublet the whole of the Leased Premises pursuant to the terms of this Section 11.1(a)(D), it shall, notwithstanding Section 11.1(c) to the contrary, first give thirty (30) days prior written notice thereof (hereinafter called the "Assignment/Subletting Notice") to Landlord together with all other information required pursuant to Section 11.1(c) hereof. In the event the proposed assignee is unacceptable to Landlord, because in Landlord's reasonable belief the Criteria have not been met, Landlord shall be permitted during the thirty (30) day period to reject the proposed assignment and Tenant shall remain liable under the Lease. In addition, within thirty (30) days after Landlord's receipt of an Assignment/Subletting Notice and such required and/or requested information from Tenant as provided in this Section 11.1(a)(D), Landlord may elect by notice (hereinafter called the "Recapture Notice") in writing to Tenant to terminate this Lease and recapture the Leased Premises, in which event this Lease shall automatically terminate on the ninetieth (90th) day (hereinafter called the "Recapture Date") following Tenant's receipt of the Recapture Notice with the same force and effect as if said Recapture Date had been designated as the expiration date of this Lease, and Landlord and Tenant shall upon such Recapture Date be released from any and all liabilities thereafter accruing hereunder, provided, however that Tenant shall be obligated to repay to Landlord the unamortized portion of the Tenant Allowance as provided for in Section 3.3 hereof on or before the Recapture Date. All Minimum Rent, Percentage Rent and additional rent payable by Tenant hereunder shall be apportioned as of the Recapture Date and Tenant shall promptly pay to Landlord any amounts so determined to be due and owing by Tenant to Landlord, and conversely Landlord shall promptly reimburse Tenant for any amounts prepaid by Tenant for periods subsequent to the Recapture Date. Notwithstanding any Recapture Notice given to Tenant by Landlord within the aforesaid thirty (30) day period, Tenant shall have the right within fifteen (15) days after its receipt of the Recapture Notice to give Landlord notice (hereinafter called the "Recision Notice") of its recision of the *** Confidential treatment requested. 33 38 Assignment/Subletting Notice, and upon Landlord's receipt of the Recision Notice the Recapture Notice previously given by Landlord shall be deemed null and void; in such event, Tenant shall not assign this Lease or sublet the Leased Premises as proposed in its Assignment/Subletting Notice. (b) Except as otherwise provided herein, if Tenant is a corporation, the sale, issuance or transfer of any voting capital stock of Tenant or of any corporate entity which directly or indirectly controls Tenant (unless the Tenant is a corporation whose stock is publicly traded) which shall result in a change in the voting control of Tenant or the corporate entity which controls Tenant shall be deemed to be a prohibited assignment of this Lease within the meaning of this Article XI. If Tenant is a partnership or an unincorporated association, then the sale, issuance or transfer of a majority interest therein, or the transfer of a majority interest in or a change in the voting control of any partnership or unincorporated association or corporation which directly or indirectly controls Tenant, or the transfer of any portion or all of any general partnership or managing partnership interest, shall be deemed to be a prohibited assignment of this Lease within the meaning of this Article XI. Except as otherwise provided herein, the consent by Landlord to any assignment, transfer, or subletting to any party shall not be construed as a waiver or release of Tenant under the terms of any covenant or obligation under this Lease or as a waiver or release of Tenant under the terms of any covenant or obligation under this Lease or as a waiver or release of the non-assignability covenants in their future application, nor shall the collection or acceptance of Rent from any such assignee, transferee, subtenant or occupant constitute a waiver or release of Tenant of any covenant or obligation contained in this Lease. (i) Notwithstanding anything herein contained to the contrary, a sale or transfer of any voting capital stock of Tenant when caused by death (e.g., testamentary transfer) or for estate planning purposes (e.g. inter vivos trust) will not be deemed a prohibited assignment of this Lease. (ii) The provisions of this Section 11.1 (b) shall not be deemed to prohibit transfer of limited partnership interests among existing limited or general partners; however, if either general partner ceases to remain a general partner of Tenant such occurrence shall be deemed a prohibited assignment of this Lease under the meaning of this Article XI. (iii) In addition, Tenant may, without violating the provisions of this Article XI, and without consent of or notice to Landlord (i) sell or offer for sale its capital stock to the public in accordance with the qualifications or registration requirements of the state where Tenant is incorporated and the Securities Act of 1933, as amended or (ii) issue or transfer shares of Tenant's capital stock (whether or not such issuance or transfer results in a change in the persons comprising majority shareholders of Tenant) as part of a so-called "private placement". (c) Without conferring any rights upon Tenant not otherwise provided in this Article XI, should Tenant desire to enter into an assignment, sublease or transfer of this Lease or Tenant's rights hereunder, Tenant shall request in writing Landlord's consent to the assignment or, where consent is not required, provide Landlord prior written notice of the same at least fifteen (15) days before the proposed effective date of the assignment (or within such other timeframe as may be provided for herein for a specific type of assignment), providing the following: (i) the full particulars of the proposed assignment, sublease or transfer of this Lease or Tenant's rights hereunder, including its nature (i.e. whether it is an assignment, sublease or transfer) and effective date, terms and conditions; (ii) a description of the identity, net worth and previous business experience of the proposed transferee, including, without limitation, copies of the proposed transferee's latest income, balance sheet and changes in financial position statements (with accompanying notes and disclosures of all material changes thereto) in audited form, if available, and certified as accurate by the proposed transferee; and (iii) any further information reasonably relevant to the proposed assignment and reasonably available to Tenant which Landlord shall request after receipt of Tenant's request for consent. Tenant shall, concurrently with any requests for Landlord's consent, pay to Landlord a fee in the sum of [***] for Landlord's review and processing of such request and Landlord shall not be obligated to review such request prior to Landlord's receipt of such fee. All requests for assignment, sublease or transfer shall be forwarded to Landlord at the address provided above and to the on-site mall management office. To the extent Landlord's consent is required, Landlord shall be required to respond within the prescribed period (being a minimum of 15 days) and if Landlord's response is a denial of the proposed transfer, Landlord shall give specific reasons for the denial. If Landlord *** Confidential treatment requested. 34 39 fails to respond within five (5) business days written notice from Tenant (provided both to Landlord at the notice address and to the Mall Manager), which notice must specify that Landlord has failed to respond to the initial request and that failure to respond within five (5) days of the date of the second notice will result in approval, then Landlord shall be deemed to have approved the requested transfer. (d) Except for a permitted assignment or subletting as specified in Section 11.1(a) and (b) and without conferring any rights upon Tenant not otherwise provided in this Article XI, in the event of an assignment or transfer of Tenant's interest in this Lease, or a sublease of all or a portion of the Leased Premises, to a third party, any monthly rent or other payment accruing to Tenant as the result of any such assignment, transfer, or sublease, including any lump sum or periodic payment in any manner relating to such assignment, transfer or sublease, which is in excess of the Rent then payable by Tenant under this Lease less any amounts paid by Tenant in commissions, tenant improvements, unamortized tenant improvements funded by Tenant and attorneys' fees shall be paid [***] Landlord may require a certificate from Tenant specifying the full amount of any such payment of whatsoever nature. (e) Notwithstanding any assignment, subletting or transfer of this Lease or Tenant's rights hereunder, Tenant shall remain fully liable on this Lease and for the performance of all terms, covenants and provisions of this Lease; provided, however, if the transferee, or assignee has a net worth equal to or in excess of [***] [in 1999 Dollars] as shown in current certified financial statements on the date of the transfer then Tenant shall be released from its obligations with respect to the Lease from and after the date of the assignment or transfer. SECTION 11.2. ASSIGNMENT OR SUBLET. If this Lease is transferred or assigned, in whole or in part in violation of the terms of this Lease, or if the Leased Premises or any part thereof be sublet or occupied by any person or entity other than Tenant in violation of the terms of this Lease, whether as a result of any act or omission by Tenant, or operation of law, or otherwise, then Landlord, whether before or after default by Tenant then Landlord may, in addition to, and not in diminution of or substitution for, any other rights and remedies under this Lease or pursuant to law to which Landlord may be entitled as a result thereof, collect rent from the transferee, assignee, subtenant or occupant and apply the net amount collected to the Rent herein reserved, but no such transfer, assignment, subletting, occupancy or collection shall be deemed a waiver of the covenants contained herein or the acceptance of the transferee, assignee, subtenant, or occupant as Tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant set forth in this Lease unless Tenant has been otherwise released, including without limitation pursuant to Section 11.1(e). SECTION 11.3. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of Landlord's interest in the Leased Premises, including a sale or lease, the transferor shall be automatically relieved of any and all obligations on the part of Landlord accruing from and after (but not before) the date of such transfer, provided that (a) the interest of the transferor, as Landlord, in any funds then in the hands of Landlord in which Tenant has an interest shall be turned over, subject to such interest, to the then transferee; and (b) notice of such sale, transfer or lease shall be delivered to Tenant as required by law. ARTICLE XII SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE SECTION 12.1. SUBORDINATION. Tenant agrees that this Lease shall, at the request of Landlord, be subordinate to any mortgages or deeds of trust that are now, or may hereafter be, placed upon the Leased Premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof, provided that the mortgagees or beneficiaries named in said mortgages or deeds of trust shall agree to recognize the interests of *** Confidential treatment requested. 35 40 Tenant under this Lease in the event of foreclosure, if Tenant is not then in default. Tenant also agrees that any mortgagee or beneficiary may elect to have this Lease constitute a prior lien to its mortgage or deed of trust, and in the event of such election and upon notification by such mortgagee or beneficiary to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of said mortgage or deed of trust. Tenant agrees that upon the request of Landlord, or any mortgagee or beneficiary, Tenant shall execute whatever reasonable instruments may be required to carry out the intent of this Section 12.1 and Section 12.2; provided that no such instrument may contain any matters which increase any of Tenant's obligations under this Lease or decrease any of Tenant's rights under this Lease and such instrument will grant a covenant of non-disturbance to Tenant. SECTION 12.2. ATTORNMENT. In the event any proceedings are brought for the foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure of, or in the event of exercise of the power of sale under, any mortgage and/or deed of trust made by Landlord covering the Leased Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the Leased Premises, this Lease shall remain in full force and effect and Tenant hereby attorns to, and covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as Landlord under this Lease. Payment by or performance of this Lease by any person, firm or corporation claiming an interest in this Lease or the Leased Premises by, through or under Tenant without Landlord's consent in writing shall not constitute an attornment or create any interest in this Lease or the Leased Premises. SECTION 12.3. FINANCING. [INTENTIONALLY DELETED] SECTION 12.4. ESTOPPEL CERTIFICATE. Tenant shall, without charge therefor, at any time and from time to time, within thirty (30) days after request therefor by Landlord, execute, acknowledge and deliver to Landlord a written estoppel certificate, in reasonable form, certifying to Landlord, any mortgagee, or any purchaser of the Shopping Center or any other person designated by Landlord, as of the date of such estoppel certificate: (i) that Tenant is in possession of the Leased Premises and has accepted the same; (ii) that this Lease is unmodified and in full force and effect (or if there has been modification, that the same is in full force and effect as modified and setting forth such modifications) (iii) whether or not there are then existing any set-offs or defenses against the enforcement of any right or remedy of Landlord, or any duty or obligation of Tenant, hereunder (and, if so, specifying the same in detail); (iv) that Rent is paid currently without any offset or defense thereto, (v) the dates, if any, to which any Rent has been paid in advance; (vi) whether or not there is then existing any claim of Landlord's default under this Lease and if so, specifying the same in detail; (vii) that Tenant has no knowledge of any event having occurred that authorized the termination of this Lease by Tenant (or if Tenant has such knowledge, specifying the same in detail); and (viii) any other matters relating to the status of this Lease that Landlord or its mortgagee may request be confirmed, provided that such facts are accurate and ascertainable. Landlord shall, within thirty (30) days after written request from Tenant, no more often than once in any Lease Year and provided Tenant is not then in default hereunder, deliver to Tenant or such persons as Tenant may designate, a statement in writing certifying to the extent true that: (i) Tenant is in possession of the Leased Premises; (ii) this Lease is in full force and effect (as later modified, if such be the case); (iii) the Rent due hereunder is current; and (iv) that to the best of Landlord's knowledge, information and belief, Tenant is not in default hereunder. SECTION 12.5. REMEDIES. Any failure by Tenant to execute any certificate, statement or instrument in accordance with the foregoing provisions of this Article XII or any financing statement in accordance with the provisions of Section 14.2(a), within the time period provided or if no time period is specified, then within thirty (30) days after written request, shall constitute a "default" under this Lease. 36 41 ARTICLE XIII ADVERTISING AND PROMOTION SECTION 13.1. PROMOTION FUND. Landlord shall establish an advertising and promotion fund (the "Fund"). The object of the Fund shall be to advertise the Retail Development in the local metropolitan statistical area and to provide a program of events, all of which shall, in Landlord's judgment, serve to enhance and promote the Retail Development and its occupants. Such program of events may include the promotion of coach traffic to the Retail Development and the development of a mall video network within the Retail Development offering a program of information, entertainment and advertisements. The Fund shall be administered by Landlord and the costs and expenses of such administration shall be charged to the Fund. Landlord shall expend all amounts paid to the Fund by the tenants in the Retail Development for the purposes herein set forth. SECTION 13.2. PROMOTION FUND CONTRIBUTION. Tenant's annual contribution to the Fund shall be the Fund Contribution (reduced proportionately for a partial Lease Year) as defined in the Data Sheet. Upon the Grand Opening, Tenant shall also pay Tenant's one-time initial contribution or Grand Opening Fee which is defined in the Data Sheet. The Fund Contribution payable by Tenant for each Lease Year shall be increased commencing with the second Lease Year of the Term of this Lease, and each Lease Year thereafter, by a percentage equal to the percentage increase from the [***] ("Index") to the "current period" of the Index of the Lease Year for which the adjustment is being made; provided, however, if the first Lease Year is less than six (6) months, the first adjustment to the Fund Contribution shall be after the first full Lease Year. Except as herein expressly provided, the term "base period" shall initially refer to the Index published for the month of October immediately preceding the Commencement Date. Following the initial increase in the Fund Contribution hereunder, the term "base period" shall refer to the Index published for the month of October immediately preceding the Lease Year for which the Fund Contribution was last adjusted hereunder. The "current period" of the Index shall refer to the Index published for the month of October immediately preceding the Lease Year for which an adjustment is being made. In the event the Index shall not be published for any of the above-described months, then the Index published for the month closest, but prior, to the described month shall be used in its place. The annual Fund Contribution shall be payable by Tenant to Landlord, or as Landlord may direct, in twelve (12) equal monthly installments, commencing on the Commencement Date, at the same time and in the same manner as the monthly installments of Minimum Rent are payable. Notwithstanding the foregoing, in lieu of Tenant's payment of the Grand Opening Fee, during the period from the Delivery of Possession Date through and including the Grand Opening date ("Advertising Period"), Tenant shall place advertisements (including, without limitation, billboards; signs; newspapers, radio, television ads; and direct mail) at a cost equal to the amount of the Grand Opening Fee that Tenant would have otherwise been obligated to pay ("Eligible Advertising") which shall specifically identify the Leased Premises, including the name and location of the Shopping Center. At or prior to the time the Eligible Advertising is placed, Tenant shall submit to Landlord copies of the actual Eligible Advertising or other written third-party evidence reasonably satisfactory to Landlord evidencing the Eligible Advertising, together with all receipts, canceled checks or other third-party evidence reasonably satisfactory to Landlord establishing Tenant's payment for the Eligible Advertising. In the event that the cost of the Eligible Advertising does not meet or exceed the Grand Opening Fee by the end of the Advertising Period, Tenant shall pay the balance to Landlord within thirty (30) days of receipt of a bill from Landlord. SECTION 13.3. ADVERTISEMENTS [INTENTIONALLY DELETED]. SECTION 13.4. NETWORK. Landlord may cause to be developed a mall video network within the Retail Development (the "Network"). The object of the Network shall be to provide a program of information, entertainment and advertisements, which shall, in Landlord's judgment, serve to enhance or promote the Retail Development and its occupants. The Network shall have the right to sell available time and access on the Network for advertisements or other uses. The Network shall be under the sole and exclusive direction of Landlord and shall be administered by Landlord. The costs and expenses paid or incurred by Landlord for administering, operating, equipping, staffing, *** Confidential treatment requested. 37 42 protecting, insuring, repairing, replacing and maintaining the Network shall be charged to the Fund. Any production by Landlord of advertising messages for Tenant and any air time on or access to the Network is subject to availability, as determined solely by Landlord, and shall be at the then applicable rates and fees set by Landlord. Landlord shall have the right to reject, remove or discontinue showing any video taped advertising message of the business conducted, or to be conducted, in the Leased Premises (herein "Tenant Video") or advertising message on the Network the content of which is, in the opinion of Landlord, unethical, misleading, in bad taste, or shall tend to injure the reputation of the Retail Development or its occupants, or shall be deemed to be detrimental to the Retail Development or is in violation of any applicable rule, law or existing agreement with occupant(s) of the Retail Development. Tenant acknowledges that Tenant shall be solely responsible for the content of its Tenant Video and except with respect to the gross negligence of Landlord and the Network, Tenant agrees to save harmless Landlord, its officers, directors, partners, employees and agents from and against any and all claims, actions, damages, liability, cost or expense, including attorneys' fees that arise from or with respect to the content of such advertising message, including without limitation any claims for infringement of the intellectual property rights of others or actions for unfair competition. Landlord reserves the right at any time to dissolve the Network and cease providing its promotional services as well as Tenant Videos and in lieu thereof, to provide, or cause to be provided, a program of advertising and promotional events which in Landlord's sole judgment, will serve to promote the Retail Development and its occupants. ARTICLE XIV DEFAULT AND REMEDIES SECTION 14.1. ELEMENTS OF DEFAULT. If any one or more of the following events occur, said event or events shall hereby be classified as a "default" as that term is used throughout this Lease: (a)(i) the failure of Tenant to take possession of the Leased Premises at the Delivery of Possession Date, or (ii) the failure of Tenant to open its doors for business within thirty (30) days after the date specified in Section 1.3 hereof, or (iii) if Tenant vacates or abandons the Leased Premises and permits the same to remain unoccupied and unattended for three (3) days after written or telephone notice, or (iv) if Tenant fails to maintain normal inventory levels and employee staff for the conduct of its normal business activities in the Leased Premises for three (3) days after written or telephone notice, or (v) the failure of Tenant to operate its business in compliance with Section 4.2 for the purposes specified in Section 4.1 and Tenant fails to cure the same within ten (10) days after written notice, or (vi) in the event of the sale or removal of a substantial portion of Tenant's property located in the Leased Premises in a manner which is outside the ordinary course of Tenant's business; (b) the failure of Tenant to pay any Rent or other charges required to be paid by Tenant when same shall become due and payable hereunder and such failure continues for ten (10) days after written notice; (c) the failure of Tenant to perform or observe any term or condition of this Lease and such failure shall continue for thirty (30) days after written notice; provided, however, such period shall be extended for an additional reasonable period if Tenant has diligently commenced the curing of such default within the thirty (30) days period and is diligently pursuing the same to completion, but in no event shall either the thirty (30) days period or any extension thereof apply to Tenant's covenant to operate pursuant to Article IV of this Lease, unless the same is excused pursuant to Article IX or Article X of this Lease; (d) if Tenant shall be given three (3) notices of the same default under subparagraphs (b) or (c) within any period of eighteen (18) months, notwithstanding any subsequent cure of the failure to perform or observe the terms or conditions of this Lease as identified in such notices; (e) if any writ of execution, levy, attachment or other legal process of law shall occur upon a substantial and material part of Tenant's assets, merchandise, fixtures, or Tenant's estate or interest in the Leased Premises; (f) Tenant shall be liquidated or dissolved or shall begin proceedings toward such liquidation or dissolution, or shall in any manner permit the divestiture of all, or any substantial part of Tenant's assets. 38 43 Section 14.2. Landlord's Remedies. In the event of any such default or breach by Tenant, Landlord may at any time thereafter, with or without further notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such default or breach: (a) Perform, on behalf and at the expense of Tenant, any obligation of Tenant under this Lease which Tenant has failed to perform and of which Landlord shall have given at least three (3) days' notice (except in the case of emergency, in which event no such notice shall be required), the cost of which performance by Landlord, together with interest therein at the interest rate (as specified in Section 20.14 hereof) from the date of such expenditure, shall be deemed additional rent and shall be payable by Tenant to Landlord upon demand. (b) Without further notice, re-enter and repossess the Leased Premises, by summary proceedings or otherwise, and remove Tenant and all other persons and property from the Leased Premises, and store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant without resort to legal process and without Landlord being deemed guilty of trespass or conversion or becoming liable for any loss or damage occasioned thereby. In connection herewith, Landlord shall have, in addition to any other remedies, any and all self-help remedies, including but not limited to a forcible entry into the Leased Premises or a "lock-out" accomplished by changing the locks on the Leased Premises. No re-entry of the Leased Premises shall be construed as an election by Landlord to accept Tenant's surrender of the Leased Premises or to terminate this Lease unless a written notice of such intention is given by Landlord to Tenant. (c) Declare the entire balance of the Rent, and all other amounts to be paid by Tenant hereunder for the remainder of the Term to be due and payable immediately, and collect such balance in any manner not inconsistent with applicable law. The amount of additional rent and Percentage Rent payable with respect to each Lease Year remaining in the Term after such default (including the Lease Year during which such default occurred) shall be conclusively presumed to be equal to the average additional rent and Percentage Rent payable with respect to each completed Lease Year preceding such default; provided, however, that if such default occurs before the expiration of [***] Lease Years, then the amount of additional rent and Percentage Rent payable with respect to each Lease Year remaining in the Term after such default (including the Lease Year or partial Lease Year during which such default occurred) shall be conclusively presumed to be equal to [***] times the average monthly additional rent and Percentage Rent payable prior to such default. Notwithstanding anything to the contrary in this Lease, Landlord hereby agrees to use reasonable efforts to mitigate damages; provided, however, that Landlord, in attempting to lease the Leased Premises shall not be obligated to give preference to the Leased Premises over any other available space in the Shopping Center. In consideration of the preceding sentence, Tenant hereby acknowledges that the Leased Premises are located within a super-regional discount specialty retail shopping center and that the quality and record of experience of a prospective tenant and the type of prospective tenant (compared with the then current tenant mix in the Shopping Center) are principal considerations which Landlord shall employ in determining whether to lease the Leased Premises. (d) Terminate this Lease by giving written notice of such termination to Tenant, which termination shall be effective as of the date of such notice or any later date therefor specified by Landlord in such notice (provided, that without limiting the generality of the foregoing provisions, Landlord shall not be deemed to have accepted any abandonment or surrender by Tenant of any or all of the Leased Premises or Tenant's leasehold estate under this Lease unless Landlord has so advised Tenant expressly and in writing, regardless of whether Landlord has re-entered or relet any or all of the Leased Premises or exercised any or all of Landlord's other rights under this Lease or applicable law). 39 44 (e) In Landlord's own name or otherwise, relet any or all of the Leased Premises with or without any additional premises, for any or all of the remainder of the Term (or, if this Lease has then been terminated, for any or all of the period which would, but for such termination, have constituted the remainder of the Term) or for a period exceeding such remainder, on such terms and subject to such conditions as are acceptable to Landlord (including, by way of example rather than of limitation, the alteration of any or all of the Leased Premises in any manner which, in Landlord's judgment, is necessary or desirable in connection with such reletting, and the allowance of one or more concessions or "free-rent" or reduced-rent periods), and collect and receive the rents thereof. Tenant shall pay to Landlord, at the times and in the manner specified by the provisions of this Lease (unless Landlord has elected to accelerate Rent as provided above in subparagraph (d), in which event Tenant shall be obligated to pay such accelerated amount as provided in such subparagraph), (i) the installments of the Minimum Rent, additional rent and Percentage Rent accruing during such remainder (or, if this Lease has then been terminated, damages equalling the respective amounts of such installments (determined as provided in subparagraph 14.2 (c) which would have accrued during such remainder, had this Lease not been terminated)), plus (ii) the cost to Landlord of any such reletting (including, by way of example rather of limitation, any attorneys's fees, leasing or brokerage commissions, repair or improvement expenses and the expense of any other actions taken in connection with such reletting) less any monies received by Landlord with respect to such remainder from such reletting of any or all of the Leased Premises. (f) Recover from Tenant, an amount equal to (i) all items of accrued and unpaid Rent, including, without limitation, the then unamortized amount of the Construction Allowance; (ii) all reasonable expenses (including, by way of example rather than of limitation, all repossession costs, management expenses, operating expenses, legal expenses and attorney's fees) incurred by Landlord in curing or seeking to cure any default or in exercising or seeking to exercise any of Landlord's rights and remedies under the provisions of this Lease or at law or in equity on account of any default, plus (iii) interest on all such expenses, at the rate provided in Section 20.14, all of which expenses and interest shall be payable by Tenant immediately on demand therefor by Landlord. (g) Without terminating this Lease, maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have vacated the Leased Premises. In such event, Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover Rent as it becomes due hereunder. (h) Any damage or loss of Rent sustained by Landlord may be recovered by Landlord, at Landlord's option, at the time of the reletting or termination, in a single action or in separate actions, from time to time, as said loss of Rent or damages shall accrue, or in a single proceeding deferred by Landlord or with jurisdiction reserved by the court, until the expiration of the Term of this Lease (in which event Tenant hereby agrees that, at Landlord's option, the cause of action shall not be deemed to have accrued until the date of expiration of said Term). (i) Nothing contained herein shall prevent the enforcement of any claim Landlord may have against Tenant for anticipatory breach of this Lease. In the event of any anticipatory breach by Tenant of any of the covenants or provisions hereof or in the event of Tenant's default, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not provided for herein. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy under this Lease or, at law or in equity. Tenant hereby expressly waives for itself and all persons claiming by or through Tenant, any and all rights to redeem, reinstate or restore, or obtain relief from forfeiture of this Lease granted by or under any present or future law in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Leased Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease. (j) In case suit shall be brought for recovery of the Leased Premises, for the recovery of Rent or any other amount due under the provisions of this Lease, or because of the breach of any other covenant herein contained on the part of Tenant to be kept and performed, and a breach shall be established, Tenant shall pay to Landlord all costs and expenses incurred therefor, including Landlord's attorney's reasonable fees and expenses. 40 45 (k) Nothing herein contained shall limit or prejudice Landlord's right to prove and obtain as damages, by reason of any default by Tenant, an amount equal to the maximum allowed by statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved. No expiration or termination of this Lease, abandonment, re-entry by Landlord or vacancy, shall relieve Tenant of any of its liabilities and obligations under this Lease (whether or not any or all of the Leased Premises are relet), and Tenant shall remain liable to Landlord for all damages resulting from any default by Tenant, including any damage resulting from the breach by Tenant of any of its obligations to pay Minimum Rent, Percentage Rent, additional rent and any other sums which Tenant is obligated to pay hereunder. (l) The rights and remedies of Landlord under this Lease shall be deemed to be cumulative, and no one of such rights or remedies shall be exclusive at law or in equity of the other rights and remedies of Landlord on account of a default by Tenant, and the exercise of any one such right or remedy by Landlord shall not impair Landlord's standing, right or power to exercise any other right or remedy. Section 14.3. Bankruptcy. (a) Neither Tenant's interest in this Lease, nor any estate hereby created in Tenant nor any interest herein or therein, shall pass to any trustee or receiver or assignee for the benefit of creditors or otherwise by operation of law, except as may specifically be provided pursuant to the Bankruptcy Code (11 USC Section 101 et seq.), as the same may be amended from time to time. (b) It is understood and agreed that this Lease is a lease of real property in a shopping center as such lease is described in Section 365 of the Bankruptcy Code, as the same may be amended from time to time. Upon the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor-in-possession, and any trustee who may be appointed with respect to the assets of or estate in bankruptcy of Tenant, agree to pay monthly in advance on the first day of each month, as reasonable compensation for the use and occupancy of the Leased Premises, an amount equal to all Minimum Rent, additional rent and other charges otherwise due pursuant to this Lease, and to pay Percentage Rent monthly, at the percentage factor set forth in this Lease for the Lease Year in which such month falls, on all of the Gross Sales during such month in excess of one-twelfth (1/12th) of the Sales Break Point for such Lease Year; payment of all such Percentage Rent to be made by the tenth (10th) day of the succeeding month. Included within and in addition to any other conditions or obligations imposed upon Tenant or its successor in the event of the assumption and/or assignment of this Lease are the following: (i) the cure of any monetary defaults and reimbursement of pecuniary loss within not more than thirty (30) days of assumption and/or assignment; (ii) the deposit of an additional sum equal to not less than three (3) months' Minimum Rent and additional rent to be held pursuant to the terms of Section 2.4 of this Lease, which sum shall be determined by Landlord, in its sole discretion, to be a necessary deposit to secure the future performance under this Lease by Tenant or its assignee; (iii) the use of the Leased Premises as set forth in Section 4.1 of this Lease and the quality, quantity and/or lines of merchandise, goods or services required to be offered for sale are unchanged; and (iv) the prior written consent of any mortgagee to which this Lease has been assigned as collateral security. Section 14.4. Additional Remedies and Waivers. Notwithstanding any other provision contained in this Lease to the contrary, all rights and remedies of Landlord set forth herein (including but not limited to Landlord's rights respecting lockout, re-entry, self-help, repossession, security interests and lien rights and foreclosure) shall be in addition to (and not in substitution of) any and all other rights and remedies now or hereafter provided by law, including but not limited to rights and remedies provided by the statutes, rules, regulations, laws and judicial decisions of the State, and all such rights and remedies shall be cumulative; and none of such rights and remedies so provided by law shall be conditioned or limited by any conditions or limitations on the remedies granted to Landlord under the terms of this Lease, nor upon any notice and/or passage of time that may be required hereunder in order for an event or condition to constitute a default or an event of default as that term is defined in this Lease. Section 14.5. Landlord's Cure of Default. If Tenant shall be in default hereunder, Landlord shall have the option, but not the obligation, upon three (3) days written notice to Tenant (except in the event of an emergency, in which event no notice shall be required), to cure the act or failure constituting said default for the account of and at the expense of Tenant. Landlord's cure or 41 46 attempt to cure any act or failure constituting the default by Tenant shall not result in a waiver or release of Tenant. Tenant agrees to pay the costs incurred by Landlord pursuant to this Section 14.5 plus interest, in accordance with Section 20.14 hereof, on all sums expended by Landlord pursuant to this Section 14.5 from the date of such expenditure plus a charge of fifteen percent (15%) of such costs, to Landlord upon demand, as additional rent. SECTION 14.6. SECURITY INTEREST. Tenant may grant a security interest, encumber or pledge its equipment, personal property, inventory and moveable trade fixtures located on or about the Leased Premises, with respect to financing which benefits this store location and Landlord shall agree to subordinate its lien, if any, on such equipment to such financing. In no event, however, shall Tenant be permitted to mortgage, hypothecate, encumber or pledge the leasehold interest in the Leased Premises. SECTION 14.7. TENANT'S REMEDIES. In the event Landlord shall fail to perform any obligation specified in this Lease, which default materially and adversely affects Tenant's operations, then Tenant may, after the continuance of any such default for thirty (30) days after written notice thereof by Tenant to Landlord (except in the event of an emergency when only reasonable notice thereof by Tenant to Landlord (except in the event of an emergency when only reasonable notice shall be required to be given to Landlord under the circumstances), cure such default all on behalf of and at the expense of Landlord and do all necessary work and make all necessary payments in connection therewith and Landlord shall, on demand, pay Tenant forthwith, the amount so paid by Tenant together with interest thereon at the rate specified in Section 20.14 hereof from the date of payment until re-payment. ARTICLE XV RIGHT OF ACCESS Landlord may, at any reasonable time or times, upon prior notice to Tenant (except in the event of an emergency, or if Tenant is in default under this Lease, in which event no notice shall be required), before and after the Commencement Date, enter upon the Leased Premises, any portion thereof and any appurtenance thereto (with men and materials, if required) for the purpose of: (a) inspecting the same; (b) making such repairs, replacements or alterations which Landlord may be required to perform as herein provided or which it may deem desirable for the Leased Premises; and (c) showing the Leased Premises to prospective purchasers, lenders or lessees. Landlord hereby expressly reserves the right, exercisable at any time and from time to time, to erect, use, maintain and repair pipes, conduits, plumbing vents, ducts and wires in, to, under and through the Leased Premises as and to the extent that Landlord may now or hereafter deem to be necessary or appropriate for the proper operation and maintenance of the Shopping Center. Any redecorating or repair necessitated by reason of location of same within the Leased Premises shall be the responsibility of Landlord. Landlord agrees to hold Tenant harmless from any damage or injury to person or property to the extent resulting from Landlord exercising its rights under this Article XV. Notwithstanding anything contained in this Lease to the contrary, if such work prevents Tenant from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. In the exercise of its rights under this Article XV, Landlord shall use reasonable efforts to avoid material interference with the operation of Tenant's business within the Leased Premises. Landlord agrees that except in the event of an emergency, and provided Tenant shall make an employee of Tenant available to accompany Landlord following Landlord's notice to Tenant of the necessity therefor, Landlord shall not enter the Leased Premises during the Term of this Lease without an employee of Tenant accompanying Landlord's representative. 42 47 ARTICLE XVI DELAYS If Landlord or Tenant is delayed or prevented from performing any of their respective obligations during the Term of this Lease because of strikes, lockouts, labor troubles, inability to procure materials, failure of power, governmental restrictions, a delay created by the other party, or reasons of a like nature not the fault of the party delayed in performing such obligation (collectively "Delays"), then the period of such delays shall be deemed added to the time herein provided for the performance of any such obligation and the defaulting party shall not be liable for losses or damages caused by such delays; provided, however, that, subsequent to the Commencement Date, this Article XVI shall not apply to the payment of any sums of money required to be paid by Tenant hereunder or any obligation of Landlord or Tenant that can be satisfied by the payment of money, and shall not excuse Tenant from its obligation to continuously operate its business within the Leased Premises in accordance with the provisions of Sections 4.1 and 4.2 hereof. ARTICLE XVII END OF TERM SECTION 17.1. RETURN OF LEASED PREMISES. Upon the Expiration Date or earlier termination of this Lease, Tenant shall quit and surrender to Landlord the Leased Premises, broom-clean, in good order and condition, ordinary wear and tear excepted, and shall surrender to Landlord all keys to or for the Leased Premises and inform Landlord of all combinations of locks, safes and vaults, if any, in the Leased Premises. Subject to the provisions of Section 3.5 hereof, Tenant, at its expense, shall promptly remove all personal property of Tenant, and repair all damage to the Leased Premises caused by such removal. Any personal property of Tenant not removed within ten (10) days following the Expiration Date or earlier termination of this Lease shall be deemed to have been abandoned by Tenant and to have become the property of Landlord, and may be retained or disposed of by Landlord, as Landlord shall desire. Tenant's obligation to observe or perform the covenants set forth in this Section 17.1 shall survive the Expiration Date or earlier termination of this Lease. SECTION 17.2. HOLDING OVER. If Tenant shall hold possession of the Leased Premises after the Expiration Date or earlier termination of this Lease at Landlord's option (a) Tenant shall be deemed to be occupying the Leased Premises as a tenant from month-to-month, at one and one-half times the Minimum Rent and other charges in effect during the last Lease Year immediately preceding such holdover and otherwise subject to all of the terms and conditions of this Lease, or (b) Landlord may exercise any other remedies it has under this Lease or at law or in equity including an action for wrongfully holding over. Notwithstanding the foregoing, if Tenant is negotiating in good faith with Landlord to renew or extend the Term of this Lease for the Leased Premises (or a relocation within the Shopping Center), then Tenant may occupy the Leased Premises on a month-to-month tenancy at one-twelfth (1/12th) of the annual Minimum Rent for the last year of the Term of the Lease. 43 48 ARTICLE XVIII COVENANT OF QUIET ENJOYMENT Landlord covenants that if and so long as Tenant pays the Rent and all other charges provided for herein, and performs all of its obligations provided for herein, Tenant shall at all times during the Term hereof peaceably have, hold and enjoy the Leased Premises, without any interruption or disturbance from Landlord, or anyone lawfully or equitably claiming through or under Landlord, subject to the terms hereof and any mortgage or deed of trust to which this Lease shall be subordinate. ARTICLE XIX UTILITIES SECTION 19.1. UTILITIES. Tenant agrees to connect to and use the utilities (including electricity, water, gas, cooling and/or heating system, telephone and any other utility) supplied to the Leased Premises in accordance with the criteria set forth in the Exhibits attached to this Lease, Landlord's schedule of mechanical and electrical design criteria, Landlord's rules and regulations, and the rules and regulations of the utility companies supplying the service. Tenant shall be solely responsible for and promptly pay all costs and charges, including installation thereof where applicable, for all water, gas, cooling, heat, electricity, sewer and other utilities provided or used in or at the Leased Premises, commencing with the Delivery of Possession Date and continuing throughout the Term of this Lease. If Landlord shall elect to supply any of the utilities used upon or furnished to the Leased Premises, Tenant agrees to pay as additional rent a per square foot charge based on Tenant's estimated usage, as reflected on a monthly invoice to be provided by Landlord; provided, however, in no event shall Tenant's total charges for utilities provided by Landlord exceed what Tenant would be charged by the local utility company if it were billed directly by such utility as a direct retail customer. Landlord shall not be liable to Tenant for any loss, damage or expense which Tenant may sustain if the utilities, or the quality or character of utilities used upon or furnished to the Leased Premises are no longer available or suitable for Tenant's requirements, or if the supply of any such utility ceases or is interrupted as a result of any cause and no such change, interruption or cessation of service shall constitute an eviction of Tenant. Any furnishing by Landlord of light, cooling and/or heat or power shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce heat, lighting and air conditioning within the Shopping Center, including, without limitation, the Leased Premises and the common areas, as required by any mandatory or voluntary fuel or energy saving allocation, or any similar statute, regulation, order or program. Notwithstanding the foregoing, in the event that any foregoing utility service is interrupted for three (3) consecutive working days solely as a result of any of Landlord's or any of Landlord's agents' wilful acts of misconduct or negligence, and Tenant is unable to operate its business within the Leased Premises as a result thereof, then Landlord shall, after written notice from Tenant to Landlord concerning such interruption, abate Minimum Rent on a day-to-day basis if and until such time as said utility services are restored. SECTION 19.2. ELECTRICITY, TELEPHONE AND GAS. All telephone, electric and gas (with gas being available only to food service tenants) utility required by Tenant for the Leased Premises shall (if available) be obtained by Tenant in accordance with Exhibit D and shall be installed by the appropriate company or utility. All charges for such utility service (including the installation thereof) shall be paid by Tenant directly to the company or utility providing any such service, as and when they become due and payable. SECTION 19.3. TRASH AND GARBAGE REMOVAL. Tenant shall be solely responsible for trash and garbage removal from the Leased Premises including the placing of all trash and garbage in containers provided by Landlord or Landlord's contractor for such purpose. In the event Landlord elects to furnish such service to the tenants in the Shopping Center, Tenant agrees to use only the service provided by Landlord and to pay for such service (including both the cost of leasing containers and the cost of removal) monthly, as additional rent, in accordance with the uniform 44 49 schedule of charges to be established by Landlord. In no event shall Tenant be obligated to pay Landlord more for such trash and garbage removal service than the prevailing competitive rates of reputable independent trash removal contractors for service similar to that provided by Landlord. SECTION 19.4. WATER AND SEWER. The cost of water and sanitary sewer for usage in the Shopping Center shall be included in Common Area Maintenance Expenses, except for food service tenants which may be billed directly by Landlord or by the supplier of water and sanitary service and any other tenants which are billed directly by Landlord or such supplier. Landlord reserves the right to install a water meter in the Leased Premises at any time or from time to time to measure Tenant's consumption of water therein and bill Tenant directly for the cost of such consumption. Tenant shall pay, as additional rent, the amount of each bill within fifteen (15) days after such bill is rendered. SECTION 19.5. GREASE INTERCEPTORS. Landlord, in its commercially reasonable judgment, will arrange for regular periodic service and cleaning of all grease interceptors at Tenant's expense. Cost of service and cleaning of grease interceptors will be allocated among grease interceptors serving food court(s) and grease interceptors serving individual tenants in proportion to grease trap size. Tenants served by individual grease traps will pay their pro rata share of the cost for their grease trap. The share of grease trap service and cleaning cost apportioned to food court grease traps will be paid by food court tenants as part of the food court common facilities expenses. ARTICLE XX MISCELLANEOUS SECTION 20.1. ENTIRE AGREEMENT. This Lease together with the Exhibits, attached hereto and incorporated herein contains the entire agreement between the parties hereto and there are no promises, agreements, conditions, undertakings, or warranties, or representations, oral or written, express or implied, between them other than as herein set forth. No change or modification of this Lease or of any of the provisions hereof shall be valid or effective unless the same is in writing and signed by the parties hereto. No alleged or contended waiver of any of the provisions of this Lease shall be valid or effective unless in writing signed by the party against whom it is sought to be enforced. SECTION 20.2. NOTICES. No notice or other communication given under this Lease shall be effective unless the same is in writing and is delivered in person or mailed by registered or certified mail, return receipt requested, first class, postage prepaid, or delivered by Federal Express or a comparably reliable national air courier service (i.e. on which delivers service in at least 48 states) provided that any such courier service provides written evidence of delivery. Any such notice or communication shall be addressed: (a) If to Landlord, at 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209, Attention: General Counsel, or to such other address as Landlord shall designate by giving notice thereof to Tenant, with a copy for informational purposes only to the Mall Manager of the Retail Development. (b) If to Tenant, at the address set forth for Tenant on page 1 of this Lease or at the Leased Premises, or such other address as Tenant shall designate by giving notice thereof to Landlord, with a courtesy copy but not required, for effective notice to: Gray Cary Ware & Friedenrich, 400 Hamilton Avenue, Palo Alto, CA 94301: Attn: Daniel K. Seubert. The date of service of any notice or other communication given by mail shall be three (3) days after the date on which such notice is deposited in the U.S. mails. The date of service of any notice given by courier service (as described above) shall be one (1) day after deposit with such courier service. SECTION 20.3. GOVERNING LAW. It is the intent of the parties hereto that all questions with respect to the construction of this Lease and the rights and the liabilities of the parties hereto shall be determined in accordance with the laws of the jurisdiction in which the Leased Premises is located 45 50 and that all disputes arising hereunder shall be heard and decided in the local jurisdiction where the Leased Premises is located. SECTION 20.4. SUCCESSORS. All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors, and assigns of the said parties; and if there shall be more than one Tenant, or more than one person or entity acting collectively as Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. Any restriction on or requirement imposed upon Tenant hereunder shall be deemed to extend to Tenant's Guarantor, Tenant's sublessees, Tenant's assignees and Tenant's invitees, and it shall be Tenant's obligation to cause the foregoing persons to comply with such restrictions or requirements. No rights, however, shall inure to the benefit of any assignee or other transferee of Tenant, and no rights or benefits shall be conferred upon any such assignee or transferee by reason of this Section 20.4, unless such rights or benefits shall be expressly otherwise set forth in this Lease. SECTION 20.5. LIABILITY OF LANDLORD. Neither Landlord, Landlord's beneficiaries, any persons or entities comprising Landlord, nor any successor in interest to Landlord (or to such persons or entities) shall have any personal liability for any failure by Landlord to perform any term, covenant or condition of this Lease. If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed, and if as a consequence of such default Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right, title and interest of Landlord in the Shopping Center and out of rents or other income from such property receivable by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Shopping Center, subject, nevertheless, to the rights of Landlord's mortgagee, and neither Landlord nor any of the co-partners comprising the partnership which is Landlord herein shall be liable for any deficiency. The foregoing limitation of liability shall be noted in any judgment secured against Landlord and in the judgment index. SECTION 20.6. BROKERS. Tenant warrants and represents that there was no broker or agent instrumental in consummating this Lease. Tenant agrees to indemnify and hold Landlord harmless against any claims for brokerage or other commissions arising by reason of a breach by Tenant of this representation and warranty. SECTION 20.7. TRANSFER BY LANDLORD. Landlord hereunder shall have the right to freely assign this Lease without notice to or the consent of Tenant. SECTION 20.8. NO PARTNERSHIP. Notwithstanding the fact that a portion of the Rent reserved hereunder may be a percentage of Tenant's Gross Sales, and notwithstanding anything else to the contrary, Landlord shall not be deemed to be a partner of Tenant or a joint venturer with Tenant. SECTION 20.9. WAIVER OF COUNTERCLAIMS. Tenant shall not impose any counterclaim or counterclaims (other than compulsory counterclaims) in a summary proceeding or other action based on termination or holdover, it being the intent of the parties hereto that Tenant be strictly limited in such instance to bringing a separate action in the court of appropriate jurisdiction. The foregoing waiver is a material inducement to Landlord making, executing and delivering this Lease and Tenant's waiver of its right to counterclaim in any summary proceeding or other action based on termination or holdover is done so knowingly, intelligently and voluntarily. SECTION 20.10. WAIVER OF JURY TRIAL. [INTENTIONALLY DELETED]. SECTION 20.11. SEVERABILITY. If any provision of this Lease or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. SECTION 20.12. NO WAIVER. No failure by Landlord to insist upon the strict performance of any term, covenant, agreement, provision, condition or limitation of this Lease to be kept, observed 46 51 or performed by Tenant, and no failure by Landlord to exercise any right or remedy available upon a breach of any such term, covenant, agreement, provision, condition or limitation of this Lease, shall constitute a waiver of any such breach or any such term, covenant, agreement, provision, condition or limitation. SECTION 20.13. CONSUMER PRICE INDEX. As used herein, "Consumer Price Index" or "Index" shall mean the Consumer Price Index for All Urban Consumers (1982-84 = 100), U.S. City Average, All Items, published by the United States Department of Labor, Bureau of Labor Statistics (or such comparable index as may be utilized in substitution for or as the successor to the stated Index). If such Index is not published by the Bureau of Labor Statistics or by another similar governmental agency at any time during the Term of this Lease, then the most closely comparable statistics on the purchasing power of the consumer dollar as published by a responsible financial authority and selected by Landlord shall be utilized in lieu of such Index. SECTION 20.14. INTEREST. Any amount due from Tenant to Landlord herein which is not paid when due shall bear interest at a rate per annum equal to the Federal Reserve Bank discount rate as published in the Wall Street Journal on the 25th day of the month preceding the date upon which the obligation is incurred (or the next business day thereafter if the 25th is not a weekday) plus [***] unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. In no event shall any interest calculated hereunder be at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Section 20.14. SECTION 20.15. EXCAVATION. If an excavation shall be made upon land adjacent to the Leased Premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Leased Premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which the Leased Premises form a part from injury or damage and to support the same by proper foundation, without any claim for damages or indemnity from Landlord, or diminution or abatement of Rent. Notwithstanding anything contained in this Lease to the contrary, if such excavation work prevents Tenant from operating its business within the Leased Premises for three (3) or more consecutive days. Landlord shall after three (3) days' written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. SECTION 20.16. RULES AND REGULATIONS. Tenant agrees to comply with and observe all reasonable rules and regulations established by Landlord for the Shopping Center from time to time. Tenant's failure to keep and observe such rules and regulations shall constitute a default pursuant to the terms of this Lease in the manner as if the same were contained herein as covenants, which shall carry with it the same consequences under Article XIV hereof as Tenant's failure to pay rent. SECTION 20.17. FINANCIAL STATEMENTS. Upon Landlord's written request from time to time, but not more than once per Lease Year, Tenant shall, within thirty (30) days after Landlord's request therefor, furnish Landlord financial statements outlining Tenant's then current financial condition and shall furnish financial statements outlining the current financial condition of any Guarantor of this Lease. Landlord shall maintain all financial information provided in a confidential manner; provided, however, that Landlord may disclose such financial statements to Landlord's mortgagees or prospective mortgagees or purchasers. SECTION 20.18. GENERAL RULES OF CONSTRUCTION. (a) This Lease may be executed in several counterparts and the counterparts shall constitute one and the same instrument. (b) Landlord may act under this Lease by its attorney or agent. (c) Wherever a requirement is imposed on Tenant hereunder, Tenant shall be required to perform such requirement at its sole cost and expense unless it is specifically otherwise provided herein. (d)(i) Wherever appropriate herein, the singular includes the plural and the plural includes the singular; (ii) whenever the word "including" is used herein, it shall be deemed to mean "including, but not limited to", and (iii) the words "re-enter" and "re-entry" as used herein shall not be restricted to their technical legal meaning. (e) Anything in this Lease to the contrary notwithstanding: (i) any provision hereof which permits or requires a party to 47 52 take any particular action shall be deemed to permit or require, as the case may be, such party to cause such action to be taken; and (ii) any provision hereof which requires any party not to take any particular action shall be deemed to require such party to prevent such action to be taken by any person or by operation of law, (f) Whenever costs or expenses are required to be assessed to or paid by Tenant, such costs and expenses shall be reasonable. SECTION 20.19. RECORDING. Neither this Lease nor any memorandum hereof may be recorded without the express written consent of Landlord. SECTION 20.20. EFFECTIVE DATE. For all purposes hereof, the "Effective Date" of this Lease shall be the date upon which this Lease shall have been executed by both parties and physically delivered by Landlord to Tenant or its attorney. Prior to the Effective Date, neither this Lease nor anything hereunder contained shall be legally binding on either Landlord or Tenant, and the submission of this Lease by Landlord to Tenant prior to such Effective Date for examination of consideration by Tenant or discussion between Landlord and Tenant shall not constitute a reservation of or option for the Leased Premises or create any legal obligation or liability whatsoever on Landlord. SECTION 20.21. HEADINGS. The captions, section numbers, article numbers and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope of intent of such sections or articles of this Lease nor in any way affect this Lease. SECTION 20.22. MANAGING AGENT. Landlord has advised Tenant that it has appointed MillsServices Corp., a Delaware corporation as managing agent of the Retail Development (said managing agent and any successor or substitute managing agent is hereinafter referred to as "Managing Agent"). Tenant shall, until otherwise notified by Landlord, make all payments of Rent required to be made pursuant to this Lease to the Managing Agent payable to Landlord and direct all notices, inquires or other communications to the Managing Agent, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209. [Signatures Appear on the Following Page] 48 53 IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease as of the day and year first above written. WITNESS: LANDLORD: CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Concord Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner By: /s/ [Illegible] 6/30/99 By: /s/ Judith Berson -------------------------- ----------------------------- Judith Berson By: /s/ [Illegible] Executive Vice President -------------------------- WITNESS/ATTEST: TENANT: SILICON ENTERTAINMENT, INC., A California corporation By: By: /s/ Christopher Morse -------------------------- ----------------------------- By: Name: Christopher Morse -------------------------- ----------------------------- Its: Vice President ----------------------------- By: By: /s/ David S. Morse -------------------------- ----------------------------- By: Name: David S. Morse -------------------------- ----------------------------- Its: Chairman/CEO ----------------------------- Tenant's Corporate Seal: 49 54 ACKNOWLEDGEMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) ) ss. COUNTY OF ARLINGTON ) On this 30th day of June, 1999, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Lease and acknowledged before me that she was duly authorized and did execute same on behalf of CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. Terri D. Byers ------------------------------ Notary Public My Commission expires: 2/28/02 [Notarial Seal] ACKNOWLEDGEMENT OF CORPORATE TENANT STATE OF CALIFORNIA ) ) ss. CITY/COUNTY OF SANTA CLARA ) On March 16, 1999, before me Laurie Shermer, a Notary Public in and for said state aforesaid, personally appeared Chris Morse and David Morse, as Vice President and Chairman and CEO of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Laurie H. Shermer --------------------------------- Notary Public, Santa Clara County, My Commission expires: 9/19/2001 [Notarial Seal] - ---------------------------------- LAURIE H. SHERMER Commission #1155999 [SEAL] Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 - ---------------------------------- 55 ADDENDUM ATTACHED TO AND MADE A PART OF LEASE DATED JUNE 30TH, 1999, BY AND BETWEEN CONCORD MILLS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, AS "LANDLORD," AND SILICON ENTERTAINMENT, INC., A CALIFORNIA CORPORATION, AS "TENANT." - ------------------------------------------------------------------------------- The Lease is hereby modified and supplemented as set forth herein. Any conflict between a term, condition or provision contained in this Addendum with any term, condition or provision contained in the printed Lease shall be resolved in favor of this Addendum. Add as a new Section 7.3: "SECTION 7.3. SALES TAX REBATE. Landlord has determined that financial assistance from the City of Concord and/or the State of North Carolina in the form of a sales tax rebate will better enable Landlord to develop the Shopping Center in a manner beneficial to both Landlord and Tenant. Therefore, in order to provide Landlord with the sales tax information from the State of North Carolina comptroller or such other office as maintains sales tax information ("Comptroller") pertaining to Tenant's sales at the Leased Premises, Tenant agrees to provide Landlord with certified copies of all sales tax returns filed with the Comptroller for Tenant's retail operations at the Leased Premises during the Term of this Lease. In addition thereto, Tenant shall provide Landlord with a power of attorney letter addressed to, and in a form satisfactory to, the Comptroller authorizing the Comptroller to release to Landlord all sales tax information for Tenant's retail operations at the Leased Premises during the Term of this Lease. Such letter shall be in the form attached hereto and made a part hereof as Exhibit G, or such other or additional forms as required from time to time by the Comptroller in order to release such information to Landlord. Landlord agrees to maintain the confidentiality of any proprietary information received by Landlord pursuant to this Section 7.3." Section 12.1: At the end of Section 12.1, insert: "In accordance with the provisions of this Section 12.1, Tenant agrees to execute the Agreement of Subordination, Non-Disturbance and Attornment attached hereto as Exhibit H or such other reasonable form of subordination agreement within twenty (20) days of a request from Landlord's lender to do so and the Tenant Estoppel Certificate attached hereto as Exhibit H-1 at the time Tenant executes this Lease." 56 IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this Addendum as of the day and year first above written. WITNESS: LANDLORD: CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Concord Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner By: /s/ [Illegible] 6/30/99 By: /s/ Judith Berson -------------------------- ---------------------------- Judith Berson By: /s/ [Illegible] Executive Vice President -------------------------- WITNESS/ATTEST: TENANT: SILICON ENTERTAINMENT, INC., a California corporation By: By: /s/ Christopher Morse -------------------------- ---------------------------- By: Its: Vice President -------------------------- ---------------------------- By: By: /s/ David S. Morse -------------------------- ---------------------------- By: Its: Chairman/CEO -------------------------- ---------------------------- Tenant's corporate seal: --------- 57 ACKNOWLEDGEMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) ) ss. COUNTY OF ARLINGTON ) On this 30th day of June, 1999, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Addendum and acknowledged before me that she was duly authorized and did execute same on behalf of CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. /s/ Terri D. Byers --------------------------------------- Notary Public, Commonwealth of Virginia My Commission expires: 2/28/02 ACKNOWLEDGEMENT OF TENANT STATE OF CALIFORNIA ) ) ss. COUNTY OF SANTA CLARA ) On this 16th day of March, 1999, before me personally appeared Chris Morse and David Morse, to me personally known, who, being by me duly sworn, did for themselves say that they are the Vice President and Chairman of SILICON ENTERTAINMENT, INC., a California corporation, the corporation named in and which executed the within instrument, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and acknowledged before me said instrument to be the free act and deed of said corporation. /s/ Laurie H. Shermer ---------------------------------- Notary Public My Commission expires: 9/19/2001 - ---------------------------------------- LAURIE H. SHERMER Commission # 1155999 [SEAL] Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 - ---------------------------------------- 58 [MAP OF MALL SHOWING THE LEASED PREMISES] LEASED PREMISES (SPACE 202) +/- 7,865 sf - ------------------------------------------------------------------------------ PROJECT: CONCORD MILLS TENANT: SILICON ENTERTAINMENT, INC. - ------------------------------------------------------------------------------ EXHIBIT: DATE: - ------------------------------------------------------------------------------- REFERENCE: CONCORD MILLS LEASE PLAN PLP 15-03 2/10/99 EXHIBIT A - ------------------------------------------------------------------------------- PREPARED BY: CRAIG BENNETT ASSOC./ FILE: [ILLEGIBLE] ARCHITECTS, PC - ------------------------------------------------------------------------------- 59 [MAP OF MALL SHOWING THE RELOCATION ZONE] - ------------------------------------------------------------------------------ PROJECT: CONCORD MILLS TENANT: - ------------------------------------------------------------------------------ EXHIBIT: DATE: - ------------------------------------------------------------------------------- REFERENCE: CONCORD MILLS LEASE PLAN PLP 15-03 2/10/99 EXHIBIT A-2 - ------------------------------------------------------------------------------- PREPARED BY: CRAIG BENNETT ASSOC./ FILE: [ILLEGIBLE] ARCHITECTS, PC - ------------------------------------------------------------------------------- 60 [MAP OF MALL SHOWING THE DISPLAY AREA] - ------------------------------------------------------------------------------ PROJECT: CONCORD MILLS TENANT: - ------------------------------------------------------------------------------ EXHIBIT: DATE: - ------------------------------------------------------------------------------- REFERENCE: CONCORD MILLS LEASE PLAN PLP 15-03 2/10/99 - ------------------------------------------------------------------------------- PREPARED BY: CRAIG BENNETT ASSOC./ FILE: [ILLEGIBLE] ARCHITECTS, PC - ------------------------------------------------------------------------------- 61 [MALL CORRIDOR FLOOR PLAN] - ------------------------------------------------------------------------------- CALCULATION OF GROSS LEASABLE AREA EXHIBIT B 8/23/94 - -------------------------------------------------------------------------------- 62 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT C LANDLORD'S WORK - ROUGH SHELL Preface Work to be performed by Landlord in constructing the Leased Premises shall be limited to those items expressly set forth below as Landlord's Work in this Exhibit C ("Landlord's Work") and except as otherwise provided in Exhibit C or Exhibit D, such work shall be performed at Landlord's sole cost and expense. All Landlord's Work shall be performed by Landlord in a first class and workmanlike manner using only new and first class materials in accordance with all applicable laws, rules, regulations, codes and ordinances. All other items of work, including the purchase and installation of all materials and equipment necessary for Tenant's use of the Leased Premises shall be provided by Tenant at Tenant's sole expense and shall include but shall not be limited to, those items set forth in Exhibit D, Tenant's Work. The building in which the Leased Premises are a part shall be designed by the architect and engineer retained by the Landlord to design and oversee construction of the Retail Development (herein sometimes referred to as "The Project"). Construction shall meet the requirements for a fully sprinklered building in accordance with the fire protection and building code program of the local jurisdictional authority as well as the Development Agreement and Master Declaration, if applicable. Landlord shall provide Tenant with a Tenant Handbook (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". Except as otherwise provided below, Landlord shall initially construct the following: A. BUILDING SHELL WORK WITHIN AND AROUND THE LEASED PREMISES 1. Shell. Landlord shall construct the building shell (building structure, insulated roof and exterior walls) in which the Leased Premises are to be located. It is expressly agreed and understood that the Leased Premises shall constitute a portion of a covered mall building. 2. Exterior Appurtenances. Public entrance features, canopies and screen walls at the exterior of the building structure shall be provided by Landlord in locations and of a design and in materials deemed appropriate by Landlord. 3. Outside Walls. If Lease Premises abuts an exterior wall, such wall shall be unfinished on the interior. 4. Demising Partitions. Landlord shall install metal wall studs, 16" on center, between all leased premises. Where rated walls are required between Leased Premises and service/exit corridors Landlord shall install 5/8" fire code gypsum board from the floor to the roof deck on both Landlord and Tenant sides, along demising partitions separating Tenant from service/exit corridors. 5. Demising Strip. Where Landlord desires, a vertical demising strip may be located at the storefront line between stores. The center line and/or back side of said strip may or may not precisely coincide with the lease line defining the Leased Premises. 6. Exterior Service/Exit Door. Where Leased Premises abuts an outside wall, Landlord shall install one (1) 3'0 X 7'0" x 1-3/4" (prime coated only on inside face) hollow Exhibit C, Rough Shell 5/1/98 Page 1 63 metal door frame (with 1 1/2 pair butts and temporary lockset) as required by code or Landlord's insurance carrier. The outside face of door will be finished by Landlord to match adjacent construction and may not be modified by Tenant. The location of such door (if any) will be indicated on the Lease Outline Drawing. Tenant's store name and space number will be applied adjacent to the door by Landlord per Landlord's Architect's specifications in accordance with Exhibit D. 7. Interior Service/Exit Door. Where the Leased Premises abuts an interior exit/service corridor, Landlord shall install one (1) 3'0" x 7'0" x 1-3/4" hollow metal door and frame (with 1 1/2 pair butts and temporary lockset), as required by code or Landlord's insurance carrier. The hollow metal door and frame will be finish painted on the corridor side with a color selected by Landlord. Tenant's store name and space number will be applied adjacent to the door by Landlord, per Landlord's Architect's specifications in accordance with Exhibit D. 8. Floor Slab. Landlord shall furnish a 4" thick slab on-grade with smooth trowelled concrete surface. The floor elevation may be 3/4" below finished floor elevation in the mall areas adjacent to the Leased Premises. The slab will be designed to support a load of not less than 125 pounds per square foot. 9. Storefronts and Sign Bands. The configuration of the storefront lease line, as established by Landlord, shall be the line beyond which no element of the storefront may extend and may not necessarily follow the line of construction. The storefront furnished by Tenant shall include one entry complete with security closure. The width of the security closure will be as follows: Storefront width up to 25' - 8' wide Storefront width up to 26' - 35' - 10' wide Storefront width 36' and up - 12' wide B. FINISH WORK OUTSIDE THE LEASED PREMISES 1. Exterior Areas. Landlord shall provide parking areas, access roads, delivery areas, drainage systems, walks, ramps, lighting, landscaping and planting, striping, signage, and other facilities and improvements as determined by Landlord in the exterior common area. 2. Interior Areas. Landlord shall provide enclosed air conditioned and lighted malls, courts and entry-ways, lighted delivery areas, service and exit corridors, ramps, public restrooms, meter and valve rooms and all other areas, facilities, and buildings used in the maintenance and operation of The Project as determined by Landlord. C. BUILDING UTILITY SYSTEMS SERVING THE LEASED PREMISES 1. HVAC System. Landlord will provide either 1) a central condenser water distribution system to provide cooling water for air conditioning unit(s) provided by Tenant in the Leased Premises in accordance with the Tenant Handbook referenced in Exhibit D. Landlord's portion of the condenser water system shall terminate at valved and capped outlets within the Leased Premises as indicated on the Lease Outline Drawing or 2) a roof-top package unit system providing at least 35 tons of air conditioning. In this case Landlord to install roof opening and curb at Tenant's expense for roof-top air conditioning equipment to be furnished and installed by Tenant in accordance with Tenant Handbook from Landlord's HVAC inventory. 2. Electrical System. Landlord shall bring primary electrical service to the Retail Development. An empty secondary electrical distribution conduit only shall be extended by Landlord from the electric room to a point within the Leased Premises Exhibit C, Rough Shell 5/1/98 Page 2 64 as indicated on the Lease Outline Drawing. Electrical service furnished by Landlord shall consist of 277/480 volt phase four wire service 400 amp service. Tenant to complete electrical system in accordance with Exhibit D and the Tenant Handbook. 3. PLUMBING SYSTEM. If required by code, Landlord shall provide 3/4" valved and capped domestic cold water line, a 1" condensate drain line, if applicable, and a 4" sanitary sewer line at the rear of the Leased Premises, as indicated on the Lease Outline Drawing. Tenant shall connect to Landlord's plumbing system and extend service within the Leased Premises according to Tenant's approved plans and in accordance with requirements of Exhibit D and the Tenant Handbook. 4. SPRINKLER SYSTEM. Landlord shall install a wet sprinkler fire protection system in the common areas and within the Leased Premises including, but not limited to, risers, bulk mains, cross mains, branch lines and upturned sprinkler heads at the bar joists. Within the Leased Premises the sprinkler provided by Landlord shall have one (1) head per 100 square feet. The quantity of heads provided by Landlord will be the minimum required by code or other governing agencies. The mains and cross mains will be designed to accept additional heads up to a maximum coverage of one (1) head per 80 square feet of Leased Premises. Additional or relocated heads shall be installed or relocated by Landlord's designated sprinkler contractor as required by Tenant's layout and as described in Exhibit D and the Tenant Handbook. Tenant shall pay Landlord for the cost thereof in accordance with Exhibit D. 5. TELEPHONE SYSTEM. Landlord shall extend empty raceway or J hooks from a telephone junction board to a point within or adjacent to the Leased Premises as indicated on the Lease Outline Drawing. 6. MECHANICAL SMOKE VENTING. Landlord's building has been designed to provide smoke venting via mechanical fans, open ceilings and no separation about 12'-0" between Tenant premises. Any Tenant required by Code or the authority having jurisdiction to provide separate smoke venting, or whose tenant space design interferes with normal functioning of Landlord's smoke venting system, must install a complete smoke venting system to meet code in accordance with Exhibit D and the Tenant Handbook. D. GENERAL PROVISIONS 1. Minor changes in any plans or specifications covering Landlord's Work which may be necessary during design and construction of The Project or affecting the Leased Premises shall not in any way invalidate the terms of the Lease or this Exhibit C nor shall it require the Landlord to provide any work not described herein. Notwithstanding the foregoing, any changes which would materially impact Tenant's Store Design and Working Drawings must be made at least sixty (60) days prior to the Delivery of Possession date. 2. Landlord shall have the right to specify or change the location, either before or after construction, of all utility lines, condenser water lines, condensate drain lines, drains, sprinkler mains and valves, and such other facilities within the Leased Premises as are necessary by engineering design and/or Code requirements. These items as described above shall be located so as not to materially interfere with Tenant's use of the Leased Premises. Landlord shall have the right to relocate and specify the location of mechanical and other equipment on the roof over the Leased Premises. To the extent that such utility lines, condenser water lines, condensate drain lines, drains, sprinkler mains and valves and other facilities within the Leased Premises are relocated, Landlord shall be responsible for paying for any changes in either Tenant's plans or connecting Tenant installed improvements to such relocated facilities. Exhibit C, Rough Shell 5/1/98 Page 3 65 4. Landlord shall have the right to perform, at Tenant's expense, any of Tenant's Work which is not being timely or properly performed by Tenant which Landlord determines in its sole discretion be performed: (a) immediately and/or on an emergency basis for the best interest of The Project, (b) to the extent required for Landlord's compliance with all applicable building codes, or, (c) to the extent necessary to obtain any Certificate of Occupancy required by the Landlord or any other tenant in The Project. Except in the event of an emergency. Landlord shall give Tenant forty-eight hours notice of its intention to undertake such work and Landlord shall refrain from undertaking such work if Tenant commences to cure during such 48-hour period. 5/1/98 Exhibit C, Rough Shell Page 4 66 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT D TENANT'S WORK - ROUGH SHELL PREFACE This Exhibit "D" is intended to describe the obligation of the Tenant in the design and construction of the Leased Premises. Landlord's Work will be limited to the work described in Exhibit C. Any part of Tenant's Work which is accomplished by Landlord for Tenant pursuant to the terms of this Exhibit D will be accomplished by Landlord at Tenant's expense. The work of Tenant described in Exhibit D is intended to complete the Leased Premises in accordance with Tenant's drawings as approved in writing by Landlord to a finished condition ready for the conduct of business therein. All finished installations will be deemed incomplete until approved by Landlord. Tenant's Work shall conform to the procedures, schedules and reimbursement requirements set forth in Sections 2 and 3 of this Exhibit. Exhibit D shall govern over any inconsistencies with Exhibit C. Landlord and Tenant have a common interest in opening the Leased Premises on the Grand Opening Date. To this end, Landlord will coordinate its work with Tenant's work insofar as the schedule for such Grand Opening Date and prudent construction practice allows and will assign one or more tenant coordinators to function as liaison between tenants and Landlord. Further to this end, Tenant and Tenant's contractors agree to abide by Landlord's Construction Rules and Regulations which may be issued from time to time. In order to ensure that the Tenant's store interior and signage design are orderly and aesthetically coordinated with Landlord's building, and to ensure that Landlord's storefront and signage requirements are understood by Tenant, its designers, engineers, contractors, and other representatives, Landlord has drafted and Tenant shall follow the architectural and signage criteria established in the Tenant Handbook (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". In order to ensure that the Tenant's HVAC, plumbing and electrical systems are compatible and coordinated with the Landlord's building, and to ensure that the Landlord's HVAC, plumbing and electrical requirements are understood by Tenant, its designers, engineers, contractors, and other representatives, Landlord has drafted and Tenant shall follow the mechanical and electrical criteria established in the Tenant Handbook. All Tenant construction shall be in accordance with the requirements of all applicable codes, ordinances, rules and regulations of all authorities having jurisdiction over the work including all requirements of the Landlord's insurance carrier. Construction shall conform to the requirements for a fully sprinklered building in accordance with the fire protection and building code program of the local jurisdictional authority as well as the Development Agreement and the Master Declaration if applicable. Tenant shall secure all necessary permits including, but not limited to, occupancy and health department permits from the jurisdictional authorities in sufficient time to allow Tenant to open the Leased Premises on the Grand Opening Date. Tenant shall furnish to Landlord upon receipt, copies of all building permit applications, statements, amendments and the like, and all permits, inspection reports, certificates, and other documents as required by authorities having jurisdiction of The Project. Tenant, at its sole cost and expense, shall perform all work other than work to be performed by Landlord as set forth in Exhibit C, required to complete the Leased Premises to a finished condition ready for the conduct of business therein. All of Tenant's work within the Leased Premises performed pursuant to this Section 1 shall, for the purpose of this Lease to which this Exhibit is attached, be deemed to be improvements made to the Leased Premises by Tenant at Tenant's expense. Exhibit D, Rough Shell 5/1/98 Page 1 67 SECTION 1 - TENANT CONSTRUCTION WORK WITHIN THE PREMISES A. GENERAL CRITERIA The criteria and outline specifications set forth herein represent minimum standards for the design, construction, and finish of the Leased Premises by Tenant. 1. Jurisdictions and Codes. The Project is being developed in and under the jurisdictions of the State, County and City in which The Project is located. All design and construction work shall comply with all applicable statutes, ordinances, regulations, laws and codes and the requirements pertaining to service and utilities furnished by utility companies, all applicable state, county, and local statutes and ordinances, and OSHA regulations. 2. Permits and Approval. Prior to the commencement of construction, all building and other permits shall be obtained and posted in a prominent place within the Leased Premises. Landlord's written approval shall be obtained by Tenant prior to the undertaking of any construction work which deviates materially from Tenant's approved Store Working Drawings and Specifications, or which modifies whatsoever Landlord's building shell or utilities, or any work not explicitly shown on said Store Working Drawings and Specifications. Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency thereof, and Tenant shall be solely responsible. To the extent and material changes, changes which modify the building shell or utility or new work are required. Landlord shall not unreasonably withhold its approval of the same. 3. Floor Loads. The slab on-grade has been designed to carry a total load (dead and live) of 125 pounds per square foot. Any loading imposed by any of Tenant's Work, either on a temporary or permanent basis, shall not exceed 125 lbs./SF ("Allowable Load"). 4. Standard Project Details. Standard Project Details, as issued by Landlord's Architect from time and time and as they pertain to Tenant's Work, shall govern with respect to Tenant's Work. Such details shall be incorporated into the Tenant's Store Working Drawings and Specifications for the Leased Premises. 5. Materials. Only new, first-class materials shall be used in the construction of the Leased Premises. Used, first-class materials for interior architectural facades and fixtures may be used provided such materials are noted on the Tenant's plans and approved by Landlord through field inspection. 6. Field Conditions. From time to time, the Tenant is obligated to verify conditions pertaining to the Leased Premises prior to and after commencement of construction of its Leased Premises. Tenant shall coordinate its work with the work of Landlord, other tenants, and with existing conditions above, below and adjacent to the Leased Premises. Tenant shall make changes as required to accommodate such work or conditions. 7. Tenant Handbook. Landlord shall provide Tenant with a Tenant Handbook ("Tenant Handbook"), and Tenant shall comply with all design criteria, procedures for drawings, specifications, and construction, and other rules, regulations and provisions therein. To the extent, if at all, that the Tenant Handbook may conflict with the provisions of the Exhibit D, the provisions of the Tenant Handbook shall govern. Exhibit D, Rough Shell 5/1/98 Page 2 68 B. ARCHITECTURAL FINISHES 1. Floors. Tenant finish floor covering materials must be selected and adapted in thickness to correspond in elevation exactly with the level of the finished mall floor, which may be approximately 3/4" above the concrete floor of the Leased Premises at the Lease Line. Quality floor materials, such as carpeting, glazed or unglazed tile, wood parquet, or marble shall be used in the sales area of the Leased Premises. All flooring finish materials are subject to Landlord's approval. 2. Storefront. Tenant's storefront shall be designed and constructed by Landlord as provided in Exhibit C and as described in the Tenant Handbook. 3. Interior Partitions. All interior partitions by Tenant within the Leased Premises shall be metal stud construction and shall have 5/8" gypsum board finish on all sides with taped and spackled joints. Any combustible materials applied to partitions shall meet all flamespread and smoke generation requirements of jurisdictional authorities and receive a U.L. labeled fire retardant coating if required by Code. Walls dividing the Leased Premises from service and exit corridors, or other rated enclosures, shall receive, on Tenant's side, sufficient layers of drywall to complete the necessary rating. Landlord shall install service and exit corridor drywall at Tenant's expense. Any Tenant penetrations of rated partitions shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. 4. Demising Partitions. Demising partitions are not load bearing and Tenant may not hang fixtures from them. Should Tenant require structure and/or backing to accommodate the loading of Tenant's wall hung fixtures, said request shall be in writing to Landlord for approval. Additional structure and backing shall be furnished and installed by Tenant at Tenant's expense. Tenant shall install drywall, taped and spackled on demising partitions between tenants. No drywall shall be placed on demising partitions above 12'-0" without Landlord's specific approval. Above 12'-0" the Tenant may, subject to Landlord's prior written approval, continue with wire mesh for security purposes if so indicated on Tenant's construction drawings. The Tenant, upon Landlord's approval, may also install drywall to a higher level if openings of sufficient size are provided to assure that the smoke venting system provided by the Landlord functions as designed - see Tenant Handbook for specific requirements. 5. Exterior Walls. Tenant shall install all finishes on the inside face of exterior walls within Leased Premises. 6. Service and Exit Corridor Partitions. Any Tenant penetrations of rated partitions, and relocations and/or additions to Landlord furnished exit doors, shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. Any framing, cutting, patching of the corridor wall surfaces including the building of vestibules to provide for the nonimpingement of the door into the corridor traffic way, and other work related construction shall be coordinated and consistent with Landlord's work, including but not limited to the provision of 4'-0" high 1/4" masonite board and metal cornerguards. Walls dividing the Leased Premises from service and exit corridors, or other rated enclosures, shall receive, on Tenant's side, sufficient layers of drywall to complete the necessary rating. All materials used in corridor construction shall be fire rated. Any Tenant penetrations of rated partitions shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. 7. Interior Service/Exit Corridor Doors. If Tenant desires additional service access to Leased Premises other than what is provided by Landlord in Exhibit C then Tenant Exhibit D, Rough Shell 5/1/98 Page 3 69 shall provide and install a 3'-0" X 7'-0" X 1-3/4" 18 gauge interior hollow metal door, labeled as required, with a hollow metal 16 gauge frame, and all hardware, in accordance with governing Codes. Any framing, cutting, and patching of the corridor wall surfaces including the building of vestibules to provide for the non-impingement of the door into the corridor traffic way, and other work related thereto shall be the responsibility of the Tenant. Hollow metal door and frame are to be finish painted on the corridor side with a color selected by Landlord. Tenant's store name will be applied adjacent to the door by Landlord, at Tenant's expense, per Landlord's Architect's specifications. 8. Door Relocation. The relocation of any exterior Tenant door shall be performed by Landlord at Tenant's sole expense and must be coordinated with the structure of Landlord's building. 9. Door Hardware. Tenant shall furnish and install all door locks and exit devices on all interior service doors, exterior doors, exit corridor doors, and storefront, using hardware recommended by Landlord in the Tenant Handbook. 10. Ceiling. Exposed and open grid systems are encouraged. All work related to ceiling and ceiling treatments, if any, shall be the responsibility of Tenant. All ceilings and ceiling treatments shall be of non-combustible material approved by Landlord and shall maintain the degree of openness required to preserve the operation of the smoke venting system and sprinkler system in The Project as established by jurisdictional authority and/or as described in the Tenant Handbook. Tenant's ceiling and ceiling treatment shall be limited to a ceiling height not less than the code required minimum nor higher than the maximum heights indicated in the Tenant Handbook. The structure of Landlord's Building has been designed to accept a super-imposed loading of three (3) pounds per square foot for the installation of Tenant's suspended ceiling and equipment. Access (such as access panels) and other openings shall be provided by Tenant where Landlord deems necessary. Tenants providing ceilings with less than the required degree of openness shall provide smoke venting at Tenant's sole expense, both as required by jurisdictional authorities and as described in the Tenant Handbook. If Tenant's interior partitions and ceiling configuration cause the requirement of additional sprinkler heads, such additional heads shall be installed by Landlord's designated contractor at Tenant's expense both as required by jurisdictional authority and Landlord's insurance carrier. 11. Interior Finishes. All finished interior surfaces must be materials approved by Landlord for appearance. All Tenant fixtures, furniture, carpeting (including underlayment), upholstery materials, drapery and other furnishing must comply with flammability of materials and smoke generation requirements for furniture and furnishings of local jurisdictional authorities. All wood shall be fire retardant in accordance with code requirements. All wood in contact with the floor shall be termite retardant. 12 Finish Hardware. Commercial grade finish hardware, labeled where required, shall be used throughout. All doors shall have at least one and one-half (1-1/2) pair butts, wall or floor stops, kick plates, lock sets and push-pull plates as required. All exit doors shall have hardware as required by Code. 13. Toilet Room. Tenant shall construct restroom facilities, fixtures, toilet partitions, and building specialty items such as toilet room mirrors, dispensers, paper holders and amenities to fully meet the ADA Guidelines and local codes. Exhibit D, Rough Shell 5/1/98 Page 4 70 14. Mezzanines. Mezzanines will not be permitted (other than the approximately 10' x 4' elevated stand which is part of Tenant's prototype store design which must be supported from the floor). 15. Layout and Painting of Exposed Mechanical and Electrical Systems. All Tenant installed ductwork, conduits, pipes and any other mechanical or electrical equipment exposed to public view from outside the Leased Premises, shall be laid out and installed in a neat and orderly configuration. Tenant shall paint the above Tenant improvements with either a black or a mutually agreed to color and finish if Tenant's improvements can be seen from Mainstreet (i.e. those portions of the common area made up of the pedestrian walkways outside of the Leased Premises) above Tenant's storefront elevation or below the top of the storefront but visible from Mainstreet. C. STRUCTURAL 1. Modifications. Any alterations, additions, and/or reinforcements to the structure of Landlord's building required to accommodate Tenant's Work, must be designed by a registered structural engineer at Tenant's expense. Tenant shall leave the structure of Landlord's building as strong or stronger than original design and with finishes unimpaired. Tenant's architect shall calculate or have calculated the structural loads caused by Tenant's improvements and submit those calculations for written approval by Landlord and Landlord's Architect prior to Tenant's construction. 2. Loading. All loads individually hung from the structure in excess of 100 pounds shall be specifically approved by Landlord's structural Engineer for location and method of support. All loads less than 100 pounds that are individually hung from the structure shall be hung in accordance with the guidelines in the Tenant Handbook. D. HEATING, VENTILATING AND AIR CONDITIONING 1. Connection to Condenser Water System (if applicable). Not applicable. 2. HVAC System. A complete air conditioning system to suit Tenant's requirements shall be designed, furnished, installed and maintained by Tenant in accordance with the requirements of the Tenant Handbook. Tenant's portion of the HVAC system shall include an air conditioning unit(s), ducts, insulation, fire dampers, outlets, grilles and controls to maintain temperatures per Tenant Handbook. If roof-top units are required, Landlord shall install roof-top curb at Tenant's expense. All Tenant ductwork shall be internally insulated and Tenant shall make all connections to Landlord installed systems in a manner fully satisfactory to Landlord. 3. Toilet Exhaust System. Tenant installed toilet facilities within the Leased Premises shall include a complete toilet exhaust system according to Code and the requirements of the Tenant Handbook. 4. Outside Air Connection. Landlord, at Tenant's expense, will provide a roof jack for Tenant's connection to provide outside air to Tenant's HVAC system. Tenant shall provide outside air ventilation as required by Code and the Tenant Handbook. No openings for fans, vents, louvers, grilles, or other devices shall be installed in any demising partition, exterior wall, or roof without Landlord's prior written approval. All roof and/or wall penetrations required for Tenant's plumbing, mechanical, Exhibit D, Rough Shell 5/1/98 Page 5 71 electrical work and any other Landlord approved Tenant work shall be made by Landlord's designated contractor at Tenant's expense. 5. Smoke Venting. If the authority having jurisdiction requires individual smoke venting from the Leased Premises, Tenant, at Tenant's expense, shall provide the complete required smoke system, discharging vertically through a roof vent at sufficient velocity to carry the discharge away from any intakes on the roof. Roof vents will be installed by Landlord's designated contractor at Tenant's expense and in accordance With the Tenant Handbook. 6. Refrigeration. Tenants may not connect refrigeration equipment to Landlord's condenser water system. Landlord's condenser water system will not operate during unoccupied hours. Refer to the Tenant Handbook for requirements regarding Tenant's refrigeration equipment. 7. Exhaust/Negative Pressure. All exhaust and make up air systems shall be by Tenant in accordance with Exhibit D and the Tenant Handbook. As determined by Landlord, all tenants producing odors within their premises shall be required to install full height partitions and provide supplemental exhaust to the exterior of the building to keep the premises at a negative pressure relative to Mainstreet and all adjacent areas. E. ELECTRICAL 1. System. Tenant shall design, furnish, install and maintain a complete electrical distribution system, including but not limited to conductors to electrical room connected to load side of meter socket, transformer, distribution panels, circuits, conductors, fixtures and devices, within the Leased Premises in accordance with the requirements of the Tenant Handbook. No appurtenances, including but not limited to light fixtures, antennas, signs, etc., will be affixed to the exterior walls or roof of Landlord's Building without Landlord's express written permission. 2. Electrical Construction. a. Material - All electrical materials shall meet National Electrical Code Standard, unless a better grade is required by local Code. All materials shall be new and shall bear evidence of approval by Underwriter's Laboratory (UL). All conductors shall be copper. Aluminum conductors will not be allowed. b. Lighting Fixtures - Recessed fixtures installed in furred spaces shall be connected by means of flexible conduit and approved fixture wire, connected to a branch circuit outlet box which is independent of the fixture. c. Fluorescent Fixtures - All fixtures shall be provided and installed by Tenant with switch legs and local switches rated 20 amps at 277 volts. All fluorescent fixtures shall have internal protection devices. Fluorescent ballasts shall be high power factor type with individual non-resetting overload protection. Ballast harmonics may not exceed that Total Harmonic Current Distortion allowable by the electric utility. All lamps subject to public view shall have warm white deluxe or better color rendition. Cool white may be used only in storage areas not exposed to public view. d. Electric Meter - Where Landlord does not provide electricity from a master meter and redistribute to Tenants, Tenant shall make direct arrangements with the local electric utility company to furnish and install electric meter to measure Tenant's use of electricity. Exhibit D, Rough Shell 5/1/98 Page 6 72 e. Panel Boards - Panel boards shall be furnished and installed by Tenant, 120/208 volt panels and 277/480 volt panels shall both be equipped with single or multiple pole bolted thermal magnetic breakers. f. Short Circuit Ratings - Tenant's electrical distribution system shall be designed to withstand and safely interrupt an available short circuit current indicated in the Tenant Handbook. g. Transformer - All necessary transformers shall be furnished and installed by Tenant. All ceiling hung transformers over 100 pounds shall be approved by Landlord's Structural Engineer for location and method of support. All ceiling hung transformers less than 100 pounds shall be hung in accordance with the requirements in the Tenant Handbook. h. Nameplates - The following equipment shall be identified with engraved Bakelite nameplates: distribution panels, motor starters, lighting panels and push-button stations. F. PLUMBING 1. System. Tenant shall connect to Landlord's plumbing system as described in Exhibit C and the Tenant Handbook. Tenant shall provide a complete plumbing system within the Leased Premises, including but not limited to, fixtures and toilet accessories as required by Code. Tenant shall provide accessible clean outs in toilet areas. Plumbing work must be installed according to all appropriate Codes and requirements of the Tenant Handbook. Landlord's approval of Tenant's plans is not a statement that the plans are in compliance with Code or other local requirements. Tenant shall be required to provide vent connections and a toilet room exhaust connection, if necessary, through the roof as required by Code and the Tenant Handbook. All such penetrations shall be by Landlord's designated contractor at Tenant's sole expense. 2. Water Heaters. Electric water heaters shall be automatic and a maximum capacity of 2 k.w. All units shall be UL approved and conform to the requirements of the local Energy Code. Water heaters must have temperature/pressure relief values with discharge piping according to Code. 3. Water Meters. All restaurants, food court tenants, salons, pet stores and any other high volume users of water (as determined by Landlord) shall furnish and install water meters at Tenant's expense in accordance with the Tenant Handbook. 4. Condensate Drains. Tenant shall extend and connect condensate drain line(s) from Tenant's air conditioning unit(s) in accordance with the Tenant Handbook. 5. Connection. If Tenant's restroom location, on Tenant's Store Working Drawings does not coincide with Landlord's utility location, Tenant, at Tenant's expense, shall move utility to coincide with Tenant's Store Working Drawings with Landlord's prior approval. All cutting and placing of concrete is by Tenant. G. FIRE PROTECTION SYSTEM All revisions to the fire protection system required by Tenant's layout shall be performed by Landlord's designated sprinkler contractor at Tenant's sole expense. Landlord's sprinkler contractor shall design system revisions in accordance with Tenant's Store Working Drawings. Such designs may involve additional heads, relocated heads, heads in refrigeration boxes, toilet rooms, kitchen exhaust ducts, and/or at Tenant's request, heads Exhibit D, Rough Shell 5/1/98 Page 7 73 located to conform with Tenant's ceiling pattern and layout. All design and construction shall be governed by Code and the requirements of Landlord's insurance carrier. Tenants are required by local code to provide fire extinguishers, at least one to be installed within 25 feet of the Tenant's entry off Mainstreet. H. TELEPHONE Tenant shall arrange directly with the local Telephone Company for telephone service. Tenant shall furnish, install and maintain telephone wiring and equipment within the Leased Premises to suit Tenant's requirements at Tenant's expense. I. SIGNAGE Guidelines. All signs shall be designed, constructed and located in accordance with Landlord's sign Criteria, Exhibit E, the Tenant Handbook, and as approved by Landlord. J. FIXTURES AND FURNISHINGS Tenant shall furnish and install in the Leased Premises all fixtures, furnishings, equipment, shelving, trade fixtures, leasehold improvements, interior decorations, graphics, signs, mirrors, cornices, covers and decorative light fixtures, portable fire extinguishers as required by Code and the Tenant Handbook, and other special effects, all as approved by Landlord. All Tenant improvements, other than mechanical equipment, ceilings, and lighting fixtures, shall be floor-mounted unless written approval is obtained from Landlord. K. MISCELLANEOUS REQUIREMENTS 1. Tenant's Contractor. Work undertaken by Tenant at Tenant's expense (a) shall not be awarded to Landlord's contractor without Landlord's written consent, except that an approved list of contractors is attached hereto as Exhibit D-1 and (b) may only be awarded to a reputable and bondable contractor or contractors licensed to do business in the State, County and City in which The Project is located. Tenant's contractor shall adhere to Landlord's policy of a drug and alcohol free workplace. 2. Equipment Screening. Tenants requiring mechanical or electrical equipment, antennas, and the like shall not have the same placed on the roof or the exterior of the building without the prior express written approval of Landlord. All such equipment, if allowed, shall be screened from the view of the public from any point within the project site. All screening materials, construction details, and construction techniques shall be approved by Landlord in writing, prior to any such work by Tenant. 3. Clean-Up. Tenant shall cause its contractors to maintain the Leased Premises in a clean and orderly condition during construction. All unusable shipping containers, packaging, and other debris shall be broken down and contained within the Leased Premises until removed by Tenant's contractor to containers provided by Landlord outside Landlord's Building. Flammable waste must be confined to covered metal Exhibit D, Rough Shell 5/1/98 Page 8 74 containers until removed by Tenant. All usable construction material, equipment, fixtures, merchandise, etc. must always be contained within the Leased Premises. Malls, courts, arcades, public corridors, service/exit corridors and the exterior of Landlord's Building shall be kept clean at all times. If Tenant fails to clean up, Tenant hereby authorizes Landlord to clean up for Tenant at Tenant's expense. 4. Full Payment. Tenant shall satisfy Landlord that adequate arrangements have been made to ensure that all Tenant's contractors shall be paid in full for work ordered by Tenant. Tenant is advised to familiarize itself with the mechanic's lien laws in the State in which The Project is located and shall hold the Landlord harmless for any liens filed against the property of the Landlord for the work of the Tenant. 5. Character of Employees. Tenant will not employ any unfit person or anyone not skilled in the work he is performing, or any workman that is incompatible with the balance of the work force or who will cause, or whose presence will cause, labor disputes or work stoppages. In the event any employee(s) of Tenant or Tenant's contractor(s) causes a labor dispute or work stoppage, Tenant expressly agrees to have such employee(s) immediately removed from the Project upon Landlord's request, and that Tenant's failure to do so shall constitute an event of Default under the Tenant's Lease of which this Exhibit is a part. SECTION 2: PROCEDURE AND SCHEDULES FOR THE COMPLETION OF TENANT'S PLANS AND SPECIFICATIONS Unless otherwise notified by Landlord, all prints, specifications, and other material to be furnished by Tenant as herein required shall be sent to: Tenant Coordinator (Address to be furnished when available). Tenant shall engage an architect ("Tenant's Architect") registered in the State and licensed to do business in the County and the City in which The Project is located to prepare the Working Drawings and Specifications to be submitted for Landlord's approval. The fees for Tenant's Architect shall be paid by the Tenant. A. LEASE OUTLINE DRAWINGS Following execution of the Lease of which this Exhibit is a part, Landlord shall furnish Tenant with two (2) prints of the Lease Outline Drawings (LOD) giving technical and design information relative to the Leased Premises along with other drawings that may be helpful to Tenant in the design of its store. B. STORE DESIGN DRAWINGS 1. Within forty-five (45) days of whichever of the following shall be the later to occur: (a) receipt of Lease Outline Drawings from Landlord or (b) the execution Exhibit D, Rough Shell 5/1/98 Page 9 75 of the Lease; the Tenant shall submit to Landlord one (1) set of sepia reproducible prints and three (3) sets of blueline prints of Store Design Drawings, showing the intended design, character, and finishes of the Leased Premises. The Store Design Drawings shall comply with the design criteria of The Project as described in this Exhibit D and in the Tenant Handbook and shall set forth the requirements of Tenant within the Leased Premises. Said Drawings shall include, but not be limited to the following: a. Architectural design of the space, including an elevation of Landlord's storefront showing Tenant's signage, floor plans, elevations, sections, and renderings indicating material and color selections and finishes, and layout including location of fixtures both permanent and movable. Provide the weights of all items to be suspended above from the structure in excess of 100 pounds each. b. Mechanical System: Basic equipment to be used and its location, duct distribution system, diffuser locations, and any louvers or vents to be provided for Tenant by Landlord at Tenant's expense. Provide projected mechanical loads on forms provided by Landlord in the Tenant Handbook. c. Electrical System: Reflected ceiling plans indicating type of lighting fixtures, and floor plans showing outlets and other electrical equipment contemplated with location of panel and switchboard. Provide projected electrical loads on forms provided by Landlord in the Tenant Handbook. d. Plumbing System: Floor plans showing the location, layout, and type of fixtures to be furnished, including riser diagrams. e. Fire Protection System: Location of any specialty heads Tenant's architect may require. f. Tenant shall identify in writing all intended exceptions to the design criteria contained in the Tenant Handbook and/or this Exhibit D. 2. After receipt of Store Design drawings, Landlord shall, within seven (7) business days, return to Tenant One (1) set of Store Design Drawings with modifications and/or approval. If, upon receipt of approved Store Design Drawings bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing within seven (7) days from date of receipt of said drawings, by certified or registered mail addressed to Landlord, at the above address, and the notice address in the Lease. Unless such action is taken, it will be deemed that all comments made by Landlord on Store Design Drawings are acceptable to and adopted by Tenant. 3. If Store Design Drawings are returned to Tenant with comments, but not bearing approval of Landlord, said Store Design Drawings shall immediately be revised by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. C. STORE WORKING DRAWINGS AND SPECIFICATIONS 1. Store Working Drawings and Specifications shall be prepared in strict compliance with the design criteria and requirements as set forth in this Exhibit D and the Tenant Handbook and shall adhere to the Store Design Drawings as approved by Landlord. Store Working Drawings to minimum scales as called for below, and Specifications shall include, but not be limited to, the following: Exhibit D, Rough Shell 5/1/98 Page 10 76 a. Key plan showing location of the Leased Premises relative to the entire mall. b. Floor plan at a minimum scale of 1/4" = 1'0". c. Overall sections at 1/4" = 1'0". d. Reflected ceiling plan at a minimum scale of 1/4" = 1'0". e. Plans, elevations, and section of storefront (if to be constructed by Tenant) at 1/2" = 1'0", with finish materials board including manufacturers, model numbers, color numbers, and all other identifying information. Details of storefront at 1-1/2" = 1'0". f. Interior elevations at 1/4" = 1'0". g. Full sections of types of partitions used at 1/2" = 1'0". h. Details of special conditions encountered at 1-1/2" = 1'0". i. Door schedule with jamb details at 1-1/2" = 1'0". j. Finish and color schedules with samples. k. Plumbing, heating, ventilating, and cooling plans, at 1/4" = 1'0". l. Mechanical details at 1-1/2" = 1'0". m. Electrical plans 1/4" = 1'0". n. Electrical details, fixture schedules, and one-line electrical riser diagram. o. Mechanical and electrical load tabulations on forms provided by Landlord in the Tenant Handbook. p. Structural load tabulations. q. Specifications covering all of Tenant's Work, including, but not limited to, architectural, electrical, plumbing, heating, ventilating, and air conditioning. r. Layout of fixture location, both permanent and movable. s. Any and all other plans and specifications as may be required by the local fire and building authorities or other governing bodies. 2. All Store Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant, in the form of one (1) set of reproducible sepia prints, specifications and three (3) sets of blueline prints to Landlord for approval within 21 days from receipt by Tenant of Landlord's written approval of Store Design Drawings. 3. As soon as practicable after receipt of Store Working Drawings and Specifications, Landlord shall return to Tenant one (1) set of prints of Store Working Drawings and Specifications with its suggested modifications and/or approval. If, upon receipt of approved Store Working Drawings and Specifications bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing, by certified or registered mail addressed to Landlord at the above address and at the notice address in the Lease, within seven (7) days from the date of receipt of Store Working Drawings and Specifications. Unless such action is taken, it will be deemed that all comments made by Landlord on Store Working Drawings and Specifications are acceptable to and adopted by Tenant. 4. If Store Working Drawings and Specifications are returned to Tenant with comments, but not bearing approval of Landlord, said Store Working Drawings and Specifications shall immediately be revised by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. 5. "For Construction" Store Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant in the form of one (1) set of mylar reproducible prints and specifications and three (3) sets of blueline prints. "For Construction" shall be marked clearly on each copy in red. Such drawings and specifications shall reflect correction of all Landlord's comments to the Store Working Drawings and specifications returned by Landlord. Exhibit D, Rough Shell 5/1/98 Page 11 77 6. Store Working Drawings shall be submitted to the local Authorities having jurisdiction for building permit after such drawings have been approved by Landlord in the submittal process as outlined above. 7. Landlord and Landlord's architect shall, from time to time, be entitled to monitor Tenant's Work and shall have the right to require all work which does not comply with Tenant's approved Store Working Drawings and Specifications to be corrected within thirty (30) days of notification to Tenant. SECTION 3: PROCEDURE AND SCHEDULES FOR THE CONSTRUCTION OF THE LEASED PREMISES BY TENANT A. COMMENCEMENT OF CONSTRUCTION Tenant shall start construction of its Leased Premises not later than ten (10) days from either of the following dates, whichever shall be the later to occur: (1) The date of receipt by Tenant of written notice from Landlord that Landlord has substantially completed the work to be performed by Landlord under Exhibit C, and payment therefore as required by Exhibit C is due (other than such work which cannot be performed by Landlord until Tenant makes the Leased Premises ready for the performance thereof) and that the Leased Premises are ready for Tenant's work; or (2) the date on which Landlord approves the Tenant's Store Working Drawings and Specifications for the Leased Premises. Tenant shall carry such construction to completion with all due diligence. B. GENERAL REQUIREMENTS 1. Tenant shall submit to Landlord, via certified or registered mail, at least five (5) days prior to the commencement of construction the following information: a. Copy of building and all other permits needed to perform Tenant's Work within the Leased Premises. b. The names and addresses of the general, mechanical, plumbing and electrical contractors Tenant intends to engage in the construction of the Leased Premises. c. The actual commencement of construction date and the estimated date of completion of construction work, fixturing work, and date of projected opening. d. e. Itemized statement of estimated construction costs including architectural, engineering, and contracting fees. f. Evidence of insurance with a company or companies authorized to transact business in which The Project is located as required below. g. 2. Tenant shall secure, pay for, maintain, and cause its contractors and subcontractors to secure, pay for, and maintain, during the continuance of construction and fixturing work within the Lease Premises, all of the insurance policies required in the amounts as set forth herein, together with such insurance as may from time to time be required Exhibit D, Rough Shell 5/1/98 Page 12 78 by City, County, State or Federal laws, Codes, regulations or authorities. Tenant's Work may not commence, nor many Tenant permit its contractors and subcontractors to commence any work, until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. Insurance policies shall name the Landlord and assignees, Landlord's Architect and General Contractor for the project as additional insureds. Certificates of insurance coverage shall provide that no change or cancellation of such insurance coverage shall be undertaken without thirty (30) days written notice to Landlord. Landlord shall have the right to require Tenant, and Tenant shall have the duty, to stop work in the Leased Premises immediately if any of the coverage required herein lapses during the course of the work, in which event Tenant's Work may not be resumed until the required insurance is obtained and satisfactory evidence of same is provided to the Landlord. a. Tenant's General Contractor's Required Minimum Coverages and Limits of Liability. (1) Worker's Compensation Insurance, as required by State law, and Employer's Liability Insurance with a limit of not less than [***] (or more if required by the law of the State) and any insurance required by any Employee Benefit Act or similar statute applicable where the work is to be performed as will protect the contractor and subcontractors from any and all liability under the aforementioned act(s) or similar statute. (2) Comprehensive General Liability Insurance (including Contractor's Protective Liability) in an amount not less than $5,000,000 per occurrence whether involving personal injury liability (or death resulting therefrom) or property damage liability or a combination thereof (combined single limit coverage) with a minimum aggregate limit of [***]. Such insurance shall include explosion, collapse and underground (X,C and U) coverage and contractual liability coverage for personal injury, death and damage to the property of other arising from construction at the Leased Premises, whether performed by Tenant's contractors, subcontractors, or sub-subcontractors, or by anyone directly or indirectly employed by any of them. (3) Comprehensive Automotive Liability Insurance, for the ownership, maintenance, or operation of any automotive equipment, whether owned, leased or otherwise held, including employer's non-ownership and hired car liability endorsements, in an amount not less than [***] per occurrence and [***] aggregate, combined single limit bodily injury and property damage liability. Such insurance policies shall insure the Tenant's general contractor and all subcontractors against any and all claims for bodily injury, including death resulting therefrom and damage to the property of others arising from its operations at the Leased Premises or in connection with construction of the Leased Premises, whether performed by the Tenant's general contractor, subcontractors, or sub-subcontractors, or by anyone directly or indirectly employed by any of them. b. Tenant's Insurance Requirements (1) Tenant shall obtain Owner's Protective Liability Insurance as will insure Tenant against any and all liability for damage from bodily Exhibit D, Rough Shell 5/1/98 Page 13 79 injury, including death resulting therefrom, or property damage or a combination thereof which may arise from work in connection with the Leased Premises, and any other liability for damages which Tenant's general contractor and/or subcontractors are required to insure against under any provisions herein. Landlord and Landlord's Architect and General Contractor shall be named as additional insureds. Said insurance shall be provided in minimum amounts of [***] aggregate, combined single limit bodily injury and property damage liability. (2) Tenant's Work Insurance: Tenant shall insure [***] of the value of the work in the Leased Premises as it relates to the building within which the Leased Premises is located, with an "all risk" perils property insurance policy or a completed value "all risk" perils Builder's Risk policy, naming the interest of the Landlord and the Tenant's general contractor and all subcontractors, as their respective interests may appear. 3. All contractors engaged by Tenant shall be licensed contractors in the State in which The Project is located possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord's General Contractor and other contractors on the job. All work shall be coordinated with the general project work. 4. Tenant's contractors and construction shall comply in all respects with applicable federal, state and local statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the Leased Premises shall be obtained and paid for the Tenant. 5. Tenant shall complete all work within the Leased Premises as expeditiously as possible, but in no event later than in time to open for business on the Grand Opening Date. Should Tenant fail to complete its work within this schedule, Landlord may, at Landlord's option, install temporary storefront or barricade at the Leased Premises at Tenant's expense. Temporary storefront and other work performed by Landlord which was made necessary due to the Tenant's failure to complete its work in time for the Grand Opening Date, shall be payable to the Landlord. 6. Landlord shall have the right to perform, on behalf of and for the account of Tenant any of Tenant's work which Landlord deems necessary to be done on an emergency basis or which pertains to structural components, the general utility systems for The Project, roof and exterior wall penetrations, or the erection of temporary barricades and temporary signs, during construction for the period following the Opening of The Project for business. Landlord will provide such work at Tenant's expense. 7. Tenant's Work shall be subject to the inspection and approval of Landlord and Landlord's Architect as to compliance with Tenant's approved plans and standards of merchantability, provided that Landlord and Landlord's Architect shall use its commercially reasonable efforts to insure that its work does not interfere with Tenant's Work. 8. Tenant shall pay or reimburse Landlord for all costs incurred by Landlord (including deposits) for all utility meters for the Leased Premises. 9. Upon the completion of the Tenant's Work, all facilities shall be in full use without defects. Exhibit D, Rough Shell 5/1/98 Page 14 80 10. All work performed by Tenant shall be performed so as to cause no interference with other Tenants and the construction and operation of The Project. Tenant will take all precautionary steps to protect its facilities and the facilities of others affected by Tenant's Work and properly police same. Construction equipment and materials are to be located within the Leased Premises and truck traffic is to be routed in and from the site, all as directed by Landlord and so as not burden the construction and operation of The Project. 11. Upon and from the completion of Tenant's Work in the Leased Premises and acceptance by Landlord's Architect, a minimum one-year warranty of all work, materials, and equipment shall be provided to Landlord by Tenant to the extent the same are received by Tenant from its contractors and/or suppliers. 12. Landlord shall have the right to stop Tenant's Work whenever necessary to obtain compliance with applicable building and safety codes or the approved Store Working Drawings and Specifications. 13. Tenant and its contractors shall comply with the guidelines for Tenant work procedures and temporary construction facilities set forth in the Tenant Handbook, and Landlord's Construction Rules and Regulations which may be issued from time to time. 14. Landlord shall have the right to order any Tenant or Tenant's contractor who willfully violates any of the above requirements to cease work, and to remove himself and his equipment and employees from The Project. C. TEMPORARY SERVICES AND FACILITIES DURING CONSTRUCTION 1. Utility costs or charges for any service to the Leased Premises shall be the responsibility of Tenant from the date Tenant commences work or is obligated to commence work, whichever is earlier. 2. If necessary, Tenant will provide temporary heat for the Leased Premises during construction. No open burners are permitted and only electricity may be used for temporary heat. 3. Temporary Electrical Services. If electrical service is not available in the Leased Premises during construction, Landlord shall provide electrical service in an area designated by the Landlord. Tenant shall request, in writing, permission to connect temporary lines to the power source for service to the Leased Premises. Tenant shall reimburse Landlord for the Temporary Electric Service's. 4. Temporary Trash Removal. During initial construction, fixturing and stocking, Landlord shall provide trash removal service from the service areas. It shall be Tenant's responsibility to break boxes down and place trash daily in the containers provided. Trash accumulation will not be permitted overnight in the Leased Premises, mall or service/exit corridors. Tenant shall not allow trash to accumulate within the Leased Premises nor shall Tenant place any trash in the service/exit corridor or mall areas adjacent to the Leased Premises. Tenant shall reimburse Landlord for the Temporary Trash Removal. The period shall start with the date the Tenant starts construction in its premises and ends with the date the Tenant opens for business. In addition, Tenant shall pay any costs incurred by Landlord in removing trash from areas in and around the Leased Premises. Landlord's decision as to which Tenant is Exhibit D, Rough Shell 5/1/98 Page 15 81 responsible for trash left outside the Leased Premises will be reasonable and equitable, and Landlord's decision will be final. 5. Plans Review/Tenant Coordination. Landlord or its architect and/or engineer shall review Tenant's plans and specifications for compliance with the provisions of this Exhibit D and the Tenant Handbook. In addition, Landlord shall assign a Tenant Coordinator(s) to work with Tenant and Tenant's Architect, Engineer and contractor for the design and construction of the Leased Premises. Tenant shall reimburse Landlord for such plan review and tenant coordination as part of the Temporary Charges provided for in C.9. 6. Temporary Storefront. If Tenant is not open for business in the Leased Premises and Landlord's Retail Development is open, or if, in Landlord's sole judgment, Landlord determines that a temporary storefront is necessary so as not to disrupt the construction, opening or operation of any portion of The Project, then Landlord shall install, at Tenant's expense, for Tenant's use during construction a full height temporary barricade on the storefront lease line. Tenant shall reimburse Landlord for the temporary storefront. Upon completion of Tenant's construction and fixturing in the Leased Premises, Tenant shall remove, disassemble and dispose of such temporary storefront. 7. Coming Soon Sign. If during Tenant's initial construction, fixturing and merchandise stocking, The Project is open (or shall open) for business, Landlord will provide and install, following the earlier to occur of (a) erection of the initial construction barricade, or (b) completion of the storefront for the Leased Premises, a "coming soon" sign on the front (barricade or storefront, as the case may be) of the Leased Premises. Tenant shall reimburse Landlord for providing such sign. 8. Suite Number and Tenant Trade Name. Landlord shall furnish and install suite number and Tenant trade name sign adjacent to Tenant's exterior and/or interior rear exit door(s) in accordance with Landlord's standard. Landlord shall also install suite number on Mall storefront. Tenant shall reimburse Landlord for this service. 9. The charges for Temporary Services and Facilities as described in this subsection C shall be: Landlord's Charge ----------------- [***] psf 10. The charges identified in C.9 above shall be due and payable within thirty (30) days after billing by Landlord. Landlord may decline at Landlord's sole judgement to proceed with work at Tenant's expense until Landlord's receipt of payment thereof. D. COST PLUS ADMINISTRATION FEE WORK BY LANDLORD IN PREMISES AT TENANT EXPENSE The following work in Tenant's premises shall only be accomplished by Landlord in Landlord's building. The Tenant shall contract with the Landlord to furnish the following work items if required by Tenant's store design at Landlord's actual cost plus [***] for administration, and the cost of any such item of work shall be payable to Landlord in full within thirty (30) days after receipt of invoice therefore. 1. Openings in rated demising partitions and exterior wall, provided such opening/penetrations have been approved in advance by Landlord in writing. *** Confidential treatment requested. Exhibit D, Rough Shell 5/1/98 Page 16 82 2. Roof Openings. With Landlord's prior written permission, roof openings for any purpose shall include supporting structures, curbs, roof patching and flashing. Tenant shall be responsible for installation of ducts, pipes, equipment and counter flashing. Landlord reserves the right to refuse to permit the furnishing of any openings which exceed the capability of the structural system or which in Landlord's opinion would have an appearance detrimental to Landlord's Building. 3. Plumbing Service. With Landlord's written permission, additional sanitary sewer or relocation of sanitary sewer. 4. Electric Service. With Landlord's written permission, additional electric service or relocation of electrical service. 5. Storefront. With Landlord's prior written permission, changes to Landlord furnished interior and exterior storefront including but not limited to additional doors and relocation of doors. 6. Landlord's Labor (including overtime, demurrage and waiting time) and equipment used in any work Landlord performs for Tenant. 7. Architectural and/or Engineering fees incurred Landlord as a result of Tenant requesting any services in excess of the standard review services described in Section 8. Building Department Expeditor Fees incurred by landlord in expediting Tenant Building Permit, Controlled Inspection and other requirements for temporary and permanent Certificates of Occupancy on the building and the Tenant Premises. 9. Building Permits, Microfilming and Documentation Fees paid by Landlord on behalf of the Tenant in expediting the approval of Building Permits and other approvals of Agencies having jurisdiction. E. CERTIFICATE OF ACCEPTANCE Upon the completion of Tenant's construction and fixturing work within its Leased Premises Tenant shall so notify Landlord in writing. Landlord, upon receipt of such notice from Tenant, shall issue a Certificate of Acceptance of said premises provided, however, that the issuing of such a Certificate shall be contingent upon all of the following: 1. The satisfactory completion by Tenant of the work to be performed by Tenant under this Exhibit D, in accordance with good workmanship and the approved Construction Documents and Specifications therefor and receipt of a certificate of occupancy from the local jurisdiction. 2. Receipt by Landlord from Landlord's Architect of a premises acceptance letter. This letter can be issued only upon Tenant's correction of the deficiencies noted by Landlord or Landlord's Architect upon any inspection of Leased Premises. 3. Tenant shall have furnished Landlord with waivers of liens and sworn statements, or satisfactory substitutes for same, in such form as may be required by Landlord, and releases of notices of commencement (if any) from all contractors, subcontractors and other persons performing labor and/or supplying materials in connection with such work showing that all of said persons have been compensated in full. 4. Submission by Tenant to Landlord of a detailed breakdown of Tenant's final and total construction costs together with receipted invoices showing payment thereof. Exhibit D, Rough Shell 5/1/98 Page 17 83 5. Exhibit D, Rough Shell 5/1/98 Page 18 84 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT E SIGN CRITERIA 1. Tenant is required to identify the Leased Premises by a sign on the storefront. The general criteria for the design of Tenant signage ("sign criteria") is set forth below. More specific sign criteria for The Project as a whole and certain tenants in certain designated locations such as in food courts and mall courts is set forth in the Tenant Handbook, (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". 2. Costs incurred in design, construction and installation, as well as maintenance shall be the responsibility of Tenant. The Tenant must obtain permits to erect and connect the sign from local community officials before the sign is installed. 3. It is intended that the signage be developed in an imaginative and varied manner so as to enhance the architectural treatment of the facade in general and be harmonious with the overall architecture and thematic consideration of the mall in particular. Although current signage practices of the Tenant shall be considered, they will not govern the signs to be installed. 4. Approval of signs shall be solely the right of the Landlord, and Tenant must submit all candidates for signage to the Landlord for approval in the form of working drawings before manufacturing or further assembly begins. Submission shall be to Landlord, in the form of shop drawings with all pertinent details necessary for construction and installation included. Submission shall be a minimum of ninety (90) days before proposed installation date, and Tenant is expected to have sign manufactured and ready for installation within forty-five (45) days of approval by Landlord or Landlord's agent before installation, at project site. Landlord reserves the right to reject signs not conforming to approved drawings regardless of stage of completion or installation. 5. The Tenant's storefront sign shall occupy an area of the storefront facade designated in the Tenant Handbook and/or the Lease Outline Drawing, and/or by the Project Architect. The area shall total no more than eight (8) square feet for up to a thirty foot (30') storefront; and twelve (12) square feet for up to a forty foot (40') storefront; sixteen (16) square feet for up to a fifty foot (50') storefront. The design of the storefront is to be considered by Tenant in the development of signage. In general, signs will be installed in the designated sign area above the entry door. Variation of this criteria shall be subject to Landlord's prior written approval, which shall be solely at the discretion of Landlord. No sign shall be installed closer than three feet (3'-0") from the end of the Tenant storefront on both sides. 6. Signage shall be limited to the name of the store. Additional elements will be considered as long as they enlarge, expand, or otherwise clarify the name of the store. 7. Signs which are comprised of unaltered sans serif typefaces are, in general, unacceptable, as will be signs or type faces which are difficult to read. 8. The use of corporate identifications or logos will be considered, but prior use or identification with a particular sign or logo will not govern Landlord's approval for Tenant use. Tenant agrees that Landlord's rejection of particular logo or sign shall not constitute a violation of Lease by Landlord. In the case of conflict between the sign criteria and other provisions of the Lease, Tenant agrees that the sign criteria and Landlord's discretion shall prevail. Tenant shall not hold Landlord liable for damage or injury as a result of the sign criteria or the implementation of the sign criteria by agreement of both parties. Exhibit E, Sign Criteria 5/1/98 Page 1 85 9. A variety of fabrication materials shall be considered, however construction shall be guaranteed for a period of at least five (5) years against peeling, cracking, crazing, blistering, or any other degradation of surface or materials. Tenant shall obtain, from manufacturer of the sign, a five (5) year warranty covering the condition of finished surfaces, construction and operation of sign. 10. All electrical signs shall carry approval of Underwriters Laboratories (U.L.) on all component parts and on the complete display. Maximum brightness of lit signs shall be fifty foot (50') Lamberts measured one foot (1') from the source of light. No blinking, moving or flashing lights shall be allowed. Surface lighting may be reduced in order to accentuate lit signage. There will be no special advantage in terms of visibility of internally lit over externally lit signs. 11. No exposed raceways, ballast boxes or electrical transformers will be permitted except as required to be exposed by local building codes. 12. Landlord shall not be responsible for signs improperly installed or manufactured, and those signs not meeting code requirements shall, at Tenant's expense, be removed and built to code specifications before reinstallation. Signs meeting Landlord's sign criteria, but not meeting local code requirements, shall be the responsibility of Tenant, and Tenant agrees not to hold Landlord liable for costs due to conflict between these sign criteria and code, should such conflict exist under present code or due to future changes in code. Tenant must make required structural modifications at Tenant's expense to Landlord's structure. Also, Landlord's engineer to approve structural modifications. 13. Notwithstanding anything herein contained to the contrary, Tenant shall have the right to replace any existing sign(s) of said Tenant as long as such replacement meets the sign criteria listed within this document, the Tenant Handbook, and is accompanied by Landlord's prior written approval prior to installation. 14. No other signs of any type or purpose, permanent or temporary, shall be permitted to be displayed upon the facade, windows or within the dimension prescribed in Section 4.03 of the Lease, behind an unobstructed window unless and until such sign has been submitted to Landlord and has received Landlord's prior written approval. Landlord shall be the sole judge of what constitutes an unobstructed window. Removal of signage of any type installed without Landlord approval shall be mandatory before said sign shall be considered by Landlord for installation. 15. Landlord shall not be required to approve signage for any reason other than conformance with the sign criteria in this Exhibit E and the Tenant Handbook. Scheduled opening dates and other time constraints shall not be reason to approve signage which Landlord otherwise would consider unsuitable for manufacture or installation. Tenant agrees not to hold Landlord liable for any damage caused to Tenant due to signage or lack of signage as a result of Landlord's insistence upon conformance with the sign criteria or the Landlord's withholding of approval of submitted signage. 16. In the event that Tenant is unable to supply satisfactory signage design by the fixturing period of Tenant's store, Landlord shall have the option of providing such design. In such a case, Tenant agrees to pay prior to store opening all expenses involved in the design, manufacture, and installation of said signage plus 15% cost of administration, and Tenant agrees to waive rights to reject said signage and agrees not to oppose installation of said signage. 17. Signage indicated on drawings and mechanicals submitted for reasons other than signage evaluation (as described in this Exhibit E and the Tenant Handbook) shall not constitute a signage submittal. No approval of such drawings and mechanicals shall constitute approval of signage. Exhibit E, Sign Criteria 5/1/98 Page 2 86 18. Food Court Tenants shall be permitted to install one menu board within the Leased Premises subject to Landlord's prior design review and written approval. Refer to the Tenant Handbook for type, size and location allowed. 19. Procedure for Submittal and Approval of Sign Drawings: a. Approval of store design drawings or working drawings and specifications for Tenant's Leased Premises does not constitute approval of any sign work. Approval of signs shall be solely the right of Landlord, and Tenant must submit all candidates for signage to the Landlord for approval in the form of sign designer's working drawings and/or manufacturer's shop drawings before manufacturing or assembly begins. Drawings by Tenant, its architect or anyone not qualified to produce signage drawings are not acceptable. At the same time as Tenant's initial submission of store working drawings and specifications to Landlord, Tenant shall submit one (1) set of reproducible prints and specifications and three (3) sets of blueprints, along with samples of all material and colors, for all its proposed sign work. The drawings shall clearly show location of sign on storefront elevation drawing, size and stroke dimensions, graphics, color, construction, and attachment details. Full information regarding electrical load requirements and brightness in footcandles shall also be included. Landlord reserves the right to reject signs not conforming to approved drawings regardless of state of completion or installation. b. As soon as practical after receipt of the sign drawings, Landlord shall return to Tenant one (1) set of such sign drawings with the suggested modifications and/or approval. If, upon receipt of approved sign drawings bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing, by certified or registered mail addressed to Landlord within seven (7) days from the date of Tenant's receipt of such sign drawings. Unless such action is taken, it will be deemed that all comments made by Landlord on the sign drawings are acceptable to and approved by Tenant. C. If sign drawings and specifications are returned to Tenant with comments, but not bearing approval of Landlord; said drawings and specifications shall be revised immediately by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. Exhibit E, Sign Criteria 5/1/98 Page 3 87 EXHIBIT F COMMENCEMENT AND EXPIRATION DATE DECLARATION LANDLORD: ________________________________________________________ TENANT: ________________________________________________________ LEASE DATE: _________________________________________________________ STORE NUMBER: _________________________________________________________ Landlord and Tenant acknowledge and agree that the Commencement Date of the above referenced Lease is _____________________ and the Expiration Date of the Lease is ___________________________________________. LANDLORD: TENANT: By: _______________________________ By: _____________________________ Its: _______________________________ Its: _____________________________ Date: ______________________________ Date:_____________________________ 88 EXHIBIT G WAIVER OF SALES TAX CONFIDENTIALITY Date: ---------------------- I authorize the Comptroller of Public Accounts to release sales tax information pertaining to the taxpayer indicated below to Concord Mills Limited Partnership, c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209. I understand that this waiver applies only at our retail store located in Concord Mills in Concord, North Carolina. Please print or type the following information as shown below on your North Carolina Sales and Use Tax Permit: - -------------------------------------------------------------------------------- Name of Taxpayer Listed on North Carolina Sales Tax Permit - -------------------------------------------------------------------------------- Name Under Which Taxpayer is Doing Business (d/b/a or Outlet Name) - -------------------------------------------------------------------------------- Taxpayer Mailing Address - -------------------------------------------------------------------------------- Physical Location of Business Permitted for Sales Tax in Concord, North Carolina - -------------------------------------------------------------------------------- North Carolina Taxpayer ID Number Tax Outlet Number (As Shown on North Carolina Sales Tax Permit) ------------------------------------- Authorized Signature ------------------------------------- Print Name of Authorized Signature ------------------------------------- Position of Authorized Signature ------------------------------------- Phone Number of Authorized Signature 89 EXHIBIT H AGREEMENT OF SUBORDINATION NON-DISTURBANCE AND ATTORNMENT THIS AGREEMENT is made this ______ day of ___________, 19__, by and among CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership having an office c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, VA 22209 ("Lessor"), SILICON ENTERTAINMENT, INC., a California corporation, having an office at 210 Hacienda Avenue, Campbell, California 95008 ("Lessee") and _____________ having offices at _________________ ("Agent"), as agent for, and as co-lender with such other lenders (collectively, the "Lenders") under the credit facility secured by the hereinafter described Deed of Trust, their successors and assigns or affiliate. W I T N E S S E T H: WHEREAS, Lenders have provided financing for CONCORD MILLS shopping center in Concord, North Carolina (the "Property"); WHEREAS, under a certain lease (the "Lease") Lessor did lease, let, and demise a portion of the Property (such portion of the Property is hereinafter called the "Premises") to Lessee; WHEREAS, Lenders have or will become the owners of indebtedness secured by, among other things, a deed of trust, granted by Lessor to ____________, trustee, for the benefit of Agent, on behalf of the Lenders, as beneficiary (the "Deed of Trust"); NOW, THEREFORE, in consideration of the covenants, terms, conditions and agreements herein contained, and in consideration of other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: NOW, THEREFORE, in consideration of the covenants, terms, conditions and agreements herein contained, and in consideration of other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: 1. The Lease and all rights and liens created thereby shall be subject and subordinate in all respects to the Deed of Trust and the lien created thereby, to any advancements made thereunder, and to any increases, extensions, modifications or renewals thereof. 2. So long as Lessee is not in default under the Lease beyond any applicable grace or cure period, Agent, on behalf of the Lenders, hereby covenants to Lessee that in the event Lenders obtain title to the Premises, either by foreclosure or by deed in lieu of foreclosure, and thereafter obtains the right of possession of the Premises, that the Lease will continue in full force and effect, and Lenders shall recognize the Lease and Lessee's rights thereunder, subject to the provisions of this Agreement. 3. Lessee agrees that from and after the date hereof in the event of any act or omission by Lessor under the Lease which would give Lessee the right, either immediately or after the lapse of a period of time, to terminate the Lease, or to claim a partial or total eviction, Lessee will not exercise any such right (a) until it has given written notice of such act or omission to Agent by certified mail, return receipt requested, and (b) until and unless Lenders fail to remedy such act or omission within thirty (30) days for any act or omission which can be cured by the payment of money, or in the case of any other act or omission, as long as necessary to remedy such act or omission, provided (i) Lenders cause such remedy to be commenced within thirty days, and (ii) Lenders cause completion of such remedy to be pursued with due diligence following such giving of notice and following the time when Lenders shall have become entitled under the Deed of Trust to remedy the same. It is specifically agreed that Lessee shall not, as to Lenders, be entitled to require cure of any such default which is personal to Lessor, and therefore not susceptible of cure by Lenders, and that no such uncured default shall entitle Lessee to exercise any rights under the Lease with respect to Lenders. 4. That in the event the interests of Lessor under the Lease shall be transferred to Lenders or Agent or any nominee, designee, assignee of Lenders or any purchaser at foreclosure sale (Lenders, Agent or such other party referred to as a "Lender Party") by reason of foreclosure, deed in lieu of foreclosure, or similar transaction, Lessee hereby covenants and agrees to make, for the benefit and reliance of Lenders, full and complete attornment to the Lender Party as substitute lessor upon the same terms, covenants and conditions as provided in the Lease, except to the extent otherwise set forth herein. 5. The provisions of this Agreement are real property covenants running with the Property, and shall be binding upon and inure to the benefit of the respective parties hereto and their respective heirs, executors, administrators, beneficiaries, successors and assigns, including without limitation any Lender Party. 6. Notwithstanding anything contained herein to the contrary, or anything to the contrary in the Lease, Lenders and any Lender Party shall not be: 90 (a) Liable for any act, omission or the breach of any warranty of Lessor, including without limitation, any delay in opening the Project or the Premises for occupancy and any failure to complete the construction of the Premises or the Project or any improvements therein; (b) Subject to any offsets, claims of defenses which Lessee might have as Lessor; (c) Required or obligated to credit Lessee with any rent for any period beyond the then current rental period which Lessee might have paid Lessor; (d) Bound by any amendments or modifications or voluntary termination of the Lease made without Lenders' prior written consent, other than exercise of rights, options or elections contained in the Lease; or (e) Bound to or liable for refund of any security deposit except to the extent actually received by Lenders or a Lender Party. 7. Lessee shall not, without the express written consent of Lenders: (a) Cancel, terminate or surrender the Lease, except as provided therein or in any modification or amendment specified herein or hereafter consented to by Lenders; (b) After the date hereof, enter into any agreement with Lessor or its successors or assigns, which grants any concession with respect to the Lease or which materially compromises, discounts or otherwise reduced the rent called for thereunder; or (c) After the date hereof, prepay rent more than one (1) month in advance. 8. Lessor and Lessee hereby jointly and severally agree for the benefit and reliance of Lenders, that neither this Agreement, nor any assignment of the Lease for collateral purposes, nor anything to the contrary in the aforesaid Lease or in any modifications or amendment thereto shall, prior to Lenders' acquisition of Lessor's interest in and possession of the Property (and thereafter, only to the extent of the Property and not personally), operate to give rise or create any responsibility or liability upon Agent or Lenders for the control, care, management or repair of the Property by any party whatsoever or for any dangerous or defective condition of the Property; or impose responsibility for the carrying out by Agent or Lenders of any of the covenants, terms and conditions of the Lease or any modification or amendment whether or not hereafter consented to by Lenders, or for any negligence in the management, upkeep, repair or control of said Property resulting in loss, injury or death to any lessee, licensee, invitee, guest, employee, agent or stranger. Notwithstanding anything to the contrary in the Lease, Lenders, their successors and assigns (and any Lender Party, as appropriate), shall be responsible for performance of only those covenants and obligations of the Lease accruing after Lenders', their successors' and assigns' (or Lender Party's, as appropriate), acquisition of Lessor's interests in and possession of the Property; and in the event that Lenders or any Lender Party shall acquire title to the Premises or the Property, Lenders or any Lender Party shall have no obligation, nor incur any liability, beyond Lenders' or any Lender Party's then equity interest, if any, in the Property or the Premises. 9. Lessee covenants and agrees to make rental payments according to the terms of such Assignment of Leases upon written demand by Agent in the event of any default (as described therein). Lessor consents to payments being so made. 10. Lessee agrees that this Agreement satisfies any condition or requirement in the Lease relating to the granting of a non-disturbance agreement. 11. Lessee agrees to execute and deliver from time to time, upon the request of Lessor or of any holder(s) of any of the indebtedness or other obligations secured by the Deed of Trust, a certificate regarding the status of the Lease in the form set forth in Schedule A attached hereto and incorporated herein by reference for all purposes. 12. THIS AGREEMENT AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NORTH CAROLINA AND APPLICABLE UNITED STATES FEDERAL LAW. 13. If any bankruptcy proceedings shall hereafter commence with respect to Lessor, and if the Lease is rejected by the trustee pursuant to Section 365 of the United States Bankruptcy Code, Lessee agrees with Lenders (i) not to treat such lease as terminated or to execute a new lease with Lenders or any Lender Party on the same terms as the Lease, and (ii) to remain in possession of the Premises. 91 14. Any notices hereunder shall be effective upon mailing by certified mail, return receipt requested, or delivery by Federal Express addressed to the recipient at its address set forth in the preambles hereof or as to each party, to such other address as the party may designate by a notice given in accordance with the requirements contained herein. 15. This Agreement contains the entire agreement between the parties hereto. This instrument may be executed in multiple counterparts, all of which shall be deemed originals and with the same document. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this document to physically form one document. EXECUTED as of the date first above written. LESSOR: CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: CONCORD MILLS, L.L.C., a Delaware limited liability company, its general partner By: THE MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, its manager By: THE MILLS CORPORATION, a Delaware corporation, its general partner By: /s/ Judith Berson -------------------------------------------------- Judith Berson Its: Executive Vice President LENDER: -----------------------------, as Agent By: -------------------------------------------------- Authorized Signatory LESSEE: SILICON ENTERTAINMENT, INC., A California corporation By: /s/ Chris Morse -------------------------------------------------- Its: Vice President -------------------------------------------------- By: /s/ David Morse -------------------------------------------------- Its: Chairman/CEO -------------------------------------------------- 92 ACKNOWLEDGEMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) )ss. COUNTY OF ARLINGTON ) On this ___ day of ____________, 19__, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Agreement of Subordination, Non-Disturbance and Attornment and acknowledged before me that she was duly authorized and did execute same on behalf of CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. ___________________________________ Notary Public My Commission expires:_____________ ACKNOWLEDGEMENT OF CORPORATE TENANT STATE OF California ) ) )ss. CITY/COUNTY OF Santa Clara ) ) On March 16, 1999, before me Laurie Shermer, a Notary Public in and for said state aforesaid, personally appeared Chris Morse and David Morse, as Vice President and Chairman and CEO of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Laurie H. Shermer ___________________________________ Notary Public, Santa Clara County, My Commission expires: 9/19/2001 _____________ [Notarial Seal] LAURIE H. SHERMER Commission #1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 ACKNOWLEDGEMENT OF LENDER STATE OF ______________ ) ) CITY/COUNTY OF _______ ) On this _____ day of _____________, 19__, before me, ______, notary public, personally appeared __________, the _________ of __________, proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity and that by his/her signature on the instrument the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. ______________________________________ Notary Public My Commission expires:________________ 93 EXHIBIT H-1 TENANT ESTOPPEL CERTIFICATE TO: NationsBank, N.A., its successors and assigns or an affiliate (referred to herein as "Lender"), for itself and as agent for itself and as agent for one or more co-lenders: 1. The undersigned is the Lessee under that certain Lease together with all amendments, modifications and supplements thereto (the "Lease") by and between CONCORD MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, as Lessor and SILICON ENTERTAINMENT, INC., a California corporation, having an office at 210 Hacienda Avenue, Campbell, California 95008, as Lessee, covering those certain premises described therein and located at Concord Mills, Concord, North Carolina ("Premises"). 2. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Lease. 3. Except for any amendments, modifications and supplements described in Schedule A, the Lease has not been modified, changed, altered or amended in any respect and is the only Lease or agreement between the Lessee and Lessor or its agents affecting the Premises. 4. Lessee has made no agreements with Lessor or its agents or employees concerning free rent, partial rent, rebate of rental payments or any other type of rental concession except as set forth in the Lease. 5. No rent has been prepaid for more than one (1) month. 6. The Lease is in full force and effect and Lessee has no right to terminate the Lease (other than by reason of default by Lessor). As of the date hereof, Lessee is entitled to no credit, no free rent and no offset or deduction in rent, except as set forth in the Lease. 7. The Lessee and Lessor are not in default under the Lease and, to the best of Lessee's knowledge, there is no event which with notice or passage of time would constitute a default by Lessee or Lessor under the Lease. 8. Lessor has and is under no obligation to Lessee with respect to payment of the cost of tenant improvement work to the Premises, except as specifically set forth in the Lease. 9. The Lease does not contain and the Lessee does not have any outstanding options or rights of first refusal to purchase the Premises or any part thereof or the real property of which the Premises are a part. 10. No actions, whether voluntary or otherwise, are pending against the Lessee under the bankruptcy laws of the United States or any state thereof. 11. Any notices sent to Lender or its affiliates shall be sent certified mail, return receipt requested and addressed to NationsBank, N.A., at its offices at 700 Louisiana, 5th Floor, Houston, Texas 77002, Attn: Real Estate Lending Administration. 12. This certification is made knowing that Lender relies upon the truth of this certification in making certain fundings. Dated as of this 16 day of March, 1999. -- ----- SILICON ENTERTAINMENT, INC., a California Corporation By: Chris Morse -------------------------------- Its: Vice President By: David Morse -------------------------------- Its: Chairman/CEO EX-10.17 19 LEASE, KATY MILLS 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT. THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. EXHIBIT 10.17 LEASE SILICON ENTERTAINMENT, INC., a California corporation -------------------------- TENANT NASCAR SILICON MOTOR SPEEDWAY and/or SILICON MOTOR SPEEDWAY -------------------------- TRADE NAME NONE -------------------------- GUARANTOR KATY MILLS 2 TABLE OF CONTENTS
Page ARTICLE I ............................................................... 4 GRANT AND TERM ..................................................... 4 Section 1.1 Leased Premises ................................... 4 Section 1.2 Term .............................................. 6 Section 1.3 Opening ........................................... 8 Section 1.4 Late Opening ...................................... 8 ARTICLE II .............................................................. 8 RENT AND DEPOSIT ................................................... 8 Section 2.1. Minimum Rent ..................................... 8 Section 2.2. Percentage Rent .................................. 9 Section 2.3. Payments By Tenant ............................... 12 Section 2.4. Security Deposit ................................. 12 Section 2.5. Late Charge ...................................... 12 ARTICLE III ............................................................. 13 PREPARATION OF LEASED PREMISES ..................................... 13 Section 3.1. Landlord's Work .................................. 13 Section 3.2. Delivery of Possession ........................... 13 Section 3.3. Tenant's Work .................................... 14 Section 3.4. Alterations by Tenant ............................ 15 Section 3.5. Removal by Tenant ................................ 16 ARTICLE IV .............................................................. 16 CONDUCT OF BUSINESS ................................................ 16 Section 4.1. Use and Trade Name ............................... 16 Section 4.2. Operation of Business ............................ 17 Section 4.3. Sign ............................................. 18 Section 4.4. Tenant's Warranties .............................. 19 Section 4.5. Storage and Office Space ......................... 19 Section 4.6. Care of Premises ................................. 20 Section 4.7. Notice by Tenant ................................. 20 Section 4.8. Radius ........................................... 20 ARTICLE V ............................................................... 20 COMMON AREA ........................................................ 20 Section 5.1. Use of Common Area ............................... 20 Section 5.2. Common Area Maintenance Expenses ................. 21 ARTICLE VI .............................................................. 24 REPAIRS AND MAINTENANCE ............................................ 24 Section 6.1. Repairs and Maintenance by Landlord .............. 24 Section 6.2. Repairs and Maintenance by Tenant ................ 24 ARTICLE VII ............................................................. 25 TAXES .............................................................. 25 Section 7.1. Tax Liability .................................... 25 Section 7.2. Method of Payment ................................ 26 ARTICLE VIII ............................................................ 26 INSURANCE, INDEMNITY AND LIABILITY ................................. 26 Section 8.1. Landlord's Insurance Obligations ................. 26 Section 8.2. Tenant's Insurance Obligations ................... 27 Section 8.3. Mutual Covenant .................................. 28
3 Section 8.4. Covenant to Hold Harmless ........................... 28 Section 8.5. Loss and Damage ..................................... 29 ARTICLE IX .................................................................. 29 DESTRUCTION OF LEASED PREMISES ......................................... 29 Section 9.1. Continuance of Lease ................................ 29 Section 9.2. Reconstruction of Lease ............................. 30 ARTICLE X ................................................................... 31 CONDEMNATION ........................................................... 31 Section 10.1. Eminent Domain ...................................... 31 Section 10.2. Rent Apportionment .................................. 31 Section 10.3. Temporary Taking .................................... 31 ARTICLE XI .................................................................. 31 ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE ........................... 31 Section 11.1. No Assignment, Subletting or Encumbering of Lease ... 31 Section 11.2. Assignment or Sublet ................................ 35 Section 11.3. Transfer of Landlord's Interest ..................... 35 ARTICLE XII ................................................................. 35 SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE .......... 35 Section 12.1. Subordination ....................................... 35 Section 12.2. Attornment .......................................... 36 Section 12.3. Financing ........................................... 36 Section 12.4. Estoppel Certificate ................................ 36 Section 12.5. Remedies ............................................ 36 ARTICLE XIII ................................................................ 37 ADVERTISING AND PROMOTION .............................................. 37 Section 13.1. Promotion Fund ...................................... 37 Section 13.2. Promotion Fund Contribution ......................... 37 Section 13.3. Advertisements [Intentionally Deleted] .............. 37 Section 13.4. Network ............................................. 37 ARTICLE XIV ................................................................. 38 DEFAULTS AND REMEDIES .................................................. 38 Section 14.1. Elements of Default ................................. 38 Section 14.2. Landlord's Remedies ................................. 39 Section 14.3. Bankruptcy .......................................... 41 Section 14.4. Additional Remedies and Waivers ..................... 41 Section 14.5. Landlord's Cure of Default .......................... 41 Section 14.6. Security Interest ................................... 42 ARTICLE XV .................................................................. 42 RIGHT OF ACCESS ........................................................ 42 ARTICLE XVI ................................................................. 43 DELAYS ................................................................. 43 ARTICLE XVII ................................................................ 43 END OF TERM ............................................................ 43 Section 17.1. Return of Leased Premises ........................... 43 Section 17.2. Holding Over ........................................ 43 ARTICLE XVIII ............................................................... 44 COVENANT OF QUIET ENJOYMENT ............................................ 44 ii 4 ARTICLE XIX ................................................................. 44 UTILITIES .............................................................. 44 Section 19.1. Utilities .......................................... 44 Section 19.2. Electricity, Telephone and Gas ..................... 44 Section 19.3. Trash and Garbage Removal .......................... 44 Section 19.4. Water and Sewer .................................... 45 Section 19.5. Grease Interceptors ................................ 45 ARTICLE XX .................................................................. 45 MISCELLANEOUS .......................................................... 45 Section 20.1. Entire Agreement ................................... 45 Section 20.2. Notices ............................................ 45 Section 20.3. Governing Law ...................................... 45 Section 20.4. Successors ......................................... 46 Section 20.5. Liability of Landlord .............................. 46 Section 20.6. Brokers ............................................ 46 Section 20.7. Transfer by Landlord ............................... 46 Section 20.8. No Partnership ..................................... 46 Section 20.9. Waiver of Counterclaims............................. 46 Section 20.10. Waiver of Jury Trial ............................... 46 Section 20.11. Severability ....................................... 46 Section 20.12. No Waiver .......................................... 46 Section 20.13. Consumer Price Index ............................... 47 Section 20.14. Interest ........................................... 47 Section 20.15. Excavation ......................................... 47 Section 20.16. Rules and Regulations .............................. 47 Section 20.17. Financial Statements ............................... 47 Section 20.18. General Rules of Construction ...................... 47 Section 20.19. Recording .......................................... 48 Section 20.20. Effective Date ..................................... 48 Section 20.21. Headings ........................................... 48 Section 20.22. Managing Agent ..................................... 48 EXHIBITS: Exhibit A Site Plan Exhibit B Measurement of Leased Premises Exhibit C Landlord's Work Exhibit D Tenant's Work Exhibit E Sign Criteria Exhibit F Commencement and Expiration Date Declaration Exhibit G Waiver of Sales Tax Confidentiality Exhibit H Agreement of Subordination, Non-Disturbance and Attornment Exhibit H-1 Pre-Construction Tenant Estoppel Certificate Exhibit I Menu iii 5 THIS LEASE dated as of this 17th day of March, 1999 (the "Lease") by and between KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, the address of which is c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209 (hereinafter referred to as "Landlord") and SILICON ENTERTAINMENT, INC., a California corporation, the address of which is 210 Hacienda Avenue, Campbell, California 95008 (hereinafter referred to as "Tenant"). RECITAL Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord, the Leased Premises, for the Term commencing on the Commencement Date, subject to the terms, covenants, conditions and provisions of this Lease. Landlord shall have the right, at any time prior to April 1, 1999, by written notice to Tenant, to relocate the Leased Premises in either direction (from side to side from the outside boundary of the Leased Premises) by not more than forty (40) feet, provided that the configuration of the Leased Premises is substantially the same in the relocated space and that the visibility of the Leased Premises from the enclosed mall is not materially and adversely impacted ("Shift"), and upon any such Shift, the size and description of the Leased Premises shall be appropriately modified to reflect any resulting proportional adjustment in the Rent based upon the change in size of the Leased Premises. If the Landlord initiates a Shift as described herein, prior to the Delivery of Possession Date but after the receipt by Tenant of the initial Lease Outline Drawing (as described in Exhibit D) then Landlord will pay for Tenant's actual costs associated with the Shift, including without limitation, the costs associated with a redesign of the Leased Premises and the Fixturing Period will be extended one day for each day of delay created by the Shift. If the Commencement Date is not the first day of a month, Minimum Rent for the month in which the Commencement Date occurs shall be prorated to the end of the month and paid as the second monthly installment of Minimum Rent on the first day of the next month and, after the expiration of the number of years in the Term, the Term shall expire on the last day of the same month in which the Commencement Date of the Term occurred, it being the intention of the parties that the Term expire on the last day of a month. When the Commencement Date has been determined, Landlord and Tenant shall execute, acknowledge and deliver a written statement in recordable form specifying the Commencement and Expiration Dates of the Term and, if there shall have been any changes in the floor area of the Leased Premises, such statement shall reflect such change or changes. Said statement upon execution and delivery shall be deemed to be a part of this Lease. 6 DATA SHEET The following references furnish data to be incorporated in the specified Sections of this Lease and shall be construed to incorporate all of the terms of the entire Section as stated in this Lease: (1) SECTION 1.1: DESCRIPTION OF LEASED PREMISES: Store number: R-6, consisting of approximately 6,172 square feet of floor area with a minimum of fifty feet (50') of frontage as shown on Exhibits A and B attached hereto and made a part hereof. (2) SECTION 1.2: TERM: COMMENCEMENT DATE: The earlier of (i) the later of (A) the Grand Opening, or (B) the date following the expiration of a one hundred twenty (120) day fixturing period ("Fixturing Period") following the Delivery of Possession Date (as defined in Section 3.2), or (ii) the date the Leased Premises is open for business to the public. It is estimated that the Delivery of Possession Date will be June 28, 1999. ORIGINAL TERM: Five (5) years, plus that period of time necessary to cause the Expiration Date to occur on the January 31st following the expiration of the fifth (5th) year. OPTION PERIOD: Five (5) years, provided Tenant's Gross Sales for the twelve (12) month period ending two hundred ten (210) days prior to the Expiration Date exceed [***] per square foot. (3) SECTION 2.1: MINIMUM RENT: Original Term: From the Commencement Date and continuing through the expiration of the Original Term, the sum of [***] annually ([***] psf), payable in equal consecutive monthly installments of [***] each. Option Period: Beginning with the first (1st) year and continuing through the expiration of the Option Period, the sum of [***] annually ([***] psf), payable in equal consecutive monthly installments of [***] each. (4) SECTION 2.2: PERCENTAGE RENT: Percentage Factor: [***] Sales Break Point for the Original Term: From the Commencement Date through the expiration of the Original Term: [***] Sales Break Point for the Option Period: Beginning with the first (1st) year and continuing through the expiration of the Option Period: [***]. (5) SECTION 2.4: SECURITY DEPOSIT: [***] *** Confidential treatment requested. 2 7 (6) SECTION 4.1: PERMITTED USE: Tenant shall use the Leased Premises for the use set forth below and for no other purpose: Conducting an interactive entertainment center featuring among other things, racing simulators and other related retail and entertainment uses. Such uses may include but shall not be limited to the installation and operation of simulators and the sale of auto racing, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR; and for the sale of snack food items only and hot and cold non-alcoholic beverages (selections to be based on Landlord's approval) for on-the-premises consumption, provided said snack food and beverage service shall not be operated or licensed by a nationally-recognized fast-food chain. See menu referred to as Exhibit I attached hereto and made a part hereof. Tenant shall have the right to conduct group sales events ("Events") from the Leased Premises at which time a portion of the Leased Premises may be closed to the general public. During Events Tenant may retain an outside catering service (giving preference to restaurant operators within the Retail Development) to provide food and beverage service (including alcoholic beverage service if Tenant or the caterer obtains all necessary permits) with food items that are not reflected on Exhibit I. TRADE NAME: NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway (7) SECTION 13.2: FUND CONTRIBUTION: [***] psf of floor area in the Leased Premises GRAND OPENING FEE (INITIAL CONTRIBUTION): [***] psf of floor area in the Leased Premises (8) GUARANTOR: N/A Address: (9) GRAND OPENING DATE: October 28, 1999 (10) TEMPORARY CHARGES: [***] psf of floor area in the Leased Premises (11) CONSTRUCTION CHARGEBACKS: $ N/A (12) CONSTRUCTION ALLOWANCE: [***] psf of floor area in the Leased Premises *** Confidential treatment requested. 3 8 ARTICLE I GRANT AND TERM SECTION 1.1 LEASED PREMISES. (a) Landlord, in consideration of the Rent (as defined in Section 2.3) to be paid and the covenants to be performed by Tenant, does hereby lease and demise to Tenant, and Tenant hereby rents and hires from Landlord for the Term herein set forth, the Leased Premises which are described as set forth in the Data Sheet attached hereto, in the retail development designated as Katy Mills or by such other name as Landlord may from time to time hereafter designate (hereinafter "Retail Development"). The term "State" as used herein shall mean the State or Commonwealth of Texas. For all purposes in this Lease, a "Major Tenant" is any occupant of 20,000 square feet or more of floor area in the Retail Development and a "Major Tenant Space" is any space in the Retail Development containing 20,000 square feet or more. It is agreed that, wherever the term "Shopping Center" is used herein, it shall mean the Retail Development excluding the Major Tenant Spaces, except as otherwise specifically stated herein. Exhibit A sets forth the general layout of the Retail Development. Landlord does not warrant or represent that the Retail Development or the Leased Premises will be constructed exactly as shown thereon or that it will be completed by a specific date, but Landlord does warrant that the Leased Premises and the Retail Development will have the general configuration shown on Exhibit A. Notwithstanding anything contained in this Lease to the contrary, Landlord shall have the right, at any time and from time to time, without notice to or consent of Tenant, and without in any manner diminishing Tenant's obligations under this Lease, to make alterations or additions to, and build additional stories on the building in which the Leased Premises are located and to build adjoining the same, to construct other buildings and improvements of any type in the Retail Development or the common areas, or any part thereof, including the right to locate and/or erect thereon permanent or temporary kiosks and structures, to enlarge the Retail Development, and to make alterations therein or additions thereto (provided in no event will any kiosk or other structure be located directly in front of the registration desk within the Leased Premises), to build additional stories on any building or buildings within the Retail Development, and to build adjoining thereto, to construct decks or elevated parking facilities and free standing buildings within the parking lot areas of the Retail Development, and to change the size, location, elevation and nature of any of the stores in the Retail Development or the common areas, or any part thereof. In exercising its options hereunder, Landlord agrees to use reasonable efforts (in light of the then existing circumstances) not to materially and unreasonably interfere with the visibility of and access to the Leased Premises from the enclosed mall; it being understood that any structure placed in the common areas shall not block Tenant's signage located on the storefront signband. In the event Landlord elects to enlarge the Retail Development, or any part thereof, any additional area may be included by Landlord in the definition of the Retail Development for purposes of this Lease. Landlord shall also have the general right from time to time to include within and/or to exclude from the defined Shopping Center any existing or future areas and the floor area of the Shopping Center shall be accordingly adjusted. The premises leased to Tenant are herein referred to as the "Leased Premises". The approximate location of the Leased Premises is cross-hatched on the lease plan of the Retail Development attached hereto and made a part hereof as Exhibit A. This Lease of the Leased Premises is subject to all applicable building restrictions, planning and zoning ordinances, governmental rules and regulations, existing underlying leases, and all other encumbrances, covenants, restrictions, easements and agreements affecting the Retail Development and the terms and provisions of certain master declaration, reciprocal easement and operating agreements now or hereafter entered into by Landlord. Landlord acknowledges that Tenant's customers shall be permitted to queue in the common areas in front of the Leased Premises while waiting for access to the Leased Premises ("Waiting Area"). The Waiting Area shall be in a location designated by Landlord and reasonably approved by Tenant, provided said Waiting Area permits Tenant's customers to queue in an orderly manner without obstructing pedestrian traffic in the common areas and/or unreasonably disturbing the operation of other tenants in the Retail Development. In addition to the Leased Premises, Landlord shall grant Tenant a license for a location in the common area of the Shopping Center which shall be used by Tenant for the display of a full size stockcar, including sign tripods ("Display Area"). The location of the Display Area shall be selected by Landlord, but such location shall always be with in the area labeled on Exhibit A-1 as "Display 4 9 Area". In no event shall Tenant be obligated to pay additional Rent for use of the Display Area; provided, however, that any utility costs associated with the illuminated display shall be the sole responsibility of Tenant. Tenant shall, [***], construct the illuminated display in accordance with approved plans and specifications, which plans and specifications shall be submitted to Landlord for approval pursuant to the submittal requirements and process outlined in the Tenant Handbook. During the Term, Tenant shall repair and maintain the Display Area in accordance with Section 6.2 of this Lease. In addition, Tenant shall be required to carry insurance for the Display Area providing for the coverage set forth in Section 8.2(a) of this Lease. Upon the Expiration Date (hereinafter defined) or the earlier termination of this Lease, Tenant shall be responsible for the complete removal of the display and shall make any necessary repairs to the Display Area in accordance with Tenant's obligations set forth in Section 17.1 of this Lease. Subject to the provisions of Section 5.1, Tenant shall enjoy a non-exclusive easement, right and privilege for Tenant and its customers, employees and invitees and the customers, employees and invitees of any assignee, sublessee, concessionaire or licensee of Tenant, to use the common areas of the Shopping Center, with Landlord and the other tenants and occupants of floor area within the Shopping Center and their respective customers, employees and invitees. Furthermore, Landlord agrees that any additions, alterations or modifications to the Shopping Center by Landlord shall not adversely affect access to, or visibility of the Leased Premises and, except as otherwise provided for herein, Tenant shall retain substantially the same relative position with respect to Major Tenants of the Shopping Center as of the Commencement Date. (b) After the Commencement Date (as defined in Section 3.2), Landlord reserves the right to relocate Tenant for the purpose of (i) the addition or expansion of a Major Tenant or (ii) the redevelopment or expansion of the Retail Development involving the addition of a minimum of 100,000 square of GLA. Landlord shall provide Tenant with not less than sixty (60) days written notice of such relocation (the "Relocation Period") during which Landlord shall offer to Tenant such alternative location(s) (with approximately the same floor area, configuration and at least fifty feet (50') of frontage) as may be available within that area of the Retail Development labeled "Relocation Zone" on Exhibit A-2. In the event the parties agree on a specific location, then this Lease shall be amended by substituting the new location for the present location and the square footage, Minimum Rent and Sales Break Point shall be proportionately adjusted based upon the change in the size of the Leased Premises and Landlord and Tenant shall agree upon a mutually acceptable timeframe for the completion of work in the new premises and the relocation of the Tenant to the new premises. Landlord shall, at Landlord's cost and expense, complete the leasehold improvements to the new location in accordance with the working drawings originally approved by Landlord with respect to Tenant's Work in the original Leased Premises (including, without limitation finish work and the installation of fixtures, simulators and other merchandise) and Tenant shall relocate to the new location and, within sixty (60) days after the delivery of the new location to Tenant ("Relocation Fixturing Period"), open for business in the new location ("Relocation Date"). Since Tenant will need to move its equipment, including simulators from one space to the other, Tenant shall be permitted to close for a period not to exceed ten (10) days for the purpose of moving the equipment and installing it in the new leased premises ("Relocation Closure"), and during such Relocation Closure Tenant's Rent shall abate. In the event that Tenant is not able to operate in either the original or the relocated Leased Premises during the Relocation Fixturing Period because of the removal and installation of the simulators and other equipment, Rent shall abate until Tenant reopens but in no event after the expiration of the Relocation Fixturing Period. Notwithstanding the foregoing, Tenant may elect to have Landlord construct the relocated space under a new prototype design, but Tenant shall bear the additional costs required as a result of the election of the new design. Landlord recognizes that the installation of simulators is a specialized task for which Tenant's experts will be required and Landlord shall reimburse Tenant for the reasonable internal costs of using Tenant's personnel for the completion of such work. In the event Landlord offers to Tenant at least one alternative location with approximately the same floor area, configuration and at least fifty feet (50') of frontage and Landlord and Tenant are unable to agree on an alternative location, then within thirty (30) days after the expiration of the sixty (60) day period set forth above Landlord shall either (A) terminate this lease by providing ninety (90) days prior notice, which termination shall be effective on the later of (i) ninety (90) days after notice from Landlord of the termination or (ii) the date that Tenant actually vacates the Leased Premises ("Termination Date") or (B) withdraw the request for relocation. In the event *** Confidential treatment requested. 5 10 of such termination, Landlord shall pay to Tenant, within thirty (30) days following the Termination Date, a sum equal to the then unamortized cost of Tenant's leasehold improvements which have been paid for by Tenant, such amortization to be on a straight line basis over the Original Term less the value of all simulators equipment removed by Tenant for re-use plus all reasonable costs associated with the moving and storage for up to three (3) months of the simulators and other equipment in the Leased Premises, provided Tenant shall furnish to Landlord such backup information as Landlord may reasonably require. Tenant shall deliver possession of the Leased Premises to Landlord on or before the Termination Date and/or the Relocation Date is "as is" condition excepting the provisions of Sections 3.5 and 17.1. Tenant shall pay all charges which are due and owing or which shall accrue up to such Termination Date or Relocation Date (which charges shall be paid to Landlord within thirty (30) days of such Termination Date or Relocation Date) and Tenant shall be released from any and all further obligations pursuant to this Lease accruing after such Termination Date or Relocation Date with respect to the vacated Leased Premises, except as otherwise provided in Articles V and VII; however, in the event of relocation, Tenant shall remain liable for all obligations accruing under this Lease after the Relocation Date. (c) The square footage of the Leased Premises (sometimes herein referred to as the gross leasable floor area or GLA) shall be measured as defined in Exhibit B. The actual square footage in the Leased Premises shall be determined by Landlord's architect. If Tenant disagrees with the square footage so determined, Tenant may advise Landlord in writing within ten (10) days that it contests the same and retain an architect to remeasure the Leased Premises. If Landlord's architect and Tenant's architect do not agree, then the two architects shall retain a third architect whose decision shall be final and binding. The agreed to square footage shall be binding upon both parties hereto, and such determined square footage shall be used in all calculations based on square footage throughout this Lease. If the floor area determined in accordance with the preceding sentence varies from the square foot floor area originally set forth in the Data Sheet, the Minimum Rent set forth in Section 2.1 hereof shall be adjusted by multiplying the Minimum Rent by a fraction, the numerator of which is the square foot floor area determined by Landlord's architect and the denominator of which is the square foot floor area originally set forth in the Data Sheet, and Tenant shall be obligated to pay such Minimum Rent, as adjusted, from the Commencement Date, subject to further adjustments as provided in this Lease but in no event shall Tenant be obligated to pay Minimum Rent on more than one hundred ten (110) additional square feet of GLA. Each monthly installment provided for in Section 2.1 shall be recomputed and shall be that dollar amount which results from dividing the adjusted Minimum Rent by twelve (12). Any and all references in this Lease to Minimum Rent (or the monthly installments thereof) shall be deemed to be references to the Minimum Rent as computed by application of this Section 1.1, subject, however, to the adjustments set forth elsewhere in this Lease. For purposes of this Lease, in determining the gross leasable floor area or the gross leased and occupied floor area of the Shopping Center, there shall be excluded therefrom project areas and offices, common areas and/or areas under Landlord's control (e.g., electrical/utility rooms, etc.). The exterior walls, roof, storefront and the area beneath the Leased Premises are not demised hereunder, and the use thereof, together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires, people counters, tunnels, sewers and structural elements leading through the Leased Premises in locations which will not materially interfere with Tenant's use thereof and serving other parts of the Retail Development are hereby reserved to Landlord. Landlord reserves an easement above Tenant's finished ceiling or light line to the roof for general access purposes and in connection with the exercise of Landlord's other rights under this Lease. Notwithstanding anything contained in this Lease to the contrary, if as a result of Landlord's exercise of the foregoing rights Tenant is prevented from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. SECTION 1.2 TERM. The Term of this Lease shall be for a period commencing on the Commencement Date, and expiring at 11:59 p.m. local time on the final day of the month in which the Original Term or the Option Period, if exercised, expires or other specified date as set forth in the Date Sheet unless sooner terminated in accordance with the provisions hereof (the "Expiration Date"). Unless otherwise specified in this Lease, the use of the word "Term" shall be deemed to include both the Original Term and the Option Period, if exercised. The term "full year" and "year" as used in this Lease shall mean consecutive periods of twelve (12) months each following the Commencement Date. For all purposes of this Lease, the term "Lease Year" shall have the following 6 11 meaning: the first Lease Year shall be a period beginning with the Commencement Date and ending on the 31st day of December next following the Commencement Date, and after the first Lease Year, the term Lease Year shall mean a fiscal period of twelve (12) consecutive calendar months commencing on January 1 of each calendar year, except that the last Lease Year shall terminate on the Expiration Date or sooner termination of this Lease. Lease Years containing 365 days or more shall be referred to as "full Lease Years." If the Leased Premises are not delivered to Tenant on or before the expiration of twelve (12) months after the date of Landlord's execution of this Lease then either party may cancel and terminate this Lease upon sixty (60) days prior written notice to the other, in which event neither party shall have any further obligation or liability to the other; provided, however, that if Landlord has commenced construction of the Shopping Center, then Landlord shall not be permitted to terminate in the foregoing manner. Following the Commencement Date of this Lease, Landlord may submit to Tenant a Commencement and Expiration Date Declaration in the form attached hereto as Exhibit F, specifying the information called for in said form, and Tenant shall execute such Declaration within thirty (30) days following submission for purposes of certifying such information; provided, however, that the Declaration shall not be rendered ineffective by Tenant's to execute same. Provided Tenant is not default (after expiration of any cure or grace period provided herein as of the date of exercise hereof, Tenant shall have the option to extend the Term hereof (the "Option") for one (1) additional period of five (5) years (the "Option Period"). The Option shall be exercised, if at all, by written notice to Landlord ("Notice") at least one hundred eighty (180) days prior to the expiration of the Original Term. All terms and conditions of this Lease shall apply during the Option Period except the Minimum Rent and Sales Break Points shall be as scheduled in Section 2.1 and 2.2 hereof. In the event that Tenant does not exercise the Option by the required date, then such Option shall become null and void and be of no further force or effect. In addition, if this Lease is transferred or assigned, in whole or in part, as permitted in Section 11.1 hereof, or if the Leased Premises or any part thereof be sublet or occupied by any person or entity other than Tenant, then such Option shall become null and void and be of no further force or effect, unless the Lease has been transferred with the prior written consent of Landlord or pursuant to a transfer of substantially all of the assets of Tenant not requiring the approval or consent of Landlord. If Tenant's Gross Sales during the twelve (12) month period ending two hundred ten (210) days prior to the Expiration Date do not exceed [***] per square foot of floor area in the Leased Premises, then any Notice by Tenant of the Option shall be null and void and Tenant's Notice shall have no force or effect. Tenant shall furnish to Landlord, concurrently with its Notice, a statement certified by an authorized representative or financial officer of Tenant setting forth the amount of Tenant's Gross Sales for the said twelve (12) month period. Notwithstanding the foregoing, in the event Tenant does not achieve Gross Sales (as hereinafter defined) of at least [***] per square foot during the third year of the Term hereof, then Landlord and Tenant, for a period of thirty (30) days following the end of the third year, shall each have the option, upon one hundred eighty (180) days prior written notice to the other party, of terminating this Lease ("Termination Option") provided, however, that Tenant shall not be entitled to terminate this Lease if Tenant is in default of this Lease. In the event Tenant fails to submit a certified report of annual Gross Sales within twenty (20) days after written notice of its failure to submit such report within the time period required pursuant to Section 2.2 of this Lease, then Landlord may use such information as Landlord shall have available to permit Landlord to make a determination as to the amount of Gross Sales achieved by Tenant during the period covered by Landlord's option to terminate, and such information shall be the basis for Landlord exercising its Termination Option and Tenant shall not be permitted to reinstate this Lease after termination for any reason or cause whatsoever, including, but not limited to, the submittal by Tenant of a subsequent sales report either certified or uncertified. In the event that neither party exercises its Termination Option within the required time period, then each such Termination Option shall, upon expiration of the applicable period, become null and void and be of no further force or effect. In the event either party exercises the foregoing Termination Option within the required time period, this Lease shall terminate upon expiration of the one hundred eighty (180) day period subject, however, to the payment by Tenant to Landlord of all sums then due and owing or having accrued to Landlord. In the event that Tenant exercises the Termination Option provided for herein, Tenant shall pay to Landlord the unamortized portion of the Construction Allowance (as hereinafter defined). *** Confidential treatment requested. 7 12 In the event that Tenant can prove that Tenant's Gross Sales are below [***] per square foot as the result of an act or omission on the part of Landlord, then Landlord shall not be permitted to exercise the Termination Option provided in the immediately preceding paragraph. SECTION 1.3 OPENING. Subject to delays as described in Article XVI, Tenant covenants and agrees to complete its construction within the Leased Premises in accordance with the provisions of this Lease, to satisfy the requirements for issuance of a certificate of acceptance pursuant to Exhibit D attached hereto and made a part hereof, and to open its store for business to the public not later than the Commencement Date. Notwithstanding the foregoing, Landlord hereby notifies Tenant that the anticipated date of the grand opening of the Shopping Center (the "Grand Opening") is the date set forth on the Data Sheet, Tenant shall be obligated to open its store for business to the public on or before the later of (A) the expiration of the Fixturing Period or (B) the Grand Opening. Tenant shall not be permitted to open for business to the public prior to the Grand Opening without the prior written consent of Landlord which consent shall be at Landlord's sole discretion. SECTION 1.4 LATE OPENING. In the event Tenant shall fail to open its store for business to the public upon the Commencement Date for reasons other than Delays, as described in Article XVI, or delays created by Landlord, then in order to compensate Landlord for its loss, Tenant shall pay to Landlord as additional rent (as defined in Section 2.3) over and above the Minimum Rent and all other charges to be paid by Tenant to Landlord pursuant to this Lease, a sum in an amount equal to [***] per day for the Commencement Date and each day after the Commencement Date that Tenant shall have failed to open its store for business. This remedy shall be in addition to any and all other remedies provided for in this Lease in the event of such failure to open. Such additional late opening rent shall be deemed to be in lieu of any Percentage Rent that might have been earned during the period of Tenant's failure to open. ARTICLE II RENT AND DEPOSIT SECTION 2.1. MINIMUM RENT. During the entire Term of this Lease, Tenant shall pay annual minimum rental ("Minimum Rent") for the Leased Premises from the Commencement Date of this Lease in the amount set forth in the Data Sheet attached hereto, which sum shall be payable by Tenant in equal consecutive monthly installments in the sum set forth in the Data Sheet attached hereto, on or before the first day of each month, in advance. The Minimum Rent and each of the monthly installments called for hereunder shall be payable to Landlord, without demand, deduction, set-off or counter-claim, except as otherwise provided herein or permitted by applicable law. The first installment of Minimum Rent shall be paid by Tenant on or before the Commencement Date. If the Commencement Date occurs on other than the first day of a month, the second installment of Minimum Rent shall be prorated at a daily rate on the basis of a thirty (30) day month. On the Commencement Date, if either of the following conditions have not been satisfied: (1) at least five (5) Major Tenants are open or ready to open for business; or (2) the "Required Occupancy Level" (as hereinafter defined) has been achieved, then Tenant's obligation for payment of Minimum Rent shall abate and Tenant shall pay to Landlord, in lieu thereof, Interim Rent on the basis of the lesser of (A) the [***] and (B) [***] of all of Tenant's Gross Sales (as defined in Section 2.2 of this Lease) until both of the conditions in (1) and (2) above have been initially satisfied; provided, however, Tenant shall not be entitled to such abatement of Minimum Rent if Tenant fails to open its store in the Leased Premises to the general public on or before the Commencement Date of the Term hereof or if Tenant shall otherwise be in default of this Lease. Said Interim Rent shall be paid to Landlord within ten (10) days following the end of each calendar month, at which time Tenant shall also be required to submit an unaudited statement of Tenant's Gross Sales for such calendar month and for the Lease Year to date. All other terms and *** Confidential treatment requested. 8 13 conditions of this Lease shall be applicable during such period. For purposes of this paragraph, the term 'Required Occupancy Level' shall mean occupants of at least sixty-five percent (65%) of the gross leasable floor area of the Shopping Center are open for business, or instead, at Landlord's sole option. 'Required Occupancy Level' shall mean sixty five percent (65%) of the total number of stores shown on the then existing lease plan for the Shopping Center, are occupied and are not open or ready to open for business. In addition, Landlord hereby represents and warrants to Tenant that it has a fully executed lease for a Bass Pro facility, Jillian's and a multi-plex theater at the Retail Development ("Key Stores"). In the event that less than two of the Key Stores have opened for business within six (6) months of the Commencement Date then Tenant's obligation for payment of Minimum Rent shall abate and Tenant shall pay to Landlord, in lieu thereof, Interim Rent on the basis of the lesser of (A) the scheduled Minimum Rent and (B) four percent (4%) of all of Tenant's Gross Sales (as defined in Section 2.2 of this Lease) until at least two (2) of the Key Stores are initially open for business; provided, however, Tenant shall not be entitled to such abatement of Minimum Rent if Tenant fails to open its store in the Leased Premises to the general public on or before the Commencement Date or if Tenant shall otherwise be in default of this Lease. Said Interim Rent shall be paid to Landlord within ten (10) days following the end of each calendar month, at which time Tenant shall also be required to submit an unaudited statement of Tenant's Gross Sales for such calendar month and for the Lease Year to date. All other terms and conditions of this Lease shall be applicable during such period. In the event that at least two (2) of the Key Stores have not initially opened for business within eighteen (18) months after the Commencement Date, then at the end of such eighteen (18) month period, Tenant may elect to terminate this Lease by providing Landlord within thirty (30) days of the end of such eighteen (18) month period, written notice of its intention to so terminate the Lease ("Key Store Termination Notice") or Tenant may elect to remain in the Lease Premises but must commence paying the then applicable scheduled Minimum Rent as provided for in the Data Sheet of this Lease. In the event that Tenant timely delivers the Key Store Termination Notice, this Lease shall terminate one hundred and eighty (180) days from the date of the Key Store Termination Notice or on such earlier date as may be mutually agreed to between the parties and this Lease and all of the unaccrued rights and obligations of the parties to it shall cease and terminate, as fully and effectively as though the date agreed to were the Expiration Date. In such event, Landlord and Tenant shall execute a Termination Agreement setting forth the terms of such termination. SECTION 2.2. PERCENTAGE RENT. (a) During and for each Lease Year, Tenant shall pay annual percentage rent ("Percentage Rent") equal to the Percentage Factor (see Data Sheet) multiplied by all "Gross Sales" resulting from business conducted in, on or from the Leased Premises during such Lease Year in excess of the applicable Sales Break Point set forth in the Data Sheet. In any Lease Year where there is more than one applicable Sales Break Point, for purposes of computing annual Percentage Rent the following calculation shall be used: each Sales Break Point which was effective during any such Lease Year shall be multiplied by a fraction, the numerator of which is the number of days in the Lease Year that such Sales Break Point was effective and the denominator of which is the actual number of days in such Lease Year (herein the "Adjusted Break Point") and the sum of the Adjusted Break Point for such Lease Year. "Gross Sales" is defined to mean the total amount of the actual sales price, whether for cash or otherwise, of all sales of merchandise or services arising out of or payable on account of (and all other receipts or amounts receivable whatsoever with respect to) all the business conducted in, on, or from the Lease Premises by or on account of Tenant or any sublessee, assignee or concessionaire of Tenant for cash or otherwise, including all orders for merchandise taken from or filled at or from the Leased Premises, including all deposits not refunded to customers. A "sale" shall be deemed to have been consummated for purposes of this Lease, and the entire amount of the sale price shall be included in Gross Sales, at such time as (i) the transaction is initially reflected in the books or records of Tenant, or any sublessee, assignee or concessionaire of Tenant, or (ii) Tenant or such other entity receives all or any portion of the sales price, or (iii) the applicable goods or services are delivered to the customer, whichever first occurs. Tenant shall record at the time of each sale or transaction, in the presence of the customer, all receipts from such sale or other transaction, whether for cash, credit or otherwise, in a cash register or cash registers having a cumulative total, which shall be sealed in a manner approved by Landlord and which shall possess such other features as shall be required by Landlord. There shall be no deduction allowed for direct 9 14 or indirect discounts, rebates, or other reductions on sales, unless generally offered to the public on a uniform basis. Tenant may deduct from Gross Sales discount sales to employees, bad debts when written off the books of Tenant and charges paid to credit card companies, as otherwise provided below. Tenant may also exclude from Gross Sales any transfer of goods between Tenant's other stores and returns to shippers or manufacturers. The term "Gross Sales" shall exclude, however, proceeds from any sales tax, gross receipts tax or similar tax, by whatever name called which are separately stated and in addition to the purchase price, bona fide transfers of merchandise from the Leased Premises to any other stores or warehouses of Tenant, refunds given to customers for merchandise purchased at the Leased Premises and returned or exchanged, and sales of Tenant's fixtures and equipment not in the ordinary course of Tenant's business. The term "merchandise" as used in this Lease shall include food and beverages if Tenant is permitted to sell such items pursuant to Section 4.1 hereof. The term "Gross Sales" shall not include, however, the following: (i) the sales price of all merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon; (ii) the sums and credits received in settlement of claims for loss or damage to merchandise; (iii) the consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee; (iv) sales taxes, so-called luxury taxes, excise taxes, gross receipt taxes, and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of the merchandise or services and collected from customers or included in the retail selling price; (v) receipts from public telephones, vending machines, sales of money orders, and the collection of public utility bills; (vi) bankcard discounts (e.g., Visa, MasterCard, etc.), interest, carrying charges, or other finance charges in respect of sales made on credit; (vii) sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail; (viii) sales to senior citizens at discount; (ix) revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers; (x) Tenant's accounts receivable, not to exceed [***] of Gross Sales, which have been determined to be uncollectible for federal income tax purposes during the applicable lease year, provided, however, that if such accounts are actually collected in a later lease year, the amount shall be included in the Gross Sales for such later lease year; (xi) rents, subrents or other consideration received in connection with a permitted assignment, sublease, license, concession or other transfer of any portion of the store (however, Gross Sales of any such transferee shall be included) and license fees otherwise received by Tenant in connection with a third party license agreement; (xii) amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in the store; (xiii) discounts given for promotional coupons that are redeemed from time to time; (xiv) amounts received in connection with remote site promotional activities; (xv) promotional fees earned by Tenant with respect to goods or services offered for sale; and (xvi) amount required to be paid by Tenant under any agreement related to Tenant's use of the NASCAR name, not to exceed [***] of Gross Sales. (b) Tenant shall keep at the Leased Premises or at Tenant's executive offices within the continental United States a full and accurate set of books and records adequately showing the amount of Gross Sales in each Lease Year. The books and records to be kept by Tenant shall include, without limitation, (i) cash register tapes, including tapes from temporary registers; (ii) serially prenumbered sales slips; (iii) detailed original records of any exclusions or deductions from Gross Sales; (iv) sales tax records; and (v) such other records, if any, would normally be examined by an independent accountant pursuant to accepted auditing standards in performing an audit of Tenant's sales. Such books and records shall be kept in accordance with generally accepted accounting principles and practices, may be saved in microfiche or an electronic storage medium, and shall be retained by Tenant for a period of not less than two (2) years following the end of the Lease Year to which they have reference. When and as Landlord may reasonably require (but no more than once per Lease Year following the first Lease Year (if the first year is a partial Lease Year) unless required by the city, county or State), Tenant shall also furnish to Landlord any and all statements, information, and copies of sales reports and returns which separately show financial data for the Leased Premises, and inventory records and other data evidencing Gross Sales. Within twenty (20) days following the end of each calendar month of the Term *** Confidential treatment requested. 15 hereof Tenant shall submit to Landlord an unaudited statement of Gross Sales for such calendar month. Within twenty (20) days following the end of the month in which Tenant's Gross Sales for the Lease Year to date exceed the Sales Break Point, and each month thereafter, Tenant shall pay to Landlord Percentage Rent and shall submit to Landlord a statement certified by Tenant setting forth the Gross Sales for each such period. Within forty-five (45) days after the close of each Lease Year, Tenant shall furnish to Landlord a statement certified by an authorized representative or financial officer of Tenant setting forth amount of Gross Sales during such Lease Year and showing the amount of Percentage Rent required to be paid by Tenant for such Lease Year. The full amount of the Percentage Rent due shall be paid to Landlord no later than sixty (60) days after the end of each Lease Year and any excess Percentage Rent paid shall be credited against Tenant's next due Rent payment, except for the final Lease Year of the Term for which any excess shall be refunded to Tenant. Landlord and/or Landlord's auditor shall have the right, at any time after thirty (30) business days notice but no more than once per Lease Year after the first Lease Year (if the first Lease Year is a partial Lease Year), to inspect and/or audit the records of Tenant relating to Gross Sales. If the Gross Sales exceed those reported, Tenant shall immediately pay any deficiency in Percentage Rent owing to Landlord. If Gross Sales vary from those reported by [***] or more, Tenant shall pay Landlord's cost of inspection and audit. If Gross Sales vary from those reported by (i) [***] or more in any [***] Lease Year, or (ii) [***] or more for any [***] Lease Years out of any [***] Lease Years, then Landlord shall have the right, at its sole option, to terminate this Lease, with Tenant remaining liable for sums due and owing under this Lease for the balance of the Term provided, however, that Landlord shall be permitted to terminate this Lease if Landlord can prove that such misstatement was a deliberate act. Tenant agrees that in the event Tenant shall fail to timely submit a Gross Sales statement as required by this Section 2.2.(b), Tenant shall pay on demand a late fee of [***] per late statement, as additional rent. (c) In the event that Tenant shall fail to operate its business in the Leased Premises in the manner and on each day as required pursuant to Article IV hereof, then, for the purpose of computing the Percentage Rent for such Lease affected by Tenant's failure to operate, the Sales Break Point for such Lease Year shall be adjusted by multiplying the Sales Break Point otherwise applicable for such Lease Year by a fraction, the numerator of which shall be the actual number of days in such short Lease Year or the actual number of days in such Lease Year during which Tenant was open for business and operating in accordance with Article IV, and the denominator of which shall be "360". In the event that the first Lease Year is less than six (6) months in length, then the Percentage Rent covering such Lease Year shall be paid on Gross Sales in excess of the Sales Break Point computed on a pro rated basis for the period beginning on the Commencement Date of the Term and ending on the succeeding December 31st. (d) *** Confidential treatment requested. 11 16 SECTION 2.3. PAYMENTS BY TENANT. Throughout the Term of this Lease. Tenant shall pay to Landlord without demands, deductions, set-offs or counterclaims (except as otherwise provided for herein or permitted by applicable law), the Rent, which is hereby defined as the sum of the Minimum Rent, Percentage Rent and all additional rent, when and as the same shall be due and payable hereunder. Unless otherwise stated, all sums of money or charges of any kind or nature, in addition to Minimum Rent and Percentage Rent, payable by Tenant to Landlord pursuant to this Lease or the Exhibits attached hereto are defined as "additional rent" and are due thirty (30) days after the rendering of an invoice therefor, without any deductions, set-offs or counterclaims, and failure to pay such sums of money or charges shall carry the same consequences as Tenant's failure to pay Rent. All payments and charges required to be made by Tenant to Landlord hereunder shall be payable in United States funds, at the address indicated on page 1 of this Lease, unless otherwise specified by written notice from Landlord to Tenant. No payment by Tenant or receipt by Landlord of a lesser amount than the correct Rent shall be deemed to be other than a payment on account and no endorsement or statement on any check or other communication accompanying a check for payment of any amounts payable hereunder shall be deemed an accord and satisfaction, and Landlord may accept such check in payment without prejudice to Landlord's right to recover the balance of any sums owed by Tenant hereunder or to pursue any other remedy available in this Lease, or under law, against Tenant. SECTION 2.4. SECURITY DEPOSIT. The amount set forth in the Data Sheet as a security deposit is payable by Tenant to Landlord upon Tenant's execution of this Lease, which sum shall be held by Landlord as security against any default by Tenant in the performance of the covenants, conditions and agreements of this Lease. The security deposit may, at Landlord's option, be applied by Landlord against any default in any of the terms, provisions or conditions of this Lease. Landlord shall not be obligated to keep such security deposit in a separate fund but may commingle the security deposit with its own funds. A mortgagee-in- possession of the Leased Premises, or any interest therein, through public or private foreclosure or the acceptance of deed in lieu thereof, shall have no liability to Tenant for return of all or any portion of the security deposit, unless, and then only to the extent that, such mortgagee has actually received all or any portion of Tenant's security deposit. In the event Landlord applies the security deposit in whole or in part against a default by Tenant, Tenant shall, upon demand by Landlord, deposit sufficient funds to maintain the security deposit in the initial amount. The failure of Tenant to maintain the security deposit in the initial amount as stated shall constitute a failure to pay Rent and shall carry with it the consequences set forth under Article XIV hereof. Upon the expiration of the Term hereof, the security deposit, if not applied toward the payment of Rent in arrears or toward the payment of damages suffered by Landlord by reason of Tenant's breach of this Lease, is to be returned to Tenant without interest, except as provided by law, but in no event is such security deposit to be returned until Tenant has vacated the Leased Premises, delivered possession thereof to Landlord, and fully satisfied Tenant's obligations under this Lease. Notwithstanding the acceptance by Landlord of Tenant's security deposit, this Lease shall not be deemed effective until the Effective Date (as defined in Section 20.20). SECTION 2.5. LATE CHARGE. In the event any Rent or sums required hereunder to be paid are not received on or before the fifth (5th) calendar day after the same are due, then, for each and every late payment, Tenant shall immediately pay, as additional rent, a late charge equal to the greater of (a) [***], (b) [***] per day for each day after the date due that such payment has not been received by Landlord or (c) [***] per month of the total receivable balance of Tenant outstanding. In the event of Tenant's failure to pay the foregoing late charge, Landlord may deduct said charge from the Security Deposit set forth in Section 2.4 hereof. The provisions herein for late charges shall not be construed to extend the date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligation to pay all such sums at the time or times herein stipulated. Notwithstanding the imposition of such late charges pursuant to this Section 2.5, Tenant shall be in default under this *** Confidential treatment requested. 12 17 Lease if any or all payments required to be made by Tenant are not made on or before the time due and as stipulated in Article XIV, and neither the demand for, nor collection by, Landlord of such late charges shall be construed as a cure of such default on the part of Tenant. It is agreed that the said late charge is a fair and reasonable charge under the circumstances and shall not be construed as interest on a debt payment. If the event any charge imposed hereunder or under any other section of this Lease is either stated to be or construed as interest, then no such interest charge shall be calculated at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Lease. ARTICLE III PREPARATION OF LEASED PREMISES SECTION 3.1. LANDLORD'S WORK. Landlord shall construct the building wherein the Leased Premises are to be located and perform the work described in Exhibit C attached hereto and made a part hereof ("Landlord's Work") at Landlord's cost and expense, except as otherwise provided in Exhibit C. Landlord's work shall be completed in a good and workmanlike manner, free of material defects and in compliance with applicable building codes, and zoning and subdivision laws relating to general retail use. All work, in excess of the work described in Exhibit C, done by Landlord at Tenant's written request shall be paid for by Tenant within thirty (30) days after the presentation to Tenant of a bill for such work. Any items of Landlord's Work which are not completed as of delivery of possession shall be identified by Tenant on a punch list to be submitted to Landlord within thirty (30) days after the date of possession and Landlord shall thereafter complete the same. Any items of Landlord's Work which are not timely identified on such a punch list shall be deemed completed, other than latent defects as provided for in Section 6.1 hereof. SECTION 3.2. DELIVERY OF POSSESSION (a) Landlord, or Landlord's supervising architect, shall give Tenant at least thirty (30) days' prior written notice of the date on which Landlord's Work will be substantially completed in accordance with Exhibit C and the Leased Premises will be available for the performance of Tenant's Work (as defined in Section 3.3) to the extent that Tenant shall be able to perform its work in the Leased Premises without substantial interference resulting from the conduct of Landlord's Work ("Delivery of Possession Date"). Tenant covenants and agrees to take physical possession of the Leased Premises on the Delivery of Possession Date provided that Landlord's Work is "substantially completed." The term "substantially complete" shall mean that Landlord can give Tenant beneficial occupancy of the Leased Premises so that Tenant can begin the performance of Tenant's Work in safety. Landlord and Tenant acknowledge that Landlord and Tenant will be working simultaneously to complete the Leased Premises and that Landlord will be continuing the completion of Landlord's Work during the thirty (30) day period after the Delivery of Possession Date. Landlord and Tenant agree to cooperate so as to avoid interference with each other so that Landlord's Work and Tenant's Work may be completed in a timely manner. The Delivery of Possession Date shall be subsequently confirmed by Landlord, or Landlord's supervising architect, by written notice to Tenant. Failure of Landlord to deliver possession of the Leased Premises within the time and in the condition provided for in this Lease will not give rise to any claim for damages by Tenant against Landlord or permit Tenant to rescind or terminate this Lease except as may be provided in Section 1.2 hereof. (b) Tenant may, provided Tenant shall not interfere with the conduct of Landlord's Work, and subject to Landlord's reasonable rules and regulations, enter the Leased Premises during normal working hours during the course of Landlord's Work for the purpose of inspecting the Leased Premises and making measurements. At such time prior to the Delivery of Possession Date that Landlord's Work has progressed sufficiently to permit Tenant to perform its work without interfering with Landlord's Work, Landlord may, but shall not be required to, notify Tenant of the same, and 13 18 Tenant may then enter the Leased Premises in order to begin to install its store fixtures and perform such other work as may be required under the provisions of this Lease in order to ready the store for opening. Throughout the period of Tenant's Work, Tenant shall schedule it work so as not to interfere with any work being performed by Landlord or by any other tenant in the Shopping Center. SECTION 3.3. TENANT'S WORK. (a) Tenant agrees, prior to the commencement of the Term of this Lease, [***], to diligently perform all work of whatever nature in accordance with Tenant's obligations set forth in Exhibit D ("Tenant's Work") and all other related work necessary to prepare for the opening to the public of Tenant's store in the Lease Premises in accordance with the provisions of this Lease. Tenant agrees to furnish to Landlord the Store Design Drawings and Working Drawings and Specifications with respect to the Leased Premises prepared in the manner and within the time period required in Exhibit D. If such Store Design Drawings or Working Drawings and Specifications are not furnished by Tenant to Landlord within the required time period(s) in form to permit approval by Landlord, then the Fixturing Period (as described in the Data Sheet) shall be reduced by [***] of delay by Tenant in submitting said Store Design Drawings or Working Drawings and Specifications. Landlord shall respond to such Store Design Drawings or Working Drawings and Specifications submitted by Tenant pursuant to this Lease within [***] business days following Landlord's receipt from Tenant. In the event of Landlord's failure to respond within such [***] business day period or there are other delays created by Landlord, the Fixing Period as described in the Delta Sheet shall be extended by [***] of additional delay by Landlord. No material deviations from the final Store Design Drawings or Working Drawings and Specifications, once approved by Landlord, shall be permitted unless necessary to comply with applicable governmental requirements or unless otherwise approved by Landlord. Landlord's approval of Tenant's Store Design Drawings and Working Drawings and Specifications shall not constitute the assumption of such items. Tenant's Work shall include the installations of fixtures and equipment and the stocking of the Leased Premises with suitable merchandise. Tenant covenants that all such fixtures and equipment visible to customers shall be new (or like-new) and otherwise reasonably acceptable to Landlord in appearance. In addition to conforming to the requirements specified in Exhibit D, all work performed by Tenant shall comply with such rules and regulations as Landlord and its representatives may make, provided that such rules and regulations are uniformly applied to all similarly situated Shopping Center tenants under construction. Unless Landlord otherwise directs in writing, Tenant shall not open the Leased Premises for business until all construction has been completed pursuant to the provisions of Exhibit D. It is further understood and agreed that: (i) Landlord shall have no responsibility or liability whatsoever for any loss of, or damage to, any fixtures, equipment, merchandise, or other property belonging to Tenant, installed or left in the Leased Premises except to the extent resulting from the negligence or intentional acts or Landlord, its agents or employees; and (ii) Tenant's entry upon and occupancy of the Leased Premises prior to the Commencement Date shall be governed by and subject to all the provisions, covenants and conditions of this Lease. Tenant shall obtain at its sole cost and immediately thereafter furnish to Landlord all certificates and approvals with respect to work done and installations made by Tenant that may be required for the issuance of a certificate of occupancy for the Leased Premises, so that such certificate of occupancy shall be issued and the Leased Premises shall be ready for the opening of Tenant's business on the Commencement Date. Upon the issuance of the certificate of occupancy, a copy thereof shall be immediately delivered to Landlord. Promptly upon the completion of its work, Tenant, at Tenant's cost, shall repair, clean and restore all portions of the Shopping Center affected by Tenant's Work to their prior condition. To the extent approved by the proper governing authorities, Tenant shall have the right to install atop the roof of Landlord's building in which the Leased Premises are located one (1) antenna and/or (1) satellite dish and the equipment necessary for Tenant's communications and data transmission network system. The satellite dish shall not be larger than five (5) feet in diameter. The antenna or satellite dish on such roof shall be at a location designated by Landlord and reasonably approved by Tenant. Tenant shall submit to Landlord for its approval plans for the installation of such antenna or satellite dish and necessary equipment, such approval not to be unreasonably withheld, delayed, or conditioned. Tenant shall also provide Landlord with copies of all permits required by the proper governmental authorities regarding such installation, which shall be obtained by Tenant at its sole cost and expense. Landlord's contractor shall cut the roof and patch it (if necessary) at Tenant's expense, and Tenant's contractor shall be subject to Landlord's prior *** Confidential treatment requested. 14 19 approval, which approval shall not be unreasonably withheld, delayed, or conditioned. Tenant shall be responsible for the cost of repairing any damage to Landlord's building arising from such installation, except to the extent caused by Landlord's contractors. Upon prior written notice to Landlord (except in case of an emergency), Tenant shall have access to the antenna or satellite dish and related equipment for the purpose of maintaining, repairing and operating the antenna or satellite dish. Any utility costs related to the installation and operating of the antenna or satellite dish shall be the sole responsibility of Tenant. Provided Tenant is not in default hereof, Landlord hereby agrees to contribute towards the cost of Tenant's Work a Construction Allowance of [***] per square foot of floor area in the Leased Premises. The aforesaid Construction Allowance shall be paid as follows: fifty percent (50%) after two-thirds (2/3) of Tenant's Work is completed; forty percent (40%) upon the opening of the Leased Premises for business; and ten percent (10%) upon receipt of the Certificate of Occupancy and the applicable lien waivers from all contractors and subcontractors. In the event that this Lease is terminated prior to the expiration of the Term hereof as a result of a default on the part of Tenant, Tenant shall repay said Construction Allowance to Landlord in cash upon termination; provided, however, that Tenant's liability for said Construction Allowance shall be reduced at the rate of one-sixtieth (1/60th) at the end of each full calendar month during the Term hereof. (b) The interest of Landlord in the Leased Premises and the Retail Development shall not be subject to liens for improvements made by or on behalf of Tenant. Nothing contained in this Lease shall be construed as a consent on the part of Landlord to subject Landlord's estate in the Leased Premises or the Retail Development to any lien or liability under applicable law. In the event that any mechanic's, materialman's or other lien or any notices of claim, including without limitation, stop notices (herein "lien") is filed against the Leased Premises or Retail Development as a result of any work, labor, services or material performed or furnished, or alleged to have been performed or furnished to or for Tenant (excluding work performed by or on behalf of Landlord) or to or for anyone holding the Leased Premises through or under Tenant, Tenant, at its expense, shall cause the lien to be discharged or fully bonded to the satisfaction of Landlord within thirty (30) days after notice of the filing thereof. If Tenant fails to discharge or bond against such mechanic's, materialman's or other lien, Landlord may, in addition to any other remedies Landlord may have, but without obligation to do so, bond against or pay the lien without inquiring into the validity or merits of such lien and all sums so advanced, including reasonable attorney fees incurred by Landlord in defending against such lien, procuring the bond or in the discharge of such lien, shall be paid by Tenant on demand as additional rent. It shall be Tenant's continuing obligation to keep and maintain the Leased Premises and all other parts of the Retail Development free from any and all liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant in connection with the Leased Premises. In addition, Tenant shall replace any bonds posted by Landlord pursuant hereto with a suitable bond of equivalent amount within twenty (20) days after Landlord's demand therefor. (c) During the Term of this Lease, Tenant agrees to repair, refurbish or replace the interior portions of the Leased Premises that are visibly worn or damaged so as to maintain the condition of the Shopping Center as a first class super-regional discount specialty retail mall. SECTION 3.4. ALTERATIONS BY TENANT. Tenant shall not make or cause to be made any alterations, repairs, additions or improvements in or to the Leased Premises (for example, but without limiting the generality of the foregoing. Tenant shall not install or cause to be installed any *** Confidential treatment requested. 15 20 exterior signs or interior signs visible from the exterior except as permitted by Section 4.3 hereof, floor covering, interior or exterior lighting, plumbing fixtures, shades, canopies or awnings or make any changes to the storefront, mechanical, electrical or sprinkler systems) without the prior written consent thereto by Landlord. Tenant shall submit to Landlord plans and specifications for such work at the time consent is sought, in accordance with the criteria and procedures as provided in Exhibit D. In the event Landlord grants such consent, such alterations, repairs, additions or improvements shall be performed in good and workmanlike manner and in accordance with all applicable legal and insurance requirements and all drawings or specifications approved by Landlord, and in accordance with the provisions of this Lease, including the provisions of Section 3.3 governing construction of the Leased Premises. Any work performed by Tenant shall be subject to Landlord's inspection and approval after completion to determine whether the same complies with the requirements of this Lease. Prior to the commencement of any such work by Tenant, Tenant shall obtain the insurance required in Section 8.2. Tenant may from time to time make non-structural alterations to the Leased Premises without Landlord's prior written approval, the aggregate total of which shall not exceed [***] in any Lease Year; provided, however, that Tenant shall not be permitted to alter the exterior storefront sign or the exterior of the storefront (other than for repairs) without the prior written consent of Landlord, and provided further that any such non-structural alterations shall not change the overall appearance of the Leased Premises as originally approved by Landlord. SECTION 3.5. REMOVAL BY TENANT. All repairs, alterations, decorations, additions and improvements made by Tenant shall be deemed to be attached to the leasehold and to have become the property of Landlord upon such attachment, and, upon the Expiration Date or sooner termination of this Lease, Tenant shall not remove any of such alterations, decorations, additions and improvements; provided that trade fixtures, simulators, and other items noted as "To Be Removed" on Tenant's Construction Documents and Specifications installed by Tenant may be removed if all Rent due herein are paid in full and Tenant is not otherwise in default hereunder; provided further, however, that Landlord may designate by written notice to Tenant given at the time such improvements are installed those alterations, decorations, additions and improvements which shall be removed by Tenant at the Expiration Date or sooner termination of this Lease and Tenant shall, at Tenant's cost, promptly remove the same and repair any damage to the Leased Premises caused by such removal. ARTICLE IV CONDUCT OF BUSINESS SECTION 4.1. USE AND TRADE NAME. Except as otherwise provided herein, Tenant shall continuously use and occupy the Leased Premises during the Term solely for the purpose of conducting the business specifically set forth in the Data Sheet and for no other purpose or purposes. Throughout the Term hereof, Tenant shall (a) operate its business in the Leased Premises under the Trade Name specifically set forth in the Data Sheet and under no other so long as such name shall not be held to be in violation of any applicable law, (b) not change the advertised name or character of the business operated in the Leased Premises, (c) refer to the Shopping Center by name in designating the location of the Leased Premises in all newspaper and other advertising within the Shopping Center market area and in all other references to the location of the Leased Premises, and (d) during the period from the Delivery of Possession Date through sixty (60) days following the Commencement Date, include in all Tenant's newspaper advertising within the Shopping Center market area the designation that Tenant is opening for business in the Shopping Center. If any governmental license(s) or permit(s) shall be required for the proper and lawful conduct of Tenant's business or other activity carried on in the Leased Premises, or if a failure to procure such a license or permit might or would in any way, adversely affect Landlord or the Shopping Center, then Tenant, *** Confidential treatment requested. 16 21 a Tenant's expense, shall duly procure and thereafter maintain such license(s) or permit(s) and submit the same for inspection by Landlord. Tenant, at Tenant's expense, shall at all times, comply with the requirements of such license(s) or permit(s). Except as provided in Section 1.3, Tenant shall open its store in the Leased Premises for business to the public on the Commencement Date, and shall thereafter diligently conduct is regular business operations in the Leased Premises as required by terms of this Lease. No symbol, design, name, mark or insignia adopted by Tenant shall be used without the prior written approval of Tenant. During the Term of this Lease, and provided Tenant shall not be in default hereof, Landlord agrees that Landlord will not lease space in the Retail Development (other than with respect to spaces leased or to be leased to Major Tenants and presently executed non-Major Tenant leases), to any tenant whose primary use is the entertainment use of auto-racing simulators. In addition, with respect to any non-Major Tenant lease, Landlord shall not be permitted to modify any such lease, either through amendment or assignment, so as to permit the occupant of the space leased thereby to have as its primary use the entertainment use of auto-racing simulators. Landlord hereby represents and warrants to Tenant that Tenant's use of the Leased Premises as contemplated in the Data Sheet does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other Tenant of the Shopping Center, and Landlord shall indemnify, defend, protect and hold harmless Tenant from any loss, liability, cost, expense, judgement, action, or claim of any such party arising from the inaccuracy of such representation and warranty. If the trade name of all or substantially all other stores operating under the same trade name as set forth in this Section 4.1 shall be changed, then Tenant, with prior written notice to Landlord, may likewise change its trade name herein set forth to such other name as adopted for all or substantially all such other stores in first class regional malls or super-regional malls. Notwithstanding the foregoing, in no event shall Tenant's trade name duplicate any other trade name in the Retail Development. SECTION 4.2. OPERATION OF BUSINESS. Tenant shall open for business in the Leased Premises and remain open during the entire Term and continuously operate its business in the entire area of the Lease Premises during the entire Term. Tenant shall conduct its business at all times in a high class and reputable manner, maintaining at all times a full staff of employees and a complete stock of merchandise. Tenant shall install and maintain at all times a display of merchandise in the display windows (if any) of the Leased Premises and shall keep the Leased Premises well lighted during all hours that the Shopping Center is open to the public and during such other hours as may be reasonably designated by Landlord but in no event more than one (1) hour after the close of business. In no event shall Tenant conduct or advertise any auction, fire sale, going out of business sale, or bankruptcy sale in or about the Leased Premises without Landlord's prior written consent in each instance, which consent may be withheld by Landlord in its sole and absolute discretion. Tenant shall conduct its business in the Leased Premises in a lawful manner and in good faith during all days and hours specified by Landlord from time to time as the published operating hours for the Shopping Center. Tenant shall not use or allow the Leased Premises to be used for any improper, immoral or objectionable purposes, as determined by Landlord, and Tenant shall not do any act tending to injure the reputation of the Shopping Center as determined by Landlord. Tenant may (but shall not be required), from time to time, upon written notice to Landlord, remain open for business beyond the normal operating hours of the Shopping Center on a daily basis, but such hours of operation shall not extend beyond the time permitted by applicable law or regulations, and in no event beyond the time that is one hour after the release of the last movie from the Theater or 1:00 a.m. whichever is later. In addition, in the event that there is an exterior entrance serving only the Leased Premises, which provides ingress and egress to the general public and such ingress and egress has been approved by the local jurisdiction for non-emergency use, then Tenant shall be permitted to remain open for business during the same days and hours that Jillian's or its replacement is open for business. Tenant agrees to reimburse Landlord for all reasonable costs directly relating to all additional hours of operation beyond the normal operating hours of the Shopping Center, which costs include, without limitation, electricity for parking lot lighting and salaries for security personnel. 17 22 Notwithstanding any provision hereof to the contrary, Tenant shall not be obligated to continuously operate from the Leased Premises during periods in which (i) Tenant is carrying on remodeling activities (but in no event for more than thirty (30) days in any lease year and no more than twice in any five (5) year period), (ii) Tenant is closed for the taking of inventory (but in no event for more than two (2) days in any lease year), (iii) Tenant is unable or reasonably unwilling to operate as a result of casualty or natural disaster, condemnation, interruption of utilities or services, extremely inclement weather, civil unrest, operation of the business would expose Tenant's employees, agents or invitees to an unreasonably risk of physical injury or property damage, or other force majeure events, (iv) Tenant's use and occupancy of the Leased Premises is prohibited by any law, ordinance, order or other act of any judicial governmental or quasi-governmental authority, (v) there exists a substantial and material hardship to Tenant or its employees, provided Tenant's failure to continuously occupy under this clause (v) for any such occurrence shall be excused only for a period of forty-eight (48) hours, (vi) Thanksgiving and Christmas, and (vii) during periods in which the Leased Premises are temporarily closed in connection with group sales activities being conducted and the Leased Premises are temporarily closed to the public (as permitted pursuant to Section 4.1 of the Data Sheet). Landlord hereby consents to Tenant's use of hydraulic oil in connection with the operation of the simulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled and disposed of in accordance with applicable laws. Landlord hereby acknowledges that such materials are approved. Landlord recognizes that Tenant's prototype incorporates an open storefront design. Tenant shall be permitted to incorporate the open storefront element into the design of the Leased Premises provided that Tenant, at Tenant's expense shall construct Tenant Work in a manner that does not cause the ambient noise level in adjacent tenant spaces and common areas to exceed 45 db(A). Similarly, Tenant installed equipment within the Leased Premises shall be isolated in a manner that eliminates the transfer of any and all vibrations to adjacent tenant spaces and common areas. Landlord shall be given the opportunity to review and approve Tenant's intended construction methods to isolate such noise and vibrations, which will be included in Tenant's Store Design Drawings submission (as provided for in Exhibit D). Landlord's review and approval of Tenant's Store Design Drawings shall not relieve Tenant of its obligation to limit the ambient noise level and eliminate the transfer of vibrations as required herein. SECTION 4.3. SIGN. Tenant shall install and maintain one (1) sign affixed to the front of the Leased Premises, subject to the prior written approval of Landlord as to design and location and conforming to all applicable legal and insurance requirements. Tenant's sign shall conform to the specifications and requirements contained in Exhibit E attached hereto. Tenant shall keep its approved storefront sign lighted during all hours that the Shopping Center is open to the public and during such other hours as may be reasonably designated by Landlord but in no event more than one (1) hour after the close of business. Tenant shall pay for all costs in connection with such sign and shall be responsible for the cost of proper installation and removal thereof and any damage caused to the Leased Premises thereby. In the event Landlord deems it necessary to remove such sign, then Landlord shall have the right to do so, provided, however, that if the sign has received Landlord's prior written approval and is consistent with the specifications and requirements of Exhibit E, Landlord shall replace said sign as soon as practicable. Except as mentioned above, Tenant shall not place or cause to be placed, erected or maintained on any exterior door, wall or window of the Leased Premises, or the glass of any window or door of the Leased Premises, or on any sidewalk or within any display window space in the Leased Premises, or within five (5) feet of the front of the storefront lease line or opening, or within any entrance to the Leased Premises, any sign (flashing, moving, hanging, handwritten or otherwise), decal, placard, flashing, moving or hanging lights, lettering or any other advertising matter of any kind or description. No symbol, design, name, mark or insignia adopted by Landlord for the Retail Development shall be used without the prior written approval of Landlord. Any interior signs must be in good taste and prepared professionally (not hand-lettered) so as not to detract from the appearance of the Leased Premises or the Shopping Center. Any sign or display visible from the exterior of the Leased Premises which does not meet the above criteria may be removed at any time by Landlord without Landlord incurring any liability therefor, and without such removal constituting a breach of this Lease or entitling Tenant to claim damages on account thereof. Tenant shall be 18 23 permitted to install a video wall within the Leased Premises (but not within five (5) feet of the storefront leaseline), which video wall may be visible from outside the Leased Premises. Landlord and Tenant agree to use commercially reasonable good faith efforts to cooperate in the development of a storefront design to permit the incorporation of a stock car replica above the storefront so long as the installation complies with applicable codes and is reasonably in keeping with the design criteria for entertainment uses in the Retail Development. SECTION 4.4. TENANT'S WARRANTIES. Tenant warrants, represents, covenants and agrees that, in the operation of its business within the Leased Premises, Tenant shall: (a) pay before delinquency any and all taxes, assessments and public charges levied, assessed or imposed upon Tenant's business, or upon Tenant's fixtures, furnishings or equipment in the Leased Premises, or upon any leasehold interest or personal property of any kind, owned by or placed in or about the Leased Premises by Tenant or by anyone claiming by, through or under Tenant, including, without limitation, any transfer taxes, and pay when and as due all license fees, permit fees and charges of a similar nature required for the conduct by Tenant or any subtenant or concessionaire of any business or undertaking authorized hereunder to be conducted in or from the Leased Premises; (b) observe all reasonable requirements promulgated by Landlord at any time and from time to time relating to delivery vehicles, the delivery of merchandise, and the storage and removal of trash and garbage; (c) not use any space outside the Leased Premises for sale, storage or any other undertaking except as provided herein; (d) not use the plumbing facilities in the Leased Premises for any purpose other than that for which they were constructed, nor dispose of any foreign substances therein; (e) not use any advertising medium or sound devices inside or adjacent to the Leased Premises which produce or transmit sounds which are intended to be audible beyond the interior of the Leased Premises it being expressly understood that Tenant shall be required to soundproof the Leased Premises so as to minimize the impact of the noise created by the Permitted Use on other tenants and patrons of the Retail Development; (f) not permit any odor to emanate from the Leased Premises which is objected to by Landlord or by any tenant or occupant of the Retail Development (and, upon written notice from Landlord, Tenant shall immediately cease and desist from causing such odor, and Landlord may deem the failure by Tenant to do so, a material breach of this Lease); (g) keep the Leased Premises and any platform, loading dock or service area used by Tenant in a neat, clean, safe and sanitary condition; (h) promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction, and observe and comply with all covenants and restrictions of record and all notices from Landlord's mortgagee, affecting or applicable to the Retail Development or affecting or applicable to the Leased Premises or to the cleanliness, safety, occupancy and use of the same, whether or not any such law, ordinance, order, rule, regulation, covenant, restriction, or other requirement is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate structural changes or improvements (provided, however, that Tenant shall not be required to make any structural changes or improvements required pursuant to this Section 4.4(h) with respect to the structural portions of the Leased Premises originally constructed by Landlord, unless such change shall be required by virtue of Tenant's use of the Leased Premises), shall interfere with the use or enjoyment of the Leased Premises, or shall be directed to or imposed upon Tenant or Landlord, and Tenant shall hold Landlord harmless from any and all cost or expense on account thereof (as used in this Lease, the term "legal requirements" shall include the requirements set forth in this subparagraph); (i) not use the parking areas or sidewalks, common areas or any space on or about the Retail Development (outside the Leased Premises) for display, sale, handbilling, advertising, solicitation, or any other similar undertaking; (j) maintain and operate the heating, ventilating and air conditioning system and equipment servicing the Leased Premises so as to adequately heat and cool the same and to maintain at all times, whether or not Tenant is open for business, temperatures in the Leased Premises which will not drain heat or ventilation or air conditioning from the enclosed mall or other interior areas into the Leased Premises and shall not discharge heat, ventilation or air conditioning from the Leased Premises into the enclosed mall or other interior areas; and (k) be authorized to do business in the State, evidence of which must be delivered to Landlord on or before the earlier of (I) the Commencement Date or (II) the date that Tenant opens for business in the Leased Premises. SECTION 4.5. STORAGE AND OFFICE SPACE. Tenant shall store or stock in the Leased Premises only such goods, wares and merchandise as Tenant intends to offer for sale at, in, from, or upon the Leased Premises or as are required to repair and maintain the improvements and simulators in the Leased Premises. This shall not preclude occasional emergency transfers of merchandise to the other 19 24 stores of Tenant, if any, not located in the Shopping Center. Tenant shall use for office, clerical or other non-selling purposes only such space in the Leased Premises as is from time to time reasonably required for Tenant's business therein, and Tenant shall not perform any office or clerical function in the Leased Premises for any store located elsewhere. SECTION 4.6 CARE OF PREMISES. Tenant shall keep the Leased Premises (including the exterior and interior portions of all windows, doors and all other glass and signs) orderly, neat, safe and clean and free from rubbish or dirt at all times and shall store all trash and garbage only in the areas reasonably designated by Landlord for such storage and accumulation. Tenant shall not move any safe, heavy machinery, heavy equipment, or fixtures into or out of the Leased Premises without Landlord's prior written consent, except that, during hours when the Shopping Center is not open to the public, Tenant shall be permitted to move equipment associated with its Permitted Use provided that Tenant uses its best efforts to protect the common area improvements from damage and agrees to assume responsibility for any damage resulting from the same. Tenant agrees that it will not place a load on any floor exceeding the floor load per square foot which such floor was designed to carry, and will not install, operate or maintain in the Leased Premises any heavy equipment except in such manners as to achieve a proper distribution of weight. Landlord and Tenant shall cooperate in their efforts to insure that the Leased Premises are designed to accommodate the Permitted Use. SECTION 4.7. NOTICE BY TENANT. Tenant shall give immediate notice to Landlord in case of fire or accidents in the Leased Premises, or in the building of which the Leased Premises are a part of, or of defects therein or in any fixtures or equipment. SECTION 4.8. RADIUS. Tenant acknowledges that the Retail Development draws it customers from a large geographic area, relying in part on regional and international tourism, and that the success of the Retail Development and income of the Landlord therefrom are dependent upon maximum customer traffic within the Retail Development. In addition, Tenant acknowledges that Landlord is relying on the generation of Percentage Rent from Tenant's Gross Sales at the Leased Premises. During the Term, in the event Tenant, or any person, firm or corporation who or which controls or is controlled by Tenant (an "Affiliate") shall directly or indirectly, either individually or as a partner or stockholder or otherwise, own, operate, or obtain a controlling interest (i.e. own more than fifty percent (50%) of the shares or interest) in any business similar to or in competition with the business of Tenant described in Article IV ("competing business"), which business is conducted within the Area (as said term is herein defined), then the Gross Sales (as said term is defined in this Lease) of any such competing business within said Area shall be included in Tenant's Gross Sales made from the Leased Premises and the Percentage Rent hereunder shall be computed upon the aggregate of Tenant's Gross Sales made from the Leased Premises and made from each such competing business then conducted within said Area. Tenant shall be obligated to provide Landlord with full and complete Gross Sales information and reports with respect to any competing business within the Area in accordance with the requirements of Article II of this Lease and Tenant shall be obligated to include the applicable portion of the Gross Sales of such competing business with the Gross Sales of the Leased Premises and to pay Percentage Rent thereon in accordance with the terms of this Lease. The "Area" shall be defined as the area falling within a radius of ten (10) miles measured from the outside boundary of the Retail Development. This Section 4.8 shall not apply to any competing business which is open and is being operated by Tenant within said Area on the Effective Date. ARTICLE V COMMON AREA SECTION 5.1. USE OF COMMON AREA. Landlord agrees to cause to be operated, managed and maintained during the Term all of the common areas of the Shopping Center. The term "common areas", as used in this Lease, shall mean the parking areas, pedestrian sidewalks and bridges, truckways, loading docks, delivery areas, park areas, pedestrian malls and courts, elevators and escalators, if any, and stairs not contained in leased areas, public restrooms and comfort stations, if any, service areas, fire, service and exit corridors, passageways, landscaped areas, berms and all other areas or improvements which may be provided for the convenience of the occupants 20 25 and tenants of the Retail Development and their respective agents, employees, customers, invitees, and the licensees and invitees of Landlord. The use and occupancy by Tenant of the Leased Premises shall include the non-exclusive use, in common with all others to whom Landlord has or may hereafter grant rights to use the same (including, but not limited to, the owners, tenants and occupants of the Shopping Center), of the common areas and of such other facilities as may be designated by Landlord from time to time; subject, however, to rules and regulations for the use thereof which will be uniformly applicable to all Shopping Center tenants as prescribed from time to time by Landlord. In particular, Tenant and its employees shall park their cars only in the areas specifically designated from time to time by Landlord for that purpose. Tenant covenants that it will enforce the parking by its employees in such designated areas. Automobile license numbers of employees' cars shall be furnished by Tenant to Landlord within five (5) days after Landlord's request. In the event any vehicle is parked by an employee of Tenant in a non-employee parking area, Landlord shall have the right to cause the vehicle to be towed to a location designated by Landlord and Tenant shall be obligated to reimburse Landlord for all towing charges. Landlord may at any time close temporarily any common area to make repairs or changes, to prevent the acquisition of public rights in such areas and to discourage non-customer use, provided the same shall not materially adversely affect access to or visibility of the Leased Premises. In addition, Landlord may modify, from time to time, the traffic flow pattern and layout of parking spaces and the entrances-exits to adjoining public streets or walkways, utilize portions of the common areas for entertainment, displays and charitable activities and may do such other acts in and to the common areas as in its judgment may be desirable to improve the convenience or attraction thereof. Landlord agrees to maintain all common areas of the Shopping Center in good order, condition and repair and in a safe, clean, sightly and sanitary condition in accordance with good and accepted shopping center practices. The maintenance obligations of Landlord shall include, without limitation, the re-striping of parking areas when required, repairing of common areas and adequate lighting of all exterior common areas during all hours of darkness during which Tenant shall be open for business and for one (1) hour thereafter. SECTION 5.2. COMMON AREA MAINTENANCE EXPENSES. (a) Tenant agrees to pay to Landlord each Lease Year, in the manner hereinafter provided, Tenant's proportionate share of all costs and expenses (the "Common Area Maintenance Expenses") of every kind and nature paid or incurred by Landlord, or for which Landlord is obligated, during each Lease Year, for operating, equipping, policing and protecting, heating, air conditioning, providing sanitation and sewer and other services, lighting, insuring, repairing, replacing and maintaining (i) the common areas, and (ii) all buildings and roofs within the Retail Development, and (iii) all other areas, facilities and buildings used in connection with the maintenance and/or operation of, and whether located within or outside of, the Retail Development, including without limitation, all roads and driveways serving the Retail Development which are maintained or repaired by Landlord or at Landlord's expense. The Common Area Maintenance Expenses shall include, but are not limited to, costs and expenses of: water, gas, sewage, electricity, refuse disposal, air conditioning, heating and other utilities (without limitation), including all usage, service, hook-up, connection, availability and/or standby fees or charges pertaining to same, and the utility costs; illumination and maintenance of signs, whether located on or off the Retail Development property; salaries of all management personnel; maintenance, repair and replacement of directories, electronic or otherwise, cleaning, lighting, snow removal and landscaping; security control and fire protection; uniforms for maintenance, administrative and security personnel for the Retail Development; management fees; maintenance for wooded areas, retention ponds, wetlands, rivers and riverbank areas; premiums for insurance to the extent maintained by Landlord, for liability, casualty and property damage, including, without limitation, insurance against vandalism, plate glass breakage, fire and extended coverage insurance and such other coverage as determined by Landlord, and liability for defamation and claims of false arrest occurring in and about such areas; personal property taxes; maintaining and replacing the equipment, if any, supplying music to such areas; the reasonable depreciation of equipment used in the operation and maintenance of such areas; total compensation and benefits (including premiums for workers' compensation and other insurance) paid to or on behalf of persons involved in the performance or administration/technical support of the work specified in this Section 5.2; repair, maintenance and cleaning of such areas; operation, repair, maintenance and reasonable depreciation of all temporary and permanent utility systems for the Retail Development, including, without limitation, heating, 21 26 ventilating and air conditioning systems (HVAC systems), gas system(s), plumbing system(s), electrical equipment and irrigational pumping system(s); operation, repair, maintenance and reasonable depreciation of emergency water and sprinkler main system(s) and security alarm system(s); operation maintenance, repair and replacement of mechanical equipment including any automatic door openers, elevators, escalators, lighting fixtures (including replacement of poles, tubes and bulbs) and all other items of equipment used in connection with such areas; paper supplies in restrooms located in or about such areas, cleaning, lighting, striping and landscaping, curbs, gutters, sidewalks, drainage and irrigation ditches, conduits, pipes and canals serving the Retail Development; and there shall also be added to the foregoing costs and expenses an amount equal to fifteen percent (15%) of the total of all of the ongoing costs and expenses as Landlord's administrative fee. As stated throughout this Lease, whenever Tenant is obligated to pay its "proportionate share" of a cost, expense or Taxes (as hereinafter defined) such share shall be based on gross leased and occupied floor area in the Shopping Center, and Tenant's proportionate share shall be that fraction, the numerator of which is the total square footage of floor area in the Leased Premises, and the denominator of which is the total square footage of gross leased and occupied floor area (including the Leased Premises) in the Shopping Center. As used throughout this Lease, the "gross leased and occupied floor area" in effect for the whole of any Lease Year shall be the average of the gross leased and occupied floor area in effect on the first day of each calendar month in such Lease Year. Prior to the proration of such Common Area Maintenance Expenses to Tenant, there shall be deducted from the total of such Common Area Maintenance Expenses any amounts specifically contributed by the Major Tenants toward such Common Area Maintenance Expenses. It is further agreed that in no event shall Tenant be obligated for the capital costs of initially constructing the Retail Development or the capital costs of subsequent expansion construction for the Retail Development (i.e., adding new Major Tenants to the development or expanding the Shopping Center or the common areas). Notwithstanding anything contained in this Lease to the contrary, the following shall be excluded from Common Area Maintenance Expenses in calculating Tenant's proportionate share: (i) the capital costs of initially constructing the Retail Development or the capital costs of subsequent expansion construction for the Retail Development; (ii) executive salaries (employees senior to management personnel); (iii) leasing commissions and the expense of preparing leases; (iv) debt service and amortization under any mortgage encumbering the Shopping Center and charges and fees incurred by Landlord in connection with the procurement and recording of such mortgages or rental under any ground lease or other underlying lease; (v) the costs of Landlord's Work in connection with preparing any tenant's space (vi) any costs for which Landlord is reimbursed by insurance proceeds or condemnation awards; (vii) costs for which Landlord is reimbursed by individual tenants of the Shopping Center (viii) to the extent that any employee of Landlord performs work or services other than for the Retail Development, the portion of his salary allocable to work not performed in connection with the Retail Development; (ix) the costs of correcting defects in or inadequacies of the initial design or construction of the Shopping Center, or repair and/or replacement of any of the original materials or equipment required as a result of such defects or inadequacies; (x) any expense resulting from the negligence of Landlord, its agents, servants or employees, or any expense incurred as a direct result of Landlord's failure to use reasonable efforts to minimize expenses to the extent possible without detracting from the standards of a first class Shopping Center; (xi) the cost of any repair to remedy damage caused by or resulting from the negligence of any other tenant(s) in the Shopping Center, including their agents, servants or employees; (xii) repairs or other work occasioned by casualty or the exercise of the right of eminent domain; (xiii) expenses incurred in build out, renovation or other improvement or decoration, painting or redecoration of any leasable area; (xiv) costs incurred due to the violation by Landlord or any tenant or occupant of any term or condition of any lease or rental arrangement covering space in the Shopping Center; (xv) any interest or penalties incurred as a result of Landlord's failure to pay any bill as the same shall become due; (xvi) any and all costs associated with the operation of the business of the entity which constitutes Landlord, intending by this exclusion to distinguish the costs of operation of the common areas (excluded items shall specifically include but shall not be limited to formation of the entity, internal accounting and legal matters, including, but not limited to preparation of tax returns and financial statements and gathering of data therefor, costs of defending any lawsuits, except as the actions of Tenant may be an issue, costs of selling, syndication, financing mortgaging or hypothecating any of Landlord's interest in the Shopping Center, and costs of any disputes between Landlord and its employees); (xvii) advertising and promotional expenditures or customer services, (xviii) costs, fines, or fees incurred by Landlord 22 27 Shopping Center, and costs of any disputes between Landlord and its employees); (xvii) advertising and promotional expenditures or customer services; (xviii) costs, fines, or fees incurred by Landlord due to violations of any federal, state or local law, statute or ordinance, or any rules, regulations, judgment or decree of any governmental rule or authority; (xix) the cost of any work or services performed for any facility other than the Shopping Center. Replacements of existing improvements, facilities, and equipment (including, by way of example, parking lot repairs, structural repairs, replacement of HVAC or mechanical equipment) otherwise chargeable as Common Area Maintenance Expenses having a useful life of more than one year shall be amortized over the useful life of the replacement, and only the reasonably amortized portion thereof shall be included in Common Area Maintenance Expenses. Tenant's proportionate share of Common Area Maintenance Expenses from the Commencement Date through December 31, 2000 shall not exceed [***] per square foot of floor area in the Leased Premises per Lease Year (proportionately reduced for a partial Lease Year). From January 1, 2001 through December 31, 2001, Tenant's proportionate share of Common Area Maintenance Expenses shall not exceed [***] per square foot of floor area in the Leased Premises per Lease Year (proportionately reduced for a partial Lease Year). Beginning January 1, 2002 and continuing through the expiration of the Original Term and Option Period, if any, Tenant's proportionate share of Common Area Maintenance Expenses shall not be increased by more than [***] per Lease Year. It is hereby agreed that at such times as there are tenants occupying less than eighty-five percent (85%) of the gross leasable floor area of the Shopping Center, Tenant's proportionate share of the foregoing Common Area Maintenance Expenses shall be computed as if the Shopping Center were eighty-five percent (85%) leased and occupied. (b) Tenant's proportionate share of such Common Area Maintenance Expenses for each Lease Year shall be paid in advance, in equal monthly installments, in the same manner and at the same time as the monthly installments of Minimum Rent are payable hereunder without deduction, offset or diminution of any kind, based on an amount estimated in advance from time to time by Landlord to be Tenant's obligation under this Section 5.2. Notwithstanding the above, in the event Landlord at any time determines that the amount of Common Area Maintenance Expenses actually being paid or incurred by Landlord exceeds the estimate upon which Tenant's proportionate share of Common Area Maintenance Expenses was computed, then Tenant, following a request from Landlord, shall commence to pay with the next monthly installment of Minimum Rent due an amount sufficient to result in Tenant's paying its full proportionate share of Common Area Maintenance Expenses as computed on the basis of Landlord's revised estimate of Common Area Maintenance Expenses. Subsequent to the end of each Lease Year, Landlord shall furnish Tenant with a statement of the actual amount of Tenant's proportionate share of such Common Area Maintenance Expenses for such period which statement shall be in reasonable detail, provided, however, Landlord shall be permitted to describe areas of expenditure by category and shall not be obligated to enumerate each specific expenditure. Upon Tenant's written request therefore, but no more frequently than once per Lease Year, Landlord shall provide Tenant written evidence substantiating up to three (3) particular items included in Tenant's share of Common Area Maintenance Expenses. Landlord shall make reasonable good faith efforts to answer or resolve Tenant's legitimate questions about the Common Area Maintenance Expenses. If the total amount paid by Tenant under this Section 5.2 for any Lease Year shall be less than the actual amount due from Tenant for such Lease Year as shown on such statement, Tenant shall pay Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such Lease Year shall exceed the actual amount due from Tenant for such Lease Year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section 5.2. *** Confidential treatment requested. 23 28 ARTICLE VI REPAIRS AND MAINTENANCE SECTION 6.1. REPAIRS AND MAINTENANCE BY LANDLORD. Landlord agrees to keep in good order, condition and repair the roof (including keeping the roof watertight), foundations, exterior (including exterior painting and finish), all structural portions of the Leased Premises (and of the building in which the Leased Premises are located) and all plumbing and utility lines not exclusively serving the Leased Premises. Should any repairs, modifications or alterations be required by reason of applicable law, the same shall be made by Landlord at Landlord's cost and expense unless the need for such repairs, modifications or alterations shall result from Tenant's failure to perform its obligations under this Lease or from Tenant's use of the Leased Premises for other than general merchandising purposes. In addition, for the first twelve (12) months only following the Delivery of Possession Date, Landlord shall, upon written notice from Tenant of the necessity therefor, correct any defects in Landlord's Work within the Leased Premises. All costs and expenses incurred by Landlord under this Section 6.1 shall be included in Common Area Maintenance Expenses, other than costs and expenses for Landlord's correction of defects in Landlord's Work or other amount that may be excluded as Common Area Maintenance Expenses pursuant to a specific exclusion contained in Section 5.2 hereof. SECTION 6.2. REPAIRS AND MAINTENANCE BY TENANT. (a) Except for the repairs and maintenance that Landlord is specifically obligated to make or perform pursuant to Section 6.1 above, throughout the entire Term of this Lease, Tenant, at its expense, shall promptly make all repairs and replacements and perform maintenance in and to the Leased Premises and all equipment and fixtures therein or appurtenant thereto, that are necessary or desirable in order to keep the Leased Premises in good order, condition and repair and in safe, dry and tenantable condition. Without limiting the generality of the foregoing Tenant, at its expense, shall maintain and promptly make any and all necessary repairs to or replacement of: (i) that portion of any pipes, lines, ducts, wires or conduits that exclusively serve the Leased Premises; (ii) the glass windows, plate glass doors, and all fixtures or appurtenances composed of glass that are located in or about the Leased Premises; (iii) Tenant's signs; (iv) the floor and floor coverings, doors and door frames, windows and window frames, walls, storefront including security gates, grilles or enclosures, locks and closing devices, partitions and ceilings in the Leased Premises; (v) heating, ventilating, air conditioning, electrical and plumbing system(s) equipment and fixtures (whether contained within or outside the Leased Premises) which are installed by Tenant or which exclusively serve the Leased Premises; and (vi) the Leased Premises or any part of the Shopping Center when repairs thereto are necessitated by any act or omission (negligent or otherwise) of Tenant or any of Tenant's agents, employees or invitees, or by the failure of Tenant to perform any of its obligations under this Lease. Notwithstanding the foregoing, Landlord shall be responsible for repairs and maintenance necessitated by the negligence or intentional acts of Landlord, its agents or employees. Notwithstanding any contrary provision of this Article VI, Tenant, at its expense, shall make any and all repairs to the Leased Premises as may be necessitated by any break-in, forcible entry or other trespass into or upon the Leased Premises, regardless of whether or not such entry and damage is caused by the negligence or fault of Tenant or occurs during or after business hours. Tenant, at its expense, shall change all air conditioning filters at least five (5) times per year and shall have the air conditioning system professionally inspected and generally serviced at least twice per year. (b) Tenant shall keep and maintain the Leased Premises in a clean, sanitary and safe condition in accordance with the laws of the State and in accordance with all directions, rules and regulations of the health officer, building inspector, the National Fire Protection association and any other officials of the governmental agencies having jurisdiction, at the sole cost and expense of Tenant, and Tenant shall comply with all requirements of laws, ordinances, rules, regulations and orders of any lawful authority having jurisdiction affecting the Leased Premises or Tenant's use thereof. Tenant, at its expense, shall install and maintain fire extinguishers and other fire protection devices as may be required by reason of the conduct of Tenant's business, from time to time by any agency having jurisdiction or the underwriters insuring the building in which the Leased Premises are located. If any bureau, department or official of the Federal or State government requires or recommends the installation of any changes, modifications or alterations in the sprinkler system or additional sprinkler heads or other equipment (hereinafter in this subsection (b) collectively 24 29 "changes") by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the Leased Premises, or for any other reason, or if any such changes become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rates set by any fire insurance company, Tenant, at Tenant's expense, shall promptly make such changes as required. (c) Tenant agrees that Tenant's use of electrical current will at no time exceed the capacity of the electric distribution system and that Tenant will not make any alteration or addition to Tenant's electrical system without Landlord's prior written consent. If Tenant installs any electrical equipment that overloads the electrical lines in the Leased Premises or the Retail Development, Tenant shall, at Tenant's sole cost and expense, be required to make whatever changes to such electrical equipment and in the electric wiring in the Leased Premises (but only after obtaining Landlord's written approval) as may be necessary in order to remedy such overloading and be in compliance with all insurance and legal requirements. All changes required to be made hereby shall result in the continued conformance with the provisions of Exhibit D and this Lease. (d) If Tenant refuses or neglects to properly maintain the Leased Premises, or to commence or to complete repairs promptly and adequately, or if Landlord finds it necessary to make any repairs or replacements otherwise required to be made by Tenant, then Landlord may, after ten (10) days prior written notice to Tenant (except in the event of an emergency in which event no notice shall be required) with Tenant having the opportunity to cure or to commence to cure during such ten (10) day period (in which event Landlord shall not take action so long as Tenant is diligently pursuing such cure to completion), in addition to all other remedies, but without obligation to do so, enter the Leased Premises and proceed forthwith to have such maintenance, repairs or replacements made and Tenant shall pay to Landlord, on demand, the cost and expenses therefor plus a charge of fifteen percent (15%) of such costs and expenses. ARTICLE VII TAXES Section 7.1 Tax Liability. Tenant agrees to pay to Landlord Tenant's proportionate share of all taxes and assessments and service payments in lieu of taxes of every nature and kind which may be levied or assessed by, or payable to, any lawful authority during or with respect to each fiscal tax year falling in whole or in part during the Term of this Lease against any or all or any part of the land, buildings and improvements comprising the Retail Development and any other taxes which Landlord becomes obligated to pay with respect to the Retail Development, whether or not the same are assessed as real or personal property or are payable in advance or in arrears (the "Taxes"). If due to a future change in the method of taxation, any tax, excise or assessment shall be levied or assessed against Landlord, directly or indirectly, in lieu of, in substitution for or as a supplement to any present Taxes or future (real estate or personal property) tax, in whole or in part, including any new tax, excise or assessment upon rentals payable to Landlord by occupants of the Retail Development or upon gross receipts or other income of Landlord derived by Landlord from or upon the interest in the Retail Development of Landlord (or any individuals or entities comprising Landlord), such tax, excise or assessment shall constitute a tax respecting which Tenant is obligated to pay its proportionate share to Landlord as provided herein. If any Taxes or assessed valuation(s) are contested by Landlord, then Tenant's proportionate share of Taxes shall also include Tenant's proportionate share of the cost and expense of consultation services incurred in evaluating and contesting such Taxes or assessed valuation(s). The term "Taxes" shall also include any form of assessment, special assessment, license fee, license tax, business license fee, business license tax, commercial rental tax, levy, charge, tax or similar imposition, imposed by any authority having the direct power to tax, including without limitation any city, county, State or Federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district or any other agency or other public body, whether or not consented to or joined in by Landlord and whether or not retroactive, payable by Landlord thereof as against the land and improvements comprising, or any legal or equitable interest of the Landlord in, the Retail Development. Notwithstanding anything to the contrary 25 30 contained in this Section 7.1, Tenant shall not be obligated, pursuant to this Section 7.2, to pay Landlord its proportionate share of any inheritance, estate, succession, transfer, gift or franchise tax, levy assessment or surcharge that may be imposed on Landlord or the individuals or entities which constitute the partners of the partnership which is Landlord, unless the same is imposed by way of substitution for all or any part of the "Taxes" otherwise required to be paid in whole or in part by Tenant pursuant to this Lease; the foregoing shall not exempt or exclude from the Taxes to be prorated among Shopping Center tenants (including Tenant) levies, taxes, assessments or surcharges based on the rentals or other revenues or gross income of Landlord derived from the Shopping Center (as opposed to Landlord's net income) or other charges payable to Landlord by Tenant or other tenants in or occupants of the Shopping Center. SECTION 7.2. METHOD OF PAYMENT. Tenant's proportionate share of Taxes shall be paid, in advance, in monthly installments on or before the first day of each calendar month, in the same manner and at the same time as the monthly installments of Minimum Rent are payable hereunder without deduction, offset or diminution of any kind, based on an amount estimated by Landlord. Following receipt of all bills for Taxes attributable to any calendar or fiscal year during the Term hereof, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's proportionate share of Taxes for such year. If any bill for any such Taxes is not available, Landlord will estimate the amount of such tax. If the total amount paid by Tenant hereunder for any calendar or fiscal year during the Term of this Lease shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after demand therefor by Landlord; and if the total amount paid by Tenant hereunder for any such calendar or fiscal year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment of Taxes due from Tenant to Landlord hereunder. For the calendar or fiscal years in which this Lease commences and terminates, Tenant's liability for its proportionate share of any Taxes for such years shall be subject to a pro rata adjustment based on the number of days of said calendar or fiscal years during which the Term of this Lease is in effect. A copy of any such bill for Taxes shall at all times be sufficient evidence of the amount of Taxes assessed or levied against the property to which such bill relates. Prior to or at the commencement of the Term of this Lease and from time to time thereafter throughout the Term hereof, Landlord shall notify Tenant in writing of Landlord's estimate of Tenant's monthly installments due hereunder. Tenant's obligations under this Article VII shall survive the Expiration Date or sooner termination of this Lease. ARTICLE VIII INSURANCE, INDEMNITY AND LIABILITY SECTION 8.1. LANDLORD'S INSURANCE OBLIGATIONS. Landlord agrees to obtain and maintain during the Term hereof, to the extent the same is available, fire and extended coverage insurance, in amounts and coverages and with such special endorsements as Landlord shall determine from time to time, insuring the building in which the Leased Premises are located and the improvements to the Leased Premises provided by Tenant pursuant to this Lease (exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment, plate glass, signs and personal property of Tenant). Landlord shall also carry rental interruption insurance in amounts at least equal to Tenant's total rental obligation for twelve (12) full months under this Lease including the total of the estimated costs to Tenant of Taxes and Common Area Maintenance Expenses (including insurance) for such twelve (12) month period. Landlord will maintain during the Term of this Lease, commercial general liability insurance, insuring against any and all claims for personal injury, bodily injury, death, or property damage, accruing in, on or about the common areas and other portions of the Shopping Center not leased to tenants, with limits of not less than [***] with respect to bodily injury and death and [***] with respect to property damage. Further Landlord shall maintain fire and extended coverage insurance insuring the improvements located within the Shopping Center (except for Tenant's trade fixtures, furnishings, operating equipment and personal property) for [***] of the full replacement cost thereof. Tenant acknowledges that such coverage may be provided pursuant to a blanket policy for centers managed by Managing Agent (as defined in Section 20.22 hereof). Tenant shall reimburse Landlord for its proportionate share of the insurance [***] Confidential treatment requested. 26 31 costs incurred by Landlord under this Section 8.1 as part of Tenant's Common Area Maintenance Expenses as provided in Section 5.2 hereof. SECTION 8.2. TENANT'S INSURANCE OBLIGATIONS. (a) Provided Tenant is the Tenant named on the Recital Page and a wholly-owned subsidiary of the Guarantor, if any, and Tenant's and Guarantor's, if any, combined net worths are or Tenant's net worth is at least equal to [***], Tenant shall have the right to self-insure for any loss or damage of the type covered by standard fire and extended coverage insurance with respect to personal property located on or within the Leased Premises including alterations and improvements made by Tenant to the extent the same are not covered by Landlord's fire and extended coverage insurance. Tenant and Guarantor shall at their sole expenses, without regard to fault on the part of any person, make and perform any repairs or restorations which are required as a result of a casualty which would be covered by insurance of the type described in this Section 8.2(a). Tenant, at Tenant's sole cost and expense, shall obtain and maintain in effect commencing with the Delivery of Possession Date and continuing throughout the Term of this Lease, insurance policies providing for the following coverage: (i) all risk property insurance against fire, theft, vandalism, malicious mischief, sprinkler leakage and such additional perils as now are or hereafter may be included in a standard extended coverage endorsement from time to time in general use in the State, insuring Tenant's merchandise, trade fixtures, furnishings, equipment and all items of personal property of Tenant and of anyone claiming by, through or under Tenant located on or in the Leased Premises, and the amount of such insurance will be set forth in an "agreed value endorsement" to the policy of such insurance, not less than [***] of the full replacement value thereof without deduction for depreciation, and with a deductible amount of not more than [***], provided, however, any and all proceeds of such insurance, so long as this Lease shall remain in effect, shall be used only to repair or replace or pay for the items so insured; (ii) a commercial general liability policy, including insurance protecting against any and all claims for injury to persons or property occurring in or about the Leased Premises and protecting against assumed or contractual liability under this Lease with respect to the Leased Premises and the operations of Tenant and any subtenant of Tenant in, on or about the Leased Premises, with such policy to be in the minimum amount of [***] single limit coverage; (iii) products liability insurance for merchandise offered for sale or lease from the Leased Premises, including (if this Lease covers leased premises in which food and/or beverages are sold and/or consumed) liquor liability coverage (if applicable to Tenant's business) and coverage for liability arising out of the consumption of food and/or alcoholic beverages on or obtained at the Leased Premises, of not less than [***] per occurrence for personal injury and death and property damage; (iv) workers' compensation coverage as required by law; (v) with respect to alterations, improvements and the like required or permitted to be made by Tenant hereunder, contingent liability and builders risk insurance in amounts satisfactory to Landlord; and (vi) the insurance required under Exhibit D. (b) All insurance policies herein to be procured by Tenant shall: (i) be issued by insurance companies reasonably satisfactory to Landlord and authorized to do business in the State; (ii) be written as primary policy coverage and non-contributing with respect to any coverage which Landlord may carry and that any coverage carried by Landlord shall be excess insurance; (iii) insure and name Landlord, Landlord's managing agent, any mortgagee of the Shopping Center and any parties in interest designated by Landlord as additional insured, as their respective interests may appear (except with respect to workers' compensation insurance); and (iv) contain any express waiver of any right of subrogation by the insurance company against Landlord, Landlord's managing agent and their respective agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives. Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to Tenant's insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease. With respect to each and every one of the insurance policies herein required to be procured by Tenant, on or before the Commencement Date and at least thirty (30) days before any such insurance policy shall expire, Tenant shall deliver to Landlord upon Landlord's written request a duplicate original or certified copy of each such policy or a certificate of the insurer, certifying that such policy has been issued, providing the coverage required by this Section 8.2 and containing provisions specified herein, together with evidence of payment of all applicable premiums. Any insurance required to be carried hereunder may be carried under a blanket policy covering the Leased Premises and other locations *** Confidential treatment requested. 27 32 of Tenant. Each and every insurance policy required to be carried hereunder by or on behalf of Tenant shall provide (and any certificate evidencing the existence of each such insurance policy shall certify) that, unless Landlord shall first have been given thirty (30) days' prior written notice thereof, the insurer will not cancel, materially change or fail to renew the coverage provided by such insurance policy. The term "insurance policy" as used herein shall be deemed to include any extensions or renewals of such insurance policy. In the event that Tenant shall fail to promptly furnish any insurance coverage hereunder required to be procured by Tenant, Landlord, at its sole option, shall have the right after ten (10) days prior written notice to Tenant to obtain the same and pay the premium therefor for a period not exceeding one (1) year in each instance, and the premium so paid by Landlord shall be immediately due and payable by Tenant to Landlord as additional rent. (c) Tenant shall not do or permit to be done any act or thing upon the Leased Premises that will invalidate or be in conflict with fire insurance policies covering the building containing the Leased Premises or any part thereof, including all common areas, or fixtures and property therein, or any other insurance policies or coverage referred to above in this Article VIII; and Tenant shall promptly comply with all rules, orders, regulations, or requirements relating to such insurance policies, and shall not do, or permit anything to be done, in or upon the Leased Premises, or bring or keep anything therein, which shall increase the rate of fire insurance on the building in which the Leased Premises are located or on any property, including all common areas, located therein, or increase the rate or rates of any other insurance referred to hereinabove. If any act or omission of Tenant, its agents, employees or contractors shall result in any increase in the premium rates applicable to any such insurance policies carried by Landlord, or other increased costs to Landlord in connection therewith, then Tenant shall reimburse Landlord on demand as additional rent for the amount of any such increased rates or costs. In particular, if Tenant uses the Leased Premises for the preparation of food, Tenant shall reimburse Landlord on demand, for any part of the premium for insurance coverage under Section 8.1 hereof required to be paid on account of such use of the Leased Premises. SECTION 8.3 MUTUAL COVENANT. Notwithstanding any provision of this Lease to be contrary, Landlord and Tenant each hereby releases the other, its officers, directors, employees, and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty for which insurance containing a waiver of subrogation is carried by the injured party at the time of such loss, damage or injury regardless of the extent of any recovery by the injured party under such insurance. Both parties agree to carry casualty insurance containing such waiver of subrogation. Additionally, during any time when Tenant is self-insuring its insurance obligations hereunder, Tenant hereby releases the Landlord, its officers, directors, employees and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty, even if such loss, damage or casualty is caused in whole or in part by Landlord or by any party for whom Landlord may be responsible. SECTION 8.4. COVENANT TO HOLD HARMLESS. Except with respect to the gross negligence or wilful misconduct of Landlord its agents or employees (unless covered or required to be covered by Tenant's insurance), Tenant hereby indemnifies and agrees to hold harmless Landlord, its officers, directors, partners, employees and agents and any mortgagee or master lessor of the Shopping Center, from and against any and all claims, actions, damages, liabilities, costs and expenses, including attorneys' fees, that (i) arise from or are in connection with the possession, use, occupancy, management, repair, maintenance or control of the Leased Premises, or any portion thereof, or (ii) arise from or are in connection with any negligent or wrongful act or omission of Tenant or Tenant's agents, employees, contractors, licensees or invitees, or (iii) result from any default, breach, violation or nonperformance of this Lease or any provision hereof by Tenant, or (iv) result from injury to person or property or loss of life sustained in the Leased Premises or outside of the Leased Premises resulting from acts or omissions within the Leased Premises. Tenant shall, at its own cost and expense, defend any and all actions, suits and proceedings which may be brought against Landlord or any mortgagee or master lessor of the Shopping Center with respect to the foregoing. Tenant shall pay, satisfy and discharge any and all judgments, orders and decrees which may be received against Landlord or any such mortgagee or master lessor in connection with the foregoing. In the event landlord or any other party so indemnified, shall, without fault, be made a party to any litigation commenced by or against Tenant, or if Landlord or any such party shall, in its sole 28 33 discretion, intervene in such litigation to protect its interest hereunder, then Tenant shall protect and hold them harmless and shall pay all costs, expenses and attorney's fees incurred or paid by such party(ies) in connection with such litigation. Landlord hereby indemnifies and agrees to save harmless Tenant, its officers, directors, partners, employees and agents from and against any and all claims, actions, damages, liabilities, costs and expenses including attorneys' fees in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in the common areas of the Shopping Center unless caused by the negligence or default of Tenant, its agents, contractors, employees, officers, directors, partners, subtenants or concessionaires. SECTION 8.5. LOSS AND DAMAGE. All Tenant's property of every kind and description which may at any time be in the Leased Premises shall be kept at Tenant's sole risk, and Landlord shall not be liable except to the extent resulting from the negligence or intentional acts of Landlord, its agents or employees to Tenant, its agents, employees or customers, for any damage, loss, compensation, accident, or claims whatsoever resulting to Tenant or its property from the necessity of repairing any portion of the Shopping Center; and interruption in the use of the Leased Premises; the use or operation (by Landlord, Tenant, or any other person or persons whatsoever) of any elevators, heating, cooling, electrical or plumbing equipment or apparatus; the termination of this Lease by reason of the destruction of the Leased Premises; any fire, robbery, theft, or any other casualty; any leakage in any part or portion of the Leased Premises or the Shopping Center; any water, wind, rain or snow that may leak into, or flow from part of the Leased Premises or the Shopping Center, any acts or omissions of any occupant of any space adjacent to or adjoining all or any part of the Leased Premises or any part of the building of which the Leased Premises are a part; any explosion, casualty, utility failure or malfunction, or falling plaster; the bursting, stoppage or leakage of any pipes, sewer pipes, drains, conduits, appliance or plumbing works; or any other cause whatsoever. ARTICLE IX DESTRUCTION OF LEASED PREMISES SECTION 9.1. CONTINUANCE OF LEASE. In the event of any damage to the Leased Premises by fire or other casualty, this Lease shall not be terminated or otherwise affected; except that, (a) if more than twenty-five percent (25%) of the square footage of the Leased Premises shall be damaged by any such fire or other casualty during the last three (3) years of the Term of this Lease (not including any Option Periods) or during any renewal or extension of the Term hereof and the cost of repair or restoration exceeds One Million and 00/100ths Dollars ($1,000,000.00) as estimated by Landlord, or (b) if Landlord is unable to rebuild any portion of the building in which the Leased Premises are located or of the Shopping Center due to any inability (after Landlord uses commercially reasonable efforts) to obtain any required governmental approval in connection therewith, or (c) if more than thirty-five percent (35%) of the floor area of the building in which the Leased Premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (d) if twenty-five percent (25%) or more of the building in which the Leased Premises are located or if twenty-five percent (25%) or more of the Shopping Center or the Leased Premises shall be damaged or destroyed at any time by the occurrence of any risk not insured under the insurance required to be carried under Article VIII hereof, then Landlord shall have the option to terminate this Lease within seventy-five (75) days following the occurrence of such fire or other casualty by giving written notice to Tenant during such period. In the event Landlord exercises any of the foregoing options to terminate, this Lease shall immediately terminate upon Landlord's written notice to Tenant and (i) the entire proceeds of the insurance provided for in Section 8.1 hereof shall be paid by the insurance company or companies directly to Landlord and shall belong to, and be the sole property of Landlord, (ii) the portion of the proceeds of the insurance provided for in Section 8.2 which is allocable to equipment, fixtures and other items, which, by the terms of this Lease, rightfully belong to Landlord upon the termination of this Lease by whatever cause, shall be paid by the insurance company or companies directly to Landlord, and shall belong to, and be the sole property of, Landlord, and (iii) Landlord and Tenant shall be relieved from any and all further liability or obligation accruing under this Lease from and after the date of such termination. 29 34 Further, if Landlord cancels this Lease by virtue of the fact that it is during the last three years of the Lease term. Tenant may nullify Landlord's cancellation within thirty (30) days after receipt thereof by giving notice to Landlord that Tenant elects to extend the term of the Lease pursuant to any such right contained in this Lease, in which event the parties shall proceed to restore in accordance with Section 9.2. SECTION 9.2. RECONSTRUCTION. If the Leased Premises are damaged by fire or other casualty and this Lease is not terminated in accordance with Section 9.1 hereof, then all fire and extended coverage insurance proceeds from policies carried pursuant to Section 8.1 hereof, however recovered, shall be held in escrow and made available for payment of the cost of repairing, replacing and rebuilding the Leased Premises. Within seventy (75) days after the casualty Landlord shall provide Tenant with a good faith estimate of the date on which the reconstruction of the Leased Premises will be completed. The Minimum Rent and other charges payable by Tenant to Landlord shall be abated in proportion to the floor area of the Leased Premises rendered untenantable, and the Sales Break Point shall likewise be proportionately reduced. Payment of Minimum Rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business ninety (90) days following the date that Landlord advises Tenant that the Leased Premises are tenantable and Landlord has substantially completed Landlord's Reconstruction Work, unless Tenant opens at an earlier time in the damaged area or remains open in such area following destruction or damage, in which event there shall be no abatement or any such abatement shall terminate as of the date of Tenant's earlier reopening. Landlord shall be obligated to commence Landlord's Reconstruction Work and shall diligently pursue the completion of Landlord's Reconstruction Work and shall cause the same to be completed as soon thereafter as possible under the attendant circumstances, but in any event all such Landlord's Reconstruction Work shall be completed and the Leased Premises reopened for business within one hundred eighty (180) days following such fire or casualty. After Landlord has completed Landlord's Reconstruction Work, Tenant shall commence Tenant's Reconstruction Work, at its expense. Tenant shall comply with all laws, ordinances and governmental rules or regulations, and shall perform all work or cause such work to be performed with due diligence and in a first-class manner. All permits required in connection with said repairs, restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost and expense. Any amount expended by Tenant in excess of any insurance proceeds received by Tenant shall be the sole obligation of Tenant. Landlord shall reconstruct such Leased Premises in accordance with the working drawings originally approved by Landlord or with (at Landlord's sole election) new drawings prepared by Tenant and acceptable to Landlord and Tenant ("Landlord's Reconstruction Work"). In no event shall Landlord be required to repair or replace Tenant's merchandise, trade fixtures, furnishings or equipment. If Landlord repairs or rebuilds, Tenant, at Tenant's sole cost, shall repair or replace Tenant's merchandise, trade fixtures, furnishings and equipment in a manner and to at least a condition equal to that prior to the damage or destruction thereof ("Tenant's Reconstruction Work"). Except as may be specifically set forth in this Article IX, Landlord shall not be liable or obligated to Tenant to any extent whatsoever by reason of any fire or other casualty damage to the Leased Premises, or any damages suffered by Tenant by reason thereof, or the deprivation of Tenant's possession of all or any part of the Leased Premises. In the event Landlord has not commenced restoration or rebuilding of the Leased Premises within ninety (90) days of the date of such fire or casualty loss, or if the Leased Premises are not restored/rebuilt to its former condition prior to such fire or casualty loss within one hundred eighty (180) days of the date of such fire or casualty loss, Tenant will have the right, in either case, to terminate this Lease by providing Landlord notice of such election and Tenant will vacate and surrender the Leased Premises pursuant to Section 17.l. 30 35 ARTICLE X CONDEMNATION SECTION 10.1 EMINENT DOMAIN. If fifty percent (50%) or more of the floor area of the of the Leased Premises shall be taken or condemned by any governmental authority (including, for purposes of this Article X, any purchase by such governmental authority in lieu of a taking), then either party may elect to terminate this Lease by giving notice to the other party not more than ninety (90) days after the date on which such title shall vest in the authority. If the parking facilities are reduced below the minimum parking requirements imposed by the applicable authorities, Landlord may elect to terminate this Lease by giving Tenant notice within one hundred eighty (180) days after such taking. In addition, if any Major Tenant shall terminate its lease with Landlord, pursuant to a taking of its store, Landlord may terminate this Lease by written notice to Tenant within ninety (90) days after notice to landlord that such Major Tenant is terminating its lease. In the case of any taking or condemnation, whether or not the Term of this Lease shall cease and terminate, the entire award shall be the property of Landlord; provided, however, Tenant shall be entitled to any award as may be made for trade fixtures and other equipment (not including any Tenant's Work required or permitted under this Lease) which under the terms of this Lease would not have become the property of Landlord; further provided, that any such award to Tenant shall not be in diminution of any award otherwise to be made to Landlord in the absence of such award to Tenant. SECTION 10.2. RENT APPORTIONMENT. In the event of any taking or condemnation, the then current Minimum Rent, Sales Break Point and the square foot floor area in the Leased Premises as determined pursuant to Section 1.1 shall be apportioned as of the date when possession of the Leased Premises is required to be delivered to the condemning authority or termination of this Lease, as the case may be, and, if the Term of this Lease shall not have ceased and have been terminated as of said date, Tenant shall be entitled to a pro rata reduction in the Minimum Rent payable and Sales Break Point hereunder, or, if Tenant has prepaid Minimum Rent, Tenant shall be entitled to a pro rata credit for the Minimum Rent paid hereunder, based on the proportion which the floor area taken from the Leased Premises bears to the entire floor area of the Leased Premises immediately prior to such taking. SECTION 10.3. TEMPORARY TAKING. Notwithstanding anything to the contrary in this Article X, the requisitioning of the Leased Premises or any part hereof by military or other public authority for purposes arising out of a temporary emergency or other temporary situation or circumstances shall constitute a taking of the Leased Premises by eminent domain when the use or occupancy by the requisitioning authority is expressly provided to continue, or shall in fact have continued, for a period of one hundred eighty (180) days or more, and if this Lease is not thereafter terminated under the foregoing provisions of this Article X, then for the duration of any period of use and occupancy of the Leased Premises by the requisitioning authority, all the terms and provisions of this Lease and obligations of Tenant hereunder shall remain in full force and effect, except that the Minimum Rent and Sales Break Point shall be reduced in the same proportion that the floor area of the Leased Premises so requisitioned bears to the total floor area of the Leased Premises, and Landlord shall be entitled to whatever compensation may be payable from the requisitioning authority for the use and occupation of the Leased Premises for the period involved. ARTICLE XI ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE SECTION 11.1. NO ASSIGNMENT, SUBLETTING OR ENCUMBERING OF LEASE. (a) Except as otherwise provided in this Article XI and notwithstanding any references to assignees, subtenants, concessionaires or other similar entities in this Lease, Tenant shall not (i) assign or otherwise transfer, or mortgage or otherwise encumber, this Lease, in whole or in part, or any of its rights hereunder, (ii) sublet the Leased Premises or any part thereof, or permit the use of the Leased Premises or any part thereof by any persons other than Tenant or its agents. Any such attempted or purported transfer, assignment, mortgaging or encumbering of this Lease or any of Tenant's interest 31 36 hereunder and any attempted or purported subletting or grant of a right to use or occupy all or a portion of the Leased Premises in violation of the foregoing sentence, whether voluntary or involuntary or by operation of law or otherwise, shall be null and void and shall not confer any rights upon any purported transferee, assignee, mortgagee, or occupant, and shall, at Landlord's option, result in a "default" under this Lease. Nothing contained elsewhere in this Lease shall authorize Tenant to enter into any franchise, concession, license, permit, subtenancy, departmental operation arrangements or the like, except pursuant to the provisions of this Article XI. Notwithstanding anything to the contrary set forth in this Article XI, the following shall govern with respect to certain types of transfers, it being understood that Tenant shall have the right to assign, sublease, or otherwise transfer its rights under this Lease provided that the conditions and requirements applicable to the particular assignment, sublease or other transfer that are specified in subparagraphs (A), (B), (C), OR (D) below are satisfied: (A) INTRA-ORGANIZATIONAL TRANSFER: Tenant shall have the right, without Landlord's consent but with prior written notice to Landlord, to assign this Lease or sublet the Leased Premises to its parent corporation or any of its wholly-owned subsidiaries, or any affiliate or subsidiary of Tenant's parent corporation provided that Tenant shall at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease. (B) ASSIGNMENT AS PART OF A TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF TENANT (Same Use): Landlord's consent shall not be unreasonably withheld or delayed to an assignment of this Lease (by merger, consolidation or otherwise) or a sublease for all or any portion of the Leased Premises to another entity (the "Transferee") to which Tenant shall simultaneously be transferring all or substantially all of its stock or all or substantially all of its assets, provided that the following criteria are met: (1) Tenant shall not at the time of such transfer be in default under any of the terms, covenants and conditions of this Lease beyond any applicable grace period, (2) such Transferee shall agree in writing to perform all of the unperformed terms, covenants and conditions of this Lease, (3) Tenant shall at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease and (4) the number of stores being transferred must consist of at least three (3) stores. (C) ASSIGNMENT AS PART OF A TRANSFER OF LESS THAN ALL OR SUBSTANTIALLY ALL OF TENANT'S ASSETS (Same Use): Landlord shall not unreasonably withhold its consent to an assignment, sublease or other transfer ("Transfer") of this Lease to an entity to whom Tenant is transferring less than substantially all of Tenant's assets ("Transferee") provided that the following requirements and conditions shall be satisfied prior to any such Transfer: (i) at the time of such proposed Transfer, Tenant is not in default of any of the terms, covenants or conditions of this Lease and shall at such time be operating the Leased Premises pursuant to Article IV of this Lease: (ii) the proposed Transferee shall agree in writing to assume all of the terms, covenants or conditions to be performed by Tenant hereunder, including, but not limited to, the obligation to continue to operate the Leased Premises in accordance with Article IV of this Lease: (iii) effective as of the date of such Transfer, the applicable Minimum Rent as provided for in Section 2.1 shall be increased to the sum of the applicable Minimum Rent [***] for the time period prior to such Transfer as required to be paid by Tenant pursuant to Section 2.2 hereof and from and after the date of the Transfer the Sales Break Point shall be adjusted also to the quotient of the increased Minimum Rent divided by [***]; (iv) at the time of such Transfer, the proposed Transferee shall have a net worth equal to or greater than [***] [in 1999 Dollars] as shown in current certified financial statements; and (v) the proposed Transferee has proven expertise and experience in operating and managing an entertainment use in a shopping center environment. In addition to Landlord's right to deny Tenant's proposed Transfer on the grounds that the items enumerated in (i) through (v) of Section 11.1(a)(C) have not been met, within fifteen (15) days after Landlord's receipt of notice from Tenant of its intention to complete the Transfer as provided for in this Section 11.1(a)(C). Landlord may elect by notice (hereinafter called the "Same Use Recapture Notice") in writing to tenant to terminate this Lease and recapture the Leased Premises, in which event this Lease shall automatically terminate on the ninetieth (90th) day (hereinafter called the "Same Use Recapture Date") following Tenant's receipt of the Recapture Notice with the same *** Confidential treatment requested. 32 37 force and effect as if said Same Use Recapture Date had been designated as the expiration date of this Lease, and Landlord and Tenant shall upon such Same Use Recapture Date be released from any and all liabilities thereafter accruing hereunder, provided, however that Landlord shall be obligated to repay to Tenant the unamortized portion of the actual cost of Tenant's Work (less the Tenant Allowance) plus the sum of [***] on or before the Same Use Recapture Date. All Minimum Rent Percentage Rent and additional rent payable by Tenant hereunder shall be apportioned as of the Same Use Recapture Date and Tenant shall promptly pay to Landlord any amounts so determined to be due and owing by Tenant to Landlord, and conversely Landlord shall promptly reimburse Tenant for any amounts prepaid by Tenant for periods subsequent to the Same Use Recapture Date, Notwithstanding any Same Use Recapture Notice given to Tenant by Landlord within the aforesaid fifteen (15) day period. Tenant shall have the right within fifteen (15) days after its receipt of the Same Use Recapture Notice to give Landlord notice (hereinafter called the "Same Use Recision Notice") of its recision of its intention to assign, transfer or sublease, and upon Landlord's receipt of the Same Use Recision Notice the Same Use Recapture Notice previously given by Landlord shall be deemed null and void; in such event, Tenant shall not assign this Lease or sublet the Leased Premises as proposed in the notice of its intention to assign or transfer the Lease or sublet the Leased Premises. (D) ASSIGNMENT WITH PROPOSED CHANGE IN USE: Landlord's consent to an assignment, transfer or sublease which results in a change in use shall not be unreasonably withheld provided that the following criteria are met: (i) the net worth of the assignee, transferee or sublessee shall be equal to or greater than [***] [in 1999 Dollars] as shown in current certified financial statements: (ii) the proposed assignee, transferee or sublessee has proven experience in the retail business to be conducted in the Leased Premises: (iii) the proposed assignment, transfer or sublease applies to the entire Leased Premises; and (iv) the business to be conducted in the Leased Premises shall (A) not violate an existing exclusive or restriction granted for the benefit of another tenant in the Retail Development or (B) complement the merchandising mix and program for the Retail Development being promoted at the time of the proposed assignment (i, ii, iii, and iv being collectively referred to as the "Criteria"). In the event Tenant proposes to assign its interest in this Lease or sublet the whole of the Leased Premises pursuant to the terms of this Section 11.1(a)(D), it shall, notwithstanding Section 11.1(c) to the contrary, first give thirty (30) days prior written notice thereof (hereinafter called the "Assignment/Subletting Notice") to Landlord together with all other information required pursuant to Section 11.1(c) hereof. In the event the proposed assignee is unacceptable to Landlord, because in Landlord's reasonable belief the Criteria have not been met. Landlord shall be permitted during the thirty (30) day period to reject the proposed assignment and Tenant shall remain liable under the Lease. In addition, within thirty (30) days after Landlord's receipt of an Assignment/Subletting Notice and such required and/or requested information from Tenant as provided in this Section 11.1(a)(D). Landlord may elect by notice (hereinafter called the "Recapture Notice") in writing to Tenant to terminate this Lease and recapture the Leased Premises, in which event this Lease shall automatically terminate on the ninetieth (90th) day (hereinafter called the "Recapture Date") following Tenant's receipt of the Recapture Notice with the same force and effect as if said Recapture Date had been designated as the expiration date of this Lease, and Landlord and Tenant shall upon such Recapture Date be released from any and all liabilities thereafter accruing hereunder, provided, however that Tenant shall be obligated to repay to Landlord the unamortized portion of the Tenant Allowance as provided for in Section 3.3 hereof on or before the Recapture Date. All Minimum Rent, Percentage Rent and additional rent payable by Tenant hereunder shall be apportioned as of the Recapture Date and Tenant shall promptly pay to Landlord any amounts so determined to be due and owing by Tenant to Landlord, and conversely Landlord shall promptly reimburse Tenant for any amounts prepaid by Tenant for periods subsequent to the Recapture Date. Notwithstanding any Recapture Notice given to Tenant by Landlord within the aforesaid thirty (30) day period. Tenant shall have the right within fifteen (15) days after its receipt of the Recapture Notice to give Landlord notice (hereinafter called the "Recision Notice") of its recision of the *** Confidential treatment requested. 33 38 Assignment/Subletting Notice and upon Landlord's receipt of the Recision Notice the Recapture Notice previously given by Landlord shall be deemed null and void; in such event, Tenant shall not assign this Lease or sublet the Leased Premises as proposed in its Assignment/Subletting Notice. (b) Except as otherwise provided herein, if Tenant is a corporation, the sale, issuance or transfer of any capital stock of Tenant or of any corporate entity which directly or indirectly controls Tenant (unless Tenant is a corporation whose stock is publicly traded) which shall result in a change in the voting control of Tenant or the corporate entity which controls Tenant shall be deemed to be a prohibited assignment of this Lease within the meaning of this Article XI. If tenant is a partnership or an unincorporated association, then the sale, issuance or transfer of a majority interest therein, or the transfer of a majority interest in or a change in the voting control of any partnership or unincorporated association which directly or indirectly controls Tenant, or the transfer of any portion or all of any general partnership or managing partnership interest, shall be deemed to be a prohibited assignment of the Lease within the meaning of this Article XI. Except as otherwise provided herein the consent by Landlord to any assignment, transfer, or subletting to any party shall not be constructed as a waiver or release of Tenant under the terms of any covenant or obligation under this Lease or as a waiver or release of the non-assignability covenants in their future application, nor shall the collection or acceptance of Rent from any such assignee, transferee, subtenant or occupant constitute a waiver or release of Tenant of any covenant or obligation contained in the Lease. (i) Notwithstanding anything herein contained to the contrary, a sale or transfer of any voting capital stock Tenant when caused by death (e.g., testamentary transfer) or for estate planning purposes (e.g. inter vivos trust) will not be deemed a prohibited assignment of this Lease. (ii) The provisions of this Section 11.1(b) shall not be deemed to prohibit transfer of limited partnership interests among existing limited or general partners; however, if either general partner ceases to remain general partner of Tenant such occurrence shall be deemed a prohibited assignment of the Lease under the meaning of this Article XI. (iii) In addition, Tenant may, without violating the provisions of this Article XI, and without consent of or notice to Landlord (i) sell or offer for sale its voting capital stock to the public in accordance with the qualifications or registration requirements of the state where Tenant is incorporated and the Securities Act of 1933, as amended or (ii) issue or transfer shares of Tenant's capital stock (whether or not such insurance or transfer results in a change in the persons comprising majority shareholders of Tenant) as part of a so-called "private placement". (c) Without conferring any rights upon Tenant not otherwise provided in this Article XI, should Tenant desire to enter into an assignment, sublease or transfer of this Lease or Tenant's rights hereunder, Tenant shall request in writing Landlord's consent to the assignment or where consent is not required, provide Landlord prior written notice of the same at least fifteen (15) days before the proposed effective date of the assignment (or within such other timeframe as may be provided for herein for a specific type of assignment), providing the following: (i) the full particulars of the proposed assignment, sublease or transfer of this Lease or Tenant's rights hereunder, including its nature (i.e. whether it is an assignment, sublease or transfer) and effective date, terms and conditions; (ii) a description of the identity, net worth and previous business experience of the proposed transferee, including, without limitation, copies of the proposed transferee's latest income, balance sheet and changes in financial position statements (with accompanying notes and disclosures of all material changes thereto) in audited form, if available, and certified as accurate by the proposed transferee; and (iii) any further information reasonably relevant to the proposed assignment and reasonably available to Tenant which Landlord shall request after receipt of Tenant's request for consent. Tenant shall, concurrently with any request for Landlord's consent, pay to Landlord a fee of [***] for Landlord's review and processing of such request and Landlord shall not be obligated to review such request prior to Landlord's receipt of such fee. All requests for assignment, sublease or transfer shall be forwarded to Landlord at the address provided above and to the on-site mall management office. To the extent Landlord's consent is required Landlord shall be required to respond within the prescribed period (being a minimum of 15 days) and if Landlord's response is a denial of the proposed transfer Landlord shall give specific reasons for the denial. If Landlord *** Confidential treatment requested. 34 39 fails to respond within five (5) business days written notice from Tenant (provided both to Landlord at the notice address and to the Mall Manager), which notice must specify that Landlord has failed to respond to the initial request and that failure to respond within five (5) days of the date of the second notice will result in approval, then Landlord shall be deemed to have approved the requested transfer. (d) Except for a permitted assignment or subletting as specified in Section 11.1(a) and (b) and without conferring any rights upon Tenant not otherwise provided in this Article XI, in the event of an assignment or transfer of Tenant's interest in this Lease, or sublease of all or a portion of the Leased Premises, to a third party, any monthly rent or other payment accruing to Tenant as the result of any such assignment, transfer, or sublease, including any lump sum or periodic payment in any manner relating to such assignment, transfer or sublease, which is in excess of the Rent then payable by Tenant under this Lease less any amounts paid by Tenant in commissions, tenant improvements, unamortized tenant improvements funded by Tenant and attorneys' fees shall be paid [***] of such excess by Tenant to Landlord monthly as additional rent. Landlord may require a certificate from Tenant specifying the full amount of any such payment of whatsoever nature. (e) Notwithstanding any assignment, subletting or transfer of this Lease or Tenant's rights hereunder, Tenant shall remain fully liable on this Lease and for the performance of all terms, covenants and provisions of this Lease; provided, however, if the transferee, or assignee has a net worth equal to or in excess of [***] [in 1999 Dollars] as shown in current certified financial statements on the date of the transfer then Tenant shall be released from its obligations with respect to the Lease from and after the date of the assignment or transfer. SECTION 11.2. ASSIGNMENT OR SUBLET. If this Lease is transferred or assigned, in whole or in part in violation of the terms of this Lease, or if the Leased Premises or any part thereof be sublet or occupied by any person or entity other than Tenant in violation of the terms of this Lease, whether as a result of any act or omission by Tenant, or operation of law, or otherwise, then Landlord, whether before or after default by Tenant then Landlord may, in addition to, and not in diminution of or substitution for, any other rights and remedies under this Lease or pursuant to law to which Landlord may be entitled as a result thereof, collect rent from the transferee, assignee, subtenant or occupant and apply the net amount collected to the Rent herein reserved, but no such transfer, assignment, subletting, occupancy or collection shall be deemed a waiver of the covenants contained herein or the acceptance of the transferee, assignee, subtenant, or occupant as Tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant set forth in this Lease unless Tenant has been otherwise released, including without limitation pursuant to Section 11.1(e). SECTION 11.3. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of Landlord's interest in the Leased Premises, including a sale or lease, the transferor shall be automatically relieved of any and all obligations on the part of Landlord accruing from and after (but not before) the date of such transfer, provided that (a) the interest of the transferor, as Landlord, in any funds then in the hands of Landlord in which Tenant has an interest shall be turned over, subject to such interest, to the then transferee; and (b) notice of such sale, transfer or lease shall be delivered to Tenant as required by law. ARTICLE XII SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE SECTION 12.1. SUBORDINATION. Tenant agrees that this Lease shall, at the request of Landlord, be subordinate to any mortgages or deeds of trust that are now, or may hereafter be, placed upon the Leased Premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof, provided that the mortgagees or beneficiaries named in said mortgages or deeds of trust shall agree to recognize the interest of *** Confidential treatment requested. 35 40 Tenant under this Lease in the event of foreclosure, if Tenant is not then in default. Tenant also agrees that any mortgage or beneficiary may elect to have this Lease constitute a prior lien to its mortgage or deed of trust, and in the event of such election and upon notification by such mortgagee or beneficiary to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of said mortgage or deed of trust, Tenant agrees that upon the request of Landlord, or any mortgage or beneficiary, Tenant shall execute whatever reasonable instruments may be required to carry out the intent of this Section 12.1 and Section 12.2; provided that no such instrument may contain any matters which increase any of Tenant's obligations under this Lease or decrease any of Tenant's rights under this Lease and such instrument will grant a covenant of non-disturbance to Tenant. SECTION 12.2 ATTORNMENT. In the event any proceedings are brought for the foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure of, or in the event of exercise of the power of sale under, any mortgage and/or deed of trust made by Landlord covering the Leased Premises, or in the event Landlords sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the Lease Premises, this Lease shall remain in full force and effect and Tenant hereby attorns to, and covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as Landlord under this Lease. Payment by or performance of this Lease by any person, firm or corporation claiming an interest in this Lease or the Leased Premises by, through or under Tenant without Landlord's consent in writing shall not constitute an attornment or create any interest in this Lease or the Leased Premises. SECTION 12.3. FINANCING. [INTENTIONALLY DELETED] SECTION 12.4. ESTOPPEL CERTIFICATE. Tenant shall, without charge therefor, at any time and from time to time, within thirty (30) days after request therefor by Landlord, execute, acknowledge and deliver to Landlord a written estoppel certificate, in reasonable form, certifying to Landlord, any mortgage, or any purchaser of the Shopping Center or any other person designated by Landlord, as of the date of such estoppel certificate; (i) that Tenant is in possession of the Leased Premises and has accepted the same; (ii) that this Lease is unmodified and in full force and effect (or if there has been modification, that the same is in full force and effect as modified and setting forth such modifications); (iii) whether or not there are then existing any set-offs or defenses against the enforcement of any right or remedy of Landlord, or any duty or obligation of Tenant, hereunder (and, if so, specifying the same in detail); (iv) that Rent is paid currently without any offset or defense thereto, (v) the dates, if any, to which any Rent has been paid in advance; (vi) whether or not there is then existing any claim of Landlord's default under this Lease and if so, specifying the same in detail; (vii) that Tenant has no knowledge of any event having occurred that authorized the termination of this Lease by Tenant (or if Tenant has such knowledge, specifying the same in detail); and (viii) any other matters relating to the status of this Lease that Landlord or its mortgage may request be confirmed, provided that such facts are accurate and ascertainable. Landlord shall, within thirty (30) days after written request from Tenant, no more often than once in any Lease Year and provided Tenant is not then in default hereunder, deliver to Tenant or such persons as Tenant may designate, a statement in writing certifying to the extent true that: (i) Tenant is in possession of the Leased Premises; (ii) this Lease is in full force and effect (as later modified, if such be the case); (iii) the Rent due hereunder is current; and (iv) that to the best of Landlord's knowledge, information and belief, Tenant is not in default hereunder. SECTION 12.5 REMEDIES. Any failure by Tenant to execute any certificate, statement or instrument in accordance with the foregoing provisions of this Article XII or any financing statement in accordance with the provisions of Section 14.2(a), within the time period provided or if no time period is specified, then within thirty (30) days after written request, shall constitute a "default" under this Lease. 36 41 ARTICLE XIII ADVERTISING AND PROMOTION SECTION 13.1. PROMOTION FUND. Landlord shall establish an advertising and promotion fund (the "Fund"). The object of the Fund shall be to advertise the Retail Development in local metropolitan statistical area and to provide a program of events, all of which shall, in Landlord's judgment, serve to enhance and promote the Retail Development and its occupants. Such program of events may include the promotion of coach traffic to the Retail Development and the development of a mall video network within the Retail Development offering a program of information, entertainment and advertisements. The Fund shall be administered by Landlord and the costs and expenses of such administration shall be charged to the Fund. Landlord shall expend all amounts paid to Fund by the tenants in the Retail Development for the purposes herein set forth. SECTION 13.2. PROMOTION FUND CONTRIBUTION. Tenant's annual contribution to the Fund shall be the Fund Contribution (reduced proportionately for a partial Lease Year) as defined in the Data Sheet. Upon the Grand Opening, Tenant shall also pay Tenant's one-time initial contribution or Grand Opening Fee which is defined in the Data Sheet. The Fund Contribution payable by Tenant for each Lease Year shall be increased commencing with the second Lease Year of the Term of this Lease, and each Lease Year thereafter, by a percentage equal to the percentage increase from the "base period" of the Consumer Price Index ("Index") to the "current period" of the Index of the Lease Year for which the adjustment is being made; provided, however, if the first Lease Year is less than six (6) months, the first adjustment to the fund Contribution shall be after the first full Lease Year. Except as herein expressly provided, the term "base period" shall initially refer to the Index published for the month of October immediately preceding the Commencement Date. Following the initial increase in the Fund Contribution hereunder, the term "base period" shall refer to the Index published for the month of October immediately preceding the Lease Year for which the Fund Contribution was last adjusted hereunder. The "current period" of the Index shall refer to the Index published for the month of October immediately preceding the Lease Year for which an adjustment is being made. In the event the Index shall not be published for any of the above-described months, then the Index published for the month closest, but prior, to the described month shall be used in its place. The annual Fund Contribution shall be payable by Tenant to Landlord, or as Landlord may direct, in twelve (12) equal monthly installments, commencing on the Commencement Date, at the same time and in the same manner as the monthly installments Minimum Rent are payable. Not withstanding the foregoing, in lieu of Tenant's payment of the Grand Opening Fee, during the period from the Delivery of Possession Date through and including the Grand Opening date ("Advertising Period"). Tenant shall place advertisements (including, without limitation, billboards, signs, newspapers, radio, television ads, and direct mail) at a cost equal to the amount of the Grand Opening Fee that Tenant would have otherwise been obligated to pay ("Eligible Advertising") which shall specifically identify the Leased Premises, including the name and location of the Shopping Center. At or prior to the time the Eligible Advertising is placed, Tenant shall submit to Landlord copies of the actual Eligible Advertising or other written third-party evidence reasonably satisfactory to Landlord evidencing the Eligible Advertising together with all receipts, canceled checks or other third-party evidence reasonably satisfactory to Landlord establishing Tenant's payment for the Eligible Advertising. In the event that the cost of the Eligible Advertising does not meet or exceed the Grand Opening Fee by the end of the Advertising Period, Tenant shall pay the balance to Landlord within thirty (30) days of receipt of a bill from Landlord. SECTION 13.3. ADVERTISEMENTS [INTENTIONALLY DELETED]. SECTION 13.4. NETWORK. Landlord may cause to be developed a mall video network within the Retail Development (the "Network"). The object of the Network shall be to provide a program of information, entertainment and advertisements, which shall, in Landlord's judgment, serve to enhance or promote the Retail Development and its occupants. The Network shall have the right to sell available time and access on the Network for advertisements or other uses. The Network shall be under the sole and exclusive direction of Landlord and shall be administered by Landlord. The costs and expenses paid or incurred by Landlord for administering, operating, equipping, staffing, 37 42 protecting, insuring, repairing, replacing and maintaining the Network shall be charged to the Fund. Any production by Landlord of advertising messages for Tenant and any air time on or access to the Network is subject to availability, as determined solely by Landlord, and shall be at the then applicable rates and fees set by Landlord. Landlord shall have the right to reject, remove or discontinue showing any video taped advertising message of the business conducted, or to be conducted, in the Leased Premises (herein "Tenant Video") or advertising message on the Network the content of which is, in the opinion of Landlord, unethical, misleading, in bad taste, or shall tend to injure the reputation of the Retail Development or its occupants, or shall be deemed to be detrimental to the Retail Development or is in violation of any applicable rule, law or existing agreement with occupant(s) of the Retail Development. Tenant acknowledges that Tenant shall be solely responsible for the content of its Tenant Video and except with respect to the gross negligence of Landlord and the Network, Tenant agrees to save harmless Landlord, its officers, directors, partners, employees and agents from and against any and all claims, actions, damages, liability, cost or expense, including attorneys' fees that arise from or with respect to the content of such advertising message, including without limitation any claims for infringement of the intellectual property rights of others or actions for unfair competition. Landlord reserves the right at any time to dissolve the Network and cease providing its promotional services as well as Tenant Videos and in lieu thereof, to provide, or cause to be provided, a program of advertising and promotional events which in Landlord's sole judgment, will serve to promote the Retail Development and its occupants. ARTICLE XIV DEFAULT AND REMEDIES SECTION 14.1. ELEMENTS OF DEFAULT. If any one or more of the following events occur, said event or events shall hereby be classified as a "default" as that term is used throughout this Lease: (a)(i) the failure of Tenant to take possession of the Leased Premises at the Delivery of Possession Date, or (ii) the failure of Tenant to open its doors for business within thirty (30) days after on the date specified in Section I.3 hereof, or (iii) if Tenant vacates or abandons the Leased Premises and permits the same to remain unoccupied and unattended for three (3) days after written or telephone notice, or (iv) if Tenant fails to maintain normal inventory levels and employee staff for the conduct of its normal business activities in the Leased Premises for three (3) days after written or telephone notice, or (v) the failure of Tenant to operate its business in compliance with Section 4.2 for the purposes specified in Section 4.1 and Tenant fails to cure the same within ten (10) days after written notice, or (vi) in the event of the sale or removal of a substantial portion of Tenant's property located in the Leased Premises in a manner which is outside the ordinary course of Tenant's business; (b) the failure of Tenant to pay any Rent or other charges required to be paid by Tenant when same shall become due and payable hereunder and such failure continues for ten (10) days after written notice; (c) the failure of Tenant to perform or observe any term or condition of this Lease and such failure shall continue for thirty (30) days after written notice; provided, however, such period shall be extended for an additional reasonable period if Tenant has diligently commenced the curing of such default within the thirty (30) days period and is diligently pursuing the same to completion, but in no event shall either the thirty (30) days period or any extension thereof apply to Tenant's covenant to operate pursuant to Article IV of this Lease, unless the same is excused pursuant to Article IX or Article X of this Lease; (d) if Tenant shall be given three (3) notices of the same default under subparagraphs (b) or (c) within any period of eighteen (18) months, notwithstanding any subsequent cure of the failure to perform or observe the terms or conditions of this Lease as identified in such notices; (e) if any writ of execution, levy, attachment or other legal process of law shall occur upon a substantial and material part of Tenant's assets, merchandise, fixtures, or Tenant's estate or interest in the Leased Premises; (f) Tenant shall be liquidated or dissolved or shall begin proceedings toward such liquidation or dissolution, or shall in any manner permit the divestiture of all, or any substantial part of Tenant's assets. 38 43 SECTION 14.2. LANDLORD'S REMEDIES. In the event of any such default or breach by Tenant, Landlord may at any time thereafter, with or without further notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such default or breach: (a) Perform, on behalf and at the expense of Tenant, any obligation of Tenant under this Lease which Tenant has failed to perform and of which Landlord shall have given at least three (3) days' notice (except in the case of emergency, in which event no such notice shall be required), the cost of which performance by Landlord, together with interest therein at the interest rate (as specified in Section 20.14 hereof) from the date of such expenditure, shall be deemed additional rent and shall be payable by Tenant to Landlord upon demand. (b) Without further notice, re-enter and repossess the Leased Premises, by summary proceedings or otherwise, and remove Tenant and all other persons and property from the Leased Premises, and store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant without resort to legal process and without Landlord being deemed guilty of trespass or conversion or becoming liable for any loss or damage occasioned thereby. In connection herewith, Landlord shall have, in addition to any other remedies, any and all self-help remedies, including but not limited to a forcible entry into the Leased Premises or a "lock-out" accomplished by changing the locks on the Leased Premises. No re-entry of the Leased Premises shall be construed as an election by Landlord to accept Tenant's surrender of the Leased Premises or to terminate this Lease unless a written notice of such intention is given by Landlord to Tenant. (c) Declare the entire balance of the Rent, and all other amounts to be paid by Tenant hereunder for the remainder of the Term to be due and payable immediately, and collect such balance in any manner not inconsistent with applicable law. The amount of additional rent and Percentage Rent payable with respect to each Lease Year remaining in the Term after such default (including the Lease Year during which such default occurred) shall be conclusively presumed to be equal to the average additional rent and Percentage Rent payable with respect to each completed Lease Year preceding such default; provided, however, that if such default occurs before the expiration of two (2) Lease Years, then the amount of additional rent and Percentage Rent payable with respect to each Lease Year remaining in the Term after such default (including the Lease Year or partial Lease Year during which such default occurred) shall be conclusively presumed to be equal to twelve (12) times the average monthly additional rent and Percentage Rent payable prior to such default. Notwithstanding anything to the contrary contained in this Lease, Landlord hereby agrees to use reasonable efforts to mitigate damages; provided, however, that landlord, in attempting to lease the Leased Premises shall not be obligated to give preference to the Leased Premises over any other available space in the Shopping Center. In consideration of the preceding sentence, Tenant hereby acknowledges that the Leased Premises are located within a super-regional discount specialty retail shopping center and that the quality and record of experience of a prospective tenant and the type of prospective tenant (compared with the then current tenant mix in the Shopping Center) are principal considerations which Landlord shall employ in determining whether to lease the Leased Premises. (d) Terminate this Lease by giving written notice of such termination to Tenant, which termination shall be effective as of the date of such notice or any later date thereof specified by Landlord in such notice (provided, that without limiting the generality of the foregoing provisions, Landlord shall not be deemed to have accepted any abandonment or surrender by Tenant of any or all of the Leased Premises or Tenant's leasehold estate under this Lease unless Landlord has so advised Tenant expressly and in writing, regardless of whether Landlord has re-entered or relet any or all of the Leased Premises or exercised any or all of Landlord's other rights under this Lease or applicable law. 39 44 (e) In Landlord's own name or otherwise, relet any or all of the Leased Premises with or without any additional premises, for any or all of the remainder of the Term (or, if this Lease has then been terminated, for any or all of the period which would, but for such termination, have constituted the remainder of the Term) or for a period exceeding such remainder, on such terms and subject to such conditions as are acceptable to Landlord (including, by way of example rather than of limitation, the alteration of any or all of the Leased Premises in any manner which, in Landlord's judgment, is necessary or desirable in connection with such reletting, and the allowance of one or more concessions or "free-rent" or reduced-rent periods), and collect and receive the rents thereof. Tenant shall pay to Landlord, at the times and in the manner specified by the provisions of this Lease (unless Landlord has elected to accelerate Rent as provided above in subparagraph (d), in which event Tenant shall be obligated to pay such accelerated amount as provided in such subparagraph), (i) the installments of the Minimum Rent, additional rent and Percentage Rent accruing during such remainder (or, if this Lease has then been terminated, damages equalling the respective amounts of such installments (determined as provided in subparagraph 14.2(c) which would have accrued during such remainder, had this Lease not been terminated)), plus (ii) the cost to Landlord of any such reletting (including, by way of example rather of limitation, any attorneys's fees, leasing or brokerage commissions, repair or improvement expenses and the expense of any other actions taken in connection with such reletting) less any monies received by Landlord with respect to such remainder from such reletting of any or all of the Leased Premises. (f) Recover from Tenant, an amount equal to (i) all items of accrued and unpaid Rent, including, without limitation, the then unamortized amount of the Construction Allowance; (ii) all reasonable expenses (including, by way of example rather than of limitation, all repossession costs, management expenses, operating expenses, legal expenses and attorney's fees) incurred by Landlord in curing or seeking to cure any default or in exercising or seeking to exercise any of Landlord's rights and remedies under the provisions of this Lease or at law or in equity on account of any default, plus (iii) interest on all such expenses, at the rate provided in Section 20.14, all of which expenses and interest shall be payable by Tenant immediately on demand therefor by Landlord. (g) Without terminating this Lease, maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have vacated the Leased Premises. In such event, Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover Rent as it becomes due hereunder. (h) Any damage or loss of Rent sustained by Landlord may be recovered by Landlord, at Landlord's option, at the time of the reletting or termination, in a single action or in separate actions, from time to time, as said loss of Rent or damages shall accrue, or in a single proceeding deferred by Landlord or with jurisdiction reserved by the court, until the expiration of the Term of this Lease (in which event Tenant hereby agrees that, at Landlord's option, the cause of action shall not be deemed to have accrued until the date of expiration of said Term). (i) Nothing contained herein shall prevent the enforcement of any claim Landlord may have against Tenant for anticipatory breach of this Lease. In the event of any anticipatory breach by Tenant of any of the covenants or provisions hereof or in the event of Tenant's default, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not provided for herein. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy under this Lease or, at law or in equity. Tenant hereby expressly waives for itself and all persons claiming by or through Tenant, any and all rights to redeem, reinstate or restore, or obtain relief from forfeiture of this Lease granted by or under any present or future law in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Leased Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease. (j) In case suit shall be brought for recovery of the Leased Premises, for the recovery of Rent or any other amount due under the provisions of this Lease, or because of the breach of any other covenant herein contained on the part of Tenant to be kept and performed, and a breach shall be established, Tenant shall pay to Landlord all costs and expenses incurred therefor, including Landlord's attorney's reasonable fees and expenses. 40 45 (k) Nothing herein contained shall limit or prejudice Landlord's right to prove and obtain as damages, by reason of any default by Tenant, an amount equal to the maximum allowed by statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved. No expiration or termination of this Lease, abandonment, re-entry by Landlord or vacancy, shall relieve Tenant of any of its liabilities and obligations under this Lease (whether or not any or all of the Leased Premises are relet), and Tenant shall remain liable to Landlord for all damages resulting from any default by Tenant, including any damage resulting from the breach by Tenant of any of its obligations to pay Minimum Rent, Percentage Rent, additional rent and any other sums which Tenant is obligated to pay hereunder. (l) The rights and remedies of Landlord under this Lease shall be deemed to be cumulative, and no one of such rights or remedies shall be exclusive at law or in equity of the other rights and remedies of Landlord on account of a default by Tenant, and the exercise of any one such right or remedy by Landlord shall not impair Landlord's standing, right or power to exercise any other right or remedy. SECTION 14.3. BANKRUPTCY. (a) Neither Tenant's interest in this Lease, nor any estate hereby created in Tenant nor any interest herein or therein, shall pass to any trustee or receiver or assignee for the benefit of creditors or otherwise by operation of law, except as may specifically be provided pursuant to the Bankruptcy Code (11 USC Section 101 et seq.), as the same may be amended from time to time. (b) It is understood and agreed that this Lease is a lease of real property in a shopping center as such lease is described in Section 365 of the Bankruptcy Code, as the same may be amended from time to time. Upon the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor-in-possession, and any trustee who may be appointed with respect to the assets of or estate in bankruptcy of Tenant, agree to pay monthly in advance on the first day of each month, as reasonable compensation for the use and occupancy of the Leased Premises, an amount equal to all Minimum Rent, additional rent and other charges otherwise due pursuant to this Lease, and to pay Percentage Rent monthly, at the percentage factor set forth in this Lease for the Lease Year in which such month falls, on all of the Gross Sales during such month in excess of one-twelfth (1/12th) of the Sales Break Point for such Lease Year, payment of all such Percentage Rent to be made by the tenth (10th) day of the succeeding month. Included within and in addition to any other conditions or obligations imposed upon Tenant or its successor in the event of the assumption and/or assignment of this Lease are the following: (i) the cure of any monetary defaults and reimbursement of pecuniary loss within not more than thirty (30) days of assumption and/or assignment; (ii) the deposit of an additional sum equal to not less than three (3) months' Minimum Rent and additional rent to be held pursuant to the terms of Section 2.4 of this Lease, which sum shall be determined by Landlord, in its sole discretion, to be a necessary deposit to secure the future performance under this Lease by Tenant or its assignee; (iii) the use of the Leased Premises as set forth in Section 4.1 of this Lease and the quality, quantity and/or lines of merchandise, goods or services required to be offered for sale are unchanged; and (iv) the prior written consent of any mortgagee to which this Lease has been assigned as collateral security. SECTION 14.4. ADDITIONAL REMEDIES AND WAIVERS. Notwithstanding any other provision contained in this Lease to the contrary, all rights and remedies of Landlord set forth herein (including but not limited to Landlord's rights respecting lockout, re-entry, self-help, repossession, security interests and lien rights and foreclosure) shall be in addition to (and not in substitution of) any and all other rights and remedies now or hereafter provided by law, including but not limited to rights and remedies provided by the statutes, rules, regulations, laws and judicial decisions of the State, and all such rights and remedies shall be cumulative; and none of such rights and remedies so provided by law shall be conditioned or limited by any conditions or limitations on the remedies granted to Landlord under the terms of this Lease, nor upon any notice and/or passage of time that may be required hereunder in order for an event or condition to constitute a default or an event of default as that term is defined in this Lease. SECTION 14.5. LANDLORD'S CURE OF DEFAULT. If Tenant shall be in default hereunder, Landlord shall have the option, but not the obligation, upon three (3) days written notice to Tenant (except in the event of an emergency, in which event no notice shall be required), to cure the act or failure constituting said default for the account of and at the expense of Tenant. Landlord's cure or 41 46 attempt to cure any act or failure constituting the default by Tenant shall not result in a waiver or release of Tenant. Tenant agrees to pay the costs incurred by Landlord pursuant to this Section 14.5 plus interest, in accordance with Section 20.14 hereof, on all sums expended by Landlord pursuant to this Section 14.5 from the date of such expenditure plus a charge of fifteen percent (15%) of such costs, to Landlord upon demand, as additional rent. SECTION 14.6 SECURITY INTEREST. Tenant may grant a security interest, encumber or pledge its equipment, personal property, inventory and moveable trade fixtures located on or about the Leased Premises, with respect to financing which benefits this store location and Landlord shall agree to subordinate its lien, if any, on such equipment to such financing. In no event, however, shall Tenant be permitted to mortgage, hypothecate, encumber or pledge the leasehold interest in the Leased Premises. SECTION 14.7 TENANT'S REMEDIES. In the event Landlord shall fail to perform any obligation specified in this Lease, which default materially and adversely affects Tenant's operations, then Tenant may, after the continuance of any such default for thirty (30) days after written notice thereof by Tenant to Landlord (except in the event of an emergency when only reasonable notice shall be required to be given to Landlord under the circumstances), cure such default all on behalf of and at the expense of Landlord and do all necessary work and make all necessary payments in connection therewith and Landlord shall, on demand, pay Tenant forthwith, the amount so paid by Tenant together with interest thereon at the rate specified in Section 20.14 hereof from the date of payment until re-payment. ARTICLE XV RIGHT OF ACCESS Landlord may, at any reasonable time or times, upon prior notice to Tenant (except in the event of an emergency, or if Tenant is in default under this Lease, in which event no notice shall be required), before and after the Commencement Date, enter upon the Leased Premises, any portion thereof and any appurtenance thereto (with men and materials, if required) for the purpose of: (a) inspecting the same; (b) making such repairs, replacements or alterations which Landlord may be required to perform as herein provided or which it may deem desirable for the Leased Premises; and (c) showing the Leased Premises to prospective purchasers, lenders or lessees. Landlord hereby expressly reserves the right, exercisable at any time and from time to time, to erect, use, maintain and repair pipes, conduits, plumbing, vents, ducts and wires in, to, under and through the Leased Premises as and to the extent that Landlord may now or hereafter deem to be necessary or appropriate for the proper operation and maintenance of the Shopping Center. Any redecorating or repair necessitated by reason of location of same within the Leased Premises shall be the responsibility of Landlord. Landlord agrees to hold Tenant harmless from any damage or injury to person or property to the extent resulting from Landlord exercising its rights under this Article XV. Notwithstanding anything contained in this Lease to the contrary, if such work prevents Tenant from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. In the exercise of its rights under this Article XV, Landlord shall used reasonable efforts to avoid material interference with the operation of Tenant's business within the Leased Premises. Landlord agrees that except in the event of an emergency, and provided Tenant shall make an employee of Tenant available to accompany Landlord following Landlord's notice to Tenant of the necessity therefor, Landlord shall not enter the Leased Premises during the Term of this Lease without an employee of Tenant accompanying Landlord's representative. 42 47 ARTICLE XVI DELAYS If Landlord or Tenant is delayed or prevented from performing any of their respective obligations during the Term of this Lease because of strikes, lockouts, labor troubles, inability to procure materials, failure of power, governmental restrictions, a delay created by the other party, or reasons of a like nature not the fault of the party delayed in performing such obligation (collectively "Delays"), then the period of such delays shall be deemed added to the time herein provided for the performance of any such obligation and the defaulting party shall not be liable for losses or damages caused by such delays; provided, however, that, subsequent to the Commencement Date, this Article XVI shall not apply to the payment of any sums of money required to be paid by Tenant hereunder or any obligation of Landlord or Tenant that can be satisfied by the payment of money, and shall not excuse Tenant from its obligation to continuously operate its business within the Leased Premises in accordance with the provisions of Sections 4.1 and 4.2 hereof. ARTICLE XVII END OF TERM SECTION 17.1. RETURN OF LEASED PREMISES. Upon the Expiration Date or earlier termination of this Lease, Tenant shall quit and surrender to landlord the Leased Premises, broom-clean, in good order and condition, ordinary wear and tear excepted, and shall surrender to Landlord all keys to or for the Leased Premises and inform Landlord of all combinations of locks, safes and vaults, if any, in the Leased Premises. Subject to the provisions of Section 3.5 hereof, Tenant, at its expense, shall promptly remove all personal property of Tenant, and repair all damage to the Leased Premises caused by such removal. Any personal property of Tenant not removed within ten (10) days following the Expiration Date or earlier termination of this Lease shall be deemed to have been abandoned by Tenant and to have become the property of Landlord, and may be retained or disposed of by Landlord, as Landlord shall desire. Tenant's obligation to observe or perform the covenants set forth in this Section 17.1 shall survive the Expiration Date or earlier termination of this Lease. SECTION 17.2. HOLDING OVER. If Tenant shall hold possession of the Leased Premises after the Expiration Date or earlier termination of this Lease at Landlord's option (a) Tenant shall be deemed to be occupying the Leased Premises as a tenant from month-to-month, at [***] and other charges in effect during the last Lease year immediately preceding such holdover and other wise subject to all of the terms and conditions of this Lease, or (b) Landlord may exercise any other remedies it has under this Lease or at law or in equity including an action for wrongfully holding over. Notwithstanding the foregoing, if Tenant is negotiating in good faith with Landlord to renew or extend the Term of this Lease for the Leased Premises (or a relocation within the Shopping Center), then Tenant may occupy the Leased Premises on a month-to-month tenancy at [***] of the annual Minimum Rent for the last year of the Term of the Lease. *** Confidential treatment requested. 43 48 ARTICLE XVIII COVENANT OF QUIET ENJOYMENT Landlord covenants that if and so long as Tenant pays the Rent and all other charges provided for herein, and performs all of its obligations provided for herein, Tenant shall at all times during the Term hereof peaceably have, hold and enjoy the Leased Premises, without any interruption or disturbance from Landlord, or anyone lawfully or equitably claiming through or under Landlord, subject to the terms hereof and any mortgage or deed of trust to which this Lease shall be subordinate. ARTICLE XIX UTILITIES SECTION 19.1. UTILITIES. Tenant agrees to connect to and use the utilities (including electricity, water, gas, cooling and/or heating system, telephone and any other utility) supplied to the Leased Premises in accordance with the criteria set forth in the Exhibits attached to this Lease, Landlord's schedule of mechanical and electrical design criteria, Landlord's rules and regulations, and the rules and regulations of the utility companies supplying the service. Tenant shall be solely responsible for and promptly pay all costs and charges, including installation thereof where applicable, for all water, gas, cooling, heat, electricity, sewer and other utilities provided or used in or at the Leased Premises, commencing with the Delivery of Possession Date and continuing throughout the Term of this Lease. If Landlord shall elect to supply any of the utilities used upon or furnished to the Leased Premises, Tenant agrees to pay as additional rent a per square foot charge based on Tenant's estimated usage, as reflected on a monthly invoice to be provided by Landlord; provided, however, in no event shall Tenant's total charges for utilities provided by Landlord exceed what Tenant would be charged by the local utility company if it were billed directly by such utility as a direct retail customer. Landlord shall not be liable to Tenant for any loss, damage or expense which Tenant may sustain if the utilities, or the quality or character of utilities used upon or furnished to the Leased Premises are no longer available or suitable for Tenant's requirements, or if the supply of any such utility ceases or is interrupted as a result of any cause and no such change, interruption or cessation of service shall constitute an eviction of Tenant. Any furnishing by Landlord of light, cooling and/or heat or power shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce heat, lighting and air conditioning within the Shopping Center, including, without limitation, the Leased Premises and the common areas, as required by any mandatory or voluntary fuel or energy saving allocation, or any similar statute, regulation, order or program. Notwithstanding the foregoing, in the event that any foregoing utility service is interrupted for three (3) consecutive working days solely as a result of any of Landlord's or any of Landlord's agents' wilful acts of misconduct or negligence, and Tenant is unable to operate its business within the Leased Premises as a result thereof, then Landlord shall, after written notice from Tenant to Landlord concerning such interruption, abate Minimum Rent on a day-to-day basis if and until such time as said utility services are restored. SECTION 19.2. ELECTRICITY, TELEPHONE AND GAS. All telephone, electric and gas (with gas being available only to food service tenants) utility required by Tenant for the Leased Premises shall (if available) be obtained by Tenant in accordance with Exhibit D and shall be installed by the appropriate company or utility. All charges for such utility service (including the installation thereof) shall be paid by Tenant directly to the company or utility providing any such service, as and when they become due and payable. SECTION 19.3. TRASH AND GARBAGE REMOVAL. Tenant shall be solely responsible for trash and garbage removal from the Leased Premises including the placing of all trash and garbage in containers provided by Landlord or Landlord's contractor for such purpose. In the event Landlord elects to furnish such service to the tenants in the Shopping Center, Tenant agrees to use only the service provided by Landlord and to pay for such service (including both the cost of leasing containers and the cost of removal) monthly, as additional rent, in accordance with the uniform 44 49 schedule of charges to be established by Landlord. In no event shall Tenant be obligated to pay Landlord more for such trash and garbage removal service than the prevailing competitive rates of reputable independent trash removal contractors for service similar to that provided by Landlord. SECTION 19.4. WATER AND SEWER. The cost of water and sanitary sewer for usage in the Shopping Center shall be included in Common Area Maintenance Expenses, except for food service tenants which may be billed directly by Landlord or the supplier of water and sanitary service and any other tenants which are billed directly by Landlord or such supplier. Landlord reserves the right to install a water meter in the Leased Premises at any time or from time to time to measure Tenant's consumption of water therein and bill Tenant directly for the cost of such consumption. Tenant shall pay, as additional rent, the amount of each bill within fifteen (15) days after such bill is rendered. SECTION 19.5. GREASE INTERCEPTORS. Landlord, in its commercially reasonable judgment, will arrange for regular periodic service and cleaning of all grease interceptors at Tenant's expense. Cost of service and cleaning of grease interceptors will be allocated among grease interceptors serving food court(s) and grease interceptors serving individual tenants in proportion to grease trap size. Tenants served by individual grease traps will pay their pro rata share of the cost for their grease trap. The share of grease trap service and cleaning cost apportioned to food court grease traps will be paid by food court tenants as part of the food court common facilities expenses. ARTICLE XX MISCELLANEOUS SECTION 20.1. ENTIRE AGREEMENT. This Lease together with the Exhibits, attached hereto and incorporated herein contains the entire agreement between the parties hereto and there are no promises, agreements, conditions, undertakings, or warranties, or representations, oral or written, express or implied, between them other than as herein set forth. No change or modification of this Lease or of any of the provisions hereof shall be valid or effective unless the same is in writing and signed by the parties hereto. No alleged or contended waiver of any of the provisions of this Lease shall be valid or effective unless in writing signed by the party against whom it is sought to be enforced. SECTION 20.2. NOTICES. No notice or other communication given under this Lease shall be effective unless the same is in writing and is delivered in person or mailed by registered or certified mail, return receipt requested, first class, postage prepaid, or delivered by Federal Express or a comparably reliable national air courier service (i.e. one which delivers service in at least 48 states) provided that any such courier service provides written evidence of delivery. Any such notice or communication shall be addressed: (a) If to Landlord, at 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209, Attention: General Counsel, or to such other address as Landlord shall designate by giving notice thereof to Tenant, with a copy for informational purposes only to the Mall Manager of the Retail Development. (b) If to Tenant, at the address set forth for Tenant on page 1 of this Lease or at the Leased Premises, or such other address as Tenant shall designate by giving notice thereof to Landlord, with a courtesy copy but not required for effective notice to: Gary Cary Ware & Friedenrich, 400 Hamilton Avenue, Palo Alto, CA 94301; Attn: Daniel K. Seubert. The date of service of any notice or other communication given by mail shall be three (3) days after the date on which such notice is deposited in the U.S. mails. The date of service of any notice given by courier service (as described above) shall be one (1) day after deposit with such courier service. SECTION 20.3. GOVERNING LAW. It is the intent of the parties hereto that all questions with respect to the construction of this Lease and the rights and the liabilities of the parties hereto shall be determined in accordance with laws of the jurisdiction in which the Leased Premises is located 45 50 and that all disputes arising hereunder shall be heard and decided in the local jurisdiction where the Leased Premises is located. SECTION 20.4. SUCCESSORS. All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors, and assigns of the said parties; and if there shall be more than one Tenant, or more than one person or entity acting collectively as Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. Any restriction on or requirement imposed upon Tenant hereunder shall be deemed to extend to Tenant's Guarantor, Tenant's sublessees, Tenant's assignees and Tenant's invitees, and it shall be Tenant's obligation to cause the foregoing persons to comply with such restrictions or requirements. No rights, however, shall inure to the benefit of any assignee or other transferee of Tenant, and no rights or benefits shall be conferred upon any such assignee or transferee by reason of this Section 20.4, unless such rights or benefits shall be expressly otherwise set forth in this Lease. SECTION 20.5. LIABILITY OF LANDLORD. Neither Landlord, Landlord's beneficiaries, any persons or entities comprising Landlord, nor any successor in interest to Landlord (or to such persons or entities) shall have any personal liability for any failure by Landlord to perform any term, covenant or condition of this Lease. If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed, and if as a consequence of such default Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right, title and interest of Landlord in the Shopping Center and out of rents or other income from such property receivable by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Shopping Center, subject, nevertheless, to the rights of Landlord's mortgagee, and neither Landlord nor any of the co-partners comprising the partnership which is Landlord herein shall be liable for any deficiency. The foregoing limitation of liability shall be noted in any judgment secured against Landlord and in the judgment index. SECTION 20.6. BROKERS. Tenant warrants and represents that there was no broker or agent instrumental in consummating this Lease. Tenant agrees to indemnify and hold Landlord harmless against any claims for brokerage or other commissions arising by reason of a breach by Tenant of this representation and warranty. SECTION 20.7. TRANSFER BY LANDLORD. Landlord hereunder shall have the right to freely assign this Lease without notice to or the consent of Tenant. SECTION 20.8. NO PARTNERSHIP. Notwithstanding the fact that a portion of the Rent reserved hereunder may be a percentage of Tenant's Gross Sales, and notwithstanding anything else to the contrary, Landlord shall not be deemed to be a partner of Tenant or a joint venturer with Tenant. SECTION 20.9. WAIVER OF COUNTERCLAIMS. Tenant shall not impose any counterclaim or counterclaims (other than compulsory counterclaims) in a summary proceeding or other action based on termination or holdover, it being the intent of the parties hereto that Tenant be strictly limited in such instance to bringing a separate action in the court of appropriate jurisdiction. The foregoing waiver is a material inducement to Landlord making, executing and delivering this Lease and Tenant's waiver of its right to counterclaim in any summary proceeding or other action based on termination or holdover is done so knowingly, intelligently and voluntarily. SECTION 20.10. WAIVER OF JURY TRIAL. [INTENTIONALLY DELETED]. SECTION 20.11. SEVERABILITY. If any provision of this Lease or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. SECTION 20.12. NO WAIVER. No failure by Landlord to insist upon the strict performance of any term, covenant, agreement, provision, condition or limitation of this Lease to be kept, observed 46 51 or performed by Tenant, and no failure by Landlord to exercise any right or remedy available upon a breach of any such term, covenant, agreement, provision, condition or limitation of this Lease, shall constitute a waiver of any such breach or of any such term, covenant, agreement, provision, condition or limitation. SECTION 20.13. CONSUMER PRICE INDEX. As used herein, "Consumer Price Index" or "Index" shall mean the Consumer Price Index for All Urban Consumers (1982-84-100), U.S. City Average, All Items, published by the United States Department of Labor, Bureau of Labor Statistics (or such comparable index as may be utilized in substitution for or as the successor to the stated Index). If such Index is not published by the Bureau of Labor Statistics or by another similar governmental agency at any time during the Term of this Lease, then the most closely comparable statistics on the purchasing power of the consumer dollar as published by a responsible financial authority and selected by Landlord shall be utilized in lieu of such Index. SECTION 20.14. INTEREST. Any amount due from Tenant to Landlord herein which is not paid when due shall bear interest at a rate per annum equal to the Federal Reserve Bank discount rate as published in [***] day of the month preceding the date upon which the obligation is incurred (or the next business day thereafter if the 25th is not a weekday) plus [***] unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. In no event shall any interest calculated hereunder be at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Section 20.14. SECTION 20.15. EXCAVATION. If an excavation shall be made upon land adjacent to the Leased Premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Leased Premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which the Leased Premises form a part from injury or damage and to support the same by proper foundation, without any claim for damages or indemnity from Landlord, or diminution or abatement of Rent. Notwithstanding anything contained in this Lease to the contrary, if such excavation work prevents Tenant from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after three (3) days' written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. SECTION 20.16. RULES AND REGULATIONS. Tenant agrees to comply with and observe all reasonable rules and regulations established by Landlord for the Shopping Center from time to time. Tenant's failure to keep and observe such rules and regulations shall constitute a default pursuant to the terms of this Lease in the manner as if the same were contained herein as covenants, which shall carry with it the same consequences under Article XIV hereof as Tenant's failure to pay rent. SECTION 20.17. FINANCIAL STATEMENTS. Upon Landlord's written request from time to time, but not more than once per Lease Year, Tenant shall, within thirty (30) days after Landlord's request therefor, furnish Landlord financial statements outlining Tenant's then current financial condition and shall furnish financial statements outlining the current financial condition of any Guarantor of this Lease. Landlord shall maintain all financial information provided in a confidential manner; provided, however, that Landlord may disclose such financial statements to Landlord's mortgagees or prospective mortgagees or purchasers. SECTION 20.18. GENERAL RULES OF CONSTRUCTION. (a) This Lease may be executed in several counterparts and the counterparts shall constitute one and the same instrument. (b) Landlord may act under this Lease by its attorney or agent. (c) Wherever a requirement is imposed on Tenant hereunder, Tenant shall be required to perform such requirement at its sole cost and expense unless it is specifically otherwise provided herein. (d)(i) Wherever appropriate herein, the singular includes the plural and the plural includes the singular; (ii) whenever the work "including" is used herein, it shall be deemed to mean "including, but not limited to"; and (iii) the words "re-enter" and "re-entry" as used herein shall not be restricted to their technical legal meaning. (e) Anything in this Lease to the contrary notwithstanding: (i) any provision hereof which permits or requires a party to *** Confidential treatment requested. 47 52 take any particular action shall be deemed to permit or require, as the case may be, such party to cause such action to be taken; and (ii) any provision hereof which requires any party not to take any particular action shall be deemed to require such party to prevent such action to be taken by any person or by operation of law. (f) Whenever costs or expenses are required to be assessed to or paid by Tenant, such costs and expenses shall be reasonable. SECTION 20.19. RECORDING. Neither this Lease nor any memorandum hereof may be recorded without the express written consent of Landlord. SECTION 20.20. EFFECTIVE DATE. For all purposes hereof, the "Effective Date" of this Lease shall be the date upon which this Lease shall have been executed by both parties and physically delivered by Landlord to Tenant or its attorney. Prior to the Effective Date, neither this Lease nor anything hereunder contained shall be legally binding on either Landlord or Tenant, and the submission of this Lease by Landlord to Tenant prior to such Effective Date for examination or consideration by Tenant or discussion between Landlord and Tenant shall not constitute a reservation of or option for the Leased Premises or create any legal obligation or liability whatsoever on Landlord. SECTION 20.21. HEADINGS. The captions, section numbers, article numbers and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope of intent of such sections or articles of this Lease nor in any way affect this Lease. SECTION 20.22. MANAGING AGENT. Landlord has advised Tenant that it has appointed MillsServices Corp., a Delaware corporation as managing agent of the Retail Development (said managing agent and any successor or substitute managing agent is hereinafter referred to as "Managing Agent"). Tenant shall, until otherwise notified by Landlord, make all payments of Rent required to be made pursuant to this Lease to the Managing Agent payable to Landlord and direct all notices, inquiries or other communications to the Managing Agent, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209. [Signatures Appear on the Following Page] 48 53 IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease as of the day and year first above written. WITNESS: LANDLORD: KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Katy Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner 3/17/99 By: /s/ [ILLEGIBLE] By: /s/ JUDITH BERSON ---------------------------- ------------------------------- Judith Berson By: /s/ [ILLEGIBLE] Executive Vice President ---------------------------- WITNESS/ATTEST: TENANT: SILICON ENTERTAINMENT, INC., a California corporation By: By: /s/ [ILLEGIBLE] ---------------------------- -------------------------------- By: Name: /s/ [ILLEGIBLE] ---------------------------- -------------------------------- Its: Vice President -------------------------------- By: By: /s/ DAVID S. MORSE ---------------------------- -------------------------------- By: Name: David S. Morse ---------------------------- -------------------------------- Its: Chairman/CEO -------------------------------- Tenant's Corporate Seal: 54 ACKNOWLEDGMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) )ss. COUNTY OF ARLINGTON ) On this 17th day of March, 1999, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Lease and acknowledged before me that she was duly authorized and did execute some on behalf of KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. Karen Denton ----------------------------------- Notary Public My Commission expires: 10/31/02 ------------- [Notarial Seal] ACKNOWLEDGMENT OF CORPORATE TENANT STATE OF CALIFORNIA ) )ss. CITY/COUNTY OF SANTA CLARA ) On March 16, 1999, before me Laurie Shermer, a Notary Public in and for said state aforesaid, personally appeared Chris Morse and David Morse, as Vice President and Chairman & CEO of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Laurie H. Shermer ----------------------------------- Notary Public, Santa Clara County, My Commission expires: 9/19/2001 ------------- [Notarial Seal] 55 ADDENDUM ATTACHED TO AND MADE A PART OF LEASE DATED MARCH 17, 1999, BY AND BETWEEN KATY MILLS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, AS "LANDLORD," AND SILICON ENTERTAINMENT, INC., A CALIFORNIA CORPORATION, AS "TENANT." The Lease is hereby modified and supplemented as set forth herein. Any conflict between a term, condition or provision contained in this Addendum with any term, condition or provision contained in the printed Lease shall be resolved in favor of this Addendum. Add as a New Section 7.3: "SECTION 7.3. SALES TAX REBATE. Landlord has determined that financial assistance from the City of Katy and/or the State of Texas in the form of a sales tax rebate will better enable Landlord to develop the Shopping Center in a manner beneficial to both Landlord and Tenant. Therefore, in order to provide Landlord with the sales tax information from the State of Texas Comptroller of Public Accounts ("Comptroller") pertaining to Tenant's sales at the Leased Premises, Tenant agrees to provide Landlord with certified copies of all sales tax returns filed with the Comptroller for Tenant's retail operations at the Leased Premises during the Term of this Lease. In addition thereto, Tenant shall provide Landlord with a power of attorney letter addressed to, and in a form satisfactory to, the Comptroller authorizing the Comptroller to release to Landlord all sales tax information for Tenant's retail operations at the Leased Premises during the Term of this Lease. Such letter shall be in a form attached hereto and made a part hereof as Exhibit G, or such other or additional forms as required from time to time by the Comptroller in order to release such information to Landlord. Landlord agrees to maintain the confidentiality of any proprietary information received by Landlord pursuant to this Section 7.3." Section 12.1: At the end of Section 12.1, insert: "In accordance with the provision of this Section 12.1, Tenant agrees to execute the Agreement of Subordination, Non-Disturbance and Attornment and Pre-Construction Tenant Estoppel Certificate attached hereto as Exhibit H and Exhibit H-1 concurrently with its execution of this Lease." 56 IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this Addendum as of the day and year first above written. WITNESS: LANDLORD: KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Katy Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner 9/17/99 By: /s/ [ILLEGIBLE] /s/ JUDITH BERSON ------------------------- -------------------------------------- By: Judith Berson By: /s/ [ILLEGIBLE] Its: Executive Vice President ------------------------- WITNESS/ATTEST: TENANT: SILICON ENTERTAINMENT, INC., a California corporation By: By: /s/ CHRISTOPHER O. MORSE ------------------------- ---------------------------------- By: Name: Christopher O. Morse ------------------------- -------------------------------- Its: Vice President -------------------------------- By: By: /s/ DAVID S. MORSE ------------------------- ---------------------------------- By: Name: David S. Morse ------------------------- -------------------------------- Its: Chairman/CEO --------------------------------- -2- 57 ACKNOWLEDGEMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) ) ss. COUNTY OF ARLINGTON ) On this 17th day of March, 1999, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Addendum and acknowledged before me that she was duly authorized and did execute same on behalf of KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. /s/ KAREN DENTON --------------------------------------- Notary Public, Commonwealth of Virginia My Commission expires: October 31, 2002 ACKNOWLEDGEMENT OF CORPORATE TENANT STATE OF CALIFORNIA ) ) ss. CITY/COUNTY OF SANTA CLARA ) On March 16, 1999, before me Laurie Shermer, a Notary Public in and for the state aforesaid, personally appeared Chris Morse and David Morse, as Vice President and Chairman and CEO of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument. /s/ LAURIE H. SHERMER ----------------------------------------- Notary Public, Santa Clara County, My Commission expires: September 19, 2001 [Notarial Seal] LAURIE H. SHERMER Commission #1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 58 EXHIBIT A LEASED PREMISES [DRAWING] 59 EXHIBIT A-1 DISPLAY AREA [DRAWING] 60 EXHIBIT A-2 RELOCATION ZONE [DRAWING] 61 EXHIBIT B CALCULATION OF GROSS LEASABLE AREA [DRAWING] 62 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT C LANDLORD'S WORK -- ROUGH SHELL Preface Work to be performed by Landlord in constructing the Leased Premises shall be limited to those items expressly set forth below as Landlord's Work in this Exhibit C ("Landlord's Work") and, except as otherwise provided in Exhibit C or Exhibit D, such work shall be performed at Landlord's sole cost and expense. All Landlord's Work shall be performed by Landlord in a first class and workmanlike manner using only new and first class materials in accordance with all applicable laws, rules, regulations, codes and ordinances. All other items of work, including the purchase and installation of all materials and equipment necessary for Tenant's use of the Leased Premises shall be provided by Tenant at Tenant's sole expense and shall include but shall not be limited to, those items set forth in Exhibit D, Tenant's Work. The building in which the Leased premises are a part shall be designed by the architect and engineer retained by the Landlord to design and oversee construction of the Retail Development (herein sometimes referred to as "The Project"). Construction shall meet the requirements for a fully sprinklered building in accordance with the fire protection and building code program of the local jurisdictional authority as well as the Development Agreement and Master Declaration, if applicable. Landlord shall provide Tenant with a Tenant Handbook (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". Except as otherwise provided below, Landlord shall initially construct the following: A. BUILDING SHELL WORK WITHIN AND AROUND THE LEASED PREMISES 1. Shell. Landlord shall construct the building shell (building structure, insulated roof and exterior walls) in which the Leased Premises are to be located. It is expressly agreed and understood that the Leased Premises shall constitute a portion of a covered mall building. 2. Exterior Appurtenances. Public entrance features, canopies and screen walls at the exterior of the building structure shall be provided by Landlord in locations and of a design and in materials deemed appropriate by Landlord. 3. Outside Walls. If Leased Premises abuts an exterior wall, such wall shall be unfinished on the interior. 4. Demising Partitions. Landlord shall install metal wall studs, 16" on center, between all leased premises. Where rated walls are required between Leased Premises and service/exit corridors Landlord shall install 5/8" fire code gypsum board from the floor to the roof deck on both Landlord and Tenant sides, along demising partitions separating Tenant from service/exit corridors. 5. Demising Strip. Where Landlord desires, a vertical demising strip may be located at the storefront line between stores. The center line and/or back side of said strip may or may not precisely coincide with the lease line defining the Leased Premises. 6. Exterior Service/Exit Door. Where Leased Premises abuts an outside wall, Landlord shall install one (1) 3'0" X 7'0" x 1-3/4" (prime coated only on inside face) hollow Exhibit C, Rough Shell Page 1 5/1/98 63 metal door and frame (with 1-1/2 pair butts and temporary lockset) as required by code or Landlord's insurance carrier. The outside face of door will be finished by Landlord to match adjacent construction and may not be modified by Tenant. The location of such door (if any) will be indicated on the Lease Outline Drawing. Tenant's store name and space number will be applied adjacent to the door by Landlord per Landlord's Architect's specifications in accordance with Exhibit D. 7. Interior Service/Exit Door. Where the Leased Premises abuts an interior exit/service corridor, Landlord shall install one (1) 3'0" x 7'0" x 1-3/4" hollow metal door and frame (with 1-1/2 pair butts and temporary lockset), as required by code or Landlord's insurance carrier. The hollow metal door and frame will be finish painted on the corridor side with a color selected by Landlord. Tenant's store name and space number will be applied adjacent to the door by Landlord, per Landlord's Architect's specifications in accordance with Exhibit D. 8. Floor Slab. Landlord shall furnish a 4" thick slab on-grade with smooth trowelled concrete surface. The floor elevation may be 3/4" below finished floor elevation in the mall areas adjacent to the Leased Premises. The slab will be designed to support a load of not less than 125 pounds per square foot. 9. Storefronts and Sign Bands. The configuration of the storefront lease line, as established by Landlord, shall be the line beyond which no element of the storefront may extend and may not necessarily follow the line of construction. The storefront furnished by Tenant shall include one entry complete with security closure. The width of the security closure will be as follows: Storefront width up to 25' - 8' wide Storefront width up to 26' - 35' - 10' wide Storefront width 36' and up - 12' wide B. FINISH WORK OUTSIDE THE LEASED PREMISES 1. Exterior Areas. Landlord shall provide parking areas, access roads, delivery areas, drainage systems, walks, ramps, lighting, landscaping and planting, striping, signage, and other facilities and improvements as determined by Landlord in the exterior common area. 2. Interior Areas. Landlord shall provide enclosed air conditioned and lighted malls, courts and entry-ways, lighted delivery areas, service and exit corridors, ramps, public restrooms, meter and valve rooms and all other areas, facilities, and buildings used in the maintenance and operation of The Project as determined by Landlord. C. BUILDING UTILITY SYSTEMS SERVING THE LEASED PREMISES 1. HVAC System. Landlord will provide either 1) a central condenser water distribution system to provide cooling water for air conditioning unit(s) provided by Tenant in the Leased Premises in accordance with the Tenant Handbook referenced in Exhibit D. Landlord's portion of the condenser water system shall terminate at valved and capped outlets within the Leased Premises as indicated on the Lease Outline Drawing or 2) a roof-top package unit system, providing at least 35 tons of air conditioning. In this case Landlord to install roof opening and curb at Tenant's expense for roof-top air conditioning equipment to be furnished and installed by Tenant in accordance with Tenant Handbook from Landlord's HVAC inventory. 2. Electrical System. Landlord shall bring primary electrical service to the Retail Development. An empty secondary electrical distribution conduit only shall be extended by Landlord from the electric room to a point within the Leased Premises Exhibit C, Rough Shell 5/1/98 Page 2 64 as indicated on the Lease Outline Drawing. Electrical service furnished by Landlord shall consist of 277/480 volt 3 phase four wire service 400 amp service. Tenant to complete electrical system in accordance with Exhibit D and the Tenant Handbook. 3. Plumbing System. If required by code, Landlord shall provide 3/4" valved and capped domestic cold water line, a 1" condensate drain line, if applicable, and a 4" sanitary sewer line at the rear of the Leased Premises, as indicated on the Lease Outline Drawing. Tenant shall connect to Landlord's plumbing system and extend service within the Leased Premises according to Tenant's approved plans and in accordance with requirements of Exhibit D and the Tenant Handbook. 4. Sprinkler System. Landlord shall install a wet sprinkler fire protection system in the common areas and within the Leased Premises including, but not limited to, risers, bulk mains, cross mains, branch lines and upturned sprinkler heads at the bar joists. Within the Leased Premises the sprinkler system provided by Landlord shall have one (1) head per 100 square feet. The quantity of heads provided by Landlord will be the minimum required by code or other governing agencies. The mains and cross mains will be designed to accept additional heads up to a maximum coverage of one (1) head per 80 square feet of Leased Premises. Additional or relocated heads shall be installed or relocated by Landlord's designated sprinkler contractor as required by Tenant's layout and as described in Exhibit D and the Tenant Handbook. Tenant shall pay Landlord for the cost thereof in accordance with Exhibit D. 5. Telephone System. Landlord shall extend empty raceway or J hooks from a telephone junction board to a point within or adjacent to the Leased Premises as indicated on the Lease Outline Drawing. 6. Mechanical Smoke Venting. Landlord's building has been designed to provide smoke venting via mechanical fans, open ceilings and no separation above 12'-0" between Tenant premises. Any Tenant required by Code or the authority having jurisdiction to provide separate smoke venting, or whose tenant space design interferes with normal functioning of Landlord's smoke venting system, must install a complete smoke venting system to meet code in accordance with Exhibit D and the Tenant Handbook. D. GENERAL PROVISIONS 1. Minor changes in any plans or specifications covering Landlord's Work which may be necessary during design and construction of The Project or affecting the Leased Premises shall not in any way invalidate the terms of the Lease or this Exhibit C nor shall it require the Landlord to provide any work not described herein. Notwithstanding the foregoing, any changes which would materially impact Tenant's Store Design and Working Drawings must be made at least sixty (60) days prior to the Delivery of Possession date. 2. Landlord shall have the right to specify or change the location, either before or after construction, of all utility lines, condenser water lines, condensate drain lines, drains, sprinkler mains and valves, and such other facilities within the Leased Premises as are necessary by engineering design and/or Code requirements. These items as described above shall be located so as not to materially interfere with Tenant's use of the Leased Premises. Landlord shall have the right to relocate and specify the location of mechanical and other equipment on the roof over the Leased Premises. To the extent that such utility lines, condenser water lines, condensate drain lines, drains, sprinkler mains and valves and other facilities within the Leased Premises are relocated, Landlord shall be responsible for paying for any changes in either Tenant's plans or connecting Tenant installed improvements to such relocated facilities. Exhibit C, Rough Shell Page 3 5/1/98 65 4. Landlord shall have the right to perform, at Tenant's expense, any of Tenant's Work which is not being timely or properly performed by Tenant which Landlord determines in its sole discretion be performed: (a) immediately and/or on an emergency basis for the best interest of The Project, (b) to the extent required for Landlord's compliance with all applicable building codes, or (c) to the extent necessary to obtain any Certificate of Occupancy required by the Landlord or any other tenant in The Project. Except in the event of an emergency, Landlord shall give Tenant forty-eight hours notice of its intention to undertake such work and Landlord shall refrain from undertaking such work if Tenant commences to cure during such 48-hour period. Exhibit C, Rough Shell Page 4 5/1/98 66 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT D TENANT'S WORK -- ROUGH SHELL PREFACE This Exhibit "D" is intended to describe the obligation of the Tenant in the design and construction of the Leased Premises. Landlord's Work will be limited to the work described in Exhibit C. Any part of Tenant's Work which is accomplished by Landlord for Tenant pursuant to the terms of this Exhibit D will be accomplished by Landlord at Tenant's expense. The work of Tenant described in Exhibit D is intended to complete the Leased premises in accordance with Tenant's drawings as approved in writing by Landlord to a finished condition ready for the conduct of business therein. All finished installations will be deemed incomplete until approved by Landlord. Tenant's Work shall conform to the procedures, schedules and reimbursement requirements set forth in Sections 2 and 3 of this Exhibit. Exhibit D shall govern over any inconsistencies with Exhibit C. Landlord and Tenant have a common interest in opening the Leased Premises on the Grand Opening Date. To this end, Landlord will coordinate its work with Tenant's work insofar as the schedule for such Grand Opening Date and prudent construction practice allows and will assign one or more tenant coordinators to function as liaison between tenants and Landlords. Further to this end, Tenant and Tenant's contractors agree to abide by Landlord's Construction Rules and Regulations which may be issued from time to time. In order to ensure that the Tenant's store interior and signage design are orderly and aesthetically coordinated with Landlord's building, and to ensure that Landlord's storefront and signage requirements are understood by Tenant, its designers, engineers, contractors, and other representatives, Landlord has drafted and Tenant shall follow the architectural and signage criteria established in the Tenant Handbook (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". In order to ensure that the Tenant's HVAC, plumbing and electrical systems are compatible and coordinated with the Landlord's building, and to ensure that the Landlord's HVAC, plumbing and electrical requirements are understood by Tenant, its designers, engineers, contractors, and other representatives, Landlord has drafted and Tenant shall follow the mechanical and electrical criteria established in the Tenant Handbook. All Tenant construction shall be in accordance with the requirements of all applicable codes, ordinances, rules and regulations of all authorities having jurisdiction over the work including all requirements of the Landlord's insurance carrier. Construction shall conform to the requirements for a fully sprinklered building in accordance with the fire protection and building code program of the local jurisdictional authority as well as the Development Agreement and the Master Declaration if applicable. Tenant shall secure all necessary permits including, but not limited to, occupancy and health department permits from the jurisdictional authorities in sufficient time to allow Tenant to open the Leased Premises on the Grand Opening Date. Tenant shall furnish to Landlord upon receipt, copies of all building permit applications, statements, amendments and the like, and all permits, inspection reports, certificates, and other documents as required by authorities having jurisdiction of The Project. Tenant, at its sole cost and expense, shall perform all work other than work to be performed by Landlord as set forth in Exhibit C, required to complete the Lease Premises to a finished condition ready for the conduct of business therein. All of Tenant's work within the Leased Premises performed pursuant to this Section 1 shall, for the purpose of this Lease to which this Exhibit is attached, be deemed to be improvements made to the Leased Premises by Tenant at Tenant's expense. Exhibit D, Rough Shell Page 1 5/1/98 67 SECTION 1 - TENANT CONSTRUCTION WORK WITHIN THE PREMISES A. GENERAL CRITERIA The criteria and outline specifications set forth herein represent minimum standards for the design, construction, and finish of the Leased Premises by Tenant. 1. Jurisdictions and Codes. The Project is being developed in and under the jurisdictions of the State, County and City in which The Project is located. All design and construction work shall comply with all applicable statutes, ordinances, regulations, laws and codes and the requirements pertaining to service and utilities furnished by utility companies, all applicable state, county, and local statutes and ordinances, and OSHA regulations. 2. Permits and Approval. Prior to the commencement of construction, all building and other permits shall be obtained and posted in a prominent place within the Leased Premises. Landlord's written approval shall be obtained by Tenant prior to the undertaking of any construction work which deviates materially from Tenant's approved Store Working Drawings and Specifications, or which modifies whatsoever Landlord's building shell or utilities, or any work not explicitly shown on said Store Working Drawings and Specifications. Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency thereof, and Tenant shall be solely responsible. To the extent and material changes, changes which modify the building shell or utility or new work are required, Landlord shall not unreasonably withhold its approval of the same. 3. Floor Loads. The slab on-grade has been designed to carry a total load (dead and live) of 125 pounds per square foot. Any loading imposed by any of Tenant's Work, either on a temporary or permanent basis, shall not exceed 125 lbs./SF (""Allowable Load"). 4. Standard Project Details. Standard Project Details, as issued by Landlord's Architect from time to time and as they pertain to Tenant's Work, shall govern with respect to Tenant's Work. Such details shall be incorporated into the Tenant's Store Working Drawings and Specifications for the Leased Premises. 5. Materials. Only new, first-class materials shall be used in the construction of the Leased Premises. Used, first-class materials for interior architectural facades and fixtures may be used provided such materials are noted on the Tenant's plans and approved by Landlord through field inspection. 6. Field Conditions. From time to time, the Tenant is obligated to verify conditions pertaining to the Leased Premises prior to and after commencement of construction of its Leased Premises. Tenant shall coordinate its work with the work of Landlord, other tenants, and with existing conditions above, below and adjacent to the Leased Premises. Tenant shall make changes as required to accommodate such work or conditions. 7. Tenant Handbook. Landlord shall provide Tenant with a Tenant Handbook ("Tenant Handbook"), and Tenant shall comply with all design criteria, procedures for drawings, specifications, and construction, and other rules, regulations and provisions therein. To the extent, if at all, that the Tenant Handbook may conflict with the provisions of the Exhibit D, the provisions of the Tenant Handbook shall govern. Exhibit D, Rough Shell Page 2 5/1/98 68 B. ARCHITECTURAL FINISHES 1. Floors. Tenant finish floor covering materials must be selected and adapted in thickness to correspond in elevation exactly with the level of the finished mall floor, which may be approximately 3/4" above the concrete floor of the Leased Premises at the Lease Line. Quality floor materials, such as carpeting, glazed or unglazed tile, wood parquet, or marble shall be used in the sales area of the Leased Premises. All flooring finish materials are subject to Landlord's approval. 2. Storefront. Tenant's storefront shall be designed and constructed by Landlord as provided in Exhibit C and as described in the Tenant Handbook. 3. Interior Partitions. All interior partitions by Tenant within the Leased Premises shall be metal stud construction and shall have 5/8" gypsum board finish on all sides with taped and spackled joints. Any combustible materials applied to partitions shall meet all flamespread and smoke generation requirements of jurisdictional authorities and receive a U.L. labeled fire retardant coating if required by Code. Walls dividing the Leased Premises from service and exit corridors, or other rated enclosures, shall receive, on Tenant's side, sufficient layers of drywall to complete the necessary rating. Landlord shall install service and exit corridor drywall at Tenant's expense. Any Tenant penetrations of rated partitions shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. 4. Demising Partitions. Demising partitions are not load bearing and Tenant may not hang fixtures from them. Should Tenant require structure and/or backing to accommodate the loading of Tenant's wall hung fixtures, said request shall be in writing to landlord for approval. Additional structure and backing shall be furnished and installed by Tenant at Tenant's Expense. Tenant shall install drywall, taped and spackled on demising partitions between tenants. No drywall shall be placed on demising partitions above 12'-0" without Landlord's specific approval. Above 12'-0" the Tenant may, subject to Landlord's prior written approval, continue with wire mesh for security purposes if so indicated on Tenant's construction drawings. The Tenant, upon Landlord's approval, may also install drywall to a higher level if openings of sufficient size are provided to assure that the smoke venting system provided by the Landlord functions as designed - see Tenant Handbook for specific requirements. 5. Exterior Walls. Tenant shall install all finishes on the inside face of exterior walls within Leased Premises. 6. Service and Exit Corridor Partitions. Any Tenant penetrations of rated partitions, and relocations and/or additions to Landlord furnished exit doors, shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. Any framing, cutting, patching of the corridor wall surfaces including the building of vestibules to provide for the nonimpingement of the door into the corridor traffic way, and other work related construction shall be coordinated and consistent with Landlord's work, including but not limited to the provision of 4'-0" high 1/4" masonite board and metal cornerguards. Walls dividing the Leased Premises from service and exit corridors, or other rated enclosures, shall receive, on Tenant's side, sufficient layers of drywall to complete the necessary rating. All materials used in corridor construction shall be fire rated. Any Tenant penetrations of rated partitions shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. 7. Interior Service/Exit Corridor Doors. If Tenant desires additional service access to Leased Premises other than what is provided by Landlord in Exhibit C then Tenant Exhibit D, Rough Shell Page 3 5/1/98 69 shall provide and install a 3'-0" X 7'-0" X 1-3/4" 18 gauge interior hollow metal door, labeled as required, with a hollow metal 16 gauge frame, and all hardware, in accordance with governing Codes. Any framing, cutting, and patching of the corridor wall surfaces including the building of vestibules to provide for the non-impingement of the door into the corridor traffic way, and other work related thereto shall be the responsibility of the Tenant. Hollow metal door and frame are to be finish painted on the corridor side with a color selected by Landlord. Tenant's store name will be applied adjacent to the door by Landlord, at Tenant's expense, per Landlord's Architect's specifications. 8. Door Relocation. The relocation of any exterior Tenant door shall be performed by Landlord at Tenant's sole expense and must be coordinated with the structure of Landlord's building. 9. Door Hardware. Tenant shall furnish and install all door locks and exit devices on all interior service doors, exterior doors, exit corridor doors, and storefront, using hardware recommended by Landlord in the Tenant Handbook. 10. Ceiling. Exposed and open grid systems are encouraged. All work related to ceiling and ceiling treatments, if any, shall be the responsibility of Tenant. All ceilings and ceiling treatments shall be of non-combustible material approved by Landlord and shall maintain the degree of openness required to preserve the operation of the smoke venting system and sprinkler system in The Project as established by jurisdictional authority and/or as described in the Tenant Handbook. Tenant's ceiling and ceiling treatment shall be limited to a ceiling height not less than the code required minimum nor higher than the maximum heights indicated in the Tenant Handbook. The structure of Landlord's Building has been designed to accept a super-imposed loading of three (3) pounds per square foot for the installation of Tenant's suspended ceiling and equipment. Access (such as access panels) and other openings shall be provided by Tenant where Landlord deems necessary. Tenants providing ceilings with less than the required degree of openness shall provide smoke venting at Tenant's sole expense, both as required by jurisdictional authorities and as described in the Tenant Handbook. If Tenant's interior partitions and ceiling configuration cause the requirement of additional sprinkler heads, such additional heads shall be installed by Landlord's designed contractor at Tenant's expense both as required by jurisdictional authority and Landlord's insurance carrier. 11. Interior Finishes. All finished interior surfaces must be materials approved by Landlord for appearance. All Tenant fixtures, furniture, carpeting (including underlayment), upholstery materials, drapery and other furnishing must comply with flammability of materials and smoke generation requirements for furniture and furnishings of local jurisdictional authorities. All wood shall be fire retardant in accordance with code requirements. All wood in contact with the floor shall be termite retardant. 12. Finish Hardware. Commercial grade finish hardware, labeled where required, shall be used throughout. All doors shall have at least one and one-half (1-1/2) pair butts, wall or floor stops, kick plates, lock sets and push-pull plates as required. All exit doors shall have hardware as required by Code. 13. Toilet Room. Tenant shall construct restroom facilities, fixtures, toilet partitions, and building specialty items such as toilet room mirrors, dispensers, paper holders and amenities to fully meet the ADA Guidelines and local codes. Exhibit D, Rough Shell 5/1/98 Page 4 70 14. Mezzanines. Mezzanines will not be permitted (other than the approximately 10' x 4' elevated stand which is part of Tenant's prototype store design which must be supported from the floor). 15. Layout and Painting of Exposed Mechanical and Electrical Systems. All Tenant installed ductwork, conduits, pipes and any other mechanical or electrical equipment exposed to public view from outside the Leased Premises, shall be laid out and installed in a neat and orderly configuration. Tenant shall paint the above Tenant improvements with either a black or a mutually agreed to color and finish if Tenant's improvements can be seen from Mainstreet (i.e. those portions of the common area made up of the pedestrian walkways outside of the Leased Premises) above Tenant's storefront elevation or below the top of the storefront but visible from Mainstreet. C. STRUCTURAL 1. Modifications. Any alterations, additions, and/or reinforcements to the structure of Landlord's building required to accommodate Tenant's Work, must be designed by a registered structural engineer at Tenant's expense. Tenant shall leave the structure of Landlord's building as strong or stronger than original design and with finishes unimpaired. Tenant's architect shall calculate or have calculated the structural loads caused by Tenant's improvements and submit those calculations for written approval by Landlord and Landlord's Architect prior to Tenant's construction. 2. Loading. All loads individually hung from the structure in excess of 100 pounds shall be specifically approved by Landlord's structural Engineer for location and method of support. All loads less than 100 pounds that are individually hung from the structure shall be hung in accordance with the guidelines in the Tenant Handbook. D. HEATING, VENTILATING AND AIR CONDITIONING 1. Connection to Condenser Water System (if applicable). Not applicable. 2. HVAC System. A complete air conditioning system to suit Tenant's requirements shall be designed, furnished, installed and maintained by Tenant in accordance with the requirements of the Tenant Handbook. Tenant's portion of the HVAC system shall include an air conditioning unit(s), ducts, insulation, fire dampers, outlets, grilles and controls to maintain temperatures per Tenant Handbook. If roof-top units are required, Landlord shall install roof-top curb at Tenant's expense. All Tenant ductwork shall be internally insulated and Tenant shall make all connections to Landlord installed systems in a manner fully satisfactory to Landlord. 3. Toilet Exhaust System. Tenant installed toilet facilities within the Leased Premises shall include a complete toilet exhaust system according to Code and the requirements of the Tenant Handbook. 4. Outside Air Connection. Landlord, at Tenant's expense, will provide a roof jack for Tenant's connection to provide outside air to Tenant's HVAC system. Tenant shall provide outside air ventilation as required by Code and the Tenant Handbook. No openings for fans, vents, louvers, grilles, or other devices shall be installed in any demising partition, exterior wall, or roof without Landlord's prior written approval. All roof and/or wall penetrations required for Tenant's plumbing, mechanical, Exhibit D, Rough Shell 5/1/98 Page 5 71 electrical work and any other Landlord approved Tenant work shall be made by Landlord's designated contractor at Tenant's expense. 5. Smoke Venting. If the authority having jurisdiction requires individual smoke venting from the Leased Premises, Tenant, at Tenant's expense, shall provide the complete required smoke system, discharging vertically through a roof vent at sufficient velocity to carry the discharge away from any intakes on the roof. Roof vents will be installed by Landlord's designated contractor at Tenant's expense and in accordance With the Tenant Handbook. 6. Refrigeration. Tenants may not connect refrigeration equipment to Landlord's condenser water system. Landlord's condenser water system will not operate during unoccupied hours. Refer to the Tenant Handbook for requirements regarding Tenant's refrigeration equipment. 7. Exhaust/Negative Pressure. All exhaust and make up air systems shall be by Tenant in accordance with Exhibit D and the Tenant Handbook. As determined by Landlord, all tenants producing odors within their premises shall be required to install full height partitions and provide supplemental exhaust to the exterior of the building to keep the premises at a negative pressure relative to Mainstreet and all adjacent areas. E. ELECTRICAL 1. System. Tenant shall design, furnish, install and maintain a complete electrical distribution system, including but not limited to conductors to electrical room connected to load side of meter socket, transformer, distribution panels, circuits, conductors, fixtures and devices, within the Leased Premises in accordance with the requirements of the Tenant Handbook. No appurtenances, including but not limited to light fixtures, antennas, signs, etc., will be affixed to the exterior walls or roof of Landlord's Building without Landlord's express written permission. 2. Electrical Construction. a. Material - All electrical materials shall meet National Electrical Code Standard, unless a better grade is required by local Code. All materials shall be new and shall bear evidence of approval by Underwriter's Laboratory (UL). All conductors shall be copper. Aluminum conductors will not be allowed. b. Lighting Fixtures - Recessed fixtures installed in furred spaces shall be connected by means of flexible conduit and approved fixture wire, connected to a branch circuit outlet box which is independent of the fixture. c. Fluorescent Fixtures - All fixtures shall be provided and installed by Tenant with switch legs and local switches rated 20 amps at 277 volts. All fluorescent fixtures shall have internal protection devices. Fluorescent ballasts shall be high power factor type with individual non-resetting overload protection. Ballast harmonics may not exceed that Total Harmonic Current Distortion allowable by the electric utility. All lamps subject to public view shall have warm white deluxe or better color rendition. Cool white may be used only in storage areas not exposed to public view. d. Electric Meter - Where Landlord does not provide electricity from a master meter and redistribute to Tenants, Tenant shall make direct arrangements with the local electric utility company to furnish and install electric meter to measure Tenant's use of electricity. Exhibit D, Rough Shell Page 6 5/1/98 72 e. Panel Boards - Panel boards shall be furnished and installed by Tenant. 120/208 volt panels and 277/480 volt panels shall both be equipped with single or multiple pole bolted thermal magnetic breakers. f. Short Circuit Ratings - Tenant's electrical distribution system shall be designed to withstand and safely interrupt an available short circuit current indicated in the Tenant Handbook. g. Transformer - All necessary transformers shall be furnished and installed by Tenant. All ceiling hung transformers over 100 pounds shall be approved by Landlord's Structural Engineer for location and method of support. All ceiling hung transformers less than 100 pounds shall be hung in accordance with the requirements in the Tenant Handbook. h. Nameplates - The following equipment shall be identified with engraved Bakelite nameplates: distribution panels, motor starters, lighting panels and push-button stations. F. PLUMBING 1. System. Tenant shall connect to Landlord's plumbing system as described in Exhibit C and the Tenant Handbook. Tenant shall provide a complete plumbing system within the Leased Premises, including but not limited to, fixtures and toilet accessories as required by Code. Tenant shall provide accessible clean outs in toilet areas. Plumbing work must be installed according to all appropriate Codes and requirements of the Tenant Handbook. Landlord's approval of Tenant's plans is not a statement that the plans are in compliance with Code or other local requirements. Tenant shall be required to provide vent connections and a toilet room exhaust connection, if necessary, through the roof as required by Code and the Tenant Handbook. All such penetrations shall be by Landlord's designated contractor at Tenant's sole expense. 2. Water Heaters. Electric water heaters shall be automatic and a maximum capacity of 2 k.w. All units shall be UL approved and conform to the requirements of the local Energy Code. Water heaters must have temperature/pressure relief valves with discharge piping according to Code. 3. Water Meters. All restaurants, food court tenants, salons, pet stores and any other high volume users of water (as determined by Landlord) shall furnish and install water meters at Tenant's expense in accordance with the Tenant Handbook. 4. Condensate Drains. Tenant shall extend and connect condensate drain line(s) from Tenant's air conditioning unit(s) in accordance with the Tenant Handbook. 5. Connection. If Tenant's restroom location, on Tenant's Store Working Drawings does not coincide with Landlord's utility location, Tenant, at Tenant's expense, shall move utility to coincide with Tenant's Store Working Drawings with Landlord's prior approval. All cutting and placing of concrete is by Tenant. G. FIRE PROTECTION SYSTEM All revisions to the fire protection system required by Tenant's layout shall be performed by Landlord's designated sprinkler contractor at Tenant's sole expense. Landlord's sprinkler contractor shall design system revisions in accordance with Tenant's Store Working Drawings. Such designs may involve additional heads, relocated heads, heads in refrigeration boxes, toilet rooms, kitchen exhaust ducts, and/or at Tenant's request, heads Exhibit D, Rough Shell 5/1/98 Page 7 73 located to conform with Tenant's ceiling pattern and layout. All design and construction shall be governed by Code and the requirements of Landlord's insurance carrier. Tenants are required by local code to provide fire extinguishers, at least one to be installed within 25 feet of the Tenant's entry off Mainstreet. H. TELEPHONE Tenant shall arrange directly with the local Telephone Company for telephone service. Tenant shall furnish, install and maintain telephone wiring and equipment within the Leased Premises to suit Tenant's requirements at Tenant's expense. I. SIGNAGE Guidelines. All signs shall be designed, constructed and located in accordance with Landlord's sign Criteria, Exhibit E, the Tenant Handbook, and as approved by Landlord. J. FIXTURES AND FURNISHINGS Tenant shall furnish and install in the Leased Premises all fixtures, furnishings. equipment, shelving, trade fixtures, leasehold improvements, interior decorations, graphics, signs, mirrors, cornices, covers and decorative light fixtures, portable fire extinguishers as required by Code and the Tenant Handbook, and other special effects, all as approved by Landlord. All Tenant improvements, other than mechanical equipment, ceilings, and lighting fixtures, shall be floor-mounted unless written approval is obtained from Landlord. K. MISCELLANEOUS REQUIREMENTS 1. Tenant's Contractor. Work undertaken by Tenant at Tenant's expense (a) shall not be awarded to Landlord's contractor without Landlord's written consent, except that an approved list of contractors is attached hereto as Exhibit D-1 and (b) may only be awarded to a reputable and bondable contractor or contractors licensed to do business in the State, County and City in which The Project is located. Tenant's contractor shall adhere to Landlord's policy of a drug and alcohol free workplace. 2. Equipment Screening. Tenants requiring mechanical or electrical equipment, antennas, and the like shall not have the same placed on the roof or the exterior of the building without the prior express written approval of Landlord. All such equipment, if allowed, shall be screened from the view of the public from any point within the project site. All screening materials, construction details, and construction techniques shall be approved by Landlord in writing, prior to any such work by Tenant. 3. Clean-Up. Tenant shall cause its contractors to maintain the Leased Premises in a clean and orderly condition during construction. All unusable shipping containers, packaging, and other debris shall be broken down and contained within the Leased Premises until removed by Tenant's contractor to containers provided by Landlord outside Landlord's Building. Flammable waste must be confined to covered metal Exhibit D, Rough Shell 5/1/98 Page 8 74 containers until removed by Tenant. All usable construction material, equipment, fixtures, merchandise, etc. must always be contained within the Leased Premises. Malls, courts, arcades, public corridors, service/exit corridors and the exterior of Landlord's Building shall be kept clean at all times. If Tenant fails to clean up, Tenant hereby authorizes Landlord to clean up for Tenant at Tenant's expense. 4. Full Payment. Tenant shall satisfy Landlord that adequate arrangements have been made to ensure that all Tenant's contractors shall be paid in full for work ordered by Tenant. Tenant is advised to familiarize itself with the mechanic's lien laws in the State in which The Project is located and shall hold the Landlord harmless for any liens filed against the property of the Landlord for the work of the Tenant. 5. Character of Employees. Tenant will not employ any unfit person or anyone not skilled in the work he is performing, or any workman that is incompatible with the balance of the work force or who will cause, or whose presence will cause, labor disputes or work stoppages. In the event any employee(s) of Tenant or Tenant's contractor(s) causes a labor dispute or work stoppage, Tenant expressly agrees to have such employee(s) immediately removed from the Project upon Landlord's request, and that Tenant's failure to do so shall constitute an event of Default under the Tenant's Lease of which this Exhibit is a part. SECTION 2: PROCEDURE AND SCHEDULES FOR THE COMPLETION OF TENANT'S PLANS AND SPECIFICATIONS Unless otherwise notified by Landlord, all prints, specifications, and other material to be furnished by Tenant as herein required shall be sent to: Tenant Coordinator (Address to be furnished when available). Tenant shall engage an architect ("Tenant's Architect") registered in the State and licensed to do business in the County and the City in which The Project is located to prepare the Working Drawings and Specifications to be submitted for Landlord's approval. The fees for Tenant's Architect shall be paid by the Tenant. A. LEASE OUTLINE DRAWINGS Following execution of the Lease of which this Exhibit is a part, Landlord shall furnish Tenant with two (2) prints of the Lease Outline Drawings (LOD) giving technical and design information relative to the Leased Premises along with other drawings that may be helpful to Tenant in the design of its store. B. STORE DESIGN DRAWINGS 1. Within forty-five (45) days of whichever of the following shall be the later to occur: (a) receipt of Lease Outline Drawings from Landlord or (b) the execution Exhibit D, Rough Shell 5/1/98 Page 9 75 of the Lease; the Tenant shall submit to Landlord one (1) set of sepia reproducible prints and three (3) sets of blueline prints of Store Design Drawings, showing the intended design, character, and finishes of the Leased Premises. The Store Design Drawings shall comply with the design criteria of The Project as described in this Exhibit D and in the Tenant Handbook and shall set forth the requirements of Tenant within the Leased Premises. Said Drawings shall include, but not be limited to the following: a. Architectural design of the space, including an elevation of Landlord's storefront showing Tenant's signage, floor plans, elevations, sections, and renderings indicating material and color selections and finishes, and layout including location of fixtures both permanent and movable. Provide the weights of all items to be suspended above from the structure in excess of 100 pounds each. b. Mechanical System: Basic equipment to be used and its location, duct distribution system, diffuser locations, and any louvers or vents to be provided for Tenant by Landlord at Tenant's expense. Provide projected mechanical loads on forms provided by Landlord in the Tenant Handbook. c. Electrical System: Reflected ceiling plans indicating type of lighting fixtures, and floor plans showing outlets and other electrical equipment contemplated with location of panel and switchboard. Provide projected electrical loads on forms provided by Landlord in the Tenant Handbook. d. Plumbing System: Floor plans showing the location, layout, and type of fixtures to be furnished, including riser diagrams. e. Fire Protection System: Location of any specialty heads Tenant's architect may require. f. Tenant shall identify in writing all intended exceptions to the design criteria contained in the Tenant Handbook and/or this Exhibit D. 2. After receipt of Store Design drawings, Landlord shall, within seven (7) business days, return to Tenant One (1) set of Store Design Drawings with modifications and/or approval. If, upon receipt of approved Store Design Drawings bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing within seven (7) days from date of receipt of said drawings, by certified or registered mail addressed to Landlord, at the above address, and the notice address in the Lease. Unless such action is taken, it will be deemed that all comments made by Landlord on Store Design Drawings are acceptable to and adopted by Tenant. 3. If Store Design Drawings are returned to Tenant with comments, but not bearing approval of Landlord, said Store Design Drawings shall immediately be revised by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. C. STORE WORKING DRAWINGS AND SPECIFICATIONS 1. Store Working Drawings and Specifications shall be prepared in strict compliance with the design criteria and requirements as set forth in this Exhibit D and the Tenant Handbook and shall adhere to the Store Design Drawings as approved by Landlord. Store Working Drawings to minimum scales as called for below, and Specifications shall include, but not be limited to, the following: Exhibit D, Rough Shell 5/1/98 Page 10 76 a. Key plan showing location of the Leased Premises relative to the entire mall. b. Floor plan at a minimum scale of 1/4" = 1'0". c. Overall sections at 1/4" = 1'0". d. Reflected ceiling plan at a minimum scale of 114" = l'0". e. Plans, elevations, and section of storefront (if to be constructed by Tenant) at 1/2" = 1'0", with finish materials board including manufacturers, model numbers, color numbers, and all other identifying information. Details of storefront at 1-1/2" = 1'0". f. Interior elevations at 1/4" = 1'0". g. Full sections of types of partitions used at 1/2" = 1'0". h. Details of special conditions encountered at 1-1/2" = 1'0". i. Door schedule with jamb details at 1-1/2" = 1'0" j. Finish and color schedules with samples. k. Plumbing, heating, ventilating, and cooling plans, at 1/4" = 1'0". l. Mechanical details at 1-1/2" = 1'0". m. Electrical plans at 1/4" = 1'0" n. Electrical details, fixture schedules, and one-line electrical riser diagram. o. Mechanical and electrical load tabulations on forms provided by Landlord in the Tenant Handbook. p. Structural load tabulations. q. Specifications covering all of Tenant's Work, including, but not limited to, architectural, electrical, plumbing, heating, ventilating, and air conditioning. r. Layout of fixture location, both permanent and movable. s. Any and all other plans and specifications as may be required by the local fire and building authorities or other governing bodies. 2. All Store Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant, in the form of one (1) set of reproducible sepia prints, specifications and three (3) sets of blueline prints to Landlord for approval within 21 days from receipt by Tenant of Landlord's written approval of Store Design Drawings. 3. As soon as practicable after receipt of Store Working Drawings and Specifications, Landlord shall return to Tenant one (1) set of prints of Store Working Drawings and Specifications with its suggested modifications and/or approval. If. upon receipt of approved Store Working Drawings and Specifications bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing, by certified or registered mail addressed to Landlord at the above address and at the notice address in the Lease, within seven (7) days from the date of receipt of Store Working Drawings and Specifications. Unless such action is taken, it will be deemed that all comments made by Landlord on Store Working Drawings and Specifications are acceptable to and adopted by Tenant. 4. If Store Working Drawings and Specifications are returned to Tenant with comments, but not bearing approval of Landlord, said Store Working Drawings and Specifications shall immediately be revised by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. 5. "For Construction" Store Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant in the form of one (1) set of mylar reproducible prints and specifications and three (3) sets of blueline prints. "For Construction" shall be marked clearly on each copy in red. Such drawings and specifications shall reflect correction of all Landlord's comments to the Store Working Drawings and Specifications returned by Landlord. Exhibit D, Rough Shell 5/1/98 Page 11 77 6. Store Working Drawings shall be submitted to the local Authorities having jurisdiction for building permit after such drawings have been approved by Landlord in the submittal process as outlined above. 7. Landlord and Landlord's architect shall, from time to time, be entitled to monitor Tenant's Work and shall have the right to require all work which does not comply with Tenant's approved Store Working Drawings and Specifications to be corrected within thirty (30) days of notification to Tenant. SECTION 3: PROCEDURE AND SCHEDULES FOR THE CONSTRUCTION OF THE LEASED PREMISES BY TENANT A. COMMENCEMENT OF CONSTRUCTION Tenant shall start construction of its Leased Premises not later than ten (10) days from either of the following dates, whichever shall be the later to occur: (1) The date of receipt by Tenant of written notice from Landlord that Landlord has substantially completed the work to be performed by Landlord under Exhibit C, and payment therefore as required by Exhibit C is due (other than such work which cannot be performed by Landlord until Tenant makes the Leased Premises ready for the performance thereof) and that the Leased Premises are ready for Tenant's work; or (2) the date on which Landlord approves the Tenant's Store Working Drawings and Specifications for the Leased Premises. Tenant shall carry such construction to completion with all due diligence. B. GENERAL REQUIREMENTS 1. Tenant shall submit to Landlord, via certified or registered mail, at least five (5) days prior to the commencement of construction the following information: a. Copy of building and all other permits needed to perform Tenant's Work within the Leased Premises. b. The names and addresses of the general, mechanical, plumbing and electrical contractors Tenant intends to engage in the construction of the Leased Premises. c. The actual commencement of construction date and the estimated date of completion of construction work, fixturing work, and date of projected opening. d. e. Itemized statement of estimated construction costs including architectural, engineering, and contracting fees. f. Evidence of insurance with a company or companies authorized to transact business in which The Project is located as required below. g. 2. Tenant shall secure, pay for, maintain, and cause its contractors and subcontractors to secure, pay for, and maintain, during the continuance of construction and fixturing work within the Lease Premises, all of the insurance policies required in the amounts as set forth herein, together with such insurance as may from time to time be required Exhibit D, Rough Shell 5/1/98 Page 12 78 by City, County, State or Federal laws, Codes, regulations or authorities. Tenant's Work may not commence, nor may Tenant permit its contractors and subcontractors to commence any work, until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. Insurance policies shall name the Landlord and assignees, Landlord's Architect and General Contractor for the project as additional insureds. Certificates of insurance coverage shall provide that no change or cancellation of such insurance coverage shall be undertaken without thirty (30) days written notice to Landlord. Landlord shall have the right to require Tenant, and Tenant shall have the duty, to stop work in the Leased Premises immediately if any of the coverage required herein lapses during the course of the work, in which event Tenant's Work may not be resumed until the required insurance is obtained and satisfactory evidence of same is provided to the Landlord. a. Tenant's General Contractor's Required Minimum Coverages and Limits of Liability. (1) Worker's Compensation Insurance, as required by State law, and Employees Liability Insurance with a limit of not less than [***] (or more if required by the law of the State) and any insurance required by any Employee Benefit Act or similar statute applicable where the work is to be performed as will protect the contractor and subcontractors from any and all liability under the aforementioned act(s) or similar statute. (2) Comprehensive General Liability Insurance (including Contractor's Protective Liability) in an amount not less than [***] per occurrence whether involving personal injury liability (or death resulting therefrom) or property damage liability or a combination thereof (combined single limit coverage) with a minimum aggregate limit of [***]. Such insurance shall include explosion, collapse and underground (X,C and U) coverage and contractual liability coverage for personal injury, death and damage to the property of other arising from construction at the Leased Premises, whether performed by Tenant's contractors, subcontractors, or subsubcontractors, or by anyone directly or indirectly employed by any of them. (3) Comprehensive Automotive Liability Insurance, for the ownership, maintenance, or operation of any automotive equipment, whether owned, leased or otherwise held, including employer's nonownership and hired car liability endorsements, in an amount not less than [***] per occurrence and [***] aggregate, combined single limit bodily injury and property damage liability. Such insurance policies shall insure the Tenant's general contractor and all subcontractors against any and all claims for bodily injury, including death resulting therefrom and damage to the property of others arising from its operations at the Leased Premises or in connection with construction of the Leased Premises, whether performed by the Tenant's general contractor, subcontractors, or subsubcontractors, or by anyone directly or indirectly employed by any of them. b. Tenant's Insurance Requirements (1) Tenant shall obtain Owner's Protective Liability Insurance as will insure Tenant against any and all liability for damage from bodily Exhibit D, Rough Shell 5/1/98 Page 13 *** Confidential treatment requested. 79 injury, including death resulting therefrom, or property damage or a combination thereof which may arise from work in connection with the Leased Premises, and any other liability for damages which Tenant's general contractor and/or subcontractors are required to insure against under any provisions herein. Landlord and Landlord's Architect and General Contractor shall be named as additional insureds. Said insurance shall be provided in minimum amounts of $5,000,000 aggregate, combined single limit bodily injury and property damage liability. (2) Tenant's Work Insurance: Tenant shall insure 100% of the value of the work in the Leased Premises as it relates to the building within which the Leased Premises is located, with an "all risk" perils property insurance policy or a completed value "all risk" perils Builder's Risk policy, naming the interest of the Landlord and the Tenant's general contractor and all subcontractors, as their respective interests may appear. 3. All contractors engaged by Tenant shall be licensed contractors in the State in which The Project is located possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord's General Contractor and other contractors on the job. All work shall be coordinated with the general project work. 4. Tenant's contractors and construction shall comply in all respects with applicable federal, state and local statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the Leased Premises shall be obtained and paid for the Tenant. 5. Tenant shall complete all work within the Leased Premises as expeditiously as possible, but in no event later than in time to open for business on the Grand Opening Date. Should Tenant fail to complete its work within this schedule, Landlord may, at Landlord's option, install temporary storefront or barricade at the Leased Premises at Tenant's expense. Temporary storefront and other work performed by Landlord which was made necessary due to the Tenant's failure to complete its work in time for the Grand Opening Date, shall be payable to the Landlord. 6. Landlord shall have the right to perform, on behalf of and for the account of Tenant any of Tenant's work which Landlord deems necessary to be done on an emergency basis or which pertains to structural components, the general utility systems for The Project, roof and exterior wall penetrations, or the erection of temporary barricades and temporary signs, during construction for the period following the Opening of The Project for business. Landlord will provide such work at Tenant's expense. 7. Tenant's Work shall be subject to the inspection and approval of Landlord and Landlord's Architect as to compliance with Tenant's approved plans and standards of merchantability, provided that Landlord and Landlord's Architect shall use its commercially reasonable efforts to insure that its work does not interfere with Tenant's Work. 8. Tenant shall pay or reimburse Landlord for all costs incurred by Landlord (including deposits) for all utility meters for the Leased Premises. 9. Upon the completion of the Tenant's Work, all facilities shall be in full use without defects. Exhibit D, Rough Shell 5/1/98 Page 14 80 10. All work performed by Tenant shall be performed so as to cause no interference with other Tenants and the construction and operation of The Project. Tenant will take all precautionary steps to protect its facilities and the facilities of others affected by Tenant's Work and properly police same. Construction equipment and materials are to be located within the Leased Premises and truck traffic is to be routed in and from the site, all as directed by Landlord and so as not burden the construction and operation of The Project. 11. Upon and from the completion of Tenant's Work in the Leased Premises and acceptance by Landlord's Architect, a minimum one-year warranty of all work, materials, and equipment shall be provided to Landlord by Tenant, to the extent the same are received by Tenant from its contractors an or suppliers. 12. Landlord shall have the right to stop Tenant's Work whenever necessary to obtain compliance with applicable building and safety codes or the approved Store Working Drawings and Specifications. 13. Tenant and its contractors shall comply with the guidelines for Tenant work procedures and temporary construction facilities set forth in the Tenant Handbook, and Landlord's Construction Rules and Regulations which may be issued from time to time. 14. Landlord shall have the right to order any Tenant or Tenant's contractor who willfully violates any of the above requirements to cease work, and to remove himself and his equipment and employees from The Project. C. TEMPORARY SERVICES AND FACILITIES DURING CONSTRUCTION 1. Utility costs or charges for any service to the Leased Premises shall be the responsibility of Tenant from the date Tenant commences work or is obligated to commence work, whichever is earlier. 2. If necessary, Tenant will provide temporary heat for the Leased Premises during construction. No open burners are permitted and only electricity may be used for temporary heat. 3. Temporary Electrical Services. If electrical service is not available in the Leased Premises during construction, Landlord shall provide electrical service in an area designated by the Landlord. Tenant shall request, in writing, permission to connect temporary lines to the power source for service to the Leased Premises. Tenant shall reimburse Landlord for the Temporary Electric Services. 4. Temporary Trash Removal. During initial construction, fixturing and stocking, Landlord shall provide trash removal service from the service areas. It shall be Tenant's responsibility to break boxes down and place trash daily in the containers provided. Trash accumulation will not be permitted overnight in the Leased Premises, mall or service/exit corridors. Tenant shall not allow trash to accumulate within the Leased Premises nor shall Tenant place any trash in the service/exit corridor or mall areas adjacent to the Leased Premises. Tenant shall reimburse Landlord for the Temporary Trash Removal. The period shall start with the date the Tenant starts construction in its premises and ends with the date the Tenant opens for business. In addition, Tenant shall pay any costs incurred by Landlord in removing trash from areas in and around the Leased Premises. Landlord's decision as to which Tenant is Exhibit D, Rough Shell 5/1/98 Page 15 81 responsible for trash left outside the Leased Premises will be reasonable and equitable, and Landlord's decision will be final. 5. Plans Review/Tenant Coordination. Landlord or its architect and/or engineer shall review Tenant's plans and specifications for compliance with the provisions of this Exhibit D and the Tenant Handbook. In addition, Landlord shall assign a Tenant Coordinator(s) to work with Tenant and Tenant's Architect, Engineer and contractor for the design and construction of the Leased Premises. Tenant shall reimburse Landlord for such plan review and tenant coordination as part of the Temporary Charges provided for in C.9. 6. Temporary-Storefront. If Tenant is not open for business in the Leased Premises and Landlord's Retail Development is open, or if, in Landlord's sole judgment, Landlord determines that a temporary storefront is necessary so as not to disrupt the construction, opening or operation of any portion of The Project, then Landlord shall install, at Tenant's expense, for Tenant's use during construction a full height temporary barricade on the storefront lease line. Tenant shall reimburse Landlord for the temporary storefront. Upon completion of Tenant's construction and fixturing in the Leased Premises, Tenant shall remove, disassemble and dispose of such temporary storefront. 7. Coming Soon Sign. If during Tenant's initial construction, fixturing and merchandise stocking, The Project is open (or shall open) for business, Landlord will provide and install, following the earlier to occur of (a) erection of the initial construction barricade, or (b) completion of the storefront for the Leased Premises, a "coming soon" sign on the front (barricade or storefront, as the case may be) of the Leased Premises. Tenant shall reimburse Landlord for providing such sign. 8. Suite Number and Tenant Trade Name. Landlord shall furnish and install suite number and Tenant trade name sign adjacent to Tenant's exterior and/or interior rear exit door(s) in accordance with Landlord's standard. Landlord shall also install suite number on Mall storefront. Tenant shall reimburse Landlord for this service. 9. The charges for Temporary Services and Facilities as described in this subsection C shall be: Landlord's Charge [***] psf 10. The charges identified in C.9 above shall be due and payable within thirty (30) days after billing by Landlord. Landlord may decline at Landlord's sole judgment to proceed with work at Tenant's expense until Landlord's receipt of payment thereof. D. COST PLUS ADMINISTRATION FEE WORK BY LANDLORD IN PREMISES AT TENANT EXPENSE The following work in Tenant's premises shall only be accomplished by Landlord in Landlord's building. The Tenant shall contract with the Landlord to furnish the following work items if required by Tenant's store design at Landlord's actual cost plus [***] for administration, and the cost of any such item of work shall be payable to Landlord in full within thirty (30) days after receipt of invoice therefore. 1. Openings in rated demising partitions and exterior wall, provided such opening/penetrations have been approved in advance by Landlord in writing. Exhibit D, Rough Shell 5/1/98 Page 16 *** Confidential treatment requested. 82 2. Roof Openings. With Landlord's prior written permission, roof openings for any purpose shall include supporting structures, curbs, roof patching and flashing. Tenant shall be responsible for installation of ducts, pipes, equipment and counter flashing. Landlord reserves the right to refuse to permit the furnishing of any openings which exceed the capability of the structural system or which in Landlord's opinion would have an appearance detrimental to Landlord's Building. 3. Plumbing Service. With Landlord's written permission, additional sanitary sewer or relocation of sanitary sewer. 4. Electric Service. With Landlord's written permission, additional electric service or relocation of electrical service. 5. Storefront. With Landlord's prior written permission, changes to Landlord furnished interior and exterior storefront including but not limited to additional doors and relocation of doors. 6. Landlord's Labor (including overtime, demurrage and waiting time) and equipment used in any work Landlord performs for Tenant. 7. Architectural and/or Engineering fees incurred Landlord as a result of Tenant requesting any services in excess of the standard review services described in Section 8. Building Department Expeditor Fees incurred by Landlord in expediting Tenant Building Permit, Controlled Inspection and other requirements for temporary and permanent Certificates of Occupancy on the building and the Tenant Premises. 9. Building Permits, Microfilming and Documentation Fees paid by Landlord on behalf of the Tenant in expediting the approval of Building Permits and other approvals of Agencies having jurisdiction. E. CERTIFICATE OF ACCEPTANCE Upon the completion of Tenant's construction and fixturing work within its Leased Premises Tenant shall so notify Landlord in writing. Landlord, upon receipt of such notice from Tenant, shall issue a Certificate of Acceptance of said premises provided, however, that the issuing of such a Certificate shall be contingent upon all of the following: 1. The satisfactory completion by Tenant of the work to be performed by Tenant under this Exhibit D, in accordance with good workmanship and the approved Construction Documents and Specifications therefor and receipt of a certificate of occupancy from the local jurisdiction. 2. Receipt by Landlord from Landlord's Architect of a premises acceptance letter. This letter can be issued only upon Tenant's correction of the deficiencies noted by Landlord or Landlord's Architect upon any inspection of Leased Premises. 3. Tenant shall have furnished Landlord with waivers of liens and sworn statements, or satisfactory substitutes for same, in such form as may be required by Landlord, and releases of notices of commencement (if any) from all contractors, subcontractors and other persons performing labor and/or supplying materials in connection with such work showing that all of said persons have been compensated in full. 4. Submission by Tenant to Landlord of a detailed breakdown of Tenant's final and total construction costs together with receipted invoices showing payment thereof. Exhibit D, Rough Shell Page 17 5/1/98 83 5. Exhibit D, Rough Shell 5/1/98 Page 18 84 - -------------------------------------------------------------------------------- SPECIALTY TENANT LEASE EXHIBIT - -------------------------------------------------------------------------------- EXHIBIT E SIGN CRITERIA 1. Tenant is required to identify the Leased Premises by a sign on the storefront. The general criteria for the design of Tenant signage ("sign criteria") is set forth below. More specific sign criteria for The Project as a whole and certain tenants in certain designated locations such as in food courts and mall courts is set forth in the Tenant Handbook, (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". 2. Costs incurred in design, construction and installation, as well as maintenance shall be the responsibility of Tenant. The Tenant must obtain permits to erect and connect the sign from local community officials before the sign is installed. 3. It is intended that the signage be developed in an imaginative and varied manner so as to enhance the architectural treatment of the facade in general and be harmonious with the overall architecture and thematic consideration of the mall in particular. Although current signage practices of the Tenant shall be considered, they will not govern the signs to be installed. 4. Approval of signs shall be solely the right of the Landlord, and Tenant must submit all candidates for signage to the Landlord for approval in the form of working drawings before manufacturing or further assembly begins. Submission shall be to Landlord, in the form of shop drawings with all pertinent details necessary for construction and installation included. Submission shall be a minimum of ninety (90) days before proposed installation date, and Tenant is expected to have sign manufactured and ready for installation within forty-five (45) days of approval by Landlord or Landlord's agent before installation, at project site. Landlord reserves the right to reject signs not conforming to approved drawings regardless of stage of completion or installation. 5. The Tenant's storefront sign shall occupy an area of the storefront facade designated in the Tenant Handbook and/or the Lease Outline Drawing, and/or by the Project Architect. The area shall total no more than eight (8) square feet for up to a thirty foot (30') storefront; and twelve (12) square feet for up to a forty foot (40') storefront; sixteen (16) square feet for up to a fifty foot (50') storefront. The design of the storefront is to be considered by Tenant in the development of signage. In general, signs will be installed in the designated sign area above the entry door. Variation of this criteria shall be subject to Landlord's prior written approval, which shall be solely at the discretion of Landlord. No sign shall be installed closer than three feet (3'-0") from the end of the Tenant storefront on both sides. 6. Signage shall be limited to the name of the store. Additional elements will be considered as long as they enlarge, expand, or otherwise clarify the name of the store. 7. Signs which are comprised of unaltered sans serif typefaces are, in general, unacceptable, as will be signs or type faces which are difficult to read. 8. The use of corporate identifications or logos will be considered, but prior use or identification with a particular sign or logo will not govern Landlord's approval for Tenant use. Tenant agrees that Landlord's rejection of particular logo or sign shall not constitute a violation of Lease by Landlord. In the case of conflict between sign criteria and other provisions of the Lease, Tenant agrees that the sign criteria and Landlord's discretion shall prevail. Tenant shall not hold Landlord liable for damage or injury as a result of the sign criteria or the implementation of the sign criteria by agreement of both parties. Exhibit E, Sign Criteria 5/1/98 Page 1 85 9. A variety of fabrication materials shall be considered, however, construction shall be guaranteed for a period of at least five (5) years against peeling, cracking, crazing, blistering, or any other degradation of surface or materials. Tenant shall obtain, from manufacturer of the sign, a five (5) year warranty covering the condition of finished surfaces, construction and operation of sign. 10. All electrical signs shall carry approval of Underwriters Laboratories (U.L.) on all component parts and on the complete display. Maximum brightness of lit signs shall be fifty foot (50') Lamberts measured one foot (1') from the source of light. No blinking, moving or flashing lights shall be allowed. Surface lighting may be reduced in order to accentuate lit signage. There will be no special advantage in terms of visibility of internally lit over externally lit signs. 11. No exposed raceways, ballast boxes or electrical transformers will be permitted except as required to be exposed by local building codes. 12. Landlord shall not be responsible for signs improperly installed or manufactured, and those signs not meeting the code requirements shall, at Tenant's expense, be removed and built to code specifications before installation. Signs meeting the Landlord's sign criteria, but not meeting local code requirements, shall be the responsibility of Tenant and Tenant agrees not to hold Landlord liable for costs due to conflict between these sign criteria and code, should such conflict exist under present code or due to future changes in code. Tenant must make required structural modifications at Tenant's expense to Landlord's structure. Also, Landlord's engineer to approve structural modifications. 13. Notwithstanding anything herein contained to the contrary, Tenant shall have the right to replace any existing sign(s) of said Tenant as long as such replacement meets the sign criteria listed within this document, the Tenant Handbook, and is accompanied by Landlord's prior written approval prior to installation. 14. No other signs of any type or purpose, permanent or temporary, shall be permitted to be displayed upon the facade, windows or within the dimension prescribed in Section 4.03 of the Lease, behind an unobstructed window unless and until such sign has been submitted to Landlord and has received Landlord's prior written approval. Landlord shall be the sole judge of what constitutes an unobstructed window. Removal of signage of any type installed without Landlord approval shall be mandatory before said sign shall be considered by Landlord for installation. 15. Landlord shall not be required to approve signage for any reason other than conformance with the sign criteria in this Exhibit E and Tenant Handbook. Scheduled opening dates and other time constraints shall not be reason to approve signage which Landlord otherwise would consider unsuitable for manufacture or installation. Tenant agrees not to hold Landlord liable for any damage caused to Tenant due to signage or lack of signage as a result of Landlord's insistence upon conformance with the sign criteria or the Landlord's withholding of approval of submitted signage. 16. In the event that Tenant is unable to supply satisfactory signage design by the fixturing period of Tenant's store, Landlord shall have the option of providing such design. In such a case, Tenant agrees to pay prior to store opening all expenses involved in the design, manufacture, and installation of said signage plus 15% cost of administration, and Tenant agrees to waive rights to reject said signage and agrees not to oppose installation of said signage. 17. Signage indicated on drawings and mechanicals submitted for reasons other than signage evaluation (as described in this Exhibit E and the Tenant Handbook) shall not constitute a signage submittal. No approval of such drawings and mechanicals shall constitute approval of signage. Exhibit E, Sign Criteria 5/1/98 Page 2 86 18. Food Court Tenants shall be permitted to install one menu board within the Leased Premises subject to Landlord's prior design review and written approval. Refer to the Tenant Handbook for type, size and location allowed. 19. Procedure for Submittal and Approval of Sign Drawings: a. Approval of store design drawings or working drawings and specifications for Tenant's Leased Premises does not constitute approval of any sign work. Approval of signs shall be solely the right of Landlord, and Tenant must submit all candidates for signage to the Landlord for approval in the form of sign designer's working drawings and/or manufacturer's shop drawings before manufacturing or assembly begins. Drawings by Tenant, its architect or anyone not qualified to produce signage drawings are not acceptable. At the same time as Tenant's initial submission of store working drawings and specifications to Landlord, Tenant shall submit one (1) set of reproducible prints and specifications and three (3) sets of blue prints, along with samples of all material and colors for all its proposed sign work. The drawings shall clearly show location of sign on storefront elevation drawing, size and stroke dimensions, graphics, color, construction, and attachment details. Full information regarding electrical load requirements and brightness in footcandles shall also be included. Landlord reserves the right to reject signs not conforming to approved drawings regardless of state of completion or installation. b. As soon as practical after receipt of the sign drawings, Landlord shall return to Tenant one (1) set of such sign drawings with the suggested modifications and/or approval. If, upon receipt of approved sign drawings bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing, by certified or registered mail addressed to Landlord within seven (7) days from the date of Tenant's receipt of such sign drawings. Unless such action is taken, it will be deemed that all comments made by Landlord on the sign drawings are acceptable to and approved by Tenant. c. If sign drawings and specifications are returned to Tenant with comments, but not bearing approval of Landlord; said drawings and specifications shall be revised immediately by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. Exhibit E, Sign Criteria 5/1/98 Page 3 87 EXHIBIT A (ADD LEASE INFORMATION) 88 EXHIBIT F COMMENCEMENT AND EXPIRATION DATE DECLARATION LANDLORD: --------------------------------------------- TENANT: --------------------------------------------- LEASE DATE: --------------------------------------------- STORE NUMBER: --------------------------------------------- Landlord and Tenant acknowledge and agree that the Commencement Date of the above referenced Lease is and the Expiration Date of the Lease is -------- -----. LANDLORD: TENANT: By: By: ----------------------------- ----------------------------- Its: Its: ----------------------------- ----------------------------- Date: Date: ----------------------------- ----------------------------- 89 EXHIBIT G WAIVER OF SALES TAX CONFIDENTIALITY Date: ------------------- I authorize the Comptroller of Public Accounts to release sales tax information pertaining to the taxpayer indicated below to Katy Mills Limited Partnership, c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209. I understand that this waiver applies only at our retail store located in Katy Mills in Katy, Texas. Please print or type the following information as shown below on your Texas Sales and Use Tax Permit: - -------------------------------------------------------------------------------- Name of Taxpayer Listed on Texas Sales Tax Permit - -------------------------------------------------------------------------------- Name Under Which Taxpayer is Doing Business (d/b/a or Outlet Name) - -------------------------------------------------------------------------------- Taxpayer Mailing Address - -------------------------------------------------------------------------------- Physical Location of Business Permitted for Sales Tax in Katy, Texas - -------------------------------------------------------------------------------- Texas Taxpayer ID Number Tax Outlet Number (As Shown on Texas Sales Tax Permit) ------------------------------------ Authorized Signature ------------------------------------ Print Name of Authorized Signature ------------------------------------ Position of Authorized Signature ------------------------------------ Phone Number of Authorized Signature 90 EXHIBIT H AGREEMENT OF SUBORDINATION. NON-DISTURBANCE AND ATTORNMENT THIS AGREEMENT is made this 5th day of April, 1999, by and among KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership having an office c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209 ("Lessor"), SILICON ENTERTAINMENT, INC., a California corporation, having an office at 210 Hacienda Avenue, Campbell, California 95008 ("Lessee"), and BAYERISCHE HYPO-UND VEREINSBANK AG, acting by and through its New York branch, having offices at 150 East 42nd Street, New York, New York 10017, its successors and assigns or an affiliate ("Lender"), for itself and as agent for, and as co-lender with one or more co-lenders. W I T N E S S E T H: WHEREAS, Lender is providing financing for the Katy Mills shopping center in Katy, Texas as more fully described on Exhibit A attached hereto and made a part hereof (the "Property"); WHEREAS, under a certain lease (the "Lease") Lessor did lease, let and demise a portion of the Property (such portion of the Property is hereinafter called the "Premises") to Lessee; WHEREAS, Lender has or will become the owner of an indebtedness secured by, among other things, a Deed of Trust dated as of March 31, 1999, made by Lessor, as trustor for the benefit of Lender, as beneficiary (the "Deed of Trust"), which Deed of Trust was recorded in the public records of the County of Ft. Bend/Harris in the State of Texas on April 5, 1999/April 1, 1999 as Instrument Number 1999626754/7635283, respectively, and an assignment of Lessor's interest in the Lease for the benefit of Lender ("Assignment of Leases"); NOW, THEREFORE, in consideration of the covenants, terms, conditions and agreements herein contained, and in consideration of other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: 1. The Lease and all rights and liens created thereby shall be subject and subordinate in all respects to the Deed of Trust and the lien created thereby, to any advancements made thereunder, and to any increases, extensions, modifications or renewals thereof. 2. So long as Lessee is not in default under the Lease beyond any applicable grace or cure period, Lender hereby covenants to Lessee that in the event it obtains title to the Premises, either by foreclosure or by deed in lieu of foreclosure, and thereafter obtains the right of possession of the Premises, that the Lease will continue in full force and effect, and Lender shall recognize the Lease and Lessee's rights thereunder. 3. Lessee agrees that from and after the date hereof in the event of any act or omission by Lessor under the Lease which would give Lessee the right, either immediately or after the lapse of a period of time, to terminate the Lease, or to claim a partial or total eviction, Lessee will not exercise any such right (a) until it has given written notice of such act or omission to Lender by certified mail, return receipt requested, and (b) until and unless Lender fails to remedy such act or omission within thirty (30) days for any act or omission which can be cured by the payment of money, or in the case of any other act or omission, as long as necessary to remedy such act or omission, provided (i) Lender commences such remedy within thirty (30) days, and (ii) Lender pursues completion of such remedy with due diligence following such giving of notice and following the time when Lender shall have become entitled under the Deed of Trust to remedy the same. It is specifically agreed that Lessee shall not, as to Lender, be entitled to require cure of any such default which is personal to Lessor, and therefore not susceptible of cure by Lender, and that no such uncured default shall entitle Lessee to exercise any rights under the Lease with respect to Lender. 4. That in the event the interests of Lessor under the Lease shall be transferred to Lender or any nominee, designee, assignee of Lender or any purchaser at foreclosure sale (Lender or such other party referred to as a "Lender Party") by reason of foreclosure, deed in lieu of foreclosure, or similar transaction, Lessee hereby covenants and agrees to make, for the benefit and reliance of Lender, full and complete attornment to the Lender Party as substitute lessor upon the same terms, covenants and conditions as provided in the Lease, except to the extent otherwise set forth herein. 5. The provisions of this Agreement shall be real covenants running with the Property, and shall be binding upon and inure to the benefit of the respective parties hereto and their respective heirs. 91 executors, administrators, beneficiaries, successors and assigns, including without limitation any Lender Party. 6. Notwithstanding anything contained herein to the contrary, or anything to the contrary in the Lease, Lender and any Lender Party shall not be: (a) Liable for any act of omission of Lessor, including without limitation, any delay in opening the Project or the Premises for occupancy and any failure to complete the construction of the Premises or the Project or any improvements therein; (b) Subject to any offsets, claims or defenses which Lessee might have as to Lessor; (c) Required or obligated to credit Lessee with any rent for any period beyond the then current rental period which Lessee might have paid Lessor; (d) Bound by any amendments or modifications or voluntary termination of the Lease made without Lender's prior written consent, other than exercise of rights, options or elections contained in the Lease; or (e) Bound to or liable for refund of any security deposit except to the extent actually received by Lender or a Lender Party. 7. Lessee shall not, without the express written consent of Agent: (a) Cancel, terminate or surrender the Lease, except as provided therein or in any modification or amendment specified herein or hereafter consented to by Lender; (b) After the date hereof, enter into any agreement with Lessor or its successors or assigns, which grants any concession with respect to the Lease or which materially compromises, discounts or otherwise reduces the rent called for thereunder; or (c) After the date hereof, prepay more than one (1) month in advance. 8. Lessor and Lessee hereby jointly and severally agree for the benefit and reliance of Lender, that neither this Agreement, nor any assignment of the Lease for collateral purposes, nor anything to the contrary in the aforesaid Lease or in any modifications or amendments thereto shall, prior to Lender's acquisition of Lessor's interest in and possession of the Property (and thereafter, only to the extent of the Property and not personally), operate to give rise to or create any responsibility or liability upon Lender for the control, care, management or repair of the Property or for any waste committed on the Property by any party whatsoever or for any dangerous or defective condition of the Property; or impose responsibility for the carrying out by Lender of any of the covenants, terms and conditions of the Lease or of any modification or amendment whether or not hereafter consented to by Lender, or for any negligence in the management, upkeep, repair or control of said Property resulting in loss, injury or death to any lessee, licensee, invitee, guest, employee, agent or stranger. Notwithstanding anything to the contrary in the Lease, Lender, its successors and assigns (and any Lender Party, as appropriate), shall be responsible for performance of only those covenants and obligations of the Lease accruing after Lender's, its successors' and assigns' (or Lender Party's, as appropriate), acquisition of Lessor's interest in and possession of the Property. 9. Lessee covenants and agrees to make rental payments according to the terms of such Assignment of Leases upon written demand by Lender in the event of any default (as described therein). Lessor consents to payments being so made. 10. Lessee agrees that this Agreement satisfies any condition or requirement in the Lease relating to the granting of a non-disturbance agreement. 11. Any notices hereunder shall be effective upon mailing by certified mail, return receipt requested, or delivery by overnight courier addressed to the recipient at its address set forth in the preambles hereof or as to each party, to such other address as the party may designate by a notice given in accordance with the requirements contained herein. 12. This Agreement contains the entire agreement between the parties hereto. This instrument may be executed in multiple counterparts, all of which shall be deemed originals and with the same effect as if all parties hereto had signed the same document. Signature and acknowledgement pages may be detached from the counterparts and attached to a single copy of this document to physically form one document. 92 13. If any bankruptcy proceedings shall hereafter commence with respect to Lessor, and if the Lease is rejected by the trustee in bankruptcy pursuant to Section 365 of the United States Bankruptcy Code, Lessee agrees with Lender (i) not to treat such lease as terminated or if the Lease is terminated by the Trustee, to execute a new lease with Lender or its designee on the same terms as the Lease, and (ii) to remain in possession of the Premises. 14. Lessee agrees to execute and deliver from time to time, upon the request of Lender a certificate regarding the status of the Lease in the form set forth in Schedule A hereto and made a part hereof. EXECUTED as of the date first above written. LESSOR: KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Katy Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner /s/ JUDITH BERSON ------------------------------------------------- By: Judith Berson Its: Executive Vice President LENDER: BAYERISCHE HYPO-UND VEREINSBANK AG, for itself and as Agent By: /s/ NINA M. LEVINE --------------------------------------------- Name: Nina M. Levine -------------------------------------------- Title: Associate Director ------------------------------------------- By: /s/ LARNEY J BISBANO ---------------------------------------------- Name: Larney J Bisbano -------------------------------------------- Title: Director ------------------------------------------- LESSEE: SILICON ENTERTAINMENT, INC., a California corporation By: /s/ CHRIS MORSE ---------------------------------------------- Name: Chris Morse -------------------------------------------- Its: Vice President --------------------------------------------- 93 ACKNOWLEDGEMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) )ss. COUNTY OF ARLINGTON ) On this 7th day of March ___, 1999, before me personally appeared JUDITH BERSON, to me known to be the person who executed the foregoing Agreement of Subordination, Non-Disturbance and Attornment and acknowledged before me that she was duly authorized and did execute same on behalf of KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. /s/ [Signature Illegible] ------------------------------------- Notary Public My Commission expires: 2/illegible/02 ACKNOWLEDGEMENT OF CORPORATE TENANT STATE OF CALIFORNIA ) )ss. CITY/COUNTY OF SANTA CLARA ) On March 16, 1999, before me Laurie Shermer, a Notary Public in and for said state aforesaid, personally appeared Chris Morse, as Vice President of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. /s/ LAURIE SHERMER -------------------------------------- Notary Public, Santa Clara County, My Commission expires: 9/19/2001 [NOTARY SEAL} [Notarial Seal] ACKNOWLEDGEMENT OF LENDER STATE OF NY ) )ss. COUNTY OF NY ) On this 5th day of April, 1999, before me, Heather Eppley, notary public, personally appeared Nina M. Levine and Larnery J. Bisbano approved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities and that by their signatures on the instrument the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. /s/ HEATHER EPPLEY ------------------------------------------------ Notary Public My Commission expires: ----------------------- [NOTARY STAMP] 94 EXHIBIT H-1 PRE-CONSTRUCTION TENANT ESTOPPEL CERTIFICATE TO: BAYERISCHE HYPO- UND VEREINSBANK AG, acting by and through its New York branch, its successors and assigns or an affiliate (referred to herein as "Lender"), for itself and as agent for one or more co-lenders: 1. The undersigned is the Lessee under that certain Lease together with all amendments, modifications and supplements thereto, as more fully described on Schedule A attached hereto, and made a part hereof (collectively, the "Lease") by and between KATY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, as Lessor and SILICON ENTERTAINMENT, INC., a California corporation, as Lessee, covering those certain premises described therein and located at Katy Mills, Katy, Texas ("Premises"). 2. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Lease. 3. Except for any amendments, modifications and supplements described in Schedule A the Lease has not been modified, changed, altered or amended in any respect and is the only Lease or agreement between the Lessee and Lessor or its agents affecting the Premises. 4. Except as provided in the Lease, Lessee has made no agreements with Lessor or its agents or employees concerning free rent, partial rent, rebate of rental payments or any other type of rental concession (except as set forth in the Lease). 5. No rent has been prepaid for more than one (1) month. 6. The Lease is in full force and effect and Lessee has no right to terminate the Lease (other than by reason of default by Lessor or as otherwise provided for in the Lease). As of the date hereof, Lessee is entitled to no credit, no free rent and no offset or deduction in rent, except as set forth in the Lease. 7. The Lessee and, to Lessee's knowledge, Lessor are not in default under the Lease and, to the best of Lessee's knowledge, there is no event which with notice or passage of time would constitute a default by Lessee or Lessor under the Lease. 8. Lessor has and is under no obligation to Lessee with respect to payment of the cost of tenant improvement work to the Premises, except as specifically set forth in the Lease. 9. The Lease does not contain and the Lessee does not have any outstanding options or rights of first refusal to purchase the Premises or any part thereof or the real property of which the Premises are a part. 10. No actions, whether voluntary of otherwise, are pending against the Lessee under the bankruptcy laws of the United States or any state thereof. 11. Any notices sent to Lender or its affiliates shall be sent certified mail, return receipt requested and addressed to Bayerische Hypo-und Vereinsbank AG, at its offices at 150 East 42nd Street, New York, New York 10017. This certification is made knowing that Lender relies upon the truth of this certification in making certain fundings. Dated as of this 16 day of March, 1999 SILICON ENTERTAINMENT, INC., a California corporation By: /s/ CHRIS MORSE ------------------------------------ Its: Vice President ------------------------------------ By: /s/ BRUCE A. KENAN ------------------------------------ Its: Chairman/CEO ------------------------------------ 95 EXHIBIT A (ADD LEASE INFORMATION) EX-10.18 20 UNIVERSAL STUDIOS CITYWALK HOLLYWOOD LEASE 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT EXHIBIT 10.18 THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. UNIVERSAL STUDIOS CITYWALK HOLLYWOOD LEASE Between UNIVERSAL STUDIOS CITYWALK HOLLYWOOD, A Division of Universal Studios Inc. as Landlord And Silicon Entertainment, Inc. A California Corporation Executed as of July 20 , 1999 ---------- 2 TABLE OF CONTENTS ARTICLE I: FUNDAMENTAL LEASE PROVISIONS Section 1.1 Landlord Section 1.2 Tenant Section 1.3 Premises Section 1.4 Lease Term Section 1.5 Rent Commencement Date Section 1.6 Minimum Annual Rental Section 1.7 Percentage Rent Section 1.8 Gross Sales Breakpoint Section 1.9 Gross Sales Threshold Section 1.10 Annual Advertising Amount Section 1.11 Marketing Fund Contribution Section 1.12 Delivery Date/Condition of Premises Section 1.13 Permitted Use of the Premises Section 1.14 Security Deposit Section 1.15 Construction Allowance Section 1.16 Tenant's Broker Section 1.17 Addresses for Notices Section 1.18 INTENTIONALLY DELETED Section 1.19 Additional Documents Exhibit A-1 Site Plan of the Project Exhibit A-2 Parking Areas Exhibit B-1 Floor Plan of Tenant's Premises Exhibit B-2 Approved Exterior Facade and Exterior Signage EXHIBIT B-3 Approved Preliminary Design Plan for Interior Layout Exhibit C Provisions Relating to Construction of Tenant's Premises Exhibit D Statement of Gross Sales Exhibit E Intentionally Deleted Exhibit F Sample Letter of Estoppel Exhibit G Tenant's Initial Merchandise and Price List Exhibit H Stairway Modification ARTICLE II: PRIMARY LEASE PROVISIONS Section 2.1 Use of the Premises Section 2.2 Trade Name Section 2.3 Operating Standards Section 2.4 Sponsorships Section 2.5 Principal's Involvement Section 2.6 Radius Restriction Section 2.7 Tenant's Exclusive Section 2.8 Option to Extend Section 2.9 Right to Relocate Section 2.10 Deposit for Tenant's Work Section 2.11 Intentionally Deleted Section 2.12 Adjustment of Taxes Section 2.13 Construction Allowance
ii 3 ARTICLE III: PREMISES Section 3.1 Lease of Premises Section 3.2 Definitions of "Floor Area" and "Tenant Areas" Section 3.3 Certain Easements in Favor of Tenant Section 3.4 Certain Easements in Favor of Landlord ARTICLE IV: TERM Section 4.1 Duration of Lease Term Section 4.2 Acceptance of the Premises Section 4.3 Delays in Completion of Landlord's Work Section 4.4 Tenants Early Use Or Possession Section 4.5 Tenant's Delivery of Documents Section 4.6 Surrender of the Premises Section 4.7 Holding Over Without Consent Section 4.8 Landlord's Right of Termination ARTICLE V: RENTAL Section 5.1 Rent Commencement Date Section 5.2 Minimum Annual Rental Section 5.3 Percentage Rent Section 5.4 Reporting of Gross Sales Section 5.5 Additional Rent Section 5.6 Late Payments Section 5.7 No Set-Offs or Deductions Section 5.8 Adjustment of Payments Section 5.9 Audit Rights ARTICLE VI: DEFINITION OF "GROSS SALES" ARTICLE VII: UTILITIES ARTICLE VIII: COMMON AREA AND PARKING AREAS Section 8.1 Definition of "Common Area" Section 8.2 Use of Common Area Section 8.3 Control of Common Area Section 8.4 Security Section 8.5 Rules and Regulations Section 8.6 Parking Section 8.7 Parking Charges ARTICLE IX: MARKETING AND ADVERTISING Section 9.1 Tenant Advertising Section 9.2 Marketing Fund ARTICLE X: POSSESSION AND USE Section 10.1 Permitted Uses Section 10.2 Duties and Prohibited Conduct Section 10.3 Deliveries/Trash Removal
iii 4 Section 10.4 Additional Costs Section 10.5 Renovation ARTICLE XI: TENANANT'S CONDUCT OF BUSINESS Section 11.1 Operating Covenants Section 11.2 Operating Days and Hours Section 11.3 Compliance with Laws ARTICLE XII: LIMITS ON SIGNS AND ADVERTISING ARTICLE XIII: PERSONAL PROPERTY; IMPROVEMENTS; CERTAIN TAXES Section 13.1 Removal and Replacement Section 13.2 Improvements Section 13.3 Certain Taxes ARTICLE XIV: TENANT'S RIGHT TO MAKE IMPROVEMENTS Section 14.1 Alterations Section 14.2 Construction Requirements ARTICLE XV: MECHANIC'S LIENS ARTICLE XVI: REPAIRS AND MAINTENANCE Section 16.1 Tenant's Obligations Section 16.2 Landlord's Obligations Section 16.3 Right to Enter Section 16.4 Landlord's Liability ARTICLE XVII: INDEMNITY; INSURANCE Section 17.1 Indemnity by Tenant Section 17.2 Tenant's Insurance Obligation Section 17.2.1 General Liability Section 17.2.2 Workers Compensation Section 17.2.3 Plate Glass Section 17.2.4 Equipment Section 17.2.5 Tenant's Improvements and Personal Property Section 17.2.6 Business Interruption Section 17.3 Form of Policies Section 17.4 Blanket Insurance Policies Section 17.5 Landlord's Insurance Obligation Section 17.6 Mutual Waivers of Rights Section 17.7 Insurance Use Restrictions ARTICLE XVIII: RECONSTRUCTION Section 18.1 Insured Casualty Section 18.1.1 Repair of Damage Section 18.1.2 Damage Near End of Lease Term Section 18.2 Uninsured Casualty Section 18.3 Construction Provisions
iv 5 Section 18.4 Release of Liability section 18.5 Major Destruction ARTICLE XIX: OCCUPANCY TRANSACTIONS Section 19.1 Restrictions Section 19.2 Nullity Section 19.3 Definitions Section 19.3.1 "Occupancy Transaction" Section 19.3.2 "Transferee" Section 19.3.3 "Control" Section 19.4 Landlord's Costs ARTICLE XX: BANKRUPTCY; INVOLUNTARY TRANSFERS Section 20.1 Right of Termination Section 20.1.1 Receivership Section 20.1.2 Attachment Section 20.1.3 Bulk Sale Section 20.1.4 Multiple Locations Section 20.1.5 Guarantor Section 20.2 Request for Information section 20.3 Assignment by DIP or Trustee ARTICLE XXI: SECURITY DEPOSIT Section 21.1 Payment Section 21.2 Application Section 21.3 Transfer of Landlord's Interest ARTICLE XXII: DEFAULTS BY TENANT; REMEDIES Section 22.1 Event of Default Section 22.1.1 Failure to Pay Rent Section 22.1.2 Breach of Operating Covenants Section 22.1.3 Other Curable Defaults Section 22.2 Notices Section 22.2.1 Failure to Pay Rent Section 22.2.2 Breach of Operating Covenants Section 22.2.3 Other Curable Defaults Section 22.3 Non-Curable Defaults Section 22.4 Landlord's Rights and Remedies Section 22.4.1 Termination of Lease Section 22.4.2 Reentry of the Premises Section 22.4.3 Termination after Reentry Section 22.4.4 Continued Enforcement of Lease Section 22.5 Landlord's Damages Section 22.5.1 Delinquent Rent Section 22.5.2 Rent After Termination Until Judgment Section 22.5.3 Rent After Judgment Section 22.5.4 Other Compensation Section 22.5.5 Additional or Alternative Documents Section 22.5.6 Calculation of Damages Section 22.6 Merchandise and Personal Property
v 6 Section 22.7 Self-Help Cure Rights Section 22.8 No Waiver Section 22.9 Waiver of Notice ARTICLE XXIII: DEFAULTS BY LANDLORD; REMEDIES ARTICLE XXIV: EMINENT DOMAIN ARTICLE XXV: SALE OR MORTGAGE BY LANDLORD ARTICLE XXVI: SUBORDINATION; ATTORNMENT; ESTOPPEL Section 26.1 Subordination Section 26.2 Attornment Section 26.3 Estoppel Certificate ARTICLE XXVII: TITLE TO PREMISES ARTICLE XXVIII: QUIET ENJOYMENT ARTICLE XXIX: NOTICES AND CONSENTS ARTICLE XXX: MISCELLANEOUS Section 30.1 Lease Rate Section 30.2 Financing Costs Section 30.3 Waiver or Consent Limitation Section 30.4 Force Majeure Section 30.5 Avoidance of Labor Disputes Section 30.6 Landlord Calculations, Determinations and Requirements Section 30.7 Failure to Give Consent Section 30.8 Reasonableness Section 30.9 Relationship of the Parties Section 30.10 Severability; Construction of Provisions Section 30.11 Warranty of Authority Section 30.12 Entire Agreement; Construction Section 30.13 Time of Essence Section 30.14 Joint and Several Liability Section 30.15 Successors and Assigns Section 30.16 Right to Lease Section 30.17 Landlord's Right to Engage in Other Activities Section 30.18 Landlord's Access Section 30.19 Attorneys' Fees Section 30.20 Brokers Section 30.21 Recordation Section 30.22 Nonbinding
vi 7 Universal Studios CityWalk Hollywood Lease This Lease is executed as of July 20, 1999 (the "Effective Date"). In consideration of the rents and covenants hereinafter set forth, Landlord (identified in Section 1.1) hereby leases to Tenant (identified in Section 1.2) and Tenant hereby leases from Landlord, the Premises upon the terms and conditions hereinafter set forth. CONDITION PRECEDENT: THE VALIDITY OF THIS LEASE IS CONDITIONED ON THE APPROVAL BY THE MUSICLAND GROUP, INC. (d/b/a SAM GOODY) ("MUSICLAND") ON OR BEFORE JULY 31, 1999 OF LANDLORD'S PRELIMINARY PLANS AND SPECIFICATIONS FOR LANDLORD'S WORK WITH RESPECT TO THE LOCATION OF THE DEMISING WALL BETWEEN THE PREMISES AND THE SPACE OCCUPIED BY MUSICLAND IMMEDIATELY ADJACENT TO THE PREMISES; PROVIDED, HOWEVER, LANDLORD REPRESENTS AND WARRANTS THAT MUSICLAND WILL NOT HAVE ANY APPROVAL RIGHTS OVER, AND THE VALIDITY OF THIS LEASE IS IN NO WAY CONDITIONED UPON MUSICLAND'S APPROVAL OVER, TENANT OR TENANT'S DESIGN PLANS AND SPECIFICATIONS FOR THE PREMISES, EXCEPT AS EXPRESSLY SET FORTH IN THIS PARAGRAPH. LANDLORD SHALL DELIVER WRITTEN NOTICE TO TENANT PROMPTLY AFTER OBTAINING THE MUSICLAND GROUP'S APPROVAL OF THE FOREGOING. LANDLORD'S FAILURE TO DELIVER TO TENANT WRITTEN NOTICE OF MUSICLAND'S DISAPPROVAL OF THE FOREGOING ON OR BEFORE JULY 31, 1999 SHALL BE DEEMED LANDLORD'S ACKNOWLEDGEMENT AND REPRESENTATION THAT THE AFORESAID CONDITION PRECEDENT HAS BEEN SATISFIED. INITIAL TENANT OBLIGATIONS: THIS PARAGRAPH SHALL SUPERSEDE ANYTHING TO THE CONTRARY CONTAINED IN EXHIBIT C ATTACHED HERETO. TENANT HAS SUBMITTED, AND LANDLORD HAS APPROVED IN ITS SOLE AND ABSOLUTE DISCRETION TENANT'S PRELIMINARY DESIGN PLANS FOR THE EXTERIOR FACADE AND EXTERIOR SIGNAGE FOR THE PREMISES (WHICH DESIGNS ARE ATTACHED HERETO AS EXHIBIT B-2), AND DOCUMENTS DETAILING TENANT'S CONCEPT. THE FINAL DESIGN PLANS FOR THE EXTERIOR FACADE AND EXTERIOR SIGNAGE FOR THE PREMISES SHALL BE SUBSTANTIALLY THE SAME AS EXHIBIT B-2. IF TENANT DESIRES TO MAKE ANY CHANGES TO THE EXTERIOR FACADE AND/OR THE EXTERIOR SIGNAGE PRELIMINARY DESIGN PLANS ATTACHED HERETO AS EXHIBIT B-2, SUCH CHANGES SHALL BE SUBMITTED TO LANDLORD FOR APPROVAL BY LANDLORD WHICH APPROVAL SHALL BE IN LANDLORD'S REASONABLE DISCRETION IF SUCH CHANGES ARE GENERALLY CONSISTENT WITH THE PREVIOUSLY-APPROVED PRELIMINARY DESIGN PLANS OF TENANT, AND IN LANDLORD'S SOLE DISCRETION IF SUCH CHANGES ARE NOT GENERALLY CONSISTENT WITH THE PREVIOUSLY-APPROVED PRELIMINARY DESIGN PLANS OF TENANT. IN DETERMINING WHETHER TO APPROVE TENANT'S EXTERIOR SIGNAGE, LANDLORD WILL CONSIDER WHETHER THE SAME IS CONSISTENT WITH THE ARCHITECTURAL AND AESTHETIC STANDARDS PREVAILING WITHIN THE PROJECT (AS DEFINED IN SECTION 1.19) AND WITH THE OVERALL CITYWALK 2000 EXPANSION PLAN AND SCHEME. TENANT ACKNOWLEDGES THAT, DUE TO THE UNIQUE ENTERTAINMENT CHARACTER OF CITYWALK, THERE ARE SPECIFIC EXPECTATIONS IN PLACE FOR EXTERIOR SIGNAGE. IN MAKING ANY CHANGES TO THE PREVIOUSLY-APPROVED EXTERIOR SIGNAGE, TENANT WILL TAKE INTO ACCOUNT LANDLORD'S DESIRE THAT THE CONCEPT AND DESIGN OF TENANT'S EXTERIOR SIGNAGE SHOULD EXHIBIT A HIGH LEVEL OF CREATIVITY AND SHOULD BE OF SUFFICIENT SIZE WITH A "FLAIR FOR THE DRAMATIC," SUCH THAT IT CAUSES IMMEDIATE BRAND RECOGNITION AND ENTICES PATRONS INTO TENANT'S SPACE. FURTHERMORE, TENANT'S SIGN DESIGNER AND SIGN FABRICATOR MUST BE PRE-APPROVED BY LANDLORD IN LANDLORD'S REASONABLE DISCRETION. TENANT HAS SUBMITTED AND LANDLORD HAS APPROVED TENANT'S PRELIMINARY DESIGN PLANS FOR THE INTERIOR LAYOUT OF THE PREMISES (WHICH DESIGNS ARE ATTACHED HERETO AS EXHIBIT B-3). IF TENANT DESIRES TO MAKE ANY CHANGES TO THE INTERIOR LAYOUT PRELIMINARY DESIGN PLANS PREVIOUSLY APPROVED BY LANDLORD, SUCH CHANGES SHALL BE SUBMITTED TO LANDLORD FOR APPROVAL IN LANDLORD'S REASONABLE DISCRETION; PROVIDED, HOWEVER, LANDLORD SHALL HAVE APPROVAL RIGHTS IN LANDLORD'S SOLE DISCRETION OVER SUCH 8 ASPECTS OF THE INTERIOR LAYOUT OF THE PREMISES THAT AFFECT THE STRUCTURAL INTEGRITY OF THE PREMISES AND/OR THE PROJECT. TENANT SHALL SUBMIT TENANT'S FINAL DESIGN PLANS FOR THE EXTERIOR FACADE, EXTERIOR SIGNAGE, AND INTERIOR LAYOUT OF THE PREMISES IN ACCORDANCE WITH SECTION III.E OF EXHIBIT C ATTACHED HERETO. LANDLORD'S APPROVAL OF ALL DESIGN PLANS SUBMITTED TO LANDLORD BY TENANT (WHETHER FOR THE FIRST TIME OR AS A RESULT OF ANY MODIFICATION THERETO) SHALL BE GRANTED OR DENIED (AND IF DENIED, SUCH DENIAL SHALL BE ACCOMPANIED BY SPECIFIC, DETAILED AND WRITTEN REASONS THEREFOR WITH ALTERNATIVE RECOMMENDATIONS BY LANDLORD) WITHIN FIFTEEN (15) DAYS AFTER LANDLORD'S RECEIPT OF THE PLANS SUBMITTED BY TENANT. IF LANDLORD DOES NOT NOTIFY TENANT OF ITS DENIAL OR APPROVAL OF TENANT'S PLANS ON OR BEFORE THE EXPIRATION OF SUCH FIFTEEN (15) DAY PERIOD AND THEREAFTER, WITHIN FIVE (5) DAYS AFTER TENANT PROVIDES WRITTEN NOTICE TO LANDLORD THAT FAILURE OF LANDLORD TO TIMELY NOTIFY TENANT OF ITS DENIAL OR APPROVAL SHALL BE DOOMED LANDLORD'S APPROVAL THEREOF, THEN LANDLORD'S FAILURE TO TIMELY NOTIFY TENANT OF ITS DENIAL OR APPROVAL WITHIN SAID FIVE (5) DAY PERIOD SHALL BE DEEMED LANDLORD'S APPROVAL THEREOF. In REVIEWING TENANT'S SIGNAGE AND OTHER PLANS FOR THE PREMISES, LANDLORD SHALL TAKE INTO ACCOUNT AND ACKNOWLEDGE THAT TENANT IS A PARTY TO A LICENSE AGREEMENT WITH NASCAR AND THAT TENANT'S USE AND DISPLAY OF THE TRADE NAME AND THE LOGO AND TRADEMARKS ASSOCIATED THEREWITH IS SUBJECT TO NASCAR'S CONSENT AS SET FORTH IN SUCH LICENSE AGREEMENT. ARTICLE I. LEASE TERMS The following terms, wherever initially capitalized in this Lease, shall have the meanings set forth in this Article I: 1.1 Landlord: UNIVERSAL STUDIOS CITYWALK HOLLYWOOD, a division of Universal Studios, Inc. 1.2 Tenant: Silicon Entertainment, Inc., a California corporation. Tenant's Trade Name: NASCAR Silicon Motor Speedway (subject to Section 2.2). 1.3 Premises: That certain space having approximately 5,000 SQUARE FEET of Floor Area ("Tenant's Floor Area") labeled SPACE Unit #120, as more particularly shown in Exhibit B-1, (a portion of the first floor of the former Sam Goody Records Space). Tenant's Floor Area shall be re-measured in accordance with Section 3.2 below. Tenant's Floor Area shall not include any mezzanine or catwalk floor area. 1.4 Lease Term: Five (5) years commencing on the Rent Commencement Date ("Initial Term") plus one (1) five (5) year option period ("Option Term") on the same terms and conditions except rent related terms (the term "Lease Term" shall be used refer to the entire term of this Lease, including the Option Term, if Tenant's option to extend the term of this Lease is exercised). 1.5 Rent Commencement Date: Tenant shall not be obligated to commence the payment of any rent under this Lease until the earlier of (a) ninety (90) days following the date that Landlord delivers the Premises to Tenant pursuant to Section 1.12 below, or (b) the date Tenant opens for business to the public in the Premises If the Rent Commencement Date is other than the first day of the month, then the first day of the calendar month immediately following the actual Rent Commencement Date shall be used for the purposes of calculating anniversaries of the Rent Commencement Date. Tenant shall use commercially reasonable efforts to open for business within 10 weeks after Landlord delivers the Premises to Tenant; provided, however, Landlord shall not be entitled to declare Tenant to be in default under this Lease for failure to open for *** Confidential treatment requested. 2 9 business in the Premises until such date that is one hundred thirty-five (135) days after the date that Landlord delivers the Premises to Tenant as required under this Lease. Furthermore, Tenant shall be obligated to commence the payment of rent under this Lease as of the Rent Commencement Date whether or not Tenant has opened for business on or before 135 days following the date that Landlord delivers the Premises to Tenant. Notwithstanding the foregoing, each of the aforesaid periods (i.e., the Rent Commencement Date and the date after which Tenant shall be in default if it has not opened the Premises for business) shall be tolled by the number of days of delay in Tenant's opening for business resulting from events of Force Majeure (as defined in Section 30.4 below) and/or delays caused by Landlord. 1.6 Minimum Annual Rental: [***] per year. The Minimum Annual Rental stated in this Section is based upon an "all in" rent of [***] per square foot of Floor Area and an initial estimated Floor Area of 5,000 square feet. Said rental amount is based upon a starting annual rental of [***] per square foot plus [***] per square foot for all other charges including, without limitation, Tenant's share of Operating Costs, CAM and Taxes (including all real property taxes assessed against the Project and the Premises, subject to Section 2.12), marketing and advertising contributions, and insurance costs; provided, however that the foregoing shall exclude real and personal property taxes, if any, levied upon Tenant's improvements (including, without limitation, Tenant's FF&E and Tenant's contents and liability insurance, both of which shall be paid separately by Tenant). Upon the determination of the final Floor Area of the Premises pursuant to Section 3.2, the amount stated in this Section shall be adjusted to equal the amount of [***] per square foot multiplied by that final Floor Area. On each anniversary of the Rent Commencement Date, the "all in" Minimum Annual Rental shall be increased by the percentage increase in the Index, as defined in Section 5.8 and as provided in Section 5.2 (such increase not to exceed 3%) over the Index for the prior year, provided, however, that upon the commencement of the [***] anniversary of the Rent Commencement Date, the Minimum Annual Rental (as adjusted by the Index in prior years) shall be increased to the greater of (i) [***] of the rent on the Rent Commencement Date, or (ii) the rent for the prior year adjusted by the percentage increase in the Index (not to exceed [***]). 1.7 Percentage Rental: [***] of Gross Sales in excess of the Gross Sales Breakpoint. Percentage Rental is defined in Section 5.3. 1.8 Gross Sales Breakpoint: [***] based on [***] per square foot per year. The amount stated in this Section is based on [***] per square foot of Floor Area, and the initial stated Floor Area of 5,000 square feet. Upon the determination of the final Floor Area of the Premises pursuant to Section 3.2, the amount stated in this Section shall be adjusted to equal the amount of [***] per square foot multiplied by that final Floor Area. On each anniversary of the Rent Commencement Date, the Gross Sales Breakpoint shall be increased by the percentage increase in the Index, as defined in Section 5.8 and as provided in Section 5.3 (such increase not to exceed [***]) over the Index for the prior year, provided, however, upon the commencement of the fifth anniversary of the Rent Commencement Date the Gross Sales Breakpoint (as adjusted by the Index in prior years) shall be increased to the greater of (i) [***] of the Gross Sales Breakpoint on the Rent Commencement Date, or (ii) the Gross Sales Breakpoint for the prior year adjusted by the percentage increase in the Index (not to exceed [***]). *** Confidential treatment requested. 3 10 00000 1.9 Gross Sales Threshold: [***], based on [***] per square foot per year. The amount stated in this Section is based on [***] per square foot of Floor Area, and the initial stated Floor Area of 5,000 square feet. Upon the determination of the final Floor Area of the Premises pursuant to Section 3.2, the amount stated in this Section shall be adjusted to equal the amount of [***] per square foot multiplied by that final Floor Area. On each anniversary of the Rent Commencement Date, the Gross Sales Threshold shall be increased by the percentage increase in the Index, as defined in Section 5.8 and as provided in Section 4.8 (such increase not to exceed [***]) over the Index for the prior year; provided, however, upon the commencement of the fifth anniversary of the Rent Commencement Date the Gross Sales Threshold (as adjusted by the Index in prior years) shall be increased to the greater of (i) [***] of the Gross Sales Threshold on the Rent Commencement Date, or (ii) the Gross Sales Threshold for the prior year adjusted by the percentage increase in the Index (not to exceed [***]). 1.10 Annual Advertising Amount: INTENTIONALLY DELETED. 1.11 Marketing Fund Contribution: INTENTIONALLY DELETED. 1.12 Delivery Date/Condition of Premises: Subject to Section 1.5 above, Landlord shall use commercially reasonable efforts to deliver the Premises to Tenant on or before August 31, 1999 subject to delays caused by events of Force Majeure. Landlord shall deliver the Premises to Tenant after completion of Landlord's Work, as described in Exhibit C and Tenant shall complete Tenant's Work within 90 days after the date of delivery of the Premises to Tenant with all of Landlord's Work completed as required hereunder. Notwithstanding anything to the contrary contained in this Lease, (y) if Landlord has not delivered the Premises to Tenant with all of Landlord's Work completed as required hereunder on or before September 30, 1999 (other than directly due to and only to the extent caused by an act or omission of Tenant), then Tenant shall not be required to commence Tenant's Work until November 3, 1999 (provided Landlord has delivered the Premises to Tenant prior to November 3, 1999 and provided further if Landlord delivers the Premises to Tenant between September 22, 1999 and November 3, 1999, for purposes of determining the Rent Commencement Date under Section 1.5 above, the delivery date shall be deemed to be the earlier of the date Tenant commences Tenant's Work or November 3, 1999), and (z) if Landlord has not delivered the Premises to Tenant with all of Landlord's Work completed as required hereunder on or before September 22, 2000 (subject to Force Majeure and not due to an act or omission of Tenant), Tenant shall have the right to terminate this Lease by written notice to Landlord delivered on or before November 22, 2000 and Landlord shall reimburse Tenant for all reasonable out-of-pocket expenses not to exceed [***]. Tenant shall receive in "rough shell" condition, as more fully described in the attached Exhibit C - Provisions Relating to Construction of Tenant's Premises -Landlord's Work. In addition to Exhibit C, Landlord, at its cost and expense, shall (i) deliver the space in broom clean condition, (ii) deliver the space in compliance with legal, code and zoning requirements exclusive of any such requirements relating to Tenant's Work including, but not limited to, building or occupancy permits, (iii) deliver the utility systems to the Premises as specified in Exhibit C in good working order, (iv) deliver the rough shell building in good condition and repair, free of any asbestos, (v) remove the existing mezzanine, catwalks (and the supporting structures therefor) from the Premises, and (vi) modify the existing exit stairway as provided in the attached Exhibit H, provided that Tenant's Construction Allowance shall be reduced by the actual cost of the stairway *** Confidential treatment requested. 4 11 modification in an amount not to exceed [***]. In addition to Exhibit C and the foregoing, other specifications regarding the rough shell condition are as follows: - Electric Service - Landlord shall provide and install conduit from Landlord's electrical room stubbed to the Premises at location specified by Tenant. Service is separately metered. Meter and hook-up is at Tenant's expense, subject to the last sentence of this Section 1.12. Amperage requirements in excess of Exhibit C (per Section I.E.1) is at Tenant's expense. - Floor structure - which can handle +l/-0.5G force at l50 lbs./square foot. - 17 feet 6 inches of interior height - excluding building service lines (i.e. sprinklers, electrical conduits, roof drains, HVAC, etc. - No finished ceiling requirements, subject to a minimum aesthetic standard reasonably approved by Landlord. - Telephone conduit stubbed to space. - Domestic (cold) water only brought to space. Tenant supplies water heater. - Interior walls and curtain walls within the Premises are per Exhibit C. Interior studs are at demising wall locations only. - Doors and vestibules to service corridor and service courts. Door hardware supplied by Tenant. - Sprinkler system per Exhibit C. - Sanitary lines stubbed under or to rear of the Premises. - Smoke Evacuation System is not required. Tenant shall be allowed to keep its front doors open during business hours. Tenant shall have the right, at Tenant's expense, to install and maintain on the building's roof one satellite dish for Tenant's communications and data transmission network, subject to Landlord's reasonable approval of the size, location, manner of installation, necessary screening, and aesthetic appearance of the satellite dish. Tenant shall supply at Tenant's expense its own rooftop 35 ton A/C unit subject to Landlord's reasonable approval of the location, manner of installation, necessary screening and aesthetic appearance of the A/C unit. Notwithstanding anything to the contrary contained in this Lease and subject to the last two sentences of the second paragraph of Section 11.3, Landlord hereby represents and warrants to Tenant that Landlord has obtained a conditional use permit (or its equivalent) and all other zoning and other discretionary permits and approvals (i.e., all consents and approvals, other than a building permit (the "Building Permit")) conditioned only upon the submission of plans and specifications which comply with applicable building codes and the payment of statutory building permit fees necessary to permit the construction of the Premises and all improvements to be constructed therein or as a part thereof by Landlord and Tenant as contemplated in this Lease (collectively, the "Discretionary Approvals") and the use of the Premises by Tenant as permitted under this Lease. Landlord acknowledges that it is the intent of this Lease that Tenant shall not be obligated to pay and Landlord shall be responsible for any mitigation, discretionary, or impact fees. 1.13 Permitted Use of the Premises: Only for the operation of an automobile racing ride simulators, as more fully described below in Section 2.1. 1.14 Security Deposit: [***] months rent based on 5,000 square feet of Floor Area. The amount of the Security Deposit is equal to [***] month's installments of the Minimum Annual *** Confidential treatment requested. 5 12 Rental as initially stated in Section 1.6. In the event Minimum Annual Rental is adjusted upon measurement of the Premises in accordance with Section 3.2 below, then the amount of the Security Deposit shall be adjusted to equal two (2) month's installments of such adjusted Minimum Annual Rental. 1.15 Construction Allowance: [***] based on [***] per square foot. Construction Allowance to be disbursed as per Section 2.13 (subject to Section 1.12 which provides for a reduction to the Construction Allowance for the stairway modification not to exceed [***]. The amount stated in this Section is based on [***] per square foot of Floor Area, and the initial stated Floor Area of 5,000 square feet. Upon the determination of the final Floor Area of the Premises pursuant to Section 3.2, the amount stated in this Section shall be adjusted to equal the amount of [***] per square foot multiplied by that final Floor Area. 1.16 Tenant's Broker: Russell J. Friend, vice-president of Blatteis Realty Co. Tenant agrees that it has selected, retained and hired Tenant's Broker and that Landlord will not be responsible in any way for any fees or commissions to Tenant's Broker associated with any services or work which have or will be provided in connection with this Lease or negotiation of this Lease. In addition, there is no fiduciary or other relationship between Landlord and Tenant's Broker. 1.17 Addresses for Notices: To Landlord: UNIVERSAL STUDIOS CITYWALK HOLLYWOOD, a Division of Universal Studios, Inc. 100 Universal City Plaza, Bldg. SC 79; Sixth Floor Universal City, CA 91608 Attention: Senior Vice President, General Manager copy to: Universal CityWalk Legal Affairs 100 Universal City Plaza, Bldg. SC 79; Sixth Floor Universal City, CA 91608 Attention: Director, Business & Legal Affairs To Tenant: Silicon Entertainment 210 Hacienda Avenue Campbell, CA 95008 Attention: President copy to: Tenant at the address of the Premises See Article XXIX 1.18 Intentionally Deleted. 1.19 Additional Documents: The following documents are attached hereto, and such documents, as well as all drawings and documents prepared pursuant thereto and all additional documents specified in Section 1.19, are made a part of this Lease: EXHIBIT A-1 - Site Plan of Universal CityWalk Phase II development, a retail entertainment center being developed by Landlord adjacent to the currently existing CityWalk Phase I development (hereinafter Phase I & II and all future additions to Universal CityWalk Phase I and Phase II are collectively referred to as the "Project") and the Common Area associated with the Project. Landlord shall have the right at any time to expand, reduce, remove, demolish, renovate or *** Confidential treatment requested. 6 13 construct any existing or new improvements at the Project and/or the Common Area. EXHIBIT A-2 Parking Areas EXHIBIT B-1 Floor Plan of Tenant's Premises. EXHIBIT B-2 Approved Exterior Facade and Exterior Signage EXHIBIT B-3 Approved Preliminary Design Plan for Interior Layout EXHIBIT C Provisions Relating to Construction of Tenant's Premises EXHIBIT D Statement of Gross Sales EXHIBIT E Intentionally Deleted EXHIBIT F Sample Letter of Estoppel EXHIBIT G Tenant's Initial Merchandise and Price List EXHIBIT H Stairway Modification 7 14 ARTICLE II. PRIMARY LEASE PROVISIONS. The provisions of this Article shall serve to modify and to amend the hereinafter specified provisions of, and otherwise to supplement, the Lease, as follows, and shall supersede any contrary provisions contained in the balance of the Lease: 2.1 Use of the Premises: Tenant covenants and agrees that, except as otherwise specifically permitted in this Lease, it shall continuously use and occupy the Premises solely and exclusively for the purposes and uses described in this Section 2.1 and for no other purpose whatsoever ("Permitted Use"). Notwithstanding anything to the contrary contained in this Lease, Tenant shall not be obligated to continuously operate from the Premises during such periods in which (i) Tenant is carrying on remodeling activities (but in no event for more than thirty (30) days in any lease year and no more than twice in any five (5) year period), (ii) Tenant is unable to operate as a direct result of a Force Majeure event to the Premises or the Project or as a result of any other condition at the Premises or the Project that would expose Tenant's employees, agents or invitees to an unreasonably high risk of physical injury or property damage, and/or (iii) Tenant's use and occupancy of the Premises is prohibited by any law, ordinance, order or other act of any judicial governmental or quasi-governmental authority. The Premises shall be used for the installation and operation of automobile racing car ride simulators for guests with each ride separately priced and no general admission price to the facility (other than group sales and leagues). Tenant shall also be permitted to use the Premises for the incidental sale of merchandise (excluding all food and beverage unless catered for a group sales activity) related to motor sports (including NASCAR videos, pictures, CD-ROMs, DVD's and other media and other such audio/visual items featuring NASCAR racing, not to exceed 2% of Tenant's total floor area, excluding videos of actual customer races recorded from the automobile racing car ride simulators at the Premises which shall not be subject to the 2% limitation) and/or related to NASCAR with the logo of NASCAR or NASCAR Silicon Motor Speedway or such Trade Name as Tenant may operate under from time-to-time in accordance with Section 2.2 below. Tenant, its employees and agents shall have the right to enter the Premises 24 hours a day, 7 days a week, 52 weeks per year, at all times. Tenant shall stay open consistent with the operating hours of the Project as per the Project Rules and Regulations (which shall be applied in a non-discriminatory manner); provided, further, Tenant may elect to stay open beyond these hours and can open as early as 8:00 am and close as late as 2:00 am each day of the week. Notwithstanding the foregoing, Tenant shall not be obligated to open for business during any such hours or on any such day as less than fifty (50%) of the other tenants of the Project are open for business. Tenant shall be allowed to conduct group sales at which time all or a portion of the store will be temporarily closed to the public with the group sales activity occurring in the closed portion of the Premises. Tenant shall use reasonable efforts to limit group sales activity such that there are no more than two group sales events per week, the events last no longer than 3 hours per event, and the events do not occur during peak operating hours unless approved by Landlord in its reasonable discretion. Conditioned on Tenant obtaining at Tenant's expense any required licenses or permits relating to the sale of alcoholic beverages, alcoholic beverages and other food may be served during group sales provided that the alcoholic beverages and other food are available only to group sales patrons and not to any other patrons in the Premises and only when the Premises is temporarily closed to the public for a group sales event. Any change in Tenant's Permitted Use within the Premises (i.e., installation and operation of automobile racing car ride simulators for guests) shall be subject to Landlord's approval to assure that Tenant maintains (a) a quality level consistent and compatible with the overall image of the Protect and Universal City, and (b) a product offering not unreasonably duplicative of that 8 15 offered by other existing or future tenants. Subject to Tenant's permitted use of the Premises as set forth above, Tenant shall not use or permit or suffer the use of the Premises in any manner inconsistent with this Paragraph or not in keeping with the character and dignity of the Project and Universal City. Landlord hereby represents and warrants to Tenant that to the best of Landlord's knowledge Tenant's use of the Premises as contemplated herein does not violate any exclusivity clause or other agreement between Landlord and any other tenant of the Project. Landlord will indemnify Tenant for any claim by another tenant of the Project arising out of Tenant's Use as described in Section 2.1 which violates the tenant's exclusivity clause or other agreement between that tenant and Landlord. Except with respect to those items of merchandise specifically permitted as part of Tenant's Permitted Use of the Premises and/or set forth in the attached Exhibit G ("Tenant's Initial Merchandise and Price List"), merchandise lines offered or used by Tenant within or from the Premises shall be subject to Landlord's prior written reasonable approval, to assure: (i) a quality level consistent and compatible with the overall image of the Project and future tenants of the Project and Universal Studios Hollywood, and (ii) a product offering not unreasonably duplicative of that offered by other existing or future tenants of the Project; provided, however, Landlord and Tenant agree that no "NASCAR" branded merchandise consistent with the Permitted Use and/or set forth in Exhibit G shall be determined to be duplicative of that offered by other existing or future tenants of the Project. Without limiting the foregoing (e.g., subject to Tenant's express right above to sell NASCAR videos, pictures, CD-ROMs, DVD's and other media and other such audio/visual items featuring NASCAR racing set forth above), Tenant shall not, without Landlord's prior express written approval, sell or offer for sale any film of any nature, disposal cameras, photographic or movie cameras, or any other related film products. Tenant expressly acknowledges and agrees that nothing contained herein shall permit or be deemed to permit without the express prior written approval of Landlord, which approval may be withheld at Landlord's sole and absolute discretion, the sale or display of any merchandise licensed by or affiliated with any "theme parks and related facilities" as defined herein (either alone or in conjunction with or as part of any other word or name), including without limitation any merchandise which uses or contains any of the characters or designs associated with any theme parks and related facilities. For the purpose of this Lease, the term "merchandise licensed by or affiliated with any theme parks" shall include all licensed products issued by such theme park or any of its affiliates or parent companies. (For example, any licensed product sold by The Wait Disney Company shall be deemed to be a product that is affiliated with Disney World, EPCOT, and/or MGM Studios, as the case may be). Tenant expressly acknowledges and agrees that Tenant shall have no right to sell or display any merchandise licensed by or affiliated with "UNIVERSAL," "UNIVERSAL STUDIOS," "UNIVERSAL STUDIOS HOLLYWOOD," "UNIVERSAL STUDIOS CITYWALK HOLLYWOOD" or "CITYWALK" (either alone or in conjunction with or as a part of any other word or name), including without limitation any merchandise which uses or contains any of the fanciful characters or designs of Universal or any of its related, affiliated or subsidiary companies or entities without Landlord's consent which Landlord may grant or withhold in Landlord's sole and absolute discretion. The Permitted Use has been approved by Landlord in accordance with certain considerations of tenant mix and product balance developed by Landlord for the Project, taking into account the rights of other tenants within the Project. The foregoing provisions of this Section form a material part of the consideration for Landlord's willingness to enter into this Lease. Accordingly, in the event Tenant or any of its agents or employees fails to comply with the provisions of this Section 2.1, then Tenant shall, without affecting or limiting any of the rights and remedies otherwise available to Landlord pursuant to this Lease, indemnify and save and hold Landlord harmless from and against all claims, costs, expenses, actions, liabilities, suits, proceedings and losses of whatever nature including all attorney's fees, arising from such failure to comply with the provisions of this Section. The foregoing indemnification shall survive the 9 16 termination of this Lease. In addition, at Landlord's option, Tenant's failure to comply with this Section 4.1 shall constitute an Event of Default. 2.2 Trade Name: Tenant represents and warrants that as of the date hereof, Tenant has an agreement with NASCAR that permits Tenant to use the word NASCAR in Tenant's Trade Name until August 12, 2001. Furthermore, Tenant covenants that on or before June 30, 1999, Tenant will enter into an extension agreement with NASCAR extending said date until December 31, 2004. Except to the extent in Tenant's reasonable business judgment it is cost prohibitive or to the extent in Tenant's reasonable business judgment, the NASCAR brand no longer brings sufficient value to the business to justify paying a license fee, Tenant shall use commercially reasonable efforts to further extend its rights to use the word NASCAR in its Trade Name for the remainder of the Lease Term. Throughout the Lease Term Tenant shall operate the Premises solely under the trade name NASCAR Silicon Motor Speedway, conditioned on Tenant executing an extension agreement (or agreements) with NASCAR, which will grant to Tenant the right to use the trade name NASCAR in connection with the operation of the Premises. If Tenant extends said agreement beyond August 12, 2001, Tenant shall continue to operate only under the Trade Name or under another trade name using the name "NASCAR". If Tenant does not extend said agreement during any part of the Lease Term and as a result Tenant removes the word NASCAR from its Trade Name, Tenant shall operate the Premises under the same trade name as all or substantially all of the other stores previously operated by Tenant under the name "NASCAR Silicon Motor Speedway". Any change of Tenant's Trade Name is subject to Landlord's approval, except in the case where Tenant changes the name of substantially all of its stores, in which case, Landlord's approval shall be limited to whether in Landlord's reasonable judgment the new Trade Name is offensive or if it conflicts or competes with any assets or operations of the Project, Universal Studios, Inc. or any affiliates thereof. In the event during the Lease Term Tenant loses the right to use "NASCAR" in their trade name and the percentage change in Tenant's Gross Sales per square foot during the consecutive 12 month period immediately following the name change is more than [***] less than the percentage change in the Gross Sales per square foot for the Project for the same 12 month period, then, as of the date of the name change (and provided there has been a decrease in Tenant's Gross Sales per square foot, Tenant's Annual Gross Sales Breakpoint shall be reduced to a level which yields the same Percentage Rental computed for the 12 month period prior to the name change. If Tenant was not liable for Percentage Rental during said 12 month period prior to the name change, then there shall be no adjustment to Tenant's Annual Gross Sales Breakpoint. By way of example, if Tenant's Gross Sales per square foot decreased by [***] for the 12 month period after the name change, and the Project's Gross Sales per square foot increased by [***] for the same 12 month period, then the percentage change in Tenant's sales per square foot is [***] less than the percentage change in the Project's Gross Sales per square foot, which exceeds the [***] threshold for adjusting Tenant's Annual Gross Sales Breakpoint, and the Annual Gross Sales Breakpoint would be reduced to equate the Percentage Rental for the 12 months following the name change to the 12 months preceding the name change. Notwithstanding the foregoing, if, during any consecutive 12 month period after the reduction of the Annual Gross Sales Breakpoint, Tenant's Gross Sales per square foot return to a level that is equal to or higher than the Gross Sales per square foot that Tenant realized for the 12 month period prior to Tenant's change of trade name, then the Annual Gross Sales Breakpoint will be increased to the amount of the Annual Gross Sales Breakpoint prior to such reduction (i.e., the amount set forth in Section 1.8 above). 2.3 Operating Standards: Tenant shall at all times act in accordance with the highest professional standards. Without limiting the foregoing, Tenant shall render and perform all necessary services in connection with the operation of the Premises as a retail store of a standard at least equivalent to the standard of quality and performance of other like establishments located in the Project as of the time such services are rendered or performed (the "Comparison *** Confidential treatment requested. 10 17 Standard") and shall make necessary repairs, replace worn-out, defective or obsolete furniture, fixtures and equipment and generally maintain the Premises in good order and repair equivalent to the Comparison Standard. Any specific operating standards developed jointly by Landlord's retail consultant and Tenant, and agreed to by Tenant, shall thereafter be deemed part of this Lease. 2.4 Sponsorships: If Landlord shall from time-to-time enter into a Project Sponsorship Agreement with a product manufacturer or distributor (the "Sponsor") and if at such time or thereafter products of the type manufactured or distributed by the Sponsor are used or sold within the Premises, then upon receipt of notice from Landlord, Tenant shall enter into a contract with the Sponsor to purchase the Sponsor's products for retail sale within the Premises (provided that there are no conflicts with (i) any Tenant contracts or other commitments or arrangements at the time Landlord enters into a Project Sponsorship Agreement, or (ii) any NASCAR sponsorship or licensing agreements, commitments or arrangements without regard to the timing of any Landlord Project Sponsorship Agreement), provided such products are comparable (in terms of quality, cost, taste and promotional benefits) with products that Tenant would otherwise purchase. Currently, Landlord has Project Sponsorship Agreements with Pepsi-Cola (until February 1, 2000, thereafter with Cola-Cola) for carbonated soft drinks and Crystal Geyser for bottled water. The foregoing shall not apply to any credit cards which Tenant accepts from its customers. Furthermore, Tenant shall participate in the Project promotions and special events, so long as such participation is at no material out-of-pocket cost to Tenant, as reasonably requested by Landlord. 2.5 Principal's Involvement: As a material inducement to Landlord to enter into this Lease with Tenant, Tenant agrees to have an executive from within its corporate structure who is experienced in Tenant's business operations personally available on a reasonable basis to oversee the concept development, design, construction, pre-opening training, operations and management of the business establishment to be developed on the Premises to the degree reasonably necessary to maximize the Gross Sales and to enhance the reputation of such business establishment. In addition, such executive shall meet with Landlord as reasonably requested by Landlord in order to discuss the ongoing design, construction, operation and/or management of such business establishment. 2.6 Radius Restriction: Tenant or Tenant's affiliates shall not directly or indirectly operate, license, own or otherwise control a business within the "Area of Exclusivity" (as defined below), the primary use of which is the same or substantially similar to the primary Permitted Use, including without limitation any venue with an entertainment experience substantially similar to the Permitted Use and/or using the name, logo, marquee, tradename, trademark or other identifying mark/logo used by Tenant for the Premises of this Lease, or using, in whole or in part, any other tradename for the Premises as otherwise approved by Landlord; provided, however, notwithstanding the foregoing, Tenant shall have the right, itself and/or through any other party, to distribute any and all merchandise with the "Nascar" and/or "Silicon Motor Speedway" name and/or any of Tenant's other tradenames, and/or any logo, marquee, trademark or other identifying mark/logo related to such tradenames, within the Area of Exclusivity. For the purposes hereof, the "Area of Exclusivity" shall be deemed to mean: (i) that geographic area within a radius of 10 miles from the Project and (ii) any and all Theme Parks located within the State of California. The phrase "Theme Parks" shall mean tourist-oriented attractions that have some combination of permanent and temporary entertainment facilities, recreational activities and exhibitions based on or related to an unifying theme, facilities (other than Theme Park Exclusions, none of which shall be considered a "Theme Park" for purposes of this Lease), contained within a closed area with a controlled entrance and charging an admission fee, which offer rides and related attractions (which may include multimedia or virtual reality 11 18 presentations), provided that the entirety of such facility, excluding parking facilities and vehicle and pedestrian ingress and egress routes, shall encompass an area equal to or greater than twenty (20) acres, as well as any open area, non-admission based complexes (containing a combination of retail, restaurant and entertainment facilities) which are attached or immediately adjacent to the Theme Parks and related facilities, and which such complexes are controlled or owned by the Theme Parks; provided, however, a "Theme Park" shall include all the components or elements of such facility which are advertised, promoted or otherwise held out to the general public as comprising a single or integrated facility, even though some of the components or elements thereof may not be contiguous or within one general admission, show or entertainment area; provided, further, that Landlord and Tenant acknowledge and agree that the following are non-exclusive examples of Theme Parks intended to be generally illustrative of the types of entities which are intended by the parties to constitute "Theme Parks": Disneyland, Knott's Berry Farm, Knott's Camp Snoopy, Six Flags Magic Mountain, LEGOLAND, and Sea World. "Theme Park Exclusions" (except if attached or immediately adjacent to a Theme Park and controlled or owned by a Theme Park) means casinos, gambling, or gaming facilities, race tracks whether or not attached or immediately adjacent to a Theme Park (e.g., Riverside Raceway or California Speedway), retail or wholesale malls or shopping centers; family entertainment centers (including miniature golf courses, often with batting cages and car racing tracks); and public streets and areas and other publicly owned attractions, movie theaters, movie and theater districts, film festivals, music and sports venues, halls of fame, convention centers, auditoriums, arenas and exhibit halls, airports and other transportation terminals, art, historic, wax space and other museums, observatories and planetariums, places of historical significance, zoos, wild animal parks, beach, seaport, wharf and pier areas, vineyards, street, county and state fairs, miniature golf courses and the Project (notwithstanding the fact that the Project is attached to or immediately adjacent to a Theme Park). 2.7 Tenant's Exclusive: Landlord will not lease any space to any other tenant in the Project (A) for a "Protected Use" (as defined below), or (B) whose trade name contains the name "NASCAR" (including, for example, a "NASCAR Cafe"), provided, however, this provision (B) shall automatically become null and void if at any time Tenant ceases to have "NASCAR" in its Trade Name. The foregoing sentence shall not apply to tenants in the Project with leases and amendments thereof that were executed prior to the date of this Lease ("Existing Leases") and which do not expressly prohibit (A) and/or (B) above. Existing Leases shall include renewals and extensions of these leases at any time during the Lease Term. Notwithstanding the foregoing sentence, if an Existing Lease (including extensions or renewals thereto) is amended or modified to allow the tenant to engage in a Protected Use or have the word NASCAR in its trade name, then Landlord shall be in violation of this Section 2.7 if such tenant engages in a Protected Use or changes its trade name to incorporate the word NASCAR. 2.7.1 "Protected Use" shall mean (i) the operation of automobile driving motion-based simulator rides, excluding arcade center(s) within the Project (which are like "GameWorks" or "Dave and Buster" type uses) which could have similar type simulator rides or games or multi-passenger (defined as having five or more passengers) motion-based simulator rides (such as the "Emaginator" ride currently operating adjacent to the movie theater) and also excluding the operation by a tenant of less than three single-passenger automobile driving motion-based simulator rides, or (ii) the sale of "NASCAR" branded merchandise, excluding the incidental sale of NASCAR branded merchandise. In the event Tenant ceases to use the Premises for the sale of NASCAR branded merchandise for a period of 45 days or more (subject to Force Majeure or remodeling by Tenant as permitted by this Lease), then NASCAR branded merchandise shall cease to be a Protected Use. 2.7.2 This Section 2.7 shall automatically become null and void if: (i) there is a material monetary default under this Lease after all applicable cure periods as set forth in Section 22.2 of this Lease have expired, or upon termination of this Lease as a result of any Tenant 12 19 default; or (ii) Tenant ceases to use the Premises as provided in Section 2.7. (i) above with a minimum of ten (10) automobile driving motion-based simulator rides for a period of 30 days or more (subject to Force Majeure or remodeling by Tenant as permitted by this Lease). 2.8 option to Extend: Landlord hereby grants to Tenant an option to extend the term of this Lease for the Option Term upon written notice given not less than six (6) months and not more than twelve (12) months in advance of the expiration of the Initial Term; provided however, that Tenant's exercise of such option shall not be effective if (a) Tenant shall be in default beyond the applicable cure period after notice from Landlord under any of the monetary or other materials terms of this Lease either at the time of such exercise or at the expiration of the then Initial Term; or (b) if Tenant has not met the Gross Sales Threshold (as defined in Section 1.9 and adjusted per Section 5.8 each year of the Lease Term) required for the preceding twelve (12) month period; provided, further, Landlord may condition Tenant's extension of the Term of this lease on Tenant's refurbishment of the Premises if such refurbishment is reasonably necessary to maintain the Premises as a first class establishment in accordance with Section 16.1 and Article 14. All terms and conditions applicable to the Initial Term shall be applicable to the Option Term, including but not limited to provisions regarding Minimum Annual Rental and Percentage Rental annual increases; however, the provisions of Exhibit C regarding the initial construction of the Premises shall not be applicable. In the event Tenant has not met the Gross Sales Breakpoint (as defined in Section 1.8 and adjusted per Section 5.3 each year of the Lease Term) required for the preceding (12) month period, then the option to extend is personal to Tenant and may not be exercised or be assigned, voluntarily or involuntarily, by or to any person or entity other than Tenant. 2.9 Right to Relocate: Following expiration of the second Lease Year of the Initial Term, Landlord shall have the right to relocate Tenant to different space, which is equal to or better than the Premises in terms of layout, foot traffic and visibility, in the Project at Landlord's sole cost. Subject to the foregoing sentence, the new space will be in a location designated by Landlord in its sole discretion and will be approximately the same size as the Premises, Base Rent and all other square footage-based dollar obligations will be calculated on the basis of the Floor Area of the new space (but in no event more than the amount then being paid by Tenant for the existing space, subject to adjustment as provided in this Lease). Otherwise, the terms and conditions of this Lease will be fully applicable to the new space. Landlord will provide Tenant with not less than ninety (90) days prior written notice of the relocation. Tenant will have the right, by written notice to Landlord delivered within twenty (20) days after Landlord's relocation notice, to terminate this Lease provided that Tenant shall promptly vacate the Premises on the date set forth in the relocation notice and shall pay Rent until the Premises are vacated. If Tenant elects to terminate this Lease due to such relocation, then this Lease shall terminate effective as of the date Landlord specified in its notice that Tenant was to relocate to the new space and, provided Tenant vacates the Premises as required in this Lease on or before such date, Landlord shall pay Tenant the sum as provided in Section 4.8 below or withdraw its request to relocate Tenant. If Landlord withdraws its request to relocate Tenant, then such notice to relocate shall become null and void. In no event shall Landlord be entitled to relocate Tenant before the date this is twenty-four (24) months after the date that Tenant opens for business to the public in the Premises. Landlord's right to relocate the Premises shall also be subject to the following: (a) Landlord will, at Landlord's sole cost and expense (except for the costs for Tenant's trade fixtures, personalty and inventory) fully construct the new space and deliver the same to Tenant in the same condition as is the Premises at the time of such relocation; provided, however, Tenant shall have the right to request that Landlord build the new space with a design different than that of the Premises (e.g., a new prototype for Tenant's stores) and Landlord shall comply with Tenant's request so long as such design complies with Landlord's design requirements; provided, further, Tenant shall reimburse Landlord for such incremental portion of the construction and design costs of the new space that result from Tenant's change of the design for the new space. Subject to the foregoing sentence, Landlord's cost shall include any costs associated with the store layout, 13 20 preparation of architectural drawings for the new space and the cost of leasehold improvements required to deliver the new space (exclusive Of fixtures personalty and inventory) in a condition that is substantially identical to the Premises at the time of such relocation (including, without limitation, electrical capacity and distribution, telephone system installation, and computer installation), subject only to such modifications as may be necessary and approved by Tenant in order to accommodate the configuration of the new space; (b) Landlord will pay all costs incurred in connection with moving Tenant and Tenant's trade fixtures, inventory and personalty to the new space, including any incidental costs incurred by Tenant in connection with said relocation (such as costs for relocating computer and telecommunications systems and equipment, new business cards, letterhead and attorney fees associated with the documentation of the relocation) up to a maximum of [***] for such incidental costs; (c) Tenant shall not be obligated to move until the relocation space is fully built-out, fixturized and ready to open for business and Tenant is not obligated to pay Rent for the period of time during which Tenant is closed as a result of said relocation. If Landlord exercises its rights to relocate Tenant during the Option Term and if Tenant does not accept the new space and elects, in lieu thereof, to terminate this Lease, then, upon Tenant promptly vacating and surrendering the Premises as required hereunder, Landlord shall, within thirty (30) days of Tenant's surrender of the Premises, pay Tenant the unamortized value of its leasehold improvements and fixtures, said unamortized value to be determined on a straight-line depreciation method allowed by the Internal Revenue Code of 1986 (as amended) assuming a useful life equal to the remaining term of this Lease (e.g., if four years remain prior to expiration of the Lease Term, then 4/10th of useful life shall remain unamortized) at the time the improvement or fixture is placed in service or installed in or upon the Premises. Tenant shall be permitted to close the Premises during the period of time reasonably required by Tenant to relocate from the Premises to the new space. Further, upon completion of such relocation by Tenant and delivery of the Premises to Landlord, Tenant shall be released and relieved of any further obligations under this Lease as pertains to the Premises. 2.10 Deposit for Tenant's Work: In addition to the Security Deposit specified in Section 1.14 and Article XXI, Tenant shall secure its obligations to complete the Tenant's Work by depositing with Landlord or in an escrow account with Bank of America NT & SA or other financial institution mutually agreed to by Landlord and Tenant an amount equal to [***] (the "Construction Account") prior to commencement of Tenant's Work. Tenant shall have the right after Tenant has spent [***] on construction of Tenant's Work to draw upon the Construction Account to pay bills and invoices for the costs of constructing Tenant's Work based on percentage of completion of such Tenant's Work, provided that Tenant shall provide documentation acceptable to Landlord of such costs and shall otherwise comply with disbursement procedures prescribed by Landlord or the depository institution. All interest on funds in the Construction Account shall be payable to Tenant. 2.11 INTENTIONALLY DELETED. 2.12 Adjustment of Taxes: Landlord estimates its costs to be expended for Taxes to be approximately $3.30 per square foot of Floor Area on a fully assessed basis. Notwithstanding anything to the contrary set forth in this Lease, if due to a change in the California tax legislation commonly known as Proposition 13, whether by legislative or administrative action or by judicial determination (a "Prop 13 Change"), Landlord's actual costs expended for Taxes in any year after the year in which the Rent Commencement Date occurs (a "Comparison Year") exceed the amount expended for Taxes for the year in which the Rent Commencement Date occurs (the "Tax Base Year") as adjusted pursuant to Section 5.8, Tenant shall pay its pro rata share (based on Tenant's Floor Area as a fraction of the Floor Area of all of the premises included in the Project) of any such excess (the "Excess Taxes") to Landlord, as additional rent, in the manner set forth below. The foregoing adjustment shall be subject to the following: *** Confidential treatment requested. 14 21 (i) Excess Taxes shall not include taxes or assessments imposed as a result of a sale or other "change in ownership" (as defined in the California Revenue and Taxation Code book) of the Project or the building in which the Premises are located. (ii) on or before May 1 of each Comparison Year after a Prop 13 Change (or as soon thereafter as is practical), Landlord shall deliver to Tenant a statement setting forth Tenant's pro rata share of the Excess Taxes for the preceding Comparison Year. The obligations of Tenant to make payments required hereunder shall survive the expiration of the Lease Term. Tenant's pro rata share of Excess Taxes in any partial Comparison Year at the end of the Lease Term shall be appropriately prorated. Landlord's statement given pursuant to this paragraph shall be conclusive and binding upon Tenant unless disputed by Tenant in writing within thirty (30) days after its receipt thereof. If any such dispute arises, Tenant shall have the right after reasonable notice and at reasonable times to inspect Landlord's accounting records at Landlord's accounting office and, if after such inspection Tenant still disputes the amount of Additional Rent owed, a certification as to the proper amount shall be made by an independent certified public accountant mutually agreeable to Landlord and Tenant, which certification shall be final and conclusive. Tenant agrees to pay the cost of such certification unless it is determined that Landlord's original statement overstated Taxes by more than three percent (3%). 2.13 Construction Allowance: Landlord agrees to contribute the Construction Allowance specified in Section 1.15. Disbursement of the Construction Allowance shall be made in two equal payments (i.e., the Construction Allowance is $150,000, then two payments of $75,000.00) in accordance with the following procedure: Tenant shall submit to Landlord a written statement (the "Payment Statement") setting forth (i) all the amounts payable to Tenant's contractors and vendors; (ii) an architect's statement certifying 50% or 100% completion of Tenant's Work, as applicable; (iii) a copy of all bills and invoices pertaining to such Tenant's Work totaling a minimum of one-half (1/2) the Construction Allowance (including "hard costs" and "soft costs" (such "soft costs" including, for example, license and permit fees and architect's fees, but excluding attorney's fees and internal overhead)) for the first payment (otherwise, the first payment will be equal to such lesser amount incurred by Tenant as shown on the bills and invoices, with the difference between 1/2 of the Construction Allowance and the amount paid as the first payment paid as part of the second payment) and a cumulative minimum amount of the Construction Allowance (including "hard costs" and "soft costs" (such "soft costs" including, for example, license and permit fees and architect's fees, but excluding attorney's fees and internal overhead)) for the second payment (otherwise, the second payment will be equal to such lesser amount incurred by Tenant as shown on the bills and invoices, with the difference retained by Landlord); (iv) unconditional lien releases and proof of payment with respect to all bills and invoices covered by the Payment Statement; (v) a copy of the occupancy permit for the Premises for the second disbursement of the Construction Allowance; and (vi) a copy of Tenant's punch list which Landlord has approved after inspection of Tenant's Work for the second disbursement of the Construction Allowance. Landlord shall issue a check to Tenant for the first payment and the second payment within ten (10) days after Landlord's receipt of the Payment Statement for such payment provided that, at Landlord's option, Landlord shall have the right to withhold fifteen percent (15%) of the Construction Allowance out of the second payment until such time as Tenant has completed all punch list items to Landlord's reasonable satisfaction and shall be payable within ten (10) days after Landlord's receipt of a notice from Tenant regarding Tenant's completion thereof. The cost of any additional work performed by Landlord (provided Tenant has requested that Landlord perform the additional work, or Landlord notified Tenant of a defect in Tenant's work prior to commencing the work and Tenant has a reasonable period to cure the defect and fails to do so in a timely manner) for the benefit of Tenant, as well as any rental that is already due and owing under this Lease as of the date the payment of the Construction Allowance is to be made, shall be deducted from the Construction Allowance before said Construction Allowance is paid to Tenant. 15 22 ARTICLE III. PREMISES 3.1 Lease of Premises: Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the space specified in Section 1.3, referred to herein as the "Premises" and described in Exhibit B-1. 3.2 Definitions of "Floor Area" and "tenant areas": The term "Floor Area," as used throughout this Lease, shall mean and include the square footage of all interior and exterior areas (including mezzanines) of the particular area or areas being referred to, measured (to the extent applicable) (a) with respect to the front and rear width thereof, from the exterior face of the adjacent exterior or corridor wall to the opposite exterior face of the adjacent exterior or corridor wall or, if none, to the center line of those walls separating the area being measured from other tenant areas, and (b) with respect to the depth thereof, from the front lease line to the exterior face of the rear exterior wall or corridor wall or, if neither, to the center of the rear demising partition; and in no case shall there be any deduction or exclusion shall be made for columns or other structural elements or by reason of stairs, elevators, corridors, interior partitions or other interior construction, improvements or equipment. The term "tenant areas" as used throughout this Lease, shall mean all interior and exterior areas in the Project which are available for exclusive use and occupancy by tenants of the Project. When construction is completed, the actual size and dimensions of the Premises shall be determined by Landlord by means of an accurate measurement of the Premise from center line to center line of those walls separating the area being measured without any deductions or exclusions made for columns or other structural elements; provided, however, Tenant shall have ten (10) business days from receipt of Landlord's determination of the size and dimensions of the Premises to itself measure the Premises and object to Landlord's determination. If Tenant timely objects to such determination, Landlord and Tenant shall together re-measure the Premises and mutually agree on the correct size and dimensions of the Premises. The total Floor Area contained in the Premises as determined above shall be memorialized in a letter from Landlord to Tenant, and shall be deemed to be the actual Floor Area of the Premises of this Lease, and such Floor Area as is set forth in the letter shall thereafter be used for the purpose of calculating Minimum Annual Rental, Gross Sales Breakpoint, Gross Sales Threshold, Tenant Allowance and any other charges based on square footage under the Lease. 3.3 Certain Easements In Favor of Tenant: Tenant shall have non-exclusive access easements for the benefit of itself and its employees, patrons, invitees, customers and other appropriate persons during the Lease Term in connection with Tenants use and occupancy of the Premises over the Common Areas, the parking areas and various private roads and sidewalks within Universal City as Landlord may from time-to-time designate. In addition, Tenant shall, subject to Landlord's prior approval, have a non-exclusive right of access to shafts, ducts and other similar facilities within the Common Area for the purpose of provision of utilities and maintenance. 3.4 Certain Easements in Favor of Landlord: Landlord reserves to itself the use of the exterior walls and roof and a nonexclusive easement to install, maintain, use, repair and replace pipes, ducts, conduits, wires, conduits, facilities and structures as may be used for ventilation and the conveyance of Utilities in and through the Premises, including air space above ceiling height or below the floor of the Premises for the common use and benefit of Landlord, Tenant or other tenants; provided that any such installation, maintenance, use, repair and replacement shall be conducted so as to avoid unreasonable interference with Tenant's use of the Premises. 16 23 ARTICLE IV. TERM 4.1 Duration of Lease Term: This Lease and the obligations of the parties hereunder shall become effective as of the Effective Date. For purposes of measuring the duration of this Lease, the Lease Term shall commence on the "Rent Commencement Date" (as specified in Section 1.5) and shall continue for the term specified in Section 1.4. If such Rent Commencement Date is other than the first day of a calendar month, the first day of the calendar month immediately following such date shall be used for purposes of calculating anniversaries of the commencement of the Lease Term. 4.2 Acceptance of the Premises: Subject to Sections 1.5 and 1.1.2, Landlord shall deliver, and Tenant shall accept from Landlord, possession of the Premises on the "Delivery Date" (as specified in Section 1.12 above), and Tenant shall commence construction of Tenant's Work as specified in Exhibit C and the Addendum as soon as commercially reasonably possible after delivery of possession of the Premises and diligently prosecute such construction so as to complete and open the Premises for business. Landlord shall have the right, but not the obligation, at Tenant's sole cost, to construct any improvements included in Tenant's Work which Tenant shall have failed to construct as and when required by this Lease if, ten (10) days after receiving written notice from Landlord that Landlord intends to itself construct such improvements, Tenant has not itself commenced construction of said improvements and/or thereafter completed such construction within thirty (30) days. Tenant shall be deemed to conclusively deemed to have accepted the Premises, including Landlord's Work, in AS IS condition, except for any items specified on a punch list delivered to Landlord within twenty (20) days after Tenant occupies the Premises. Notwithstanding the foregoing, Tenant shall not be deemed to have waived its right to require Landlord to correct any latent defects as long as Tenant gives notice thereof to Landlord on the earlier of fifteen (15) days after discovery of such defect or fifteen (15) days after the date Tenant should have been alerted to the existence thereof had Tenant acted reasonably. 4.3 Delays in Completion of Landlord's Work: If Landlord does not for any reason complete Landlord's Work sufficiently to constitute substantial completion of the Premises by the date specified in Section 1.12 above and/or does not thereafter complete all items of Landlord's Work to enable Tenant to open the Premises for business, Landlord shall not be subject to any liability with respect hereto, and such delay shall not affect the validity of this Lease, nor the obligations of Tenant hereunder, however, the Delivery Date shall be postponed one day for each day's delay in Landlord's completing Landlord's Work, but only to the extent that solely but for such delay, Tenant would have opened the Premises for business by the Rent Commencement Date. If and to the extent Landlord's failure to timely complete the various phases of Landlord's Work as set forth in the prior sentence is due to delays by Tenant or failure by Tenant to timely provide Landlord with plans or any other information or approvals, the Rent Commencement Date shall not be postponed. 4.4 Tenant's Early Use Or Possession: Tenant's entry upon, or use or possession of, the Premises for purposes other than the normal conduct of its business activities prior to the Rent Commencement Date shall be subject to all the terms and conditions of this Lease, other than Tenant's obligation to pay any Rental as defined in Section V below. 4.5 Tenant's Delivery of Documents: Within thirty (30) days after the earlier of completion of construction of Tenants Work or Tenant's opening for business, Tenant shall deliver to Landlord the following items: (a) copies of all mechanics' lien releases or other lien releases relating to Tenant's Work, notarized and unconditional, in such form as Landlord shall have approved, or evidence that same have been removed of record by bonding; (b) a copy of Tenant's recorded valid Notice of Completion; (c) copies of all building permits, business license and other 17 24 certificates evidencing inspection, acceptance and/or approval of the Premises by appropriate governmental authorities, including the underwriters approval of Tenants electrical system; (d) a certification by Tenant's architect that the Premises have been constructed substantially in accordance with Tenant's Plans and in accordance with Exhibit C; (e) Tenant's certification as to the actual cost of constructing Tenant's Work along with such documentation of such costs, and payment thereof, as Landlord requires; (f) a complete list of the names, addresses, telephone numbers and contract amounts for all contractors, subcontractors, vendors and/or suppliers providing materials and/or labor for Tenant's Work; (g) a set of "as-built" plans and specifications for Tenant's Work in reproducible form prepared and sealed by Tenant's architect; (h) letter of assurance from Tenant's contractor that the Premises and all equipment installed therein can be maintained and operated as designed and installed; (i) certified balance report that Tenant's HVAC system meets design requirements; (j) copies of operation and maintenance manuals for all equipment installed at the Premises; (k) emergency telephone numbers with respect to maintenance and repair of the Premises; and (l) any other statements, certificates or agreements reasonably requested by Landlord. 4.6 Surrender of the Premises: At the expiration of the Lease Term or the earlier termination of this Lease, Tenant will surrender possession of the Premises and deliver the same to Landlord. Upon surrender of the Premises, Tenant shall deliver the Premises to Landlord in good order, condition and state of repair, but shall not be responsible for damages resulting from ordinary wear and tear, casualty losses which are Landlord's responsibility under Article XVIII, or any items of repair which are Landlord's responsibility under Section 16.2. Unless waived by Landlord in writing and in response to Tenants request for Landlord to review the space hereunder, Tenant shall accompany Landlord, or one of Landlord's authorized representatives, on a joint inspection of the Premises prior to such surrender. 4.7 Holding Over Without Consent: If, after the expiration or earlier termination of the Lease Term, Tenant remains in possession of the Premises without Landlord's express written consent, Tenant shall become a tenant at sufferance only, subject to all of the provisions of this Lease (except as to Lease Term), provided that the monthly installments of Minimum Annual Rental payable by Tenant shall be increased to one hundred fifty percent (150%) of the monthly average of the total Minimum Annual Rental and Percentage Rental which was payable by Tenant during the Lease Term; the aforementioned new Minimum Annual Rental payable during the aforementioned tenancy at sufferance shall be prorated and paid in advance on a daily basis; and if and to the extent the amount of the Percentage Rental payable with respect to the Lease Term is not known when the tenancy at sufferance begins, the rate of Minimum Annual Rental payable until the aforementioned amount of Percentage Rental has been determined shall be at the daily rate specified by Landlord and when the correct figure is determined an appropriate lump sum adjusting payment shall be made to correct any overpayment or underpayment. Acceptance by Landlord of rental after such expiration or earlier termination shall not result in a renewal or extension of this Lease. The provisions of this Section are in addition to and do not affect Landlord's right of re-entry or any rights of Landlord hereunder or as otherwise provided by law. If Tenant fails to surrender the Premises upon the expiration or earlier termination of this Lease, despite demand to do so by Landlord, Tenant shall indemnify, defend and hold Landlord harmless from all loss or liability, including any claim made by any succeeding tenant founded on or resulting from such failure to surrender and any attorney fees and costs associated therewith. 4.8 Landlord's Rights of Termination: If at any time following the twenty fourth (24th) full month after the Rent Commencement Date, Tenant's Gross Sales (as defined in Article VI) for any consecutive twelve (12) month period (ending in or after the twenty-fifth (25th) full calendar month after the Rent Commencement Date) do not exceed an amount equal to the Gross Sales Threshold (specified in Section 1.9), Landlord may elect to terminate this Lease by notice to Tenant delivered any time within one year after said consecutive twelve (12) month period with a termination date designated at least (90) days after the date of such notice. For the purposes of 18 25 this Section 4.8, the definition of "Gross Sales" (as defined in Article VI below) is modified to mean only those sales made to third parties, and not to related or affiliated companies of Tenant. If Landlord elects to so terminate this Lease, Landlord shall pay Tenant within fifteen (15) days after the last to occur of the aforementioned designated termination date or the date Tenant surrenders possession of the Premises in accordance with Section 4.6 a sum equal to the unamortized portion of Tenant's actual cost of constructing Tenant's Work (excluding "soft costs" and Tenant's Trade Fixtures) as certified pursuant to Section 4.5 (after first subtracting Tenant's Construction Allowance, if any) amortized on a straight line basis without interest over the Lease Term (including the Option Term). Landlord shall be entitled to subtract from any payment otherwise due and owing to Tenant under this Section all sums owed by Tenant to Landlord. The Gross Sales Threshold shall be increased (but never decreased) on each anniversary of the Rent Commencement Date during the Lease Term in accordance with the procedure described in Section 5.8 (for which purposes "Base Amount" shall mean the Gross Sales Threshold specified in Section 1.9, "Base Month" shall mean the month in which the Rent Commencement Date occurs, and "Month of Adjustment" shall mean any month in which the Gross Sales Threshold is to be increased pursuant to this Section). ARTICLE V. RENTAL 5.1 Rent Commencement Date: Tenant's obligation to pay any amount of "Minimum Annual Rental", "Percentage Rental" or "Additional Rent" (as defined in this Article V) under this Lease shall commence on the Rent Commencement Date. Tenant shall pay all rental and other payments to Landlord at its management office in the Project, or at such other place as may from time-to-time be designated by Landlord. For the purposes of this Lease, the term "Rental" or "Rent" shall mean and be defined as all Base Rent, Percentage Rental and Additional Rent due from Tenant to Landlord hereunder. 5.2 Minimum Annual Rental: Tenant shall pay as rental the Minimum Annual Rental specified and defined in Section 1.6 in advance and without notice or invoice, on the first day of each calendar month. Minimum Annual Rental for any fractional calendar month at the beginning or end of the Lease Term shall be prorated on the basis of the number of days in that particular calendar month and if the Rent Commencement Date occurs on other than the first day of a calendar month, the prorated rent for that calendar month plus the rent for the succeeding calendar month shall be paid in advance on the Rent Commencement Date. On each anniversary of the Rent Commencement Date during the Lease Term, the Minimum Annual Rental shall be increased (but never decreased) in accordance with the procedure described in Section 5.8 (for which purposes "Base Amount" shall mean the Minimum Annual Rental specified in Section 1.6 on the Rent Commencement Date and the fifth anniversary of the Rent Commencement Date depending on the period of adjustment, "Base Month" shall mean the month in which the Rent Commencement Date and the fifth anniversary of the Rent Commencement Date depending on the period of adjustment occurs, and "Month of Adjustment" shall mean any month in which the Minimum Annual Rental is to be increased pursuant to this Section). The Minimum Annual Rental shall be deemed to include Tenant's share of Operating Costs and Taxes. The term "Taxes" as used in this Lease is defined as any and all real and personal property taxes, general and special assessments, water and sewer charges, and similar impositions by any governmental authority or agency upon the Project, the land upon which it is located, Landlord's Work, and any improvements, fixtures, equipment or other property of Landlord located in or used in connection with the operation or maintenance of the Project. "Taxes" shall also include any tax on or measured by rental as well as any tax hereafter imposed wholly or partly in lieu of any of the foregoing. "Taxes" shall not include any net income, franchise, capital stock, estate or inheritance taxes, or any tax hereafter imposed on the Project, on Landlord 19 26 or on Tenant that is not imposed as of the Effective Date, or any taxes (including sales and use taxes), assessments, license fees and public charges levied, assessed or imposed upon it business operation at the Premises or upon its merchandise, Improvements and Personal Property. The term "Operating Costs" as used in this Lease is defined as the sum of the costs of all utilities, building supplies, equipment, materials, repairs and maintenance, insurance maintained by Landlord pursuant to Section 17.5, and cost of labor and services of employees and independent contractors incurred by Landlord in maintaining, repairing (or replacing in lieu thereof) and operating the Project, together with all Common Areas and ancillary parking areas, access roads, walkways, plazas, landscaped areas (the "Adjacent Areas") and any other property, fixtures, equipment and improvements used in connection with the operation or maintenance of the Project. "Operating Costs" shall also include: rental expenses for (or a reasonable depreciation allowance on) personal property used in the maintenance, operation or repair of the Project and/or the Adjacent Areas; costs, expenditures or charges (whether capitalized or not) required by any governmental or quasi-governmental authority; amortization of capital expenses (including financing costs) made by Landlord to reduce Operating Costs; a reasonable building management fee; and any other costs or expenses incurred by Landlord in the performance of its obligations under this Lease and not otherwise reimbursed by Project tenants or by insurance. Landlord reserves the right to determine in its sole discretion what portion of Tenant's Minimum Rent shall be allocated to cover the Operating Costs and Taxes; provided, however, Tenant will not be obligated to pay any amount toward Operating Costs and/or Taxes to the extent such Operating Costs and/or taxes are not included in the Minimum Annual Rental collected from Tenant hereunder, unless expressly provided in on Section 2.12 or Section 13.3. 5.3 Percentage Rental: In addition to the Annual Rental, Additional Rent and other sums specified herein, Tenant shall pay percentage rent each year commencing in the month in which the annual Gross Sales Breakpoint is exceeded (hereinafter "Percentage Rental") calculated as a percentage of Tenant's "Gross Sales" (as that term is defined in Article VI) made from or upon the Premises during each calendar year or pro ration thereof. Percentage Rental shall be calculated by (i) subtracting the "Gross Sales Breakpoint" specified in Section 1.8 from Tenant's Gross Sales, and then (ii) multiplying the resulting amount by the percent specified in Section 1.7. Said Percentage Rental shall be computed each calendar month and, on or before the fifteenth (15th) day after the close of each such calendar month, Tenant shall submit to Landlord a Statement of Gross Sales in the form set forth in Exhibit D and pay to Landlord the "Percentage Rent Due" (if any) as computed pursuant to Exhibit D. Tenant shall account for and pay Percentage Rental on any Gross Sales during any partial calendar month or partial calendar year at the beginning or end of the Lease Term in the same manner based on a pro rated Gross Sales Breakpoint calculated on the basis of the number of days in such partial calendar month or year divided by thirty (30) or three hundred sixty-five (365), as the case may be. The Gross Sales Breakpoint shall be increased (but never decreased) on each anniversary of the Rent Commencement Date during the Lease Term in accordance with the procedure described in Section 5.8 (for which purposes "Base Amount" shall mean the Gross Sales Threshold specified in Section 1.9 on the Rent Commencement Date and the fifth anniversary of the Rent Commencement Date, "Base Month" shall mean the month in which the Rent Commencement Date and the fifth anniversary of the Rent Commencement Date occurs, and "Month of Adjustment" shall mean any month in which the Gross Sales Breakpoint is to be increased pursuant to this Section). 5.4 Reporting of Gross Sales: Tenant shall furnish Landlord with a weekly report of its daily sales at the times and in the manner that Landlord may request. If Landlord develops an automated mechanism (by computer or otherwise) to collect such daily sales reports, Tenant shall cooperate with Landlord's introduction of such automated mechanism and shall furnish such daily sales reports using such automated mechanism; provided, however, that Tenant will not be required to introduce such automated mechanism to the extent the cost thereof would be greater than One Thousand Dollars ($1,000). 20 27 Tenant shall furnish to Landlord a monthly Statement of Gross Sales of Tenant within ten (10) business days after the close of each calendar month. Each such Statement shall be in accordance with Exhibit D and shall show the gross selling prices of all merchandise and services with all adjustments allowed thereto pursuant to Article VI. Each such Statements shall be signed by all individuals doing business as Tenant, by a general partner if Tenant is a partnership, or by an authorized officer of Tenant if Tenant is a Corporation. Each such Statement of Gross Sales shall also include a certification (in a form approved by Landlord) by the chief financial officer of Tenant to the effect that to such officer's knowledge such Statement is in material compliance with the provisions of this Lease and (after the first such Statement) was prepared in a manner consistent with all prior Statements. Tenant shall record at the time of sale all receipts from sales or other transactions, whether cash or credit, in a cash register or registers (paid for and provided by Tenant) having a sealed and continuous tape which cumulates and consecutively numbers all purchases. Tenant shall keep the following items: (a) accurate books of account and records in accordance with generally accepted accounting principles consistently applied, including, a sales journal, general ledger, and all bank account statements showing deposits of Gross Sales revenue; (b) all such cash register receipts with regard to the Gross Sales and credits, refunds and other pertinent transactions made from or upon the Premises (including the Gross Sales of any subtenant, licensee or concessionaire); and (c) detailed original records of any exclusions or deductions from Gross Sales, including vendor invoices, canceled checks, and any other documents supporting such exclusions or deductions. Tenant shall also follow such additional fiscal, accounting, and reporting procedures and maintain such additional records as Landlord may from time-to-time reasonably require. Such books, receipts and records shall be kept for a period of three (3) years after Landlord's receipt of the Gross Sales Statement for each calendar year. The receipt by Landlord of any statement or any payment of Percentage Rental for any period shall not bind it as to the correctness of the statement or the payment. 5.5 Additional Rent: In addition to Minimum Annual Rental and Percentage Rental, Tenant shall pay all other sums of money or charges required to be paid by Tenant under this Lease (which sums are referred to in this Lease as "Additional Rent"). 5.6 Late Payments: Any amount due from Tenant to Landlord hereunder which is not paid within five (5) days after it is due shall be subject to a late charge in the amount of [***] of the amount unpaid and shall in addition bear interest at the Lease Rate, calculated from the due date until paid. The payment of such late charge and/or interest shall, however, not excuse or cure any default by Tenant under this Lease. The parties hereby agree that the aforestated late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Tenant. Such costs include, without limitation, processing and accounting charges and any late charges that may be imposed on Landlord. If Tenant shall have been late in making Rental payments three (3) times during any twelve (12) month period, Landlord shall have the option, exercised by notice to Tenant, to require that beginning immediately thereafter, Minimum Annual Rental shall no longer be made in monthly installments on the first day of each calendar month, but each installment of such Minimum Annual Rental shall be payable three (3) months in advance until such time as Tenant has paid each installment of such Minimum Annual Rental in a timely manner for twelve (12) consecutive months, at which time Tenant shall be entitled to make payments of Minimum Annual Rental as regularly required under Section 5.2 above (i.e., Tenant shall no longer be obligated to pay each installment of Minimum Annual Rental three (3) months in advance). 5.7 No Set-Offs Or Deductions: All amounts of Minimum Annual Rental, Percentage Rental and Additional Rent payable in a given month (also collectively referred to in this Lease as "Rental") shall be deemed to comprise a single rental obligation of Tenant to Landlord. Tenant *** Confidential treatment requested. 21 28 shall not, except as otherwise herein provided, have the right to set-off or any right of deduction against any Rental provided for under this Lease. 5.8 Adjustment of Payments: Certain provisions of this Lease require that adjustments be made to a sum of money or other consideration ("Base Amount") in accordance with this Section. The measure for such percentage increase, if any, shall be the Department of Labor, Bureau of Labor Statistics Consumer Price Index for all Urban Consumers, Los Angeles-Anaheim-Riverside (1982-1984 equals 100), hereinafter referred to as the "Index." The procedure for making such adjustment shall be to increase the Base Amount by a percentage (such increase not to exceed [***]) equal to the percentage increase, if any, in the Index for the month which is three (3) months before the Month of Adjustment as compared to the Index for the month which is three (3) months before the Base Month. The terms "Month of Adjustment," "Base Month" and "Base Amount," as used herein, are defined in the applicable sections of this Lease. Should said Bureau discontinue the publication of the above Index, or publish the same less frequently, or alter the same in some other manner, then Landlord shall adopt a substitute procedure which reasonably reflects and monitors consumer prices and/or shall substitute any official index published by the Bureau of Labor Statistics or by such successor or similar governmental agency as may then be in existence and shall be most nearly equivalent thereto as reasonably determined by Landlord. 5.9 Audit Rights: Landlord shall have the right up to twice per annum (provided, however, such limitation shall apply if Landlord finds a material discrepancy in Tenant's books of account and records during its previous inspection and/or audit), upon at least fifteen (15) days' reasonable advance written notice, to inspect and audit all of the books of account and records of Tenant (including the books of account and records of any subtenant, licensee or concessionaire) required to be kept pursuant to Section 5.4. Tenant shall make the books of account and records available for inspection and audit by Landlord's representatives at the Premises or at a business office of Tenant in Los Angeles County during regular business hours. In addition, upon request of Landlord, Tenant shall furnish to Landlord a copy of Tenant's state and local sales and use tax returns, and all taxing authority audit reports, delinquency notices, and the like pertaining thereto, and, at Landlord's request, shall obtain copies of the foregoing from the taxing authorities. Any information gained from such statement or inspection shall be confidential and shall not be disclosed other than to carry out the purpose hereof, provided, however, Landlord shall be permitted to divulge the contents of any such statement in connection with any contemplated sales, transfers, assignments, encumbrances or financing arrangements of Landlord's interest in the Premises or in connection with any administrative or judicial proceedings in which Landlord is involved where Landlord may be required to divulge such information. If it shall be determined as a result of such audit that there has been a deficiency in the payment of Percentage Rental, then such deficiency shall become immediately due and payable with interest at the Lease Rate from the date when said payment should have been made. In addition, if Tenant understates Gross Sales by more than [***], and if Landlord is entitled to any additional Percentage Rental as a result of said understatement, or if such audit shows that Tenant has failed to maintain the books of account and records required by Section 5.4 so that Landlord is unable to verify the accuracy of Tenant's statement, then Tenant shall pay to Landlord all reasonable costs and expenses (including reasonable auditors' and attorneys' fees and costs) which may be incurred by Landlord in conducting such audit and collecting such underpayment if any and implement such corrective measures as may be required by Landlord to maintain accurate books of account and records. If Tenant intentionally understated Gross Sales, then, in addition to Landlord's aforesaid rights, Landlord may terminate this Lease. ARTICLE VI. DEFINITION OF "GROSS SALES" The term "Gross Sales" of Tenant as used in this Lease is defined to be the gross selling price of all merchandise or services sold in or from, and any other gross receipts (including cover *** Confidential treatment requested. 22 29 charges and fees paid by third parties for sponsorships or celebrity appearances or other promotional considerations) generated on or from, the Premises by Tenant, its subtenants, licensees and concessionaires, whether for cash, credit or barter, and whether made by store personnel or by approved vending, video, pinball or gaming machines, which shall be adjusted only by excluding the following: (a) The selling price of all merchandise sold in or from the Premises returned by customers and accepted for full credit or the amount of discounts and allowances made thereon; (b) Sales taxes, so-called luxury taxes, consumers' excise taxes, gross receipts taxes, and other similar taxes now or hereafter imposed upon the sale of merchandise or services included in Gross Sales and paid by Tenant to the applicable governmental authorities; (c) Sales of fixtures, equipment or property (including the racing simulators) which are not stock in trade; (d) Insurance proceeds, but to the extent any such proceeds are intended to compensate for, or are measured by anticipated lost sales, such proceeds shall be included in Gross Sales; and (e) Sales which are "bulk transfers" of inventory, as that term is defined in the California Commercial Code. (f) Exchanges and transfer of goods and merchandise between, Tenant's stores/locations made for the convenient operation of Tenants business and not to consummate a sale made in, at, or from the Premises, and goods returned to their sources or transferred to a warehouse owned by or affiliated with Tenant; (g) Returns to manufacturer; (h) Discounted or complimentary use of games or entertainment attractions by, or discounted or complimentary merchandise given or sold to, employees, guests or invitees of Tenant, provided that any consideration received by Tenant in connection any discounted or complimentary transaction shall be included in Gross Sales; (i) Special promotional use of games or other entertainment attractions, provided that any consideration received by Tenant in connection with a promotion shall be included in Gross Sales; (j) Revenue received from the sale of "debit cards," "game cards" or "smart cards," or tokens except to the extent that such cards or token are redeemed for use of games or other entertainment devices within the Premises; (k) Sales of gift certificates (unless redeemed at the Premises); (l) Sums and credits received in the settlement of claims for loss of or damage to merchandise to the extent previously reported as Gross Sales; (m) The price allowed on all merchandise traded in by customers for credit to the extent the credit given is greater than the value of the merchandise traded in (provided that such credit is not greater than the greater of (y) the sales price originally paid for such merchandise or (z) the current sales price for such merchandise); 23 30 (n) Alteration workroom charges and delivery charges, if the amount of any such charge received by Tenant is no greater than Tenant's cost of providing the service; (O) INTENTIONALLY DELETED. (p) Reimbursement of the amount paid for minor service charges, such as postage or delivery expenses; (q) Receipts from sales of food and beverages by third-party caterers to Tenant's employees and/or customers where such receipts are not retained by Tenant; (r) Fees paid by Tenant to credit card companies and/or banking institutions (to the extent previously reported as Gross Sales) in accordance with credit card purchase plans not to exceed five percent (5%) of the merchandise sales price; and (s) Tips and gratuities passed through and/or paid directly to Tenant's employees. All sales originating at the Premises or orders secured or received at the Premises (whether by mail, telephone, facsimile transmission, telegraph, or otherwise) shall be considered as made and completed therein, even though bookkeeping, payment or collection of the account may take place elsewhere, and even though actual filling of the sale or service order and actual delivery of the merchandise may be made from a place other than the Premises. Each sale upon installments or credit shall be treated as a sale for the full cash price at the time of sale. The term "merchandise" as used in this Lease is defined as any goods and commodities, including foods and beverages, sold or offered for sale, unless the context of the use of such term requires a different meaning. ARTICLE VII. UTILITIES Landlord will make available to Tenant, as set forth in Exhibit C, facilities for removal of sewage and for delivery of water, electricity, telephone services and natural gas (hereinafter collectively referred to herein as "Utilities") to the Premises or, at Landlord's sole option, to a central distribution point outside the Premises. Subject to Section 1.12 above, Tenant shall, at its expense, connect to and use such Utilities throughout the Lease Term. Tenant shall install and maintain at its expense a separate meter for any and all Utilities and pay to the appropriate utility company or Landlord the cost of all such Utilities used upon the Premises. If any such charges are not paid when due, Landlord may, but shall not be required to, pay the same, and any amount so paid by Landlord shall immediately thereafter become due to Landlord from Tenant as Additional Rent. In the event that Landlord elects to deliver water or electricity to the Premises or to provide for the removal of sewage from the Premises (the "Supplied Utilities"), Tenant shall pay, as Additional Rent, a "Utilities Charge" to reimburse Landlord for charges related to delivery or removal of the same. Such Utilities Charge shall be calculated on the basis of Tenant's metered utility use and the rates charged by the local public utility supplying such Supplied Utilities. The Utilities Charge will include reimbursement to Landlord for direct and indirect costs of providing such Supplied Utilities, but shall not exceed the charge of the local public utility company had said company furnished such Supplied Utilities directly to Tenant. Landlord shall not be liable, in damages or otherwise, for any discontinuance, failure or interruption of service to the Premises or the Common Areas of Utilities or of any air-conditioning 24 31 system unless such discontinuance, failure or interruption results from Landlord's (or its contractor's, agent's or employee's) negligence or willful misconduct. No such discontinuance, failure or interruption shall be deemed a constructive eviction of Tenant or entitle Tenant to terminate this Lease. Except as provided in this paragraph below, no such discontinuance, failure or interruption shall entitle Tenant to withhold payment of any rental due under this Lease unless such discontinuance, failure or interruption (i) is due to Landlord's voluntary action, negligence or willful misconduct and continues for more than five (5) days or (ii) is not due to Landlord's voluntary action, negligence or willful misconduct and continues for more than twenty (20) days, but only to the extent Tenant's business interruption insurance does not pay Tenant's rent due during such period; provided, finally, such discontinuance, failure or interruption shall be deemed a constructive eviction of Tenant and entitle Tenant to terminate this Lease if such discontinuance, failure or interruption lasts for one hundred and eighty (180) days or more. In either event, Landlord shall use reasonable efforts to restore any interrupted service. ARTICLE VIII. COMMON AREA AND PARKING AREAS 8.1 Definition of "Common Area": The term "Common Area" refers to all improved and unimproved areas that are now or hereafter made available for the general use, convenience and benefit of Landlord, Tenant, other persons entitled to occupy Floor Area in the Project and/or their customers, patrons, employees and invitees, including floors, ceilings, roofs, skylights, windows, driveways, open or enclosed malls, food court seating areas, service areas, loading docks, vertical circulation facilities (other than those stairways, escalators and elevators within tenant areas), sidewalks, curbs and landscaped areas that are within the Project. 8.2 Use of Common Area: Subject to the provisions of this Section, Tenant and its employees and invitees are authorized, empowered and privileged to use the Common Area. Tenant and its employees shall have the right to use the Common Area for access to the Premises at all times and Tenant's customers shall have such right during all hours that Tenant is open for the conduct of business. Notwithstanding the foregoing and subject to Section 8.3, Landlord shall have the right to use the Common Areas for special events, during which use Tenant shall remain open for business unless such use prohibits or materially impairs (i.e., place or locate any physical barrier (whether permanent or temporary; e.g., a stage, crowd-control ropes, booths, kiosks, special event sound or lighting equipment, etc.), in such a manner as to make it difficult and/or dangerous to gain) access to the Premises by Project patrons (excluding event guest patronage of and use of Tenant's Premises) in which case, Tenant shall have the right to close for business for the duration of the event. Landlord agrees to construct, or cause to be constructed, the Common Area generally upon the areas shown on Exhibit A and shall maintain and operate, or cause to be maintained and operated (except as hereinafter provided with reference to cost of maintenance) in a first-class condition and repair, said Common Area at all times following completion thereof for the non-exclusive benefit and use of the customers and patrons of Tenant, and of other tenants, owners and occupants of the Project. All expenses in connection with the original construction and installation of the Common Area shall be at the sole cost and expense of Landlord and shall not be charged to Tenant. Landlord shall, in a manner consistent with other facilities within Universal City, keep, or cause to be kept, said Common Area in a neat, clean and orderly condition, properly lighted and landscaped, and repair and maintain (or replace, if necessary) all equipment and facilities thereof. Subject to CityWalk Management approval and provided that there is no interference with ingress or egress to and from other tenant spaces or with pedestrian traffic in the common areas, Tenant's customers shall be allowed to queue in the Common Areas for the purchasing of tickets and waiting for the use of available simulator rides. Landlord shall have the right to approve, in Landlord's sole discretion, Tenant's request to place an actual or model NASCAR stockcar in the Common Areas fronting the Premises. 25 32 8.3 Control of Common Area: Landlord shall at all times have the right of determining the nature and extent of the Common Area and parking areas, and of making such changes thereto from time-to-time which in its reasonable opinion are deemed to be desirable, including the location and relocation of driveways, entrances, exits, automobile parking spaces, the direction and flow of traffic, designation of prohibited areas, landscaped areas, utilities and all other facilities thereof, and the modification of the Common Area for the purpose of expanding and/or remodeling the Project. Except as otherwise specifically provided in this Lease, Landlord shall at all times after the Effective Date have the sole and exclusive control of the Common Area and parking areas, including the right to lease space within the Common Area to tenants for the sale of merchandise and/or services and the right to permit advertising displays, educational displays and entertainment in the Common Area. Landlord shall also have the right at any time to exclude and restrain any person from use thereof, excepting, however, bona fide customers, patrons and service suppliers of Tenant and other tenants of Landlord who make use of said areas in accordance with the rules and regulations established by Landlord from time-to-time with respect thereto in accordance with Section 8.5. The rights of Tenant with respect to the Common Area and parking areas shall at all times be subject to the rights of Landlord, the other tenants of Landlord and the other owners of the Project to use the same in common with Tenant. It shall be the duty of Tenant to keep all of the Common Area free and clear of any obstructions created or permitted by Tenant or resulting from Tenant's operation. Notwithstanding the foregoing, Landlord shall not materially and adversely impair public access (through any of Tenant's front entry doors) to the Premises or the visibility of the Premises. 8.4 Security: Tenant acknowledges that, by providing any security guards for the Common Area and parking areas, Landlord does not represent or assume responsibility that Tenant will be free from any Claims (as defined in Section 17.1) relating to such security guards, and Tenant further agree that Section 17.1 shall relate to Claims arising out of the actions and inactions of such security guards. Landlord shall have the right to recover from Tenant reasonable additional security costs incurred by Landlord as a result of Tenant's activities or a special event at the Premises reasonably necessitating the expenditure of such additional security costs. 8.5 Rules and Regulations: Tenant acknowledges that it is aware that Landlord and others are engaged in motion picture and television film production, motion picture exhibition, hotel, restaurant, bar, studio tour business and other businesses within Universal City (none of which they are obligated to continue), and Landlord may promulgate, amend and require the observance by Tenant and Tenant's customers, licensees, concessionaires and employees, of reasonable rules and regulations uniformly imposed and enforced in a non-discriminatory manner for the proper and efficient operation and/or maintenance of the Common Area and parking areas or any portion thereof and so as to preclude or minimize the possibility of disruption or conflict with the other activities in Universal City. In the event of a conflict between such rules and regulations and this Lease, the provisions of this Lease shall prevail. 8.6 Parking: Landlord shall furnish space for parking by Tenant, its customers and employees on a nonexclusive basis in common with customers and employees of other Project tenants and of Landlord and its affiliated companies. Tenant acknowledges that Landlord does not represent or guarantee that Tenant's patrons will have immediate access to the parking at all times. The parking areas initially designated for such use are designated on Exhibit A-2 as "Parking Areas." Landlord may at its discretion change the configuration, location and size of the parking areas, but except for emergency situations or temporary interruptions, any such changes will provide parking areas substantially equivalent to that which existed prior to such change. At all times Landlord shall have the right, on a nondiscriminatory basis, to designate, or change the designation of, the particular parking area to be used by any or all Project tenants, their employees and customers and to designate discrete areas for employee parking; provided, 26 33 however, Tenant's employees shall be entitled to park in such designated areas free of charge throughout the Lease Term unless all or substantially all of the other tenants of the Project (or their employees) are required to pay for employee parking and then Tenant (or Tenant's employees) shall pay for such employee parking the lowest amount charged to any other Tenant of the Project. If Tenant or its employees fail to park their cars in the designated parking areas, Landlord may, charge Tenant an amount specified from time-to-time by Landlord (as of execution of this Lease, such amount is Ten Dollars ($10)) per car per day for each day or partial day that any car is parked in any area other than those designated. All amounts due under provisions of this Section shall be payable by Tenant within ten (10) days after demand by Landlord. Tenant shall have the right to purchase valet parking validation stamps at $2.00 per stamp. The stamp purchase price shall be increased (but never decreased) on each anniversary of the Rent Commencement Date during the Lease Term in accordance with the procedure described in Section 5.8 (for which purposes "Base Amount" shall be $2.00, "Base Month" shall mean the month in which the Rent Commencement Date occurs, and "Month of Adjustment" shall mean any month in which the stamp purchase price is to be increased pursuant to this Section). Subject to the availability of valet parking spaces in the Project, the stamps may be used any day by Tenant's customers up until 4:00 PM and entitle the customer to park in valet parking for two hours for $4.00. If the customer parks in valet parking for longer than two hours, then the customer will pay the standard valet parking rate for time parked exceeding two hours. Landlord reserves the right to increase the rate it charges for valet parking (including the $4.00 rate) based on demand and market conditions, provided that any increase shall be applied in a non-discriminatory manner. Landlord and Tenant acknowledge that the intent of this valet parking provision is to benefit Tenant's customers who participate in racing league activity and therefore Tenant is prohibited from advertising to the public or posting signage in or on the Premises regarding the availability of valet parking stamps, provided, however, Tenant may inform league patrons and Tenant's "Driver's Club" patrons who pay an annual membership fee in exchange for special privileges of the valet parking arrangement in brochures provided the brochures are not purposefully sent or distributed to the public other than to the foregoing permitted recipients. For purposes of customer satisfaction, Tenant may also offer to validate a customer's parking to remedy a situation where a customer is dissatisfied. Tenant shall have the right to get reimbursed by Landlord for the full price paid by Tenant to Landlord for unused stamps which are returned to Landlord within one year after issuance. 8.7 Parking Charges: Landlord shall have the right to charge all users of the parking facilities made available by Landlord to Project tenants, their customers, invitees and employees (subject to Section 8.6), and, in Landlord's sole discretion, to establish a system for validating or waiving some or all of said charges, provided that (i) Landlord may establish different rates based on the type of use (e.g. restaurant, office, or retail), and (ii) Landlord shall offer hourly, daily and monthly parking rates for employees, which rate shall not exceed the then-prevailing rates in Universal City. If Landlord shall have established a validation system for the Project which system shall be employed in a non-discriminatory manner) and if a majority of Project tenants agree to assume their allocable shares of the cost of such validation system, Tenant shall contribute its pro rata portion based upon Tenant's Floor Area as a fraction of the floor area of all of the premises located within the Project (or some other equitable allocation method), of the cost of such validation system, payable upon receipt of an invoice therefor from Landlord. ARTICLE IX. MARKETING AND ADVERTISING 9.1 Tenant Advertising: If required by Section 1.10 above, beginning on the Rent Commencement Date and continuing for the balance of the Lease Term, Tenant shall expend during each full or partial calendar year the Annual Advertising Amount set forth in Section 1.10 for the immediately preceding calendar year, to purchase paid media or direct response 27 34 advertising, in either print or broadcast form, to advertise Tenants business conducted at the Premises. Such advertising shall specifically name the Project and its location. Within sixty (60) days following the close of each calendar year, Tenant shall furnish Landlord with such documentation as Landlord may reasonably request evidencing Tenant's compliance with advertising requirements set forth herein. If Tenant shall fail to advertise as provided for herein, then Tenant shall pay Landlord upon demand, as Additional Rent, the difference between (a) the amount actually expended by Tenant for advertising hereunder, and (b) the amount which Tenant would have expended had Tenant complied with the advertising requirements set forth in this Section 9.1. 9.2 Marketing Fund: If required by Section 1.11 above, Landlord shall establish a marketing fund (the "Marketing Fund") to market, advertise and promote the entire Project in accordance with long-range, coordinated marketing plans including advertising through various media, a community relations program, special events and promotions. Tenant shall make a contribution to the Marketing Fund in the amount specified in Section 1.11. The Marketing Fund contribution shall be increased (but never decreased), effective on the first day of each calendar year during the Lease Term, in accordance with the procedure described in Section 5.8 (for which purposes "Base Amount" shall mean the amount specified in Section 1.11, "Base Month" shall mean the month in which the Rent Commencement Date occurs, and "Month of Adjustment" shall mean any month in which the Marketing Fund contribution is to be increased pursuant to this Section). Such Marketing Fund contribution shall be made in advance as of the first day of each calendar year upon receipt of landlord's invoice for same. Landlord shall control and administer the Marketing Fund with advice from such advisory group as a majority of the tenants at the Project shall select and Landlord shall have the right to recoup from the Marketing Fund its costs of administering the Marketing Fund. ARTICLE X. POSSESSION AND USE 10.1 Permitted Uses: Tenant shall use the Premises solely for the purpose or use specified in Section 1.13 and shall operate its business on the Premises using only the exact trade name(s) specified above, and for no other use whatsoever without Landlord's prior consent which may be withheld in Landlord's sole discretion. Tenant shall procure and maintain all governmental licenses and permits required for the proper and lawful conduct of Tenant's business. 10.2 Duties and Prohibited Conduct: Tenant shall not use, or knowingly permit any invitee or other person to use, the Premises for the sale or display of, or for any activity involving, pornography, nudity, violence, drug paraphernalia, or any goods and/or services and/or conduct which, in the sole discretion of Landlord, are inconsistent with the image of a community- or family-oriented establishment, or for a massage parlor, adult bookstore or second-hand store or for the conduct of an auction, distress, fire, bankruptcy or going-out-of-business sale. Tenant shall implement such procedures as Landlord requires in order to effectuate the prior sentence, including retaining qualified on-Premises security personnel and by making adjustments in the manner Tenant conducts its business. Tenant shall not cause or permit waste to occur in the Premises, or overload any floor, or abuse the plumbing in the Premises. Tenant shall keep the Premises, and every part thereof, in a clean and wholesome condition, free from any objectionable noises, music volumes, lights, odors or nuisances, which may be detected from outside the Premises, except to the extent the foregoing are generated from the normal operations associated with the automobile racing car ride simulators in compliance with the Permitted Use (including, for example, the noise made by the track announcer, but not promotional announcements or "hawking" directed toward patrons of the Project outside of the Premises), shall comply with all requirements of all governmental authorities, and shall conduct its activities in a manner which is environmentally sound. Landlord hereby consents to Tenant's use 28 35 of hydraulic oil in connection with the operation of the automobile race car driving simulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled and disposed of in accordance with applicable laws. Unless otherwise permitted by the Lease, Tenant shall keep no live animals of any kind in the Premises. Tenant shall not display or sell merchandise or place carts, portable signs, devices or any other objects, outside the defined exterior walls or roof and permanent doorways of the Premises, nor will Tenant erect any aerial antenna or extra "dish." Tenant shall not solicit or distribute material in any manner in any of the Common Area of the Project. Tenant shall not sell merchandise from vending machines or allow any coin- or token-operated vending, video, pinball or gaming machines in the Premises (other than the automobile racing car ride simulators), except that Tenant may install a coin operated telephone on the Premises for the use of its employees. 10.3 Deliveries/Trash Removal: Tenant shall use its commercially reasonable efforts to complete, or cause to be completed, all deliveries, loading, unloading and services to the Premises prior to 10:00 a.m. of each day. Tenant shall not cause, and shall use commercially reasonable efforts to attempt to prevent, any delivery trucks or other vehicles serving the Premises from parking or standing in front of, or at the rear of, the Premises from 10:00 a.m. to 9:00 p.m. of each day. Landlord reserves the right to reasonably regulate further the activities of Tenant in regard to deliveries and servicing of the Premises, and Tenant agrees to abide by such further reasonable and nondiscriminatory regulation of Landlord. Landlord will establish a system for pick-up, disposal, cartage and recycling of refuse generated by Project tenants. Tenant shall not burn trash or rubbish in or about the Premises and shall deposit its trash and rubbish only in those receptacles provided by Landlord for Tenant's use. Landlord shall cause such receptacles to be emptied and trash removed at Tenant's expense. 10.4 Additional Costs: If Landlord shall incur additional costs as a result of Tenants failure to observe the provisions of this Lease or its rules and regulations, such as failure to deposit trash and rubbish in proper receptacles or Tenant's misuse of any portion of the Project outside of the Premises, Tenant shall pay, to Landlord, as Additional Rent, the sums required to reimburse Landlord for such additional reasonable, out-of-pocket costs plus Landlord's reasonable administrative fee related thereto. 10.5 Renovation: Subject to Sections 2.3 and 2.7, Tenant shall renovate and refurbish the Premises as reasonably required from time to time by Landlord in order to maintain the Premises in substantially the same condition as when Tenant first opened for business (provided, however, this Section is not intended nor shall it be construed to impose any obligation on Tenant to update the technology relating to the automobile driving simulators or other equipment). Such renovation or refurbishment may include new carpeting, painting, new wall covering and/or new tenant fixtures. Any such work by Tenant pursuant to this Section shall be commenced within three (3) months after Tenant's receipt of notice from Landlord and shall be completed within three (3) months after the commencement thereof. ARTICLE XI. TENANT'S CONDUCT OF BUSINESS 11.1 Operating Covenants: Tenant covenants and agrees that it will open for business and thereafter continuously and uninterruptedly (a) operate and conduct within the Premises during the required operating hours the business which it is permitted to operate and conduct under the provisions hereof, except while the Premises are untenantable by reason of fire or other casualty, and (b) maintain within the Premises during the entire Lease Term an adequate stock of in-season merchandise together with sufficient personnel and Personal Property to service and supply the usual and ordinary requirements of its customers and to maximize Gross Sales. Tenant acknowledges that the Project is intended to provide only the highest quality of service and merchandising for the patrons of the Project and that Tenant will operate and conduct all 29 36 aspects of its operations in accordance with this standard. Prior to substantial completion of the Premises, Tenant shall provide Landlord with an initial first year Profit and loss proforma. Tenant will not be in breach of the foregoing sentence until ten (10) days after Landlord provides written notice to Tenant requesting said proforma. Landlord shall include provisions substantially similar to this Section 11.1 in the lease agreements of all other tenants of the Project and shall enforce such provisions in a non-discriminatory manner. As used herein, the term "merchandise" or "merchandising" shall mean items of merchandise typically associated with the Permitted Use, including food, beverages, themed apparel and related products and other goods and commodities. 11.2 Operating Days and Hours: Subject to the limitations set forth in Section 11.1 above, recognizing that it is in the interests of both Tenant and Landlord to have regulated hours of business for all of the Project, Tenant shall, commencing with the opening for business by Tenant in the Premises and for the remainder of the Lease Term, be open for business continuously with its window displays, exterior signs and exterior advertising displays adequately illuminated during all hours on all days on which Landlord, in its sole discretion, determines to open the Project for business to the public. In that connection, Tenant acknowledges and agrees that Project hours may change seasonally, and that due to regulatory requirements, hours may vary for patrons depending on patron age. If Tenant shall open late, close early or fails to be open at any time in violation of this Lease without the express written consent of Landlord, which consent Landlord may grant or withhold in its sole discretion, Landlord may assess Tenant, and Tenant shall pay the amount so assessed as Additional Rent, at the rate of Two Hundred Dollars ($200.00) per full or partial hour of Tenant's unauthorized closure; provided, however, Tenant shall not be required to pay the amount assessed to Tenant if Tenant's failure to open or to stay open resulted from a Force Majeure event. It is agreed, however, that the foregoing provisions shall be subject to the hours of operation prescribed by any governmental regulations or labor union contracts which may govern the operation or business of Landlord or Tenant. 11.3 Compliance with Laws: Subject to Section 1.12, Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements (including, without limitation, ABC liquor license and liquor conditional use, permits, mitigation plans and best management practices from time-to-time required to be obtained or implemented by Landlord or Tenant to satisfy legal requirements) now or hereafter in force, and with the requirements of any board of fire underwriters or other similar bodies now or hereafter constituted relating to or affecting the condition, use or occupancy of the Premises, in each case excluding structural changes not related to or affected by Tenant's improvements or acts, which shall be Landlord's obligation. Tenant shall immediately notify Landlord in writing, and provide Landlord copies, of any threatened or actual claim, notice, citation, violation, warning, complaint or report that Tenant may receive with respect to Tenant's failure to comply with Tenant's obligations under this provision. Except for the approval by the Los Angeles County regional planning department of a parking calculation taking into account Tenant's use, Landlord represents and warrants that to the best of Landlord's knowledge, the Premises are in compliance with all applicable zoning ordinances and all mitigation plans applicable to the Premises have been satisfied. Landlord shall obtain said approval on or before July 1, 1999. Tenant shall disclose all ABC liquor license information to Landlord; including but not limited to any restrictions imposed on Tenant's ABC liquor license. In addition, Tenant understands that the Project and Universal Studios Hollywood have extensive resources and experiences with land use issues (past, current and future public approval projects), local agencies and a special sensitivity to its local residential neighbors. As a result Tenant agrees to allow Landlord to coordinate and manage all of the public approval processes (including any public hearings) for any necessary permits including but not limited to the liquor conditional use permit. Landlord represents and warrant that there is nothing inherent or specific to the Project or 30 37 Landlord or constituent owners of Landlord that will prevent Tenant from using a catering service for the services of food and alcoholic beverages provided that the caterer complies with all laws and regulations relating to the services of food and alcoholic beverages. ARTICLE XII. LIMITS ON SIGNS AND ADVERTISING Subject to the paragraph entitled "Initial Tenant Obligations" after the preamble of this Lease, all exterior Tenant signage and the sign designer and fabricator shall be subject to the review and approval of Landlord, in accordance with the procedures set forth in Exhibit C and the Tenant's Manual. Tenant shall not place any signs, placards, names, insignia, trademarks, or any other similar item or items outside, on or within thirty-six inches (36") of, the front lease line, or on the store front, the glass panes and supports of the show windows, or on any window, door, roof or perimeter wall of the Premises, or which is otherwise visible from the Project common areas (except for the standard design elements reflected on Tenant's plans and specifications for the initial build out of the Premises), except such as Landlord shall approve in its sole discretion. Notwithstanding anything to the contrary in this Lease, Tenant shall not affix any signs to the roof of the Premises. Tenant shall utilize no advertising medium (other than signage permitted or approved pursuant to the preceding sentence) within the Premises or within the Common Area which can be heard or experienced outside the Premises (excluding Tenant's track announcer or the automobile driving simulator rides). Tenant shall not display, paint or place any handbills or other advertising devices on any vehicle parked in the parking area of the Project, whether belonging to Tenant or to any other person, nor shall Tenant distribute in the Project any handbills or other advertising devices. Other than Tenant's signage, Landlord represents and warrants that it will not place any signage on the front building facade of the Premises. ARTICLE XIII. PERSONAL PROPERTY; IMPROVEMENTS; CERTAIN TAXES 13.1 Removal and Replacement: All of Tenant's trade fixtures, furniture, furnishings, signs and other personal property not permanently affixed to the Premises (collectively referred to herein as "Personal Property") must be either new or antique and, in either case of a quality consistent with the Project when installed in, or attached to, the Premises by Tenant. Subject to the provisions of Section 13.2, any such Personal Property shall remain the property of Tenant. Provided Tenant is not in default beyond the applicable cure period after notice from Landlord under any of the monetary or other materials terms of this Lease, Tenant shall have the right to remove any or all of its Personal Property which it may have stored or installed in the Premises; provided, however, if this Lease is still in effect, Tenant shall immediately replace the same with similar Personal Property of comparable or better quality. At Landlord's option, Landlord may require Tenant to remove any and all Personal Property from the Premises upon the expiration of the Lease Term. Tenant shall, at its expense, immediately repair any damage occasioned to the Premises by reason of the removal of any Personal Property. 13.2 Improvements: Tenant's Alterations (as specified in Section 14.1) and Tenant's Work (as specified in Exhibit C) are collectively referred to in this Lease as "Improvements" and shall become the property of Landlord upon the expiration or earlier termination of this Lease. 13.3 Certain Taxes: Tenant shall pay before delinquency all taxes (including sales and use taxes), assessments, license fees and public charges levied, assessed or imposed upon its business operation at the Premises as well as upon its merchandise, Improvements and Personal Property. If any such items of property are assessed with property of Landlord or a third party, then, and in such event, such assessment shall be equitably divided between Tenant and either Landlord or such third party, as the case may be. 31 38 ARTICLE XIV. TENANT'S RIGHT TO MAKE IMPROVEMENTS 14.1 Alterations: At Tenant's own expense, after giving Landlord notice of its intentions to do so, Tenant may, from time-to-time after completion of all work in accordance with Exhibit C, make such permanent and nonstructural alterations, replacements, additions, changes and/or improvements (collectively referred to in this Lease as "Alterations") to Tenant's Work previously completed in accordance with Exhibit C or to prior Alterations as Tenant may find necessary or convenient for its purposes, provided that: (i) any such Alterations which are structural or on the exterior of the Premises and/or visible from the exterior may not be made without Landlord's prior written consent which Landlord may withhold in its sole and absolute discretion; (ii) the value of the Premises is not thereby diminished; and (iii) no Alterations costing in excess of [***] for any one work of improvement, or in excess of [***] in the aggregate for multiple works of improvement during any period of twelve (12) consecutive months during the Lease Term, may be made without obtaining the prior approval of Landlord, which Landlord may withhold in its reasonable discretion. Tenant shall reimburse Landlord for all reasonable out-of-pocket costs and expenses (including, any architect and/or engineer fees) incurred by Landlord in approving or disapproving Tenant's plans for Alterations up to [***]. 14.2 Construction Requirements: All Alterations to be made to the Premises which require the approval of Landlord shall be made under the supervision of a competent architect or licensed structural engineer and in accordance with plans and specifications prepared and constructed in conformity with the structural, mechanical, electrical, design and quality standards, requirements and/or criteria specified in Exhibit C. Such plans and specifications shall be submitted to Landlord for its approval prior to commencement of the work, in accordance with such procedures as Landlord shall reasonably specify. Upon the expiration or earlier termination of this Lease, such Alterations (unless they comprise Personal Property or trade fixtures) shall not be removed by Tenant but shall become a part of the Premises unless Landlord requires their removal, in which event Tenant shall remove such Alterations promptly upon vacating the Premises. In performing the work of any such Alterations, Tenant shall have the work performed in such a manner as not to obstruct access to the premises of any other tenant in the Project. ARTICLE XV. MECHANICS' LIENS Except as otherwise provided in this Lease, Tenant shall pay all costs of labor, services and materials supplied in the prosecution of any work, except for "Landlord's Work" as specified in Exhibit C, or other work undertaken by Landlord in discharge of its responsibilities under this Lease, done, or caused to be done, on the Premises. Landlord and Tenant will keep the Premises free and clear of all mechanics' liens and other such liens on account of work done by Landlord and Tenant or persons claiming under Landlord and Tenant. [Construction surety bond requirement waived subject to satisfactory review of Tenant's financials] Tenant shall forthwith notify Landlord of any claim of lien filed against the Premises of which Tenant has notice or the commencement of any action affecting the title thereto. Landlord and its representatives shall have the right to post and keep posted thereon notices of non-responsibility or such other notices which Landlord may deem to be proper for the protection of Landlord's interest in the Premises. Before the commencement of any work which might result in any such lien, Tenant shall give to Landlord written notice of its intention to do so, specifying the date on which such work shall commence, in sufficient time to enable Landlord to post and record such notices in accordance with the laws and/or statutory requirements of the State of California. *** Confidential treatment requested. 32 39 ARTICLE XVI. REPAIRS AND MAINTENANCE 16.1 Tenant's Obligations: From and after substantial completion of the Premises and, except for punch list items as provided in Section 4.2, Tenant shall at all times repair, maintain in good and tenantable condition and replace, as necessary, the Premises and every part thereof (except that portion of Premises to be maintained by Landlord under Section 16.2). All replacements made by Tenant in accordance with this Section 16.1 shall be of like size, kind and quality to the items replaced as they existed when originally installed and shall be subject to Landlord's reasonable approval. 16.2 Landlord's Obligations: Subject to Sections 16.1 and 8.3, Landlord shall repair, maintain in good and tenantable condition and replace, as necessary, the roof, exterior walls and structural parts of the Premises (including the structural floor) and all meters, pipes, conduits, equipment, components and facilities that supply the Premises with Utilities installed by Landlord (except as the appropriate utility company has assumed these duties); provided however that Landlord shall not be required, and Tenant shall be required, to make repairs necessitated by reason of the negligence or willful misconduct of Tenant or anyone claiming under Tenant, or by reason of the failure of Tenant to perform or observe any conditions or agreements of this Lease, or by reason of Improvements made by Tenant or anyone claiming under Tenant. As used in this Article XVI, "exterior walls" shall exclude storefronts, plate glass, window cases and window frames, doors and door frames, security grills and similar enclosures, the repair and maintenance of which are Tenant's responsibility. Landlord shall have no obligation to repair, replace or maintain the Premises or the mechanical equipment exclusively serving the Premises at any time, except as this Lease expressly provides. Landlord shall perform its obligations under this Section in a manner consistent with first-class retail centers in Southern California. All of Landlord's costs and expenses arising out of Landlord's complying with its obligations and exercising its rights under this Section 16.2 shall constitute Operating Costs as defined in Section 5.2, except that Landlord's costs and expenses of repairing and maintaining meters, pipes, conduits, equipment and facilities that supply Tenant's Premises exclusively shall be allocated entirely to Tenant. 16.3 Right to Enter: Tenant shall permit Landlord, or its authorized representatives, upon reasonable notice (except in an emergency in which case no notice shall be required), to enter the Premises at all times during usual business hours to inspect the same, to perform its duties under Section 16.2, and to perform any work therein that Landlord may reasonably deem necessary or that is Landlord's obligation under this Lease. No exercise by Landlord of any rights reserved in this Section 16.3 shall entitle Tenant to any compensation, damages or abatement of rent from Landlord for any injury or inconvenience occasioned thereby. 16.4 Landlord's Liability: Landlord shall be liable and assumes the risk for any damage occasioned by reason of the construction of the Premises or for failure to keep the Premises in repair, provided Landlord is obligated to construct same or make such repairs under the terms hereof, and further provided that notice of the need for repairs has been given to Landlord, a reasonable time has elapsed and Landlord has failed to make such repairs. Landlord shall also be liable for its negligence or willful misconduct in performing any repairs that Landlord undertakes hereunder. Except as hereinabove set forth, Landlord shall not be liable for any damage done or occasioned by or from the electrical system, heating or air conditioning system, and plumbing and sewer systems in, upon or about the Premises or the building of which the Premises are a part, nor for damages occasioned by water, snow or ice being upon or coming through the roof, trap door, walls, windows, doors or otherwise, nor for any damage arising from acts of negligence of tenants or other occupants of the building or buildings of which the Premises may be a part, or the acts of any owners or occupants of adjoining or contiguous properties, and in any event, Landlord shall not be liable for any damage to Tenants Improvements, Personal Property, or merchandise resulting from fire or other insurable hazards, regardless of the cause thereof other than as results from the gross negligence or willful misconduct of Landlord, its employees or agents, and Tenant, 33 40 subject to the provisions of Section 17.1, hereby releases Landlord from all liability for such damage other than as results from the gross negligence or willful misconduct of Landlord, its employees or agents. ARTICLE XVII. INDEMNITY; INSURANCE 17.1 Indemnification: 17.1.1 Indemnification by Tenant: Landlord shall not be liable for, and Tenant shall defend (unless Landlord waives its right to such defense, and in any event with counsel satisfactory to Landlord), indemnify and protect Landlord from, any claim, liability, fine, loss, or expense (including reasonable actual attorneys' fees and court costs) arising directly or indirectly from (a) any labor dispute involving Tenant or its contractors or agents, or (b) the construction, repair, alteration, improvement, use, occupancy or enjoyment of the Premises by Tenant, or (c) any activities in connection with Tenant's business, including any activities relating to advertising copy supplied by Tenant under Article IX, or (d) any loss or damage to Tenant's property (hereinafter referred to as "Claim"); provided, however, Tenant shall have no obligation to defend, indemnify or protect Landlord from Claims (y) made by Tenant in accordance with Article XXIII, or (z) caused by the sole negligent or willful acts of Landlord and/or its agents or employees. Landlord shall give notice to Tenant as to litigation that is instituted against Landlord that may subject Tenant to liability under this Section. 17.2 Tenant's Insurance Obligation: From and after the earlier of commencement of Tenant's Work or Tenant's entry upon the Premises, Tenant will carry and maintain the following types of insurance, in the amounts specified and in the form hereinafter provided for: 17.2.1 General Liability: Commercial general liability insurance (and/or excess umbrella liability) written on an occurrence form with a combined single limit of not less than [***] per occurrence. Said policy must be written on the CG0001 11/85 or 11/88 ISO occurrence form or broader, with no additional exclusions, and must include: 1. primary, not contributing coverage 2. blanket contractual 3. broadform property damage 4. personal/advertising injury 5. products completed operations 6. liquor liability, if tenant is a restaurant 7. X, C and U, if necessary due to the nature of the work All such bodily injury liability insurance and property damage liability insurance shall specifically insure the performance by Tenant of that part of the indemnity agreement contained in Section 17.1 relating to liability for injury to or death of persons and damage to property, as well as contractual liability. 17.2.2 Workers' Compensation: Statutory workers' compensation including employers liability insurance with a limit of not less than [***]. Tenant shall cause its workers' compensation carrier to waive insurer's right of subrogation with respect to Universal Studios Recreation Services, Universal Studios, Inc., and its affiliates, and such additional individuals or entities as Landlord shall from time-to-time designate. 17.2.3 Plate Glass: Insurance covering full replacement cost of all plate glass on the Premises. Tenant shall have the option either to insure commercially or to self-insure the risk. *** Confidential treatment requested. 34 41 17.2.4 Equipment: Machinery insurance on all air-conditioning equipment and systems exclusively serving the Premises. if said equipment and the damage it may cause are not covered by Tenant's "All Risks" insurance (as specified in Subsection 17.2.5 below), then the insurance specified in this Subsection 17.2.4 shall be in an amount not less than One Hundred Thousand Dollars ($100,000); if Tenant requires boilers or other pressure vessels to serve the Premises, they shall also be insured for the same amount. 17.2.5 Tenant's Improvements and Personal Property: Insurance covering Tenant's (a) merchandise; (b) "Improvements" (as defined in Section 13.2) including "Alterations" (as defined in Section 14.2); and (c) "Personal Property" (as defined in Section 13.1) from time-to-time in, on or upon the Premises, in an amount not less than [***] of their full replacement cost, providing protection against any peril included within the classification "All Risks," including coverage for sprinkler and water damage and theft. Any policy proceeds shall be used for the repair or replacement of the property damaged or destroyed unless this Lease shall cease and terminate under the provisions of Article XVIII, in which event Landlord and Tenant shall share in such proceeds as their respective interests may appear. 17.2.6 Business Interruption: Insurance covering Tenant's anticipated continuing expenses (including Rental) and lost profits following a casualty for a period of twelve (12) months. Notwithstanding the foregoing, Tenant may cause any of the policies which it maintains to carry such deductibles as are commercially reasonable. Notwithstanding the types of insurance and dollar amounts specified above in this Section 17.2, Landlord may by notice to Tenant given from time-to-time require additional types and/or higher limits of insurance coverage as Landlord may reasonably specify as being appropriate, provided, however, that Landlord shall not so change the insurance requirements more than [***] years and provided further that such additional types or higher limits are customary for developments similar to the Project in the City of Los Angeles. Tenant shall be responsible for paying any additional premiums charged by its insurer(s) for additional insurance or waivers reasonably specified by Landlord. 17.3 Form of Policies: All policies of insurance provided for herein shall be issued by insurance companies qualified to do business in the State of California and with a rating of at least "A X" in Best's Key Rating Guide. All such policies (except to the extent inconsistent with the type of policy) shall contain cross-liability endorsements and shall name Landlord and Universal Studios, Inc. and Universal Studios, Inc.'s affiliated companies, mortgagees or beneficiaries and such additional individuals or entities as Landlord shall from time-to-time reasonably designated as "Additional Insureds." Satisfactory evidence of each insurance coverage, on the standard ACORD form or a form acceptable to Universal Studios shall be delivered to Landlord within ten (10) days prior to Tenant's entry onto the Premises and, thereafter, executed copies of renewal policies or certificates thereof shall be delivered to Landlord within thirty (30) days prior to the expiration of the term of each such policy. When any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All policies must contain a provision that the company writing said policy will give to Landlord thirty (30) days' written notice in advance of any cancellation, lapse, reduction in the amount of coverage or other adverse change respecting such insurance. All general liability, property damage and other casualty policies shall be written as primary policies, not contributing with or secondary to coverage which Landlord may carry. The stipulated limits of coverage above shall not be construed as a limitation of any potential liability to Landlord, and failure to deliver said insurance certificate or Landlord's failure to request delivery shall in no way be construed as a waiver of Tenant's obligation to provide the insurance coverage specified. 17.4 Blanket Insurance Policies: Tenant's obligation to carry the insurance provided for above may be satisfied by inclusion of the Premises within the coverage of a so-called *** Confidential treatment requested. 35 42 "blanket" policy or Policies of insurance carried and maintained by Tenant; provided, however, that Landlord and Landlord's affiliated companies, mortgagees or beneficiaries shall be named as additional insureds thereunder as their interests may appear and that the coverage afforded Landlord will not be reduced or diminished by reason of the use of such blanket policies of insurance, and provided further that the requirements set forth herein are otherwise satisfied. Tenant shall permit Landlord at all reasonable times to inspect any policies of insurance maintained by Tenant covering risks upon the Premises or related to Tenant's occupancy of the Premises if such policies have not been previously delivered to Landlord. 17.5 Landlord's Insurance Obligation: At all times from and after the Effective Date, Landlord shall maintain in effect a policy or policies of insurance providing protection for the following liabilities and/or risks: (a) general liability for bodily injury and property damage arising from Landlord's ownership and/or operation of the Project with coverage limits at least equal to those Tenant is required to maintain in accordance with Subsections 17.2.1, and (b) all perils insurable under an All Risks policy (with, at Landlord's election, coverage for other risks such as flood and earthquake, providing such coverage is available at commercially reasonable cost) covering the Project, exclusive of any item insured by Tenant pursuant to Section 17.2 and by other Project tenants, in an amount at least equal to eighty percent (80%) of the insured improvements' full replacement cost (exclusive of the cost of excavations, foundation and footings). Insurance provided for in this Section 17.5 may be carried by inclusion within the coverage of any blanket policy or policies of insurance carried and maintained by Landlord, provided that the coverage accorded will not be reduced or diminished by reason of the use of such blanket policies of insurance. Notwithstanding the above, Landlord may cause any of the policies which it maintains to carry such deductibles as are commercially reasonable. Landlord (itself or through an affiliate) may self-insure any of the risks set forth in this Section 17.5. 17.6 Mutual Waivers of Rights: Landlord (for itself and its insurer) and Tenant (for itself and its insurer) each hereby waive any rights, including rights of subrogation, either may have against the other, and Tenant hereby waives any rights it may have against other tenants of the Project (provided such other tenants have waived such rights against Tenant and to the extent that Tenant is insured for the loss) for compensation of any loss or damage occasioned to Landlord or Tenant, as the case may be, with regard to their respective property, the Premises, its contents or portions of the Project, arising from any risk generally covered by the All Risks insurance Landlord and Tenant shall carry and maintain under Sections 17.2 and 17.5. The foregoing waivers shall be in operation only so long as insurance coverage recognizing such waivers is available in the State of California and so long as no policy is invalidated thereby. Each party may conclusively presume that the waiver by the other party is in full force and effect unless and to the extent the other party notifies the presuming party to the contrary. Nothing in this Section 17.6 shall derogate from the generality of Section 17.1, which Section 17.1 shall prevail. 17.7 Insurance Use Restrictions: Tenant will not carry any goods or do anything in or about the Premises which will in any way tend to increase the insurance rates for any insurance maintained by Landlord above the levels generally applicable to low-risk commercial rental space. Nothing in this Section 17.7 shall in any way limit such Permitted Use or require Tenant to compensate Landlord for increased insurance rates under this Section 17.7 as a result of Tenants use of the Premises for the Permitted Use. Subject to the foregoing sentence, Tenant shall pay to Landlord forthwith upon demand the amount of any increase in premiums charged to Landlord for insurance carried by Landlord pursuant to Section 17.5, which increase results from Tenants violation of the foregoing restrictions. Tenant shall make all changes to its Premises and install any fire extinguishing equipment and/or other safeguards that Landlord's insurance underwriters or applicable fire, safety and building codes and regulations may reasonably require in order to obtain and maintain favorable premium rates and terms; Landlord shall notify Tenant prior to Tenant's commencement of Tenant's Work of any such installations and/or other safeguards that, 36 43 to Landlord's best knowledge regarding safeguards that Landlord's insurance underwriters require, Tenant will be required to perform or construct in order to comply with this Section 17.7. ARTICLE XVIII. RECONSTRUCTION 18.1 Insured Casualty: If the Premises are damaged by fire or other perils covered by Landlord's insurance or self-insurance: 18.1.1 Repair of Damage: As soon as is reasonably possible, but no later than ninety (90) days after the date of such damage, Landlord shall commence repair, reconstruction and restoration (collectively referred to as "Reconstruction" in this Article XVIII) of that portion of the Premises described as Landlord's Work in Exhibit C and prosecute the same diligently to completion, in which event this Lease shall continue in full force and effect; or 18.1.2 Damage Near End of Lease Term: In the event of partial or total destruction of the Premises during the last two (2) years of the Lease Term, Landlord and Tenant shall each have the option to terminate this Lease on notice to the other of exercise thereof within thirty (30) days after such destruction. For purposes of this Article XVIII, "partial destruction" shall mean destruction to an extent of more than thirty-three and one-third percent (33-1/3%) of the full replacement cost of the Premises as of the date of destruction. 18.2 Uninsured Casualty: If the Premises are damaged by any casualty not required to be covered by Landlord's insurance or self-insurance or if the cost of Reconstruction exceeds the insurance proceeds recoverable by Landlord, Landlord shall have the election, and shall within ninety (90) days following the date of such damage give Tenant notice of Landlord's election, either (i) to commence Reconstruction of that portion of the Premises described as Landlord's Work in Exhibit C and prosecute the same diligently to completion, in which event this Lease shall continue in full force and effect, or (ii) not to perform such Reconstruction of such portion of the Premises, in which event this Lease shall cease and terminate not later than sixty (60) days after Landlord's notice of its election to terminate. 18.3 Construction Provisions: In the event of any Reconstruction of the Premises under this Article XVIII, said Reconstruction shall substantially conform to the provisions of Exhibit C and shall cover all of the work set forth therein under "Description of Landlord's Work" and "Description of Tenant's Work." Landlord shall reconstruct the Premises only to the extent of the work described as "Landlord's Work" in Exhibit C. Tenant, at it sole cost and expense, shall reconstruct all items described as "Tenant's Work" in Exhibit C and shall replace its merchandise and Personal Property. Tenant shall commence such reconstruction of Tenant's Work and replacement of Tenant's merchandise and Personal Property promptly upon delivery to it of possession of the Premises and shall diligently prosecute the same to completion. 18.4 Release of Liability: Upon any termination of this Lease under any of the provisions of this Article XVIII, the parties shall be released thereby without further obligation to the other party coincident with the surrender of possession of the Premises to Landlord, except for obligations which have theretofore accrued and are then unpaid. In the event of termination, Landlord and Tenant shall share in the proceeds from Tenant's insurance (including selfinsurance and deductibles) maintained pursuant to Subsection 17.2.5 as their respective interests may appear. 18.5 Waiver of Statutory Rights. Tenant hereby waives any statutory rights of termination which may arise by reason of any partial or total destruction of the Premises which Landlord is obligated to restore or may restore under any of the provisions of this Lease. 37 44 18.6 Major Destruction: Notwithstanding any of the foregoing provisions of this Article XVIII, if either the Project or the Premises are damaged to an extent of more than thirty-three and one-third percent (33-1/3%) of the full replacement cost of the Project or the Premises (as the case may be) as of the date of destruction, or is totally destroyed, Landlord shall have the right to terminate this Lease by giving notice of such termination to Tenant within ninety (90) days after such destruction. ARTICLE XIX. OCCUPANCY TRANSACTIONS 19.1 Restrictions: Except as otherwise provided herein, Tenant shall not enter into, or consent to, an Occupancy Transaction nor shall an Occupancy Transaction occur, without first procuring Landlord's consent (except that in the case of a non-consensual Occupancy Transaction, Tenant shall request Landlord's consent as soon as possible), and any attempt to do so without such prior written consent shall be void and at Landlord's option shall terminate this Lease. Subject to the provisions of the next succeeding paragraph hereof, Landlord shall not withhold its consent unreasonably but may condition such consent upon compliance with this Article. The parties agree, however, that the exact use, manner of operation of the Premises and conduct of business thereon by Tenant will have an impact on the quality and reputation of the Project. Accordingly, the parties agree that without limiting any other reasonable criteria which Landlord may utilize, Landlord may withhold its consent, and in so doing will not be deemed to be acting unreasonably, if Landlord in the exercise of reasonable business judgment determines that the Transferee has insufficient business reputation or experience in the operation of the business being conducted by Tenant (or by Tenant's then-current Transferee, if any), or that the financial condition of the Transferee is inadequate (notwithstanding that Tenant may remain liable) or that it is likely that the Transferee will not be able to generate the same level of Percentage Rental as would Tenant, or that the transfer may lead to a breach of this Lease. In the event that Tenant desires to gain Landlord's consent to a proposed Occupancy Transaction pursuant to this Article 19, Tenant shall provide Landlord with written request for consent to such Occupancy Transaction, accompanied by information reasonably sufficient to enable Landlord to evaluate Tenant's request for consent in accordance with the aforesaid factors. In the event that prior to the exercise by Tenant of its Option to extend the term of this Lease, Landlord consents to an Occupancy Transaction requested by Tenant where such consent is required under this Article XIX, then Tenant shall be relieved of liability under this Lease for the Option Term. Notwithstanding the foregoing, at any time within thirty (30) days after receiving Tenant's written notice of a proposed Occupancy Transaction, Landlord shall have the right, in its sole discretion, to either: (i) grant or withhold its consent in accordance with the foregoing paragraph, accompanied by specific reason(s) for its decision in the event that Landlord denies consent; or (ii) terminate this Lease with respect to the portion of the Premises that Tenant proposes to assign or sublease; Landlord's right to terminate this Lease under this section may be revoked if the Tenant rescinds the assignment request within thirty (30) days after Landlord receiving Tenant's written notice of a proposed assignment or sublease. In the event of any such sublease or assignment approved by Landlord, Landlord shall receive [***] of the net sales price directly attributable to the Lease assignment/sublease (e.g., after deduction for Tenant's costs of sale (such as commissions, improvement costs, fees, etc.) and after deduction of the unamortized value of Tenant's leasehold improvements and fixtures (after deducting any Landlord Construction Allowance) installed in the Premises by or at the direction of Tenant which are sold as part of the assignment or sublease, said unamortized value to be determined on a straight-line depreciation method allowed by the Internal Revenue Code of 1986 (as amended) assuming a useful life equal to the remainder of the Lease Term (including the Option Term) at the time the improvement or fixture is placed in service or installed in or upon the Premises). Landlord shall notify Tenant of its consent or denial of consent to any proposed Occupancy Transaction in accordance with the provisions of this paragraph within 10 days after receipt of Tenant's written request and any *** Confidential treatment requested. 38 45 documents or information reasonably requested by Landlord and relating to such proposed Occupancy Transaction. 19.2 Nullity: Any purported Occupancy Transaction consummated in violation of the provisions of this Article XIX shall be null and void and of no force or effect. 19.3 Definitions: As used in this Article, the following definitions shall apply: 19.3.1 "Occupancy Transaction" means any (i) assignment of some or all of Tenant's interest and rights in the Lease and/or the Premises, including Tenant's right to use, occupy and possess the Premises, or (ii) sublease of Tenant's right to use, occupy and possess the Premises, in whole or in part, or (iii) granting of a concession or management arrangement pertaining to the Premises in whole or part, or (iv) mortgage, deed of trust, pledge, hypothecation, lien, or other security arrangement with respect to Tenants interest in the Lease, foreclosure of which may result in an Occupancy Transaction; provided, however, furniture, fixture and equipment financing shall not constitute an "Occupancy Transaction", or (v) change of Control of Tenant, or (vi) permitting the Premises or any part thereof to be occupied by anyone other than Tenant or Tenant's employees (as such employees may change from time to time). Notwithstanding anything to the contrary contained in this Article 19, an "Occupancy Transaction" shall not include, and Tenant shall not be required to obtain Landlord's consent for any of the following transactions: (a) any assignment, sublease or other transfer of this Lease of all of the Premises to (A) any person or entity which is a parent (owning all or substantially all of the ownership interest of Tenant) or a wholly-owned subsidiary of Tenant, or (B) any corporation or other entity into which or with which all or substantially all of the assets or ownership interests of Tenant are merged or consolidated; or (b) any assignment, sublease or other transfer of this Lease of all of the Premises to any person or entity acquiring all or substantially all of the assets of Tenant operating under the same trade name of Tenant as of the date of such transfer, or (c) any sale, assignment, or other transfer of all of the shares of stock, partnership interests, limited liability company membership interests, or other ownership interests in Tenant resulting in a change in the Control of Tenant; or (d) in connection with any public offering of stock in Tenant, transfer of stock between, or among any partners, members, owners, limited partners, or other persons or entities having an ownership interest in Tenant. Tenant covenants that in the event of the occurrence of any of the foregoing transactions (a) through (d) above (excluding an initial public offering under item (d)), that, as a result thereof, there will not be a material and adverse change in Tenant's net worth (or if there is a material and adverse change in Tenant's net worth, Tenant will provide reasonable additional financial security to Landlord to compensate for the material and adverse change); and, there will not be a material change in Tenant's senior management (or if there is a material change in Tenant's senior management, there will be competent and experienced new senior management with regard to the Permitted Use). 19.3.2 "Transferee" means a proposed buyer, assignee, sublessee, mortgagee, beneficiary, pledge, concessionaire, manager or other recipient of Tenant's interests, rights or duties in this Lease or the Premises in an Occupancy Transaction. 19.3.3 "Control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. 19.4 Landlord's Costs: Tenant shall pay to Landlord the amount of [***] for each Occupancy Transaction to which Landlord shall have consented, which amount shall be deemed to reimburse Landlord for its expenses in reviewing and approving Tenant's request for Landlord's consent, in addition to the sales percentage price described in Section 19.1 above. *** Confidential treatment requested. 39 46 ARTICLE XX. BANKRUPTCY; INVOLUNTARY TRANSFERS 20.1 Right of Termination: Should any of the following events occur, Landlord shall have the right (but not the obligation) to terminate this Lease and any interest of Tenant herein, effective with the commencement of the event: 20.1.1 Receivership: Proceedings are instituted whereby all, or substantially all, of Tenant's assets are placed in the hands of a receiver, trustee or assignee for the benefit of Tenant's creditors, and not placed back in Tenant's hands within ninety (90) days; 20.1.2 Attachment: Any creditor of Tenant institutes judicial or administrative process to execute on, attach or otherwise seize any of Tenant's merchandise or Personal Property, located on the Premises and Tenant fails to discharge, set aside, exonerate by posting a bond, or otherwise obtain a release of such property within thirty (30) days; 20.1.3 Bulk Sale: Tenant makes a bulk sale of all, or substantially all, of Tenant's merchandise or Personal Property located on the Premises, except in accordance with Section 13.1, or except in a permitted Occupancy Transaction under Article XIX, and fails to replace the same with similar items of equal or greater value and utility within ten (10) days; or 20.1.4 Intentionally Deleted. 20.2 Requests for Information: Within ten (10) days after Landlord's request therefor, Tenant shall provide Landlord and Landlord's mortgagee or proposed mortgagee, as Landlord shall specify, such financial, legal and business information concerning any of the events described in Section 20.1 as Landlord shall request. 20.3 Assignment by DIP or Trustee: Notwithstanding anything to the contrary contained herein, if Tenant, as a debtor-in-possession (the "DIP"), or a trustee for the estate in bankruptcy of Tenant (the "Trustee"), assumes this Lease and proposes to assign this Lease, or sublet the Premises (or any portion thereof), pursuant to the provisions of the Federal Bankruptcy Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code") to any person, partnership, corporation or other entity (the "Proposed Assignee"), then such assumption of this Lease and any such assignment or sublease shall be subject to all of the following: 20.3.1 The DIP, or the Trustee, as the case may be, shall give Landlord written notice at least ten (10) days prior to the date that the DIP or the Trustee, as the case may be, shall make application to a court of competent jurisdiction for authority and approval to enter into such assumption and assignment or subletting, which notice shall set forth: (i) the name and address of the Proposed Assignee; (ii) all of the terms and conditions of the Proposed Assignee's offer; and (iii) the adequate assurances to be provided Landlord to assure such Proposed Assignee's future performance under this Lease, including, without limitation, the assurances referred to in Section 365(b)(3) of the Bankruptcy Code. Landlord, upon receipt of such notice, shall have the prior right and option, to be exercised by notice to the DIP or the Trustee, as the case may be, given at any time prior to the effective date of such proposed assignment or sublease, to accept an assignment or sublease of this Lease by any other assignee or sublessee acceptable to Landlord, upon the same terms and conditions and for the same consideration, if any, as the Proposed Assignee, less any brokerage commissions which may be payable out of the consideration to be paid by or for the assignment of this Lease; 20.3.2 If the rental agreed upon between the DIP or the Trustee, as the case may be, and the Proposed Assignee under any proposed assignment or sublease of the Premises 40 47 (or any part thereof) is greater than the rental rate that Tenant must pay Landlord hereunder for that portion of the premises that is subject to such proposed assignment or sublease, or if any consideration shall be received by the DIP or the Trustee, as the case may be, in connection with any such proposed assignment or sublease, then all such excess rental or such consideration shall be paid or delivered to Landlord, and shall not constitute property of the DIP, the Trustee, or of the estate of Tenant, as the case may be, within the meaning of the Bankruptcy Code; and 20.3.3 Any proposed assignment or sublease of this Lease by the DIP or the Trustee, as the case may be, pursuant to provisions of the Bankruptcy Code shall provide adequate assurance of future performance under this Lease by the Proposed Assignee, which adequate assurance shall include, as a minimum, the following: (i) any Proposed Assignee of the Lease shall deliver to Landlord a security deposit in an amount equal to at least three (3) months Minimum Annual Rental accruing under this Lease; (ii) any Proposed Assignee of the Lease shall provide to Landlord an unaudited financial statement, certified to be accurate by such Proposed Assignee or by an officer, director or partner thereof and dated no later than six (6) months prior to the effective date of such proposed assignment or sublease, which financial statement shall show the Proposed Assignee to have a net worth equal to at least the Minimum Annual Rental that shall accrue under this Lease for the next year of the Lease Term, (iii) any Proposed Assignee shall pay all Rental not previously paid under this Lease including all payments which have been suspended, mitigated, nullified or reduced to a claim of any kind against Tenant or Tenant's property, by operation of law or otherwise; and (iv) any Proposed Assignee shall assume Tenant's obligation to pay Landlord's attorneys' fees pursuant to Section 30.25 hereof. This Section 20.3 shall not apply to any assignment or sublease other than pursuant to the provisions of the Bankruptcy Code, nor shall it in any way limit Landlord's rights to damages or other relief in a proceeding under the Bankruptcy Code. ARTICLE XXI. SECURITY DEPOSIT 21.1 Payment: On or before the Effective Date, Tenant shall deposit with Landlord the sum specified in Section 1.14 as "Security Deposit." Said deposit shall be held by Landlord without liability for interest as security for the faithful performance by Tenant of all of its obligations under this Lease. 21.2 Application: If any of the rental herein reserved or any other sum payable by Tenant to Landlord shall be overdue or paid by Landlord on behalf of Tenant, or if Tenant shall otherwise be in default beyond the applicable cure period after notice from Landlord under any of the other monetary or other terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy which Landlord may have on account thereof, appropriate and apply said entire Security Deposit, or so much thereof as may be necessary, to compensate Landlord for such rental or other sum, or out-of-pocket loss or damage (i.e., excluding (except if pursuant to a judgment) consequential and special damages but including, for example, reasonable attorneys' fees) sustained by Landlord as a result thereof, and Tenant shall forthwith upon demand restore said Security Deposit to the original sum deposited. Subject to the foregoing sentence, said Security Deposit shall be refunded in full to Tenant no later than thirty (30) days after Tenant has surrendered possession of the Premises to Landlord at the expiration or earlier termination of the Lease Term. If Landlord claims deductions against the Security Deposit, Landlord shall return any remaining portion to Tenant within such thirty (30) day period. In the event of bankruptcy or other debtor-creditor proceedings against Tenant, as specified in Section 20.1, the Security Deposit shall be deemed to be applied first to the payment of rental and other charges due Landlord for the earliest periods prior to the filing of such proceedings. 41 48 21.3 Transfer of Landlord's Interest: Landlord may deliver the funds deposited hereunder by Tenant to the purchaser or assignee of Landlord's interest in the Premises in the event that such interest is transferred and thereupon Landlord shall be discharged from any further liability with respect to such Security Deposit. This Section 21.3 shall also apply to any subsequent transfers of any successor Landlord's interest in the Premises. ARTICLE XXII. DEFAULTS BY TENANT; REMEDIES 22.1 Events of Default: The occurrence of any of the following shall constitute a default by Tenant and a breach of this Lease: 22.1.1 Failure to Pay Rent: Failing or refusing to pay any amount of Rental when due in accordance with the provisions of this Lease; 22.1.2 Breach of Operating Covenants: Failing or refusing to occupy and operate the Premises in accordance with Article XI; or 22.1.3 Other Curable Defaults: Failing or refusing to perform fully and promptly any covenant or condition of this Lease, other than those specified in Subsections 22.1.1 and 22.1.2 above, the breach of which Tenant is reasonably capable of curing after notice from Landlord. 22.2 Notices: When this Lease requires service of a notice, that notice shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by California Code of Civil Procedure section 1161 or any similar or successor statute. Following the occurrence of any of the events specified in Sections 22.1, Landlord shall give Tenant, and any subtenant, a written notice specifying the nature of the default and the provisions of this Lease breached and demanding that Tenant, and any subtenant, either fully cure each such default within the time period specified in the corresponding subsections below or quit the Premises and surrender the same to Landlord: 22.2.1 Failure to Pay Rent: For nonpayment of any amount of Rental, ten (10) days after receiving written notice from Landlord regarding the same; 22.2.2 Breach of Operating Covenants: For breach of Article XI, ten (10) days after receiving written notice from Landlord regarding the same, except as otherwise provided in Section 22.3; and 22.2.3 Other Curable Defaults: For other curable defaults, thirty (30) days after receiving written notice from Landlord regarding the same; provided, however, that if such default cannot be cured within said time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure. To the extent permitted by applicable State law, the time periods provided in this Section 22.2 for cure of Tenant's defaults under this Lease or for surrender of the Premises shall be in lieu of, and not in addition to, any similar time periods prescribed by applicable State law as a condition precedent to the commencement of legal action against Tenant for possession of the Premises. 22.3 Non-Curable Defaults: With regard to any breach of this Lease which is not capable of cure or if Tenant shall have committed three (3) or more material curable breaches of 42 49 Tenant's operating covenants (each for which Tenant was provided a notice to cure pursuant to Section 22.2.2) during any twelve (12) month period after the Effective Date, Landlord shall have the right to give Tenant and any subtenant, a notice specifying the nature of the default and the provisions of this Lease so breached, and Landlord shall have the right to demand in said notice that Tenant close the Premises for business within five (5) days after Tenant receives such notice and vacate the Premises within thirty (30) days after tenant receives such notice. 22.4 Landlord's Rights and Remedies: Should Tenant fail to cure within the time periods specified in Section 22.2 any default specified in Subsections 22.1.1, 22.1.2 or 22.1.3, or fail to quit the Premises in accordance with Section 22.3, Landlord may exercise any of the following rights without further notice or demand of any kind to Tenant or any other person, except as required by applicable State law: 22.4.1 Termination of Lease: The right of Landlord to terminate this Lease and Tenant's right to possession of the Premises and to reenter the Premises, take possession thereof and remove all persons therefrom, following which Tenant shall have no further claim thereon or hereunder; and 22.4.2 Reentry of the Premises: The right of Landlord, without terminating this Lease and Tenant's right to possession of the Premises, to reenter the Premises and occupy the whole or any part thereof for and on account of Tenant and to collect any unpaid rentals and other charges which have become payable or which may thereafter become payable; and 22.4.3 Termination after Reentry: The right of Landlord, even though it may have reentered the Premises in accordance with Subsection 22.4.2, to elect thereafter to terminate this Lease and Tenant's right to possession of the Premises; and 22.4.4 Continued Enforcement of Lease: The right of Landlord to continue to enforce all Landlord's rights and remedies under this Lease, including the right to recover rental as it becomes due under this Lease. Tenant further covenants that the service by Landlord of any notice pursuant to the unlawful detainer statutes of the State of California and the surrender of possession pursuant to such notice shall not (unless Landlord elects to the contrary at the time of, or at any time subsequent to, the serving of such notice and such election is evidenced by a notice to Tenant) be deemed to be a termination of this Lease. The rights and remedies given to Landlord in this Section 22.4 shall be additional and supplemental to all other rights or remedies which Landlord may have under laws in force when the default occurs. 22.5 Landlord's Damages: Should Landlord terminate this Lease and Tenant's right to possession of the Premises pursuant to the provisions of Subsections 22.4.1 or 22.4.3 or the provisions of Section 20.1, Landlord may recover from Tenant as damages all of the following: 22.5.1 Delinquent Rent: The worth at the time of award of any unpaid rental that had been earned at the time of such termination; 22.5.2 Rent After Termination Until Judgment: The worth at the time of award of the amount by which the unpaid rental that would have been earned after termination until the time of award exceeds such rental loss Tenant proves could have been reasonably avoided; 22.5.3 Rent After Judgment: The worth at the time of award of the amount by which the unpaid rental for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; 43 50 22.5.4 Other Compensation: Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including any costs or expense incurred by Landlord in (a) retaking possession of the Premises, including reasonable attorney fees therefor, (b) maintaining or preserving the Premises after such default, (c) preparing the Premises for reletting to a new tenant, including repairs or alterations to the Premises for such reletting, (d) leasing commissions, and (e) any other costs necessary or appropriate to relet the Premises; and 22.5.5 Additional or Alternative Documents: At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time-to-time by the laws of the State of California; and 22.5.6 Calculation of Damages: As used in Subsections 22.5.1 and 22.5.2, the "worth at the time of award" is computed by allowing [***]. As used in Subsection 22.5.3, the "worth at the time of award" is computed by discounting such amount at the discount rate of the [***]. All rental other than Minimum Annual Rental shall, for the purposes of calculating any amount due under the provisions of Subsection 22.5.3, be computed on the basis of the average monthly amount thereof accruing during the immediately preceding sixty (60) month period, except that, if it becomes necessary to compute such rental before such a sixty (60) month period has occurred, then such rental shall be computed on the basis of the average monthly amount hereof accruing during such shorter period. 22.6 Merchandise and Personal Property: Without limitation of Landlord's rights under Section 13.1, in the event of default by Tenant (i.e., after notice and expiration of any applicable cure period set forth in such Article XXII) pursuant to which Tenant either vacates the Premises or is dispossessed of the Premises, all of Tenant's merchandise and Personal Property including the driving simulators and Tenant's other related fixtures and equipment) shall, at Landlord's option: (a) remain on the Premises and, Landlord, continuing during the length of said default, shall have the right to take the exclusive possession of same and to use the same free of rent or charge until all defaults have been cured if and only if (i) no secured party has a lien on such merchandise and Personal Property, and (ii) if required by NASCAR, Landlord has a license to use the "NASCAR" name and related intellectual property pursuant to a license agreement with NASCAR or such other licensor that has the rights to so license such intellectual property, and (iii) such license agreement (if any) and Landlord's use of the "NASCAR" name and related intellectual property does not conflict with any agreement between Tenant and NASCAR or such other licensor that has the rights to so license such intellectual property; provided, however, if Landlord takes possession of such merchandise and/or Personal Property, any and all revenues derived therefrom by Landlord shall be applied toward the mitigation of Tenant's default under this Lease; (b) be removed by Landlord from the Premises and placed in storage at a public warehouse at the expense and risk of Tenant; or (c) be removed by Tenant upon demand by Landlord. 22.7 Self-Help Cure Rights: If Tenant is in default (after notice and expiration of any applicable cure period) under any provisions of this Lease, Landlord may, but shall not be obligated to, take such action as Landlord in good faith determines to be appropriate to remedy or mitigate such default. Tenant shall pay, as Additional Rent, all reasonable out-of-pocket costs incurred by Landlord in following such course and in remedying or mitigating such default. The exercise of rights by Landlord shall not constitute a waiver of any default by Tenant or of any of Landlord's other rights or remedies. 22.8 No Waiver: The waiver by either Landlord or Tenant of any breach of any term, covenant or condition contained in this Lease shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach thereof, or of any other term, covenant or *** Confidential treatment requested. 44 51 condition contained in this Lease. Landlord's subsequent acceptance of partial rental or performance by Tenant shall not be deemed to be an accord and satisfaction or a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease or of any right of Landlord to a forfeiture of the Lease by reason of such breach, regardless of Landlord's knowledge of such preceding breach at the time of Landlord's acceptance. 22.9 Waiver of Notice: Notwithstanding anything to the contrary contained in this Article XXII, Tenant waives (to the fullest extent permitted under law) any written notice, other than such notice as this Article XXII specifically requires or as required by law for the service of process in legal proceedings, which any statute or law now or hereafter in force prescribes be given Tenant. ARTICLE XXIII. DEFAULTS BY LANDLORD; REMEDIES If Landlord shall neglect or fail to perform or observe any of the terms, covenants, or conditions contained in this Lease on its part to be performed or observed within thirty (30) days after notice from Tenant of default or, when more than thirty (30) days shall be required to cure the default, if Landlord shall fail to commence such cure within said thirty (30) day period or thereafter fail to proceed diligently to cure such default, then Landlord shall be liable to Tenant for any and all damages sustained by Tenant as a result of Landlord's breach. ARTICLE XXIV. EMINENT DOMAIN The word "taking" (and its variants, such as "taken") as used in this Article shall mean any appropriation, condemnation or taking under the power of eminent domain by any public or quasi-public authority or any other entity having the right to exercise such power and includes a voluntary sale or conveyance under imminent threat and in lieu of condemnation. If a taking occurs which involves real property and/or improvements constituting the Project having a fair market value of at least thirty-three and one-third percent (33 1/3%) of the fair market value of the entire Project, whether or not the Premises thereof are also taken, Landlord or Tenant shall have the right to terminate this Lease on forty-five (45) days' written notice to the other party. If more than twenty-five percent (25%) of the Floor Area of the Premises is taken, Tenant shall have the right to terminate the Lease upon forty-five (45) days' written notice to Landlord. In the event of such termination, both Landlord and Tenant shall thereupon be released from any liability thereafter accruing hereunder. If this Lease is not terminated following a taking, then Tenant shall continue to occupy that portion of the Premises which shall not have been appropriated or taken and the parties shall proceed as follows: (a) at Landlord's cost and expense and as soon as reasonably possible, Landlord shall restore the Premises on the land remaining to a complete unit of like quality and character as existed prior to such appropriation or taking, and (b) the Minimum Annual Rental shall be reduced on an equitable basis, taking into account the relative values of the portion taken as compared to the portion remaining. Tenant hereby waives any statutory rights of termination which may arise by reason of any partial taking of the Premises under the power of eminent domain. If this Lease is terminated or modified as hereinabove provided, Landlord shall be entitled to receive the entire condemnation award for the taking of all real property interests in the Premises. The rental and other charges for the last month of Tenant's occupancy shall be prorated, and Landlord shall refund to Tenant any rental or other charges paid in advance. Tenant's right to receive a condemnation award for the taking of its merchandise, Personal Property, goodwill, relocation expense and/or interest in other than the real property taken shall not be affected in any manner by the provisions of this Article, provided Tenant's award does not reduce or affect Landlord's award. 45 52 ARTICLE XXV. SALE OR MORTGAGE BY LANDLORD From and after a sale or other conveyance of Landlord's interest in and to the Project, Landlord shall be released from all liability to Tenant and Tenant's successors and assigns arising from this Lease because of any act, occurrence or omission of Landlord occurring after such sale. ARTICLE XXVI. SUBORDINATION/NONDISTURBANCE; ATTORNMENT; ESTOPPEL 26.1 Subordination/Nondisturbance: Within twenty (20) days after the receipt of a request from Landlord, Tenant will subordinate its rights under this Lease to the rights or lien or security interest of any present or future mortgage, deed of trust on the Project (including all future advances made thereunder subsequent to the Effective Date of this Lease), lease of the entire Project in which Landlord is the lessee, or any reciprocal easement agreement, as such may now or in the future burden the Premises or any building hereafter placed upon the land of which the Premises are a part. Notwithstanding the foregoing Tenant shall not be required to subordinate to any future lease, security interest, mortgage, or deed of trust unless the secured party or lessor delivers a nondisturbance agreement in a recordable, commercially reasonable form as long as Tenant is not in default hereunder (after notice and expiration of any cure period), and subject to the terms of this Lease. 26.2 Attornment: If landlord conveys in a sale all of its rights and duties in and to the Lease and/or the Premises and the realty underlying the Premises, or if an interest in Landlord or Landlord's equity of redemption or other interest in the Lease and the Premises under a mortgage, deed of trust, pledge or security agreement is foreclosed judicially or nonjudicially, upon the request of Landlord's lawful successor, Tenant shall attorn to said successor, provided said successor accepts the Premises subject to this Lease and agrees to perform all of Landlord's obligations under the Lease. 26.3 Estoppel Certificate: At any time and from time-to-time on not more than twenty (20) days' notice from Landlord, Tenant shall execute and deliver to Landlord a statement (the "Estoppel Certificate"), in a form reasonably acceptable to Landlord, ratifying this Lease and certifying as to the date that Tenant accepted and began occupancy of the Premises, the amount of Minimum Annual Rental then payable under this Lease and the period through which such Rental has been paid, the expiration date of the Lease, and such other matters as Landlord may reasonably request. Unless Tenant shall have notified Landlord within said twenty (20) day period of any qualifications Tenant may have to the statements in the Estoppel Certificate, anyone transacting with Landlord in a sale or mortgage of the Premises shall have the right to rely on the accuracy of such statements in the Estoppel Certificate or deemed made by Tenant pursuant to this Section. ARTICLE XXVII. TITLE TO PREMISES Landlord represents and warrants that as of the Effective Date Landlord shall have good and marketable title to the Premises subject to (a) covenants, conditions, restrictions, easements and rights of record and (b) the effect of any zoning laws of the city, county and state where the Project is located and (c) general and special Taxes not delinquent. Landlord covenants that Tenant will not be unreasonably interfered with as a result of any of the covenants, conditions, restrictions, easements and rights of record, provided Tenant is in full compliance with the provisions of this Lease. 46 53 ARTICLE XXVIII. QUIET ENJOYMENT Landlord agrees that Tenant, upon paying the rental and performing the terms, covenants and conditions of this Lease, may quietly have, hold and enjoy the Premises from and after Landlord's delivery of the Premises to Tenant in accordance with Section 4.2, and until the end of the Lease Term, subject, however, to the other provisions of this Lease. ARTICLE XXIX. NOTICES AND CONSENTS All notices, consents, approvals, requests, demands, releases, waivers, certifications, and other communications permitted or required to be given under, or referred to in, this Lease shall be in writing and shall be and deemed duly served or given (i) when actually delivered, if personally delivered or delivered by overnight or other courier or delivery service which confirms delivery in writing, or (ii) within five (5) business days after deposit in the U.S. Mail, if sent by certified mail, postage prepaid, return receipt requested. Such notices shall be addressed to all persons entitled to receive notice for such party pursuant to Section 1.17. Landlord and Tenant may, from time-to-time by notice to the other, designate another place for receipt of future notices. ARTICLE XXX. MISCELLANEOUS 30.1 Lease Rate: For purposes of this Lease, the term "Lease Rate" shall be deemed to mean [***] above the annualized rate of interest publicly announced from time-to-time by Bank of America National Trust and Savings Association in San Francisco, California (or such other bank as Landlord may from time-to-time specify), as its "reference rate" or its "prime rate" unless such rate exceeds the maximum lawful rate under usury or similar laws in the State of California in which case it shall be deemed to mean such maximum lawful rate. 30.2 Financing Costs: Whenever in this Lease provision is made for Landlord to charge certain costs or expenses to Tenant which include financing costs, the amount of interest to be included in that calculation shall be two percent (2%) above the annual rate of yield available at the time of the particular transaction on a Treasury Note or bond of the United States of America maturing at approximately the end of the useful life or other relevant period selected by Landlord unless such rate exceeds the maximum lawful rate under usury or similar laws in the State of California in which case it shall be deemed to mean such maximum lawful rate. 30.3 Waiver or Consent Limitation: No term, covenant or condition of this Lease shall be deemed to have been waived by Landlord or Tenant unless such waiver is in writing and signed by the party to be charged with the waiver. A waiver of any given breach or default shall not be a waiver of any other breach or default. Consent to or approval of any act by one party requiring the other party's consent or approval shall not be deemed to waive or render unnecessary such other party's consent to or approval of any subsequent similar act. 30.4 Force Majeure: The occurrence of any of the following events shall constitute "Force Majeure" hereunder and excuse such obligations of Landlord or Tenant as are thereby rendered impossible or reasonably impracticable for so long as such event continues: lockouts; labor disputes; acts of God; inability to obtain labor, materials or reasonable substitutes therefor; governmental restrictions regulations or controls; judicial orders; enemy or hostile governmental action; civil commotion; fire or other casualty; and other causes beyond the reasonable control of the party obligated to perform. Notwithstanding the foregoing, the occurrence of such events shall not excuse Tenant's obligations to pay Minimum Annual Rental and Additional Rent (except to the extent that the payment of Minimum Annual Rental and/or Additional Rent is abated pursuant to *** Confidential treatment requested. 47 54 the terms or conditions of this Lease) or excuse such obligations as this Lease may otherwise impose on the party to obey, remedy or avoid such event. 30.5 Avoidance of Labor Disputes: In constructing or causing its contractor to construct, Alterations (as defined in Section 14.1) and Tenant's Work (as defined in Exhibit C) and throughout the Lease Term, Tenant shall conduct its activities in such a manner as to avoid any labor dispute which causes or is likely to cause stoppage or impairment of work, deliveries or any other services in the Project. If there shall be any such stoppage or impairment as the result of any such labor dispute or potential labor dispute, Tenant shall immediately undertake such action as may be necessary to eliminate such dispute or potential dispute, including (a) removing all disputants from the job site until such time as the labor dispute no longer exists, (b) seeking a temporary restraining order and other injunctive relief with regard to illegal union activities or a breach of contract between Tenant and Tenant's contractor, and (c) filing appropriate unfair labor practice charges. Should Landlord incur or sustain any Claims (as defined in Section 17.1) in connection with any such labor dispute or potential labor dispute, the provisions of Section 17.1 shall apply regardless of whether Tenant has performed its duties under this Section 30.5. 30.6 Landlord Calculations, Determinations and Requirements: Whenever this Lease contemplates that Landlord will make particular determinations, calculations, specifications, requirements, estimates or the like with respect to amounts payable by Tenant, Landlord shall make such determinations, etc., including the amount, allocation, proration and composition of charges and expenses, in a reasonable and equitable manner and acting in good faith. 30.7 Failure to Give Consent: If Landlord or Tenant fails to give any consent or approval referred to in this Lease, the other party hereto shall be entitled to specific performance in equity and shall have such other remedies as are reserved to it under this Lease, but in no event shall Landlord or Tenant be responsible in monetary damages for such failure to give consent or approval unless withholding maliciously or in bad faith. 30.8 Reasonableness: Except as expressly provided in this Lease, whenever this Lease provides that consent or approval of either party is required, such consent or approval will not be unreasonably withheld or delayed. The parties acknowledge that there are recent California cases interpreting lease provisions and imposing covenants of good faith and fair dealing together with reasonableness standards in connection with lease consents. There are certain provisions of this Lease, however, in which either Landlord or Tenant may withhold its consent "in its sole discretion." These specific provisions, which may be viewed as allowing such party in such instance to deviate from a standard of reasonableness which is imposed on Landlord and Tenant in connection with other provisions of this Lease, have been lengthily negotiated and bargained for and represent a material part of the consideration to be received by each party. The parties, bearing in mind the rights, duties and obligations of the parties to honor the implied covenants of good faith and fair dealing, have specifically negotiated for and agreed that it is the intent of the parties that Landlord or Tenant, where expressly provided, may exercise their respective consent authority pursuant to a standard of sole discretion. 30.9 Relationship of the Parties: Nothing contained in this Lease shall be deemed or construed as creating a partnership, joint venture, principal-agent, or employer-employee relationship between Landlord and any other person or entity (including Tenant) or as causing Landlord to be responsible in any way for the debts or obligations of such other person or entity. 30.10 Severability; Construction of Provisions: If any provision of this Lease shall be determined to be void by any court of competent jurisdiction, then such determination shall not affect any other provision of this Lease and all such other provisions shall remain in full force and effect. It is the intention of the parties hereto that if any provision of this Lease is capable of two 48 55 (2) constructions, one of which would render the Provision void and the other of which would render the provision valid, then the provision shall have the meaning which renders it valid. 30.11 Warranty of Authority: If either Landlord or Tenant is a corporation, the person or persons executing this Lease on behalf of either Landlord or Tenant hereby covenant and warrant as of the Effective Date that: (a) such corporation is a duly constituted corporation, qualified to do business in the State of California; (b) such corporation has paid all applicable franchise and corporate taxes; and (c) such corporation will file or pay when due all future forms, reports, fees and other documents necessary to comply with applicable laws. 30.12 Entire Agreement; Construction: This Lease supersedes and cancels any and all previous negotiations, arrangements, representations, brochures, displays, projections, estimates, agreements and understandings, if any, made by or between Landlord and Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret, construe, supplement or contradict this Lease. Phrases such as "including" and "for example" shall in no circumstances be construed as phrases of limitation but shall be treated as merely providing examples of the more general language which more general language shall be broadly and fairly construed. 30.13 Time of Essence: Time is of the essence in the performance of all covenants and conditions in this Lease for which time is a factor. 30.14 Joint and Several Liability: If two (2) or more persons or corporations execute this Lease as Landlord or Tenant, then and in such event the words "Landlord" or "Tenant' as used in this Lease shall refer to all such persons or corporations, and the liability of such persons or corporation for compliance with the performance of all the terms, covenants and conditions of this Lease shall be joint and several. 30.15 Successors and Assigns: The parties hereto agree that all the provisions of this Lease are to be construed as covenants and agreements and, except as otherwise specified, that said provisions shall bind and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 30.16 Right to Lease: The Project is being designed and will be constructed as a dining, retail and entertainment complex. Notwithstanding the foregoing, Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord, in the exercise of its sole business judgment, shall determine to best promote the interest of the Project. Tenant does not rely on the fact, nor does Landlord represent, that there shall be any specified occupants or number of occupants of space in the Project after the Effective Date. 30.17 Landlord's Right to Engage In Other Activities: Landlord may allow or cause additional structures and facilities to be constructed adjacent to the Project or in any part of Universal City, California, or elsewhere, including motion picture theaters, hotels, motels, retail shops, office buildings, restaurants and bars, including any business operations which might be competitive with that of Tenant's. Tenant expressly acknowledges Landlord's absolute right to own, operate, lease, franchise or otherwise be affiliated with the foregoing. 30.18 Landlord's Access: Landlord and Landlord's agents shall have the right, upon prior notice to Tenant, to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, lenders, or tenants provided that Landlord shall attempt to minimize interference with Tenant's business. Landlord may at any time during the last one hundred twenty (120) days of the Lease Term place on or about the Premises any ordinary "For Lease" signs, all without rebate of rent or liability to Tenant. 49 56 30.19 Attorneys' Fees: if, at any time after the Effective Date, either Landlord or Tenant institutes any action or proceeding against the other relating to the provisions of this Lease, the nonprevailing party in such action or proceeding shall reimburse the prevailing party for the reasonable expenses of attorneys' fees and all costs and disbursements incurred therein by the prevailing party, including any such fees, costs or disbursements incurred on any appeal from such action or proceedings. 30.20 Brokers: Landlord and Tenant warrant that neither has had any dealings with any realtor, broker, or agent, in connection with the negotiation of this Lease, excepting the person or persons specified in Section 1.16 and agrees to indemnify, defend and hold the other harmless from any cost, expense, or liability for any compensation, commission, or charges claimed by any realtor, broker, or agent, other than those named above, with respect to this Lease or the negotiation of this Lease if it has had dealings or negotiations with the broker making the claim. 30.21 Recordation: Tenant shall not record this Lease without prior consent from Landlord. 30.22 Nonbinding: This Lease and the terms and conditions set forth herein shall be of no force and effect, and neither party shall be bound hereby, unless and until this Lease has been duly executed and delivered by Landlord and Tenant. 30.23 Applicable Law/Jury Proceedings: This Lease shall be governed by and construed in accordance with the laws of the State of California. In the event of legal proceedings, Tenant and Landlord hereby knowingly, voluntarily and intentionally WAIVE THE RIGHT EITHER OF THEM OR THEIR HEIRS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LANDLORD'S ACCEPTING THIS LEASE. "LANDLORD" "TENANT" UNIVERSAL STUDIOS CITYWALK SILICON ENTERTAINMENT, INC. HOLLYWOOD A Division of Universal Studios, Inc. By: /s/ LARRY KURTZWEIL By: /s/ [ILLEGIBLE] ------------------------------- ------------------------------- Larry Kurtzweil Senior Vice President Title: V.P. Date: July 20, 1999 Date: 7/14/99 50 57 EXHIBIT A-1 SITE PLAN OF PROPERTY 1 OF 4 58 EXHIBIT A-1 SITE PLAN OF PROPERTY 2 OF 4 59 EXHIBIT A-1 SITE PLAN OF PROPERTY 3 OF 4 60 EXHIBIT A-1 SITE PLAN OF PROPERTY 4 OF 4 61 EXHIBIT A-2 PARKING AREAS 62 EXHIBIT B-1 FLOOR PLAN OF TENANT PREMISES [GRAPHIC] 63 1 SIGN Metal Face w/"Pop-through" Graphics Projected from Scrim similar design to our Irvine Spectrum Sign 2 SCRIM Perforated Metal w/Faux Painted Race Track. Will provide shop dwgs. for final Approval. 3 RACERS Authentic NASCAR Stock Cars 4 MARQUEE Checkerboard Metal Fascia w/Crossed Flags mounted on existing ellipsoidal Sign frame 5 LIGHTING Lit remotely from building across the courtyard 6 TRANSOM Replace existing lightbox faces with "NASCAR" logos 7 DOORS Clear Butt-glass Doors w/Crossed Flag Graphic 8 THEMING (2) Free-standing lightboxes 9 VIDEO (2) 50" Projection Monitors in Custom Cabinets Video presentations must be related to the Permitted Use. 10 ENTRY Checkerboard tile in existing tile locations only. [GRAPHIC] 64 [GRAPHIC] 65 EXHIBIT B-3 APPROVED PRELIMINARY DESIGN PLAN FOR INTERIOR LAYOUT [GRAPHIC] 66 EXHIBIT C PROVISIONS RELATING TO CONSTRUCTION OF TENANT'S PREMISES 1. LANDLORD'S WORK: Except as otherwise provided in this Exhibit C, Landlord, at its own cost and expense, will construct the following, ALL of which are herein collectively referred to as "Landlord's Work." A. Building of Which Premises Shall Form a Part: The building of which the Premises forms a part (herein referred to as the "Building") shall be constructed in accordance with the following criteria: 1. Structure: The structural frame including columns, beams, joists, and such other non-combustible materials as may be specified by Landlord. 2. Roof: The roof will be either a metal standing seam roof with an inverted roof membrane or a built-up roofing system, and will be insulated in accordance with applicable governmental requirements. 3. Exterior Walls: The exterior walls will be of masonry, pre-fabricated panels, structural metal studs, exterior gypsum sheathing with cementitious-finished wall system or such other materials as may be specified by Landlord and will have an R value in conformance with applicable governmental requirements. 4. Interior Walls: The exposed interior face of exterior facing walls will be exposed studs with exterior insulation only. B. Common Areas as set forth in Section 8.1 of the Lease: C. Heating, Air Conditioning and Ventilation: Equipment locations will be identified, via the Lease Outline Drawings, on the roof and/or mechanical wells for Tenants packaged heat pumps and, as appropriate, kitchen make-up air and exhaust units. Chase locations will be provided for running refrigerant pipes and controls through other tenant spaces. Locations for duct chases and/or exterior wall louvers for fresh air, return air and toilet exhaust for Tenant use will be identified on the Lease Outline Drawings. D. Work Within Tenant's Premises: Landlord's Work within the Premises shall be limited to the following: 1. Demising Walls: The demising walls which separate the Premises from other tenant areas and Common Areas will extend from the finished floor to the underside of the structural beam or roof deck. Gypsum board will be supplied and installed by Tenant at Tenant's expense. 2. Floors: For ground floor restaurant Premises which are not over structured slabs, Landlord will furnish a gravel bed at four inches (4") below the finished floor elevation selected by Landlord; tenants of such Premises shall not install a floor slab thicker than four inches (4") or change the floor elevation without Landlord's approval. For all other Premises, Landlord will provide a recessed concrete sub-slab with a brushed finish installed at an elevation identified on the Lease outline drawings. 67 3. Service doors: The service door supplied by Landlord, if any, shall be provided at or about the location shown on the Lease Outline Drawings. While Landlord may elect to provide hardware for the service door, it is Tenant's responsibility to provide hardware and locking devices adequate for Tenant's service and security requirements. Repair and replacement of the service door are Tenant's responsibility. 4. Ceilings: The ceilings will be exposed structure with exposed plumbing, conduit and other building services as required. Heights of exposed elements will be noted on the Lease Outline Drawings. E. Utility Services in the Premises: 1. Electric Service: Landlord will provide conduit from the meter base in the Project's main electrical room to the Premises. Electric service will be made available for the Premises at a location designated by Landlord in the Project's main electrical room and will be 400 Amps, 277/480 volts, 3 phase, 4 wire, 60 cycle alternating current. 2. Water Service: Landlord will provide a domestic cold water line with shutoff valve to a point in or adjacent to the Premises designated by Landlord. Such domestic cold water line shall have either a two (2) inch diameter if serving Premises to be used as a restaurant or a three-quarter (3/4) inch diameter for other Premises. Approximate location will be identified on the Lease Outline Drawings. Tenant shall install a water meter of a type and at a location approved by Landlord. 3. Telephone Service: Landlord will arrange with the telephone utility company to provide service at the Project's main telephone room with a minimum two (2) inch conduit to the Premises. Approximate location will be identified on the Lease Outline Drawings. 4. Gas service: If the Premises are to used as a restaurant, Landlord will provide an interior three-(3) inch natural gas branch, valved and capped at a location selected by Landlord. Approximate location will be identified on the Lease Outline Drawings. 5. Sanitary Sewer Service: If the Premises are to used as a restaurant, Landlord will stub two plugged four (4) inch sanitary outlets (one for grease waste and one for regular waste) at locations selected by Landlord to which Tenant shall connect. Otherwise, Landlord will provide a four (4) inch sanitary line under slab in the Premises to which Tenant shall connect. Retail Tenant Spaces will have vent line installed as indicated on the Lease Outline Drawings. 6. Sprinkler Service: A fire protection sprinkler system including feeds and/or cross mains and branch lines installed in a grid pattern designed to Factory Mutual standards for unoccupied space, will be located within the Premises at an elevation above the maximum ceiling height. The design of the system hydraulically shall provide coverage densities established by Factory Mutual. Their criteria for retail spaces is 0.15 density per 2,500 square feet of area and 0.10 density per 1,500 square feet for restaurant spaces. Modifications of the system to meet Tenant's design will be provided by Landlord at Tenant's expense or, at Landlord's option, by Tenant provided that Tenant uses a Landlord approved licensed sprinkler contractor. Tenant's sprinkler layout shall not exceed the base building design parameters. F. Openings: Any structural openings or penetrations in roofs, demising walls, exterior walls or floor slabs for any purpose will be furnished at Landlord's option by Landlord at Tenant's expense. Landlord reserves the right to refuse to permit the furnishing of any openings which exceed the capability of the structural system or which, in Landlord's opinion, would have an appearance detrimental to the Building. 2 68 II. TENANT'S WORK: All work set forth in this Section 11 and all other work not specifically designated as Landlord's Work by Section I which is necessary to complete the Premises in accordance with Tenant's Plans and for the Premises to be ready to open for business to the public shall be done by Tenant at Tenant's expense, and is herein collectively referred to as "Tenant's Work." A. Construction Type: All Tenant construction must be non-combustible. All finishes shall comply with applicable governmental requirements for both flame spread and smoke ratings. All concealed framing above ceiling or soffit shall be made of steel studs or other fireproof materials. B. Demising Partitions: All demising partitions between Tenant's space and adjacent space must be fully sheathed using 5/8" Type X gypsum board, taped and finished, from floor to structure above. C. Mezzanines: Landlord acknowledges that Tenant will be installing a mezzanine for its observation deck subject to Landlord's approval of Tenant's final plans. All mezzanines, if approved, must meet local building codes, be of fireproof construction, have complete sprinkler coverage, and be approved by Landlord's structural engineer with respect to design and attachment to the Building. D. Floors: The maximum live floor load shall be one hundred (100) pounds per square foot on the first floor. Above the first floor, the maximum live floor load shall be eighty (80) pounds per square foot plus twenty (20) pounds per square foot load for partitions. 1. Sales Area: The floor slab shall be covered with floor finish materials approved by Landlord. All Tenant floor finishes must be installed to taper or match the elevation of the projects adjacent finished walkway surfaces. All tapers must be one quarter (1/4) inch per foot or less. 2. Stock Room, Service or Other Non-Sales Areas: The concrete floor slab provided by Landlord must be sealed by Tenant with a sealant approved by Landlord. If the concrete floor slab is covered, floor finish materials must be approved by Landlord. 3. Kitchens, Bars, Food Preparation Areas: Floors shall be thick-set quarry tile with minimum one quarter (1/4) inch to a foot slope to all required drains. A waterproof membrane shall be installed between the setting bed and structural slab, and shall run a minimum of six (6) inches up all walls, curbs, and other vertical surfaces. Membrane shall be Latacrete 9235 or equal. All floor penetrations shall be sleeved, grouted, and made waterproof in accordance with details shown in the Lease Outline Drawings. All floor drains and floor sinks shall have a minimum two (2) foot by two (2) foot lead flashing in accordance with details in the Lease Outline Drawings. Floor drains shall be required at each compartmentalized utensil sink, dishwashing machine, janitorial sink, and ice machine. 4. Toilet Rooms: All toilet rooms must have a non-porous floor covering with a waterproofing membrane installed under the finished flooring and an integral six (6) inch high base sealed to the floor finish material. All non-porous floor covering shall be of commercial grade with a non-slip surface. Tenant shall provide a minimum of one (1) floor drain in each toilet room. E. Painting and Decorating: Exposed walls shall have a minimum two coat finish and all natural wood a minimum of one sealer coat. The, walls and ceilings of the toilet rooms shall have a two-coat, semi-gloss finish. 3 69 F. Ceilings: All ceilings must be suspended from beams and/or floor decking. No ceiling may be suspended from roof decking. Any ceiling weighing over five (5) pounds per square foot must attach to primary structural members. All existing fireproofing or insulation must be protected and repaired if damaged. All ceiling attachment methods must be approved by Landlord's structural engineer. All ceiling tile shall meet the following specifications: a noise reduction coefficient of .60 to .70, minimum room to room attenuation factor of 40.0 decibels, a flame spread of 0 to 25, smoke development of 0 to 15 and full contribution of 0 to 25, tested in accordance with A.S.T.M.E. -84. If gypsum board or plaster ceilings are used, access panels must be installed by Tenant to allow Landlord access to all suspended Project equipment or systems above the ceiling. Access panels must be installed flush and finished to match adjacent surfaces. All above ceiling storage is prohibited. G. Store Fixture Supports: All Tenant improvements, other than ceiling and lighting fixtures, shall be floor mounted unless Landlord's approval is obtained to support improvements otherwise. H. Egress Door Hardware: Egress door hardware is all hardware other than that supplied as part of Landlord's Work. Secondary locks or latches are not allowable. Door closers are required. I. Mechanical, Electrical and Plumbing Work by Tenant: (in order to coordinate Tenant's Mechanical and Electrical Design, reference should be made to Section XII of this Exhibit C.) 1. Mechanical Systems: Tenant shall design and install the air conditioning system for the Premises including the air conditioning units, fans, piping, duct work, any controls or circuitry, and any related elements required for the operation of said system. Tenant shall not install the rooftop air conditioning system and return/exhaust fans unless and until Landlord has approved the contractor proposed to install the equipment, the method of installation, the type of equipment and the location of equipment and routing of ducts and pipes outside of the Premises. The air conditioning system shall be in compliance with applicable governmental requirements, including building and energy codes. If Tenant's business is an odor-producing operation, the air conditioning system shall be designed and installed so as to prevent such odors from migrating to other areas within the Project. 2. Electrical: All electrical facilities shall conform with applicable governmental requirements. Tenant shall extend the service conduit stub-in provided by Landlord to Tenant's main distribution service panel. Tenant shall install feeder wires through the conduit from the switch in Landlord's electrical room to Tenant's service panel and make all connections. Requirements greater than that provided by Landlord shall be made, if power is available, at Tenant's expense. 3. Plumbing: Tenant shall install drain and soil lines to the point of entry provided by Landlord. Requirements greater than that provided by Landlord must be shown on Tenant's working drawings and will be made at Tenant's expense. Tenant shall install all plumbing fixtures and rough-in plumbing except as provided above in Section 1. Any increase in the size of the water service required by Tenant which necessitates a branch water line larger than as specified in Section I will be furnished by Landlord at Tenants expense. 4. Sprinkler Service: Revisions to Landlord's system or additional sprinkler heads in excess of those provided by Landlord will be provided by Landlord at Tenant's expense. Landlord reserves the right to refuse to permit the installation of additional heads if such additional heads exceed the supplying capacity of Landlord's bulk mains. 4 70 5. Costs: Tenant shall pay the costs of any meters or pressure-reducing valves or other devices as well as any connection fees or charges related to the provision of utility services to the Premises. J. Appurtenances: No appurtenances (including light fixtures, antennas, signs, etc.) will be affixed to the exterior walls of the Building without Landlord's approval. K. Fire Alarm System: Landlord shall provide, at Tenant's expense, extension of Landlord's fire alarm system throughout Tenant's premises in accordance with Tenant's approved plans, and Fire Department requirements. L. Exiting: If Tenant is required by applicable governmental requirements to have a second means of egress from its Premises, either to an adjacent corridor or public area, Tenant shall provide such egress at its own expense in a location and of a design specifically approved by Landlord. M. Miscellaneous: Tenant shall install the following: 1. Internal communication, alarm, fire protection, or smoke detection systems in compliance with applicable governmental requirements; 2. Storefronts, Tenant's sign(s), show window display platforms, window backs, interior finish in show windows, store fixtures, and furnishings; 3. Double-studded walls and sound insulation of the walls, glazing, floors and ceilings, and such other sound insulation measures as required by Landlord in its sole and absolute discretion when, in the sole and absolute judgment of the Landlord, Tenant's business operations create sounds or noises which may disturb Landlord, other tenants, patrons of other tenants or the occupant of any space in the Project; and 4. If the Premises are used as a restaurant, kitchen exhaust fans, make-up air fans, special door opening "air curtains" fan systems and other provisions required by applicable government requirements for restaurants. III. TENANT'S PLANS: A. Landlord's Design Criteria: After the execution of the Lease, Landlord will deliver to Tenant one sepia and one print of a measured drawing of the Premises (the "Lease Outline Drawings") and such other plans, criteria drawings and information as Landlord deems necessary or appropriate (herein collectively referred to as the "Landlord's Design Criteria"). B. Tenant's Preliminary Plans: Within thirty (30) days after receipt by Tenant of Landlord's Design Criteria, Tenant shall submit for Landlord's approval the plans and other items set forth below ("Tenant's Preliminary Plans"), all in accordance with the criteria set forth in Landlord's Design Criteria and with conceptual presentations, if any, made by Tenant to Landlord prior to Lease execution. The submission must be complete in order for Landlord to evaluate the proposal fairly and to prevent continuation of work on an unacceptable design. Failure to provide adequate information may be cause for return of the submission with no review. Such submittal shall include the following: 1. Three (3) sets of prints and one (1) sepia of (a) floor plans (at 1/4" scale) showing all partitions, doors, store fixtures, plumbing fixtures, electrical and telephone panels and transformer, and other construction; signage plan (at 1/4" scale) showing all signs, plus elevations 5 71 of sign elements at a scale appropriate to understand clearly the sign design and message; reflected ceiling plan (at 1/4" scale) showing all light fixtures, Plus a description and fixture cut for each lighting fixture correlated with the reflected ceiling plan; plans (at 1/2" scale) showing storefront elevations and sections through the storefront, including signage, graphics, and decorative fixtures; and plans and/or elevations with dimensions and preliminary details as necessary to locate and identify any penetrations of the floor, demising walls, and adjacent walls of the Premises and the roof structure above the Premises, all at a scale appropriate to show clearly the intended penetrations; 2. Samples of storefront and interior materials and colors mounted on foam core or card stock not exceeding 30" by 42", with all materials clearly labeled and referenced on an attached room finish schedule; 3. A one point perspective color rendering of Tenant's proposed storefront design, including signage and graphics; and 4. Three (3) copies of Tenant's estimated cooling, heating and electrical load data, on forms provided by Landlord. C. Landlord's Review: Landlord will review Tenant's Preliminary Plans and, within fifteen (15) days of its receipt of such Plans, either return such Plans to Tenant marked approved or marked to show the corrections required or give Tenant notice of disapproval of Tenant's Preliminary Plans together with the reasons therefor. If Landlord gives Tenant notice of disapproval, Tenant shall have twenty (20) days from the date of such notice of disapproval to submit revised Tenant's Preliminary Plans subject to subsequent markups and/or disapprovals and corrections in the manner set forth above. D. Tenant's Working Drawings: Within ninety (90) days after the date of receipt by Tenant of the Lease Outline Drawings and Landlord's Design Criteria, regardless of whether Tenant's Preliminary Plans have been submitted, Tenant shall submit to Landlord six (6) sets of prints and one (1) sepia of fully detailed and dimensioned working drawings and specifications as set forth below ("Tenant's Working Drawings"). Upon receipt of Tenant's Working Drawings Landlord shall have the same rights of approval, markup and disapproval, and Tenant shall have the same obligations as to resubmissions, as are set forth with regard to Preliminary Plans. Tenant's Working Drawings shall include the following: 1. Key plan showing location of Tenant's Premises. 2. Floor plans. 3. Interior elevations. 4. Reflected ceiling plan, including type of ceiling tile and rating requirements as listed in UL Building Material manual. 5. Longitudinal section through the storefront. 6. Plan, elevation and section of the storefront. 7. Details of storefront. 8. Details of special conditions. 9. Door schedule with jamb, head and sill details. 6 72 10. Finish material and color schedule. 11. Mechanical HVAC plans. 12. Plumbing plans. 13. Fire protection system modifications to Landlord's standard grid layout. 14. Electrical power and lighting plans. 15. Electrical details, fixtures, panel schedules, and riser diagram, including circuitry plans, panel schedules, riser diagrams, load calculations and all other calculations and forms required by applicable governmental requirements. 16. Mechanical details and equipment schedules. 17. Required Title 24 analysis and calculations. 18. Store fixture plan showing catalog cut sheets of all trade fixtures and location of any heavyweight equipment such as safes, equipment cases, refrigeration equipment, etc. 19. Fixture drawings and specifications. 20. Technical specifications. 21. Samples of finish materials. 22. Kitchen exhaust drawings. 23. Kitchen equipment plans. 24. Signage details and specifications. 25. Waterproofing details and specifications. E. Tenant's Final Plans: After Landlord's approval of Tenant's Working Drawings, any subsequent changes, modifications or alterations requested by Tenant before completion of Tenant's Work shall be processed by Landlord, and Tenant shall pay any reasonable out-of-pocket costs and expenses incurred by Landlord in connection with said processing, including any additional fees of Landlord's architects and engineers. Landlord shall have the right to demand that Tenant pay such costs and expenses in advance of Landlord's processing such a request. No such changes, modifications or alterations in Tenant's Working Drawings shall be made without prior consent of Landlord after written request therefor by Tenant. The total of all of Tenant's Preliminary Plans and Tenant's Working Drawings, as approved by Landlord, are collectively referred to herein as "Tenant's Plans." F. Preparation of Tenant's Plans: All of Tenant's Plans shall be prepared by architects or engineers licensed by the State of California and employed by Tenant at its expense. If possible, such architects or engineers shall have experience working with the building departments of the City of Los Angeles and/or the County of Los Angeles. Tenant shall not submit plans and specifications which have been prepared by contractors, subcontractors or 7 73 suppliers, as such plans will not be accepted by Landlord. It is the responsibility of Tenant's architect to verify all dimensions and field conditions. G. Landlord's Consents Interpreted: Any approval or consent by Landlord of any and all of Tenant's Plans, criteria or systems shall neither constitute an assumption of responsibility by Landlord for any aspect of such Tenant's Plans, criteria or systems including their accuracy or efficiency nor obligate Landlord in any manner with respect to Tenant's Work, and Tenant shall be solely responsible for any deficiency in design or construction of all portions of Tenant's Work for which Tenant is responsible. Landlord's approval shall not be deemed to certify that Tenant's Plans comply with applicable governmental requirements and shall not relieve Tenant of Tenant's responsibility to verify all job conditions including dimensions, locations, clearances and property lines, prior to Tenant's preparation of its plans as well as prior to starting construction. IV. CONSTRUCTION PROCEDURES: A. General Regulations: All of Tenant's Work shall be done in accordance with Tenant's Plans, all applicable governmental requirements, the regulations of Landlord's fire underwriters and Landlord's Design Criteria. At any time and from time-to-time during the performance of Tenant's Work, Landlord or Landlord's contractor may enter upon the Premises and inspect the work being performed by Tenant and take such steps as they may deem necessary or desirable to assure the proper performance by Tenant of Tenant's Work and/or for the protection of the Building and/or areas adjacent to the Premises. Any entry by Landlord or Landlord's contractor shall be in a manner calculated not to interfere unreasonably with the progress of Tenant's Work. In addition, Tenant's Work shall be performed in a thoroughly first class and workmanlike manner, shall incorporate only new materials, and shall be in good and usable condition at the date of completion. B. Building Permit: Landlord or its designated representative shall assist Tenant in obtaining a building permit for the construction of Tenant's Work by coordinating Tenant's submission of Tenant's Plans to the applicable governing agencies. The fact that Landlord shall assist Tenant shall not relieve Tenant of the responsibility for the processing of the building permit. If any such governing agency shall reject Tenant's Plans and thereby prevent the issuance of a building permit, Tenant shall, subject to Landlord's approval, immediately make all necessary corrections required by said agency. Upon said agency's approval of Tenant's plan check and permit application, Tenant or Tenant's contractor shall obtain the building permit from said agency. Tenant shall apply for and obtain all approvals and permits from the local health department, as required. C. Completion of Tenant's Work: Tenant shall complete Tenant's Work as quickly as possible. Delays in the completion of the Premises caused by Tenant's contractor shall not relieve Tenant of any obligation under this Lease. If the Premises have not been constructed substantially in accordance with Tenant's Plans in the judgment of Landlord's architect, then Tenant shall not be permitted to open the Premises for business until the Premises do so comply, and Tenant shall not be excused from the performance of any obligations under this Lease. D. Financial Requirements: Landlord may require Tenant, upon entering on the Premises to commence Tenant's Work, to give Landlord proof satisfactory to Landlord of Tenant's financial ability to comply with and fully pay for Tenant's Work in a timely manner. E. Insurance: In addition to and not in lieu of the other policies of insurance required by the Lease, at all times during the period commencing with the start of construction of Tenant's Work and terminating on the date of the acceptance by Landlord of Tenant's Work as being completed in accordance with the provisions in this Exhibit C (such period is herein referred to as 8 74 "Tenant's Construction Period"), Tenant, at its expense, shall maintain in effect with a responsible insurance company, a policy of Builder's "All Risk" Insurance in the standard California form. Said insurance shall cover the full replacement value of all work done or to be done and all fixtures and equipment installed or to be installed at the Premises by Tenant without co-insurance and without any deductible clauses. F. Fees and Charges: Tenant shall obtain and pay for all necessary permits and shall pay all plan check and other fees required by public authorities or utility companies with respect to Tenant's Work. Unless otherwise provided, Tenant shall pay Landlord, as Additional Rent, all fees and other charges and/or payments for which Tenant is obligated pursuant to this Exhibit C within thirty (30) days after demand therefor is made by Landlord. G. Temporary Utility Service: Temporary utility services, as well as Tenant's connection therefor during construction, including light and power, shall be obtained by Tenant at Tenant's expense from appropriate public utility companies or Landlord's utility service. Temporary heat, if any, is to be provided by the temporary electrical service. H. Cleanup: Tenant shall maintain the Premises and the adjacent Common Areas in a clean and orderly condition during construction. Tenant shall promptly deposit all unused construction materials, equipment, shopping containers, packaging, debris, and waste from the building site and deposit it in Landlord-provided receptacles. Tenant shall contain all construction materials, equipment, fixtures, merchandise, shipping containers and debris within the Premises. Trash storage for the Premises shall be confined to covered metal containers. Tenant shall reimburse Landlord for the removal from the Project by Landlord of trash and debris generated by Tenant or Tenant's contractors and subcontractors during Tenant's Construction Period. I. Violations: If Tenant is notified of any violations of applicable governmental requirements, either by appropriate governmental agencies or by Landlord, Tenant shall correct such violations as soon as reasonably possible. Should Tenant fail to correct such violations promptly, Landlord shall have the right to correct such violations at Landlord's actual cost plus a [***] administrative charge. J. Notice of Completion: Tenant shall obtain and record a Notice of Completion promptly following completion of Tenants Work. V. TENANT'S USE OF A CONTRACTOR: A. Contractor Selection: Tenant may select any contractor for the construction of Tenant's Work provided such contractor is bondable, is licensed by and meets all insurance requirements established by appropriate governmental agencies and is approved by Landlord, which approval shall not be unreasonably withheld. To the end that there shall be no labor dispute which would interfere with the construction completion or operation of the Project or any part thereof including the Premises, Tenant shall engage the services of only such contractors or subcontractors as will work in harmony and without causing any labor dispute with each other and with contractors and subcontractors of working for Landlord or others in or upon the Project or any part thereof. Tenant shall enforce strict discipline and good order among the employees of Tenant's contractors. B. Plans: Tenant's contractor shall have one (1) set of Landlord and Building Department approved Plans at the job site at all times during Tenant's Construction Period and may not commence work until Tenant's Plans are on the Premises. *** Confidential treatment requested. 9 75 C. Insurance: At all times during Tenant's Construction Period, Tenant's contractor(s) shall maintain and pay for all premium costs for the following insurance coverages on the forms and in the amounts not less than hereinafter specified: 1. Statutory workers compensation including employers liability insurance with a limit of not less than [***]. Tenant's contractor shall waive and cause its workers compensation carrier to waive their respective rights of subrogation against Landlord, Universal Studios, Inc. and Universal Studios, Inc.'s affiliated companies. 2. Comprehensive or commercial general liability insurance (and/or excess umbrella liability) written on an occurrence basis for bodily injury and property damage with coverage limits of not less than [***] combined single limit per occurrence in the aggregate. Said policy shall be written on the 1985 ISO occurrence form or broader, with no additional exclusions and must include (a) severability of interest, (b) primary, not contributing coverage, and (c) blanket contractual. Landlord, Universal Studios, Inc., and Universal Studios, Inc.'s affiliated companies must be indicated as additional insureds and a waiver of subrogation must be granted. 3. Business auto liability and/or excess umbrella liability for all owned, hired or non-owned vehicles to be driven onto Landlord's private facilities, with a combined single limit of not less than one million dollars ($1,000,000). Landlord, Universal Studios, Inc., and Universal Studios, Inc.'s affiliated companies must be indicated as additional insureds. 4. All risk property insurance covering all of such contractor's property to be brought onto Landlord's private property, including a waiver of subrogation in favor of Landlord, Universal Studios, Inc., and Universal Studios, Inc.'s affiliated companies. All policies of insurance provided for herein shall be issued by insurance companies qualified to do business in the State of California and satisfactory to Landlord. When any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by such contractor in like manner and to like extent. All policies must contain a provision that the company writing said policy will give to Landlord thirty (30) days' written notice in advance of any cancellation, lapse, reduction in the amount of coverage or other adverse change respecting such insurance. The stipulated limits of coverage above shall not be construed as a limitation of any potential liability to Landlord, and failure to deliver said insurance certificate or Landlord's failure to request delivery shall in no way be construed as a waiver of such contractor's obligation to provide the insurance coverage specified. Tenant's contractor shall require all of its subcontractors to maintain in effect Workers' Compensation Insurance as required by the laws of the State of California and comprehensive general liability insurance with such limits of liability and coverage endorsements that will cover the scope of their respective work activities consistent with the reasonable and prudent practice of similar subcontractors doing similar work in Los Angeles County. D. Contract with Contractor: Tenant shall provide Landlord with a copy of the contract with its contractor prior to commencement of Tenant's Work. Tenant shall incorporate into such contract the following items as "Special Conditions": 1. Schedule: Prior to commencement of Tenant's Work, Tenant's contractor shall provide Landlord with a construction schedule in "bar graph" form indicating the completion dates of all phases of Tenant's Work. 2. Interference with Others: Tenant's contractor shall diligently perform Tenant's Work in a manner and at times which do not impede or delay Landlord in the completion *** Confidential treatment requested. 10 76 of the Premises or any other portion of the Project. Tenant's contractor shall coordinate Tenant's Work with all work being performed or to be performed by Landlord and other occupants of the Project. Tenant's contractor and each of its subcontractors shall comply with all procedures and regulations prescribed by Landlord or its agents for integration of Tenant's Work with that to be performed in connection with the construction of the Project. 3. Temporary Storage Areas: Tenant's contractor shall store all construction materials and contain all operations within the Premises and such other space as Landlord may specifically permit. Should Tenant be assigned space outside of the Premises, Tenant shall move to such other space as Landlord shall reasonably direct from time-to-time to avoid interference or other delays with other work. All trash, construction debris and surplus construction materials shall be promptly removed and placed in Landlord-provided receptacles. if any such contractor and/or subcontractor shall use any space in the Project for any or all of its aforesaid enumerated purposes or any other similar purpose without obtaining Landlord's approval, Landlord shall have the right to terminate such use and remove all of such contractor's or subcontractor's material, equipment and other property from such space, without Landlord being liable to Tenant and/or to such contractor or subcontractor, and the cost of such termination and/or removal shall be paid by Tenant to Landlord. 4. Protection of Work: Tenant's contractor and subcontractors shall maintain continuous protection of adjacent property and improvements against damage by reason of the performance of Tenant's Work. Tenant's contractor shall be responsible for the repair, replacement or clean-up of any damage caused by Tenant's contractor to any other contractor's work in any area of the Project. 5. Labor Disputes: Any and all work performed by Tenant's contractor shall be performed in a manner so as to avoid any labor dispute which results in a stoppage or impairment or work, deliveries or any other service in the Project. 6. Penetrations of Roof, Floor and Walls: Tenant's contractor shall not make any structural penetration or opening in any roof, floor slab, demising wall or exterior wall of the Project. All such penetrations, at Landlord's option, shall be done by Landlord at Tenant's expense. 7. Weekend Work: No work shall be done by Tenant's contractor on weekends or other than normal job hours without Landlord's prior approval. Tenant shall pay all costs associated therewith. Notwithstanding the foregoing, Landlord hereby pre-approves weekend work provided that the work is confined to the interior of the Premises. 8. Safety: Tenant's contractor shall comply with all applicable governmental requirements (including OSHA) governing the performance of Tenant's Work, including all applicable safety regulations established by Landlord and Landlord's general contractor for the Project. 9. Signs: Tenant's contractor or subcontractors shall not post signs on any part of the Project or the Premises. 10. Intentionally Deleted. 11. Guarantees: Each contractor and subcontractor participating in Tenant's Work, prior to the commencement of that portion of such work for which such contractor or subcontractor is responsible, shall guarantee or warrant in writing, in the manner hereinafter set forth, that such portion will be free from any defects in workmanship and materials for the period of time of not less than one year after the Premises first opens for business to the public. All such 11 77 guarantees and/or warranties (collectively referred to as "guarantees") shall be contained in the contracts and subcontracts for the performance of Tenant's Work, shall include the obligation to repair and replace in a first-class and workmanlike manner, and without any additional charge, all of Tenant's Work done or furnished by the contractor or subcontractor, his employees, or agents which shall be or become defective within such one (1) year period and shall be written so as to insure to the benefit of Landlord and Tenant as their respective interests may appear and so as to be directly enforceable by either Landlord or Tenant. All such guarantees shall also include the agreement by the contractor or subcontractor to pay for all expenses and damages incidental to the removal, replacement or repair of any other part of Tenant's Work which may be damaged or disturbed thereby. VI. REMEDIES: If Tenant fails or omits to make timely submission or resubmissions to Landlord of Tenant's Preliminary Plans or Tenant's Working Drawings or electrical load data or fails to or delays in submitting or supplying information or in giving authorizations or in performing or completing Tenant's Work or in any manner delays or interferes with the performance of Landlord's Work, Landlord, in addition to any other right or remedy it may have under this Lease, at law or in equity, may require Tenant to pay to Landlord, as Additional Rent hereunder, the cost to Landlord of completing the Premises in accordance with, the terms of this Lease over and above what would have been such cost had there been no such failure, omission or delay. VII. DESIGN INTENT AND DESCRIPTIVE INFORMATION: The Project is located in Universal City, California, adjoining the Universal Studios Tour, the Universal Amphitheater, and the Universal City Cinemas. The Project is an expansive carfree promenade connecting all of Universal City's attractions. Approximately 1,600 feet in length, the Project is the length of Westwood Village, from Wilshire Boulevard to the gates of UCLA, or Rodeo Drive in Beverly Hills. It is designed to include over 50 retail, restaurant, and entertainment outlets carefully selected for their interest value and quality of merchandise. Street entertainers and roaming push carts further enhance the festive and colorful atmosphere. Additionally, there are second and third level office spaces and some community service facilities including the East Valley Campus classrooms for the UCLA Extension program. The Project is serviced by more than 5,000 on-grade and structured parking spaces with easy freeway access. The Project is a one-of-a-kind, up-beat and active street, collecting distinctive shops, restaurants, offices, community classrooms and entertainment elements in an outdoor urban district. Rather than establishing finite goals or limitations on the design of facades, graphics, or lighting, Landlord encourages Tenant to create innovative, distinctive and original designs that reflect the eclectic architectural characteristics of Los Angeles, and that are supportive of the character of the Projects themed districts. The goal of Landlord's design criteria is to provide for a variety of design, not a consistency of appearance. The Project can be seen as three districts, each with a distinct character, and which may be described as follows: The WEST WALK district is similar to nearby areas known as "Sunset Plaza" and "Larchmont Village," an intimately scaled "people street" set against a textured backdrop of building styles indigenous to Los Angeles. It consists primarily of retail shops and specialty food merchants at the street level with second and third story office or retail space above. The west end of WEST WALK fronts on the existing Tour Plaza. The east end leads to the Central Courtyard. 12 78 The FOUNTAIN COURT is an elegantly landscaped district fashioned as the street arboretum that Los Angeles has never had. With filtered light, exotic palms, densely planted wall arbors and water fountains, this garden plaza will serve as the crossroads of the Project. It will link EAST WALK and WEST WALK and serve as the main entrance from the nearby parking areas. On each of the two levels around the FOUNTAIN COURT are restaurants and entertainment venues, many of which have outdoor dining terraces. The CINEMA PLAZA district centers around the eighteen-screen Universal City Cinemas and the Hard Rock Cafe and will emulate the glitzy excitement and frenetic energy of "Sunset Boulevard" and/or "Times Square". With animated lighting systems and signage, the energy of CINEMA PLAZA is youthful and exciting. The retail shops, theaters, and food venues are to be designed around an entertainment theme and are encouraged to participate in the "Times Square" atmosphere. The design criteria for the Project's three distinctive districts should stimulate Tenant to expand its design development beyond the concept of traditional retail. Tenant's design should reflect the urban context of the highly designed "LA street" theme. Tenant is encouraged to take a fresh and innovative approach as to ways in which its Premises can be designed to fit the Project's special atmosphere. Tenants are also encouraged to consider how climatic conditions, pride of ownership, and the context of a city street determine the quality, type of materials and design features of traditional street retail shops. Tenant's overall design concept should coordinate its storefront design, interior design and the merchandising plan. Tenant should consider creative adaptations to its interior design and planning to create a store for the Project that is unique and to build a total store design concept around unique aspects of its business operation or product. VIII. STOREFRONT CRITERIA: A. General: The storefront design is defined as the display windows, entrance ways, opaque panels, fascias, soffits, graphics, lighting, landscaping, adjoining finished surfaces, and any display fixtures directly associated with the storefront elements. Tenant is encouraged to design a highly creative and memorable storefront and to create icon images out of its storefront design. Each storefront design will be evaluated on an individual basis. Signage should be considered as a key ingredient in the development of the facade. The storefront should reinforce the idea of "streetness" as a total store design concept and convey a memorable image of an exterior urban facade that is supportive of the merchandising therein. The conceptual theme of each of the districts provides an appropriate point of departure for the design of all Tenant storefronts. Tenant is encouraged to have a large, visually open glass storefront, utilizing the entire storefront opening provided by Landlord, subject to Tenant's obligation to meet California Title 24 requirements and comply with applicable governmental requirements, including energy codes, with respect to the overall ratio of wall to glass area on Tenant's storefront. Generic "mail" designs or standard storefront design concepts which have been developed for typical shopping center locations are not appropriate for the Project and use of such designs is discouraged. National and regional chain stores with predetermined design concepts should adapt their standard design to complement the theme of the three districts of the Project. B. Location: Storefronts may be located at the lease line or recessed behind the lease line or a combination of both. If Tenants storefront is set back from the lease line, Tenant is responsible for finishing the adjoining exposed surfaces out to the lease line. Tenant may choose to match the existing materials and construction of adjoining surfaces or propose its own design solution. Tenant may propose to continue the finished exterior surface and other elements of the storefront design onto Landlord's adjoining building surfaces. That is, the exterior finishes of the storefront design, such as decorative tile, applied ornamentation, painted murals, lighting and signage/graphics may bleed over onto the adjoining wall surfaces in a creative way. Construction 13 79 of any adjoining surfaces outside of Tenant's lease space will be performed by Landlord's contractor at Tenant's expense. Landlord will review such proposals on an individual basis. C. Materials: Storefronts may be constructed of any materials that will fit the image and intent of the Project design criteria, provided that they are fully weatherproof, new and of high quality, appropriate for exterior applications, conform to applicable governmental requirements, and are approved by Landlord and its architect. Materials that will not be approved by Landlord include painted gypsum board or materials deemed by Landlord to be of low quality, non-durable and/or difficult to maintain. D. Awnings/Canopies: Awnings, where desired, may be of conventional design; however, creative shapes, sizes, materials, and designs are encouraged. If fabric awnings are used, Tenant must consider the retractability and flame retardant specifications of applicable governmental requirements. It is highly recommended that awnings utilize translucent fabrics and incorporate lighting for nighttime effects. Use of canopies and projecting metal framework is encouraged. Designs may be of various shapes, sizes and materials. No awning, canopy or projecting metal framework may hang below eight (8) feet above the finished floor surface. E. Flags/Banners: Flags and banners identifying Tenant can provide a colorful and festive supplement to the storefront design and image. Graphic messages on flags or banners should be limited to a generic logo or symbol of the product type of Tenant. Printed copy may be permitted on an individual basis. Flags and banners may not hang below eight (8) above the finished floor surface. Flag and banner material must be lightweight fabric and meet applicable governmental requirements for flame spread and smoke generation ratings. F. Construction: All storefront construction, including doors, projecting elements, awnings, canopies, signs and lighting elements shall be self-supporting and independent from Landlord's building structure whenever possible. Any loading of Landlord's structure is subject to Landlord's approval and shall conform to applicable governmental requirements. G. Security Devices: All security devices must be physically integrated into storefront construction. No free-standing pedestals containing sensor equipment will be allowed at entrances. No overhead or horizontal rolling security screens, inside or outside of the storefront will be permitted. Door key devices, controls and other operating components shall be mounted flush and integrated within the storefront design. All face plates for such components shall be finished to blend with the background into which they are installed. Burglar alarm tape, contact stickers, etc. are not permitted. IX. SIGNAGE CRITERIA: A. General: Tenant signage represents one of the most critical elements of the Project. One horizontal and one blade sign or other graphic treatment is required per store elevation. See Lease outline drawings for additional criteria. All signs must be installed and operational before Tenant opens its Premises for business. Tenant is encouraged to incorporate signage as a key design element in the development of its store's retail image. It is strongly recommended that Tenant employ a competent graphic designer and use exceptional creativity in developing the signage concept for its storefront identity. Landlord will supply upon request a list of suggested designers. Landlord has not specified a uniform signband requirement so as to encourage creativity and individuality in the design of the storefronts. Signage may occur anywhere within the limits of the basic storefront and may run over onto the adjoining Landlord wall surfaces with Landlord's approval. B. Content: The advertising or informative content of Tenant's signs shall be limited to letters designating Tenant's trade name set forth in this Lease. The use of any brand name or 14 80 brand name logo will not be allowed on the sign unless it is specifically included in Tenant's "doing business as" (d.b.a.) designation. Crests, corporate shields or logos may be permitted at the discretion of Landlord. Tenant's sign shall not include specification of the merchandise offered for sale or of the services rendered. No advertising placards, banners, pennants, signs, devices, slogans, symbols or marks other than those specifically approved by Landlord shall be affixed upon the glass panes or supports of the store windows, doors, or upon the exterior of the storefront, or within three feet (3'-0") of the lease line, except that symbols or names reflecting accepted credit cards may be so displayed in a manner reasonably approved by Landlord. Signs may not display, on any portion, the name, stamps or decals of the sign manufacturer or installer. Tenant may install on its storefront, if required by the U.S. Post Office, the numbers only for the street address in an exact location stipulated by Landlord's architect. Size, type, color and style of numbers shall be as stipulated by Landlord's architect. C. Construction: All signage must be fully weatherproof and shall be constructed of premium quality, weather resistant materials. All illuminated signs shall be fabricated and installed in compliance with all applicable building and electrical codes and shall bear an Underwriters Laboratory (UL) label. No exposed raceways, crossovers or conduits will be permitted. All cabinets, conductors, transformers or other equipment related to lighting controls must be concealed from the public view or accessibility unless they are an integral part of the design. All exterior Tenant signage is to be controlled by a time clock. All permits for signs and their installation will be obtained by Tenant with a copy sent to Landlord's Tenant Coordinator prior to installation. X. LIGHTING CRITERIA: Tenant is responsible for all lighting within its Premises. Tenant's lighting design must comply with Title 24 energy requirements. All display windows must have adequate lighting, employing dimmable, concealed light sources. Tenant should keep night time considerations in mind as it designs its storefront and interiors. Tenant is encouraged to put on a "show business" hat to convey a dramatic and exciting appearance to its Premises. Special lighting of merchandise and attention to lighting design details are encouraged. All fixtures within Tenants public areas shall be decorative. All fixtures shall be new and bear the Underwriters Laboratory (UL) label. Floor-mounted fixtures are prohibited unless specifically approved by Landlord in writing. All storefront plans and internal reflected ceiling plane shall indicate all illuminating devices. Specifications and catalog cut sheets shall be submitted for review and approval by Landlord for all lighting fixtures and elements. Emergency lighting and exit signs are required as per applicable governmental requirements. All emergency lighting shall be self-contained. Any battery packs for such lighting in sales areas shall be concealed. Landlord shall provide lighting for public areas of the Project. Tenant shall control the brightness of its lighting and avoid any direct glare from its Premises into the Common Areas. Excessively bright or flashing lights shall only be permitted with Landlord's approval. All of Tenant's storefront lighting and signage within three (3) feet of Tenant's front lease line, including Tenant's entry vestibule (if any) and display windows, shall be separately circuited for control by Tenant's time clock. XI. INTERIOR CRITERIA: A. General: Development of the interior of Tenant's space should be an extension of Tenant's storefront image. Tenants are expected to continue the quality and design level established in the storefronts throughout the public areas of Tenant's Premises. All exposed 15 81 surfaces should be of exceptional quality. Elements of particular concern are show windows, display platforms, floors, ceilings, walls, doors, screens, ornamental work, glass and metal work. Landlord and its architect will carefully review all submissions to ensure Compliance with the criteria set forth in this Section XI as well as elsewhere in this Lease and Exhibit C. B. Flooring: Tenant shall not use vinyl composition or sheet vinyl in the public areas of its Premises. C. Partitions: Landlord's demising walls are not designed to accommodate cantilevered or eccentric loads. If Tenant plans to use a demising wall for support of any elements of equipment or fixturing, Tenant shall reinforce the wall as needed. The design to reinforce the wall structure must be approved by Landlord prior to work commencing. Where demising walls occur on structural column lines, at structural braces, at structural expansion joints or at pipe chases, projections may occur. D. Ceilings/Acoustical Tile: Retail, restaurant and fast food/beverage Tenants are encouraged not to use acoustical tile ceilings in areas that are visible to the public. If acoustical tile is used, only concealed spline ceilings will be acceptable. Acoustical tile ceilings may be used in other areas, but two (2) foot by four (4) foot lay-in ceilings are not permissible. The use of acoustical tile shall be limited to horizontal ceiling surfaces only. Tenant may, at its option and upon approval of Landlord, expose the structure as long as all visible elements receive a painted finish. All exposed elements shall be fabricated in a neat and workman-like manner. It shall be Tenant's responsibility to adequately seal and finish all common building elements including utilities, ducts, conduit and shafts. E. Structural: Overhead loading to the structure above shall not exceed ten (10) pounds per square foot. Tenant's architect shall indicate on Tenant's Plans the precise location, size and weight of all elements that may exceed the per square foot weight limits and shall include references to column grid lines and structural supporting members. Any alterations, additions or reinforcements to Landlord's structure required to accommodate Tenant's loading of the structure that may exceed the allowable floor loads shall be designed by Landlord's structural engineer and performed by Landlord's contractor at Tenant's expense. F. Shelving: All stock shelving over eight (8) feet in height requires structural calculations prepared by an engineer licensed in the state of California. Shelving and its contents shall not interfere with sprinkler head water flow. XII. MECHANICAL, ELECTRICAL AND PLUMBING CRITERIA: A. General Criteria: 1. All plans, specifications and calculations for Tenant's mechanical, electrical and plumbing work shall be prepared under the supervision of a registered professional engineer holding a valid registration in the State of California in the applicable fields of engineering. Tenant's engineer shall refer to the Lease Outline Drawings and this Exhibit C for requirements governing the design and construction of Tenant's Premises. 2. The design and appearance of all light fixtures and exposed ductwork and piping which are visible from the public areas are critical to the overall visual effect and are subject to detailed review and approval by Landlord. All piping and ductwork is to be installed as high as reasonably possible. All holes through structural members must be approved by Landlord's structural engineer prior to the start of any work. 16 82 3. Noise and Vibration Control: All equipment installed by Tenant shall be provided with vibration isolators, sound traps, duct lining, acoustic housings, acoustical louvers and other noise and vibration control apparatus so as to limit intrusion into adjacent spaces. It is the intent of Landlord and Tenant that noise levels caused by Tenant in adjacent tenant spaces and exterior spaces be maintained below levels which are an annoyance and disruption to Landlord or adjacent tenants. With the above qualitative intent as the overriding goal, the Landlord may make quantitative compliance determinations as follows: Intrusive noise levels between Sam Goody and Tenant shall not exceed NC-35 and between NASCAR and the space above NASCAR shall not exceed NC-25 when measured in such adjacent tenant areas. Tenant equipment noise emitted to the exterior shall not exceed 65 DBA in any occupied exterior space. Tenant shall provide vibration isolation of ductwork, piping and equipment in accordance with practices described in the latest ASHRAE Fundamentals Handbook so that the numerical difference between flat and C-Scale measurements made in adjacent spaces does not exceed five decibels. 4. Test for Noise and Vibration Control: At any time within the first six months after either initial occupancy or installation of any new equipment which produces noise and vibration, Landlord may request a test by an acoustical consultant of its choice to verify compliance with the above minimum acoustical requirements. If such test determines that Tenant is in compliance, Landlord will pay the costs of the testing. If such test determines that Tenant is not in compliance, Tenant will pay the costs of the initial testing, make whatever changes are required to bring the installation into compliance and pay the costs of all subsequent testing by an acoustical consultant approved by Landlord to verify compliance. 5. Field conditions may vary from those shown on the Lease Outline Drawings. Tenant's design team is encouraged to visit the site and verify field conditions which may affect the design. B. HVAC Criteria: 1. System Types: Ground Floor Tenants will use split HVAC systems consisting of fan coil units in Tenant's Premises fed by refrigerant lines from roof top compressor and condenser units. Make-up air and exhaust will be through louvered openings in the Building. Second and Third Floor Tenants throughout the Project will use rooftop packaged units ducted to each Tenant's Premises through rated shafts. 2. Balancing: If any HVAC units, ductwork and/or diffusers or outlets are provided by Tenant, Tenant shall engage the services of a certified air balance contractor to adjust and completely balance Tenant's portion of the system to the design air and condenser water quantities, and Tenant shall provide to Landlord a copy of the certified balance report showing design and measured quantities, static pressures, fan motor RPM, motor current and exhaust quantities. 3. Calculations: All of Tenant's design calculations shall be in accordance with the latest edition of the ASHRAE Fundamentals Handbook, all applicable governmental requirements and good engineering practice. All calculations shall be certified by a registered professional engineer and submitted to Landlord for approval. Heat loss from the spaces shall be calculated to maintain a minimum of 68oF DB when the temperature outdoors is 31oF DB with a 15 mph wind. Cooling load calculations shall be calculated to maintain a maximum temperature of 76oF DB with relative humidity not exceeding 55% when the outdoor conditions do not exceed 98oF DB or 67oF (coincidental) WB with a 7.5 mph wind. Cooling load calculations shall take into account all interior heat producing items. 17 83 4. Data Forms: Tenant shall complete and submit for Landlord's approval on the forms annexed hereto the Heating and Cooling Calculation Schedule and the HVAC Equipment Schedule. Tenant's calculations shall include (i) block peak cooling load; (ii) block peak heating load; (iii) instantaneous peak cooling load for each space served by a separate terminal unit; (iv) circulated CFM required for peak cooling load; (v) instantaneous heating load for each heated space; (vi) toilet room exhaust air calculation, including static pressure if applicable; (vii) calculation of static pressure required from Tenant's air-conditioning equipment; (viii) exhaust quantities and static pressure calculations for kitchen exhaust, if applicable; and (ix) make-up quantity and static pressure calculations for make-up air, if applicable. 5. Ventilation: Tenant's air conditioning system shall provide outside air ventilation of a quantity equal to the greater of (i) 7.5 CFM per person for all areas or (ii) the quantity required by applicable governmental requirements. To help in containing food odors, ventilation air from the restaurant dining and waiting areas shall be transferred into the kitchen so as to constitute at least fifteen percent (15%) of the total quantity of the make-up air for the kitchen exhaust. Outside air for ventilation shall be available either from roof top intake or sidewall louvers, depending on the location of Tenant's Premises. Such intakes shall be provided by Tenant with Landlord's approval. No exhaust or vent will be located within ten (10) feet of any supply or air intake, or such distance as may be approved by Landlord. Tenant shall not install any mechanical equipment or any connecting duct work or pipe chases outside of the Premises without Landlord's approval. 6. Ductwork: All ductwork shall be fabricated from galvanized sheet steel in accordance with the best recommended practices of the American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) and in strict compliance with all the applicable standards of the Sheet Metal and Air Conditioning contractors National Association (SMACNA), latest editions. Branches from the main low velocity trunk ductwork shall be furnished with splitter dampers or similar balancing devices in general accordance with the latest standards of the Associated Air Balance Council. Access panels are required for these devices in ceilings. All supply and outside air ductwork shall be insulated with one (1) inch thick glass fiber insulation with foil vapor barrier, except those portions which are lined for acoustical purposes and supply air ductwork within air conditioned spaces (not return air plenums). 7. Air Distribution Devices: Air distribution devices shall be grilles or ceiling diffusers installed as required to achieve draft-free air distribution in accordance with good engineering practice. Diffusers or grilles shall have lockable individual manual volume control devices. 8. Fire Dampers: Tenant shall indicate the location of fire dampers on Tenant's Plans. Tenant shall provide for ready access to reset each fire damper. All fire dampers must carry evidence of UL approval. 9. Piping Systems: All piping systems must be compatible with the type of materials used by Landlord. Condenser water piping shall be black steel schedule 40, ASTM A53 with threaded ends and malleable iron threaded fittings. Tenant may use Type L copper tubing as specified under "Plumbing Criteria" in this Exhibit C. Dielectric couplings shall be provided between dissimilar metals. Pipe supports and valves shall be as specified under "Plumbing Criteria" in this Exhibit C unless noted otherwise. 10. Life Safety Interface: All spaces which require interconnection to the base building system by the local Fire Marshall shall have conduit and wire run, by Tenant, to Landlord's base building fire alarm CDT, located in accordance with the Lease Outline Drawings. C. Plumbing Criteria: 18 84 1. Connections: Landlord shall provide sewer, vent and water connections for the installation of Tenant equipment at the locations specified on the Lease Outline Drawings. 2. Water Pressure: Landlord's domestic cold water system is designed to provide the minimum pressure of 30 PSI at the ceiling. If Tenant requires additional water pressure, Tenant shall provide a local booster pump. 3. Hot Water: If Tenant desires hot water service, Tenant shall furnish and install its own electric water heater, fully insulated and steel jacketed. Instantaneous recovery type water heaters are not permitted. 4. Collars: If Tenant's Premises are located on floors above grade, Tenant shall provide flashing collars and/or flange collars on all floor drains and pipe sleeves to restore area waterproofing. 5. Gas Piping: Gas piping shall be approved by Landlord. 6. Materials: All piping systems must be compatible with the type of materials used by Landlord. Drainage and vent pipe and fittings for above grade use shall be service weight, hubless cast iron with rubber sealing sleeve and stainless steel coupling joints with stainless steel clamps and bolts as manufactured by Tyler Pipe or equivalent. Drainage and vent pipe and fittings for below grade use shall be service weight, bell and spigot cast iron with lead and oakum or gasketed joints. No PVC is permitted. Water piping above grade shall be Type L copper tubing, seamless drawn, hard temper with plain ends ASTM B88. Fittings shall be wrought or cast copper with socket ends for lead-free solder. Gas piping shall be black steel pipe schedule 40, ASTM A53 with threaded ends and malleable iron threaded fittings. Piping installed in return air plenums shall be welded joint. 7. Valves: All valves for domestic water to be 125 PSI test all bronze wedge gate valves or line size quarter-turn installed in the proper orientation ball valves as manufactured by either NIBCO, Crane or Wafts. Valves for gas piping system shall be all bronze ball valves with threaded or welded ends as manufactured by Crane or equivalent. All valves shall be accessible for ease of operations. 8. Piping support: Pipes supported from steel structure shall be supported from steel beams and joists with approved clamps and other structural attachments. In areas with concrete flat slabs and concrete on metal deck inserts, self-drilling anchors, or powder driven anchors will be allowed. No pipe hangers will be supported from the metal roof deck. Hangers shall not pierce piping insulation vapor barrier. Appearance and spacing of hangers exposed to public view are important aspects of the final visual environment. All steel hangers, rods, beam clamps, etc. exposed to public view shall be painted to match adjacent finishes and shall be as manufactured by F & M, Grinnell or Central Foundry. Specific details of support methods and location of hangers must be indicated on Tenant's Plans and are subject to Landlord's approval. All hangers must be evenly spaced and grouped as much as possible with supports for other trades to minimize visual clutter in the upper portions of all spaces exposed to public view. Support systems must be neat and workmanlike, and free of extra length of support rods below the supported member. Hardware and accessories must be selected with a smooth finished appearance for the completed support assembly. Hangers exposed to public view shall be of the clevis or trapeze type complete with bolts, rods and nuts. All pipe insulation in areas exposed to public view shall be installed in the most workmanlike manner and is subject to the approval of Landlord for appearance. Minimum hanger rod diameter shall not be less than, and the maximum spacing of supports for steel and copper horizontal piping shall not be greater than, the values in the latest issue of the ASHRAE Equipment Handbook. Cast iron pipe must be supported at least 19 85 every five feet and at every joint and fitting. Cast iron pipe branches must have hangers four foot on center maximum. Where required to meet minimum Spacing of hangers, Tenant's plumbing contractor is responsible for installing additional intermediate structural supports. 9. Escutcheons: Tenant shall provide cast brass or chrome escutcheons with set screw, deep type, to cover sleeves or of a size to cover fitting projections. Tenant shall provide escutcheons for all exposed piping through walls, floors and exposed ceiling. 10. Fire protection: Landlord will provide a wet pipe fire sprinkler system. All modifications, additions or relocations to fire protection systems shall be performed by Landlord sprinkler contractor at Tenant's expense. Any proposed changes to materials such as fire sprinkler heads shall be submitted by Tenant to Landlord for approval. Sprinkler head grid provided in Tenant spaces shall be as indicated on the Lease Outline Drawings. 11. Condensate drainage: Tenant shall dispose of all condensate flow within Tenant's Premises. The installation of condensate drainage shall be through an indirect connection to the sanitary sewer system in accordance with all applicable governmental requirements. 12. Traps: If the Premises are to be used as a restaurant, Tenant shall provide back flow prevention and grease traps for all food preparation areas having pot sinks or any grease-producing appliances that discharge into the waste system. D. Electrical Design Criteria: 1. Maximum Demand: The maximum demand of Tenant's electrical system shall not exceed fifteen (15) watts per square foot without Landlord's approval. Any increase in service capability will be at Tenant's expense. 2. Materials: Materials, products and equipment, including all components thereof shall be new and be identified by Underwriter's Laboratories as suitable for the purpose, and shall meet the specifications of the National Electrical Code ("NEC") and applicable governmental requirements. Materials, products and equipment, including all components thereof, shall be sized in conformity with the requirements of other recognized standards such as ASTM, IEEE, IPCEA, NFPA and NEMA, where the requirements of such standards are more stringent than those cited above. All conductors shall be soft-drawn annealed copper. Minimum size shall be #12 for power wiring and #14 for control wiring. Wire shall be 600 volt insulated, NEC type THW, or THHN/THWN. All wire shall be run in rigid conduit or EMT. No plastic conduit is permitted. 3. Service: Electrical service provided for Tenant will be 277/480 volts, three phase, four wire, 60 cycle. Landlord will provide such service consisting of a fusible switch or circuit breaker located in the meter room. From the service point Landlord will provide a conduit sized to accommodate the maximum allowable Tenant load to a point within or adjacent to Tenant's Premises. Tenant will provide its own transformer for other voltages as required. Transformer installations shall conform to NEC and applicable governmental requirements with respect to location, mounting, grounding and over-current protection. Transformers shall be drytype, and shall not be hung from the structure without Landlord's approval. Tenant shall provide feeders, meter socket, and a disconnect switch for its Premises and shall provide all wiring and electrical equipment in its Premises. 4. Panelboards: Tenant's distribution and lighting panelboards within its Premises shall be of the three phase, four wire distributed phasing type. Tenant's circuiting shall be arranged to present, as nearly as possible, an evenly balanced load on all phases. 20 86 Panelboards shall be circuit breaker type. All circuit breakers shall have interrupting capacity at least ten percent (10%) greater than the available fault current at the breaker location. Available fault current will be stated on Tenant's panelboard schedule. 5. Installation: All electrical work shall be installed so as to be readily accessible for operating, servicing, maintaining and repairing. All conduit shall be concealed where possible. Exposed conduit shall be in straight lines parallel with, or at right angles to, column lines or beams and separated by at least three (3) inches from water lines whenever they run alongside or across such lines. Hangers shall be fastened to steel, concrete or masonry, but not to piping. Hangers and support systems are an integral part of the visual environment. All hangers and supports exposed to public view must be shown in detail on plans submitted to Landlord for approval of appearance. All hangers must be uniformly spaced and neatly installed with no excess material beyond what is required for the support function. Tenant shall select accessories and hardware with a smooth, neat finished appearance and paint all exposed conduit hangers to match the adjacent finishes. 6. Grounding: Grounding shall consist of copper conductors in conduit with bolted or brazed connection to cold water line for the neutral. Grounding and bonding shall comply with NEC Article 250. All metallic raceways shall be grounded. 7. Timers: Contractors for control of show window lighting and signs shall be Automatic Switch Company Bulletin 920 series, electrically operated and mechanically held, or equivalent. Time switches for control of show window lighting and signs shall be Sangamo Electric Company Type L-12 or equivalent. 8. Motors: Manual motor starters with overload protection may be used for fractional horsepower motors. Single phase starters shall be Square D or equivalent. Threephase starters shall be provided with overload relay in each phase. Magnetic motor starters shall be used for integral horsepower motors. Combination starters, when used, shall contain fusible switches. Reduced voltage starters shall be used for all motors 100 HP and larger. All magnetic motor starters shall have a control transformer, HOA switch and red pilot light. Motors shall be designed to latest NEMA Standards. Motors rated 3/4 HP and larger shall be 460 volt, three phase. Motors rated less than 3/4 HP shall be 115 volt, single phase. 9. Lights: Incandescent fixtures shall be as required by Tenant. Fluorescent fixtures, where permitted, shall be either rapid start or slimline lamps with high power factor ballast individually fused. All ballasts for four (4) foot fluorescent lamps shall be the high efficiency type. Preheat and/or trigger start fixtures shall be used only in special applications requiring lamps less than four feet in length. All fixtures shall be selected so as not to produce, in Landlord's opinion, objectionable glare. Tenants engineer should also refer to the Lighting Criteria and Signage Criteria sections of this Exhibit C for additional requirements regarding light fixtures and signage lighting. 10. Water Heaters: Water heaters in Tenant's Premises that are rated less than 5000 watts may be 120 volts single phase or 208 volts single phase or 227 volts single phase. Those larger than 7000 watts shall be 480 volt three phase. Instantaneous type water heaters will not be permitted. 11. NEC/Data Forms: Tenant shall perform all electrical work in accordance with NEC and all applicable governmental requirements and in accordance with good engineering practice. All calculations shall conform to the appropriate articles in NEC. Calculation shall include all branch circuits and feeder (service) tabulation. Tenant shall complete and submit for Landlord's approval the forms annexed hereto with respect to Tenant's Service Requirements, Tenant Electrical Data and the Panelboard Schedule. Tenant's estimated maximum demand load 21 87 shall be based on the summation of (i) 100% of the air conditioning and ventilation load (the greater load of cooling or heating); plus (ii) the percentage of the connected load for kitchen equipment, including refrigerators, freezers. etc., in accordance with Article 220-20 of the NEC; plus (iii) 100% of the connected load for electric water heaters; plus (iv) 100% of connected lighting load (based on lamp wattage for incandescent lamps and watts input to the ballast for fluorescent lamps); plus (v) 65% of the connected load of all appliances not mentioned above; plus illuminated signs (based on the equipment connected load set forth on the equipment nameplate); plus receptacles (based on NEC specification). E. KITCHEN EXHAUST SYSTEMS: (Applicable if Tenant's Premises are used for restaurant purposes.) 1. General: Tenant shall furnish, install and maintain its own individual kitchen exhaust and make-up air systems. Make-up air fans and equipment and kitchen exhaust fans shall be located in equipment areas designated by Landlord. Kitchen exhaust ducts shall discharge vertically through the roof. Tenant-provided kitchen hoods will be designed to operate with 85% direct connected outside air supply from their tempered make-up air system. Tenant is responsible for providing whatever tempering is required for make-up air. The balance of the kitchen exhaust shall be drawn from the conditioned space, in conformance with all applicable codes. Kitchen hoods shall bear evidence of both UL and FM approval. Kitchen hoods must incorporate a UL listed fire damper. Make-up air and exhaust systems shall have wiring interconnected so that one (1) switch operates both units. 2. Fire Protection: Tenant shall furnish, install and maintain in proper working order a UL-listed fire extinguishing system to protect all kitchen hoods above cooking areas. Fire extinguishing system must be approved by Landlord, and meet the requirements of NFPA 96, applicable governmental requirements, Landlord's insurance carrier and Factory Mutual data sheets 4-10 and 2-8N. Sprinkler heads will be installed by Landlord at Tenant expense in the horizontal kitchen exhaust ductwork at the midpoint of each offset not more than ten (10) foot on center and at the top of all vertical kitchen exhaust ductwork. Sprinkler heads must be located on both sides of a fire damper. Tenant shall provide a 1/2 inch pipe coupling welded into the side wall of the duct at each sprinkler head location, as well as the access doors described below. 3. Materials: Make-up air ductwork shall be fabricated from galvanized sheet metal in accordance with the standards of the Sheet Metal and Air Conditioning Contractors National Association of America, latest edition. Kitchen exhaust ductwork shall be constructed of galvanized steel of a thickness not less than sixteen (16) gauge. Tenant shall continuously weld all longitudinal joints and transverse joints or provide flanges with 2" x 2" x 18" galvanized structural rolled angles with high temperature gasket and sealer. Where applicable, ducts shall be enclosed as required by NFPA 96. Kitchen exhaust ducts shall be fully insulated with at least 1 1/2 inch of calcium silicate, or thermally equivalent thickness of other insulation specifically approved for kitchen exhaust duct insulation. Ductwork for dishwater exhaust shall be properly pitched to drain to the hood connection and constructed of rectangular low pressure stainless steel or aluminum material of a thickness not less than twenty (20) gauge. Ductwork joints shall be fully sealed to prevent leaking. 4. Cleaning Systems: Cleanout doors shall be provided by Tenant 10' - 0" on centers on the side of the kitchen exhaust duct. Cleanout doors shall be located to provide access to each sprinkler head located inside the duct. Bottom edge of cleanout door shall be not less than two inches above the bottom of the duct. Every run shall have at least one cleanout door. Tenant shall provide a cleanout door and grease drain at the base of each vertical section of kitchen exhaust duct. Cleanout door and frame shall be fabricated of the same gage metal as the duct. Tenant shall provide 1/8 inch thick high temperature gasket, approved for use on kitchen exhaust ducts, between frame and duct and between door and frame. If Tenant uses 22 88 water wash type hoods with direct connected water supply for cleaning, Tenant shall provide a full size waste water connection running to the kitchen drainage System. 23 89 EXHIBIT D "STATEMENT OF GROSS SALES" Attn: JAMES CHAU Tel# (818) 622-2924 Fax# (818) 622-0150 STATEMENT OF GROSS SALES FOR VENUE: --------------------_ for the period ended: ---------- Month Year-to-date ----- ------------ SALES Merchandise -------------- -------------- Services -------------- -------------- Vending -------------- -------------- Gift Certificates Sold -------------- -------------- Other (Describe) -------------- -------------- Other (describe) -------------- -------------- TOTAL SALES ================================= LESS ADJUSTMENTS Voided Transactions -------------- -------------- Returns & Refunds -------------- -------------- Gift Certificates Redeemed -------------- -------------- Coupons -------------- -------------- Taxes included in sales above -------------- -------------- Other (Describe) -------------- -------------- Other (Describe) -------------- -------------- TOTAL ADJUSTMENTS -------------- -------------- ================================= ================================= GROSS SALES (AS DEFINED) ================================= GROSS SALES BREAKPOINT --------------------------------- EXCESS ================================= PERCENTAGE RENT RATE % % --------------------------------- TOTAL PERCENTAGE RENTAL ================================= Less Percentage Rental Previously Paid N/A --------------------------------- PERCENTAGE RENTAL DUE CHECK NO. DATE -------- -------------- - -------------------------------------------------------------------------------- I certify that (i) the above amounts are true and correct, and (ii) this statement has been prepared in accordance with the provisions of the lease and is consistent with all prior statements. - --------------------------------------- --------------------------- NAME & TITLE DATE - -------------------------------------------------------------------------------- 90 EXHIBIT F TENANT'S ESTOPPEL CERTIFICATE Date:___________, 19__ Tenant's Address: ____________________ ____________________ ____________________ Gentlemen: The undersigned, as Tenant, has entered into that certain lease ("Lease"), dated __________, 199__, with Universal Studios CityWalk Hollywood, a division of Universal Studios, Inc., as Landlord, for the leasing of certain premises ("Premises") at Universal City commonly known as "CityWalk" the "Project"). Tenant understands that you have offered or committed to enter into a transaction with Landlord with respect to an interest in Landlord and/or the Lease and/or the Premises and/or the realty underlying the Premises and/or a portion of or interest in the realty or improvements in the Project owned or hereafter acquired by Landlord. You have requested this Certificate from Tenant as a condition precedent to consummation of one of the following transactions: sale, purchase, exchange, transfer, assignment, lease, conveyance, encumbrance, pledge, mortgage or hypothecation. Any party to any of the aforementioned transactions (a "Relying Party") may rely upon this Certificate. In accordance with the terms of the Lease, Tenant ratifies the Lease and certifies that: 1. The undersigned accepted and began occupancy of the Premises described in said Lease on ______________, 199__, and the Rent Commencement Date was _____________, 199__; 2. The undersigned is presently open and conducting business with the public in the Premises; 3. Minimum Annual Rental in the amount of $__________ is currently payable under the Lease, and such Minimum Annual Rental has been paid through the end of the current calendar month; 4. Said Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way (except by agreement[s] dated ______________), and neither party thereto is in default thereunder; 91 5. The Lease (as modified by the agreements, if any, listed in Item 4 above) represents the entire agreement between the parties as to this leasing; 6. The Lease Term expires on ______________, 199__; 7. All conditions under the Lease to be performed by Landlord have been satisfied, including, without limitation, all co-tenancy requirements thereunder; 8. All required contributions by Landlord to Tenant on account of Tenant's improvements have been received; 9. On this date there are no existing defenses, offsets, counterclaims, or deductions against rental which the undersigned has against the enforcement of the Lease by Landlord; and 10. No rental has been paid more than one (1) month in advance and no security (other than a security deposit in the amount of $__________) has been deposited with Landlord. Statements made in this Certificate shall be deemed continually updated and may continue to be relied upon by any Relying Party until ______________, 199__ unless and until notice to the contrary is given by Tenant and received at the address to which rent is then being paid and also at the following address: ________________________________ ________________________________ ________________________________ Very truly yours, ________________________________ (Tenant) By: _________________________ Title: _________________________ 2 92 EXHIBIT G TENANTS INITIAL MERCHANDISE & PRICE LIST 1 OF 6 1999 MASTER MERCHANDISE LIST - -------------------------------------------------------------------------------- TEES Update 05/04/99 - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- BL * Full Throttle $ 20.00 Track Schedule $ 20.00 MoA/Dallas Only Extreme Machine x $ 15.50 DE * DE Crew $ 30.00 DE Heavyweight $ 38.00 DE Racer $ 24.00 Grandstand $ 22.00 It's/Name $ 22.00 Standing $ 22.00 Hot Rod x $ 15.50 DE Jr. * Checkered/Cir $ 20.00 Coast/Coast $ 20.00 New Breed $ 20.00 New Kid x $ 15.50 DJ * DJ Heavyweight $ 38.00 Objects/Mirror $ 20.00 Sponsor $ 20.00 In Motion x $ 15.50 JG * Business/Good $ 24.00 Driving/Force $ 30.00 JG Crew $ 30.00 JG Heavyweight $ 38.00 JG Racer $ 24.00 Fighting Finish $ 18.00 No/Signs $ 22.00 Race Tech $ 18.00 Pepsi Crew $ 30.00 Pepsi Power $ 22.00 Star Wars D/F $ 22.00 Super Race $ 22.00 Superteam $ 18.00 Driving Force x $ 15.50 Generation... x $ 15.50 Star Wars D/F(y) x $ 16.50 Superteam(y) x $ 16.50 MM * Dominator $ 22.00 Race Idol $ 18.00 RW * Atti2ude $ 22.00 RW Heavyweight $ 38.00 True Blue $ 20.00 Taking/Limit x $ 15.50
93 EXHIBIT G TENANTS INITIAL MERCHANDISE AND PRICE LIST 2 OF 6 - -------------------------------------------------------------------------------- TEES, cont. - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- TL * Don't Mess $ 20.00 Rocket Man x $ 15.50 TS * Toughest $ 20.00 Heavy Duty $ 24.00 BL & TL Two/Texas $ 20.00 DE & Jr. Two Faces x $ 28.00
- -------------------------------------------------------------------------------- HATS - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- BL * BL Thrasher $ 23.00 Pit $ 22.00 MoA/Dallas Only DE * 3 Track $ 23.00 GM/Plus $ 25.00 The Drip $ 20.00 Victory Lane $ 23.00 Wrangler $ 20.00 Be #3 x $ 16.00 DE Jr. * Flag $ 20.00 Oval $ 18.00 Busch Champ $ 23.00 DJ * FQCS/FC $ 23.00 Sponsor $ 18.00 DJ Car x $ 16.00 JG * Big Car $ 25.00 Blk. Slouch $ 23.00 Brush Stroke $ 24.00 Pepsi Racing $ 23.00 Pepsi Visor $ 23.00 Star Wars $ 24.00 Superman $ 23.00 Be #24 x $ 16.00 Star Wars(y) x $ 16.50 Superman(y) x $ 16.50 MM * MM Domestic $ 20.00 RW * Miller/Flame $ 24.00 Twist/Open $ 18.00 RW Car x $ 16.00 TL * TL Thrasher $ 23.00 TS * Sandwich $ 23.00 Up Front x $ 20.00
- -------------------------------------------------------------------------------- SPECIALTY - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- Logo L/S Tee $ 16.50 DE * DE Crew Jkt. $155.00
94 EXHIBIT G TENANTS INITIAL MERCHANDISE AND PRICE LIST 3 OF 6 DE Yth Jkt. x $ 75.00
- -------------------------------------------------------------------------------- SPECIALTY - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- DE Top Groove $ 38.00 DE HW Jersey DJ * DJ Crew Jkt. $155.00 DJ DJ Top Groove $ 38.00 DJ HW Jersey JG * JG Crew Jkt. $155.00 JG Twill $120.00 JG Yth Jkt. $ 75.00 JG Top Groove $ 38.00 JG HW Jersey MM MM Twill $155.00 RW * RW Crew Jkt. $120.00 RW Twill Jkt. $155.00 RW Top Groove $ 38.00 RS HW Jersey
- -------------------------------------------------------------------------------- SWEATS - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- DE * Steel Hood Team Color Block DJ * Team Color Block JG * Steel Hood Team Color Block MM * Team Color Block RW Team Color Block
- -------------------------------------------------------------------------------- DIE-CAST - --------------------------------------------------------------------------------
ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- BL * 1:24 Interstate $ 49.95 1:64 Interstate $ 9.95 DE * Bank 25th Ann. $ 59.95 Crystal 25th Ann. $109.95 Pedal 25th Ann. $ 39.95 1:24 25th Ann. $ 59.95 1:64 25th Ann. $ 11.95 * Bank GW Plus $ 49.95 Crystal GW Plus $ 89.95 Pop Up GW Plus 1:24 GW Plus $ 49.95 1:64 GW Plus $ 9.95 * Bank Wrangler 1:24 Wrangler 1:64 Wrangler DE Jr. * Pedal AC Delco
95 EXHIBIT G TENANTS INITIAL MERCHANDISE & PRICE LIST 4 OF 6 Pop Up AC Delco $ 49.95 1:24 AC Delco $ 9.95 1:64 AC Delco $ 49.95 DE, Jr. * Bank Bud $ 89.95 Crystal Bud Pedal Bud $ 49.95 1:24 Bud $ 9.95 1:64 Bud $ 42.95 Pump Bud Crystal Superman(Jr.) Pedal Superman(Jr.) 1:24 Superman(Jr.) 1:64 Superman(Jr.) DJ * Bank QC $ 49.95 1:24 QC $ 49.95 1:64 QC $ 9.95 1:24 Winston 1:64 Winston EI * Bank Crispy 1:24 Crispy 1:64 Crispy JG * Crystal Baby Ruth $ 89.95 * 1:24 Carolina '91 $ 49.95 * Bank Dupont $ 49.95 Crystal Dupont $ 89.95 Pedal Dupont Pop Up Dupont 1:24 Dupont $ 49.95 1:64 Dupont $ 9.95 Pump Dupont $ 42.95 * Bank Pepsi $ 49.95 1:24 Pepsi $ 49.95 1:64 Pepsi $ 9.95 * Bank Star Wars Helmet Star Wars Pedal Star Wars Pit Wagon Star Wars 1:24 Star Wars 1:64 Star Wars * Crystal Superman(JG) Pedal Superman(JG) 1:24 Superman(JG) $ 79.95 1:64 Superman(JG) $ 14.95 JM * Bank Ky Derby $ 49.95 1:24 Ky Derby 1:64 Ky Derby
96 EXHIBIT G TENANTS INITIAL MERCHANDISE & PRICE LIST 5 OF 6 * 1:24 Mobil 1 1:64 Mobil 1 KI * 1:24 Texaco $ 49.95 - -------------------------------------------------------------------------------- DI-CAST, cont. - -------------------------------------------------------------------------------- ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- RW * 1:24 Texas '99 $ 62.95 1:64 Texas '99 $ 11.95 SM * 1:24 J Wayne TL * Bank Kellogg's $ 49.95 1:24 Kellogg's $ 49.95 1:64 Kellogg's $ 9.95 TS * Bank Home Depot $ 49.95 1:24 Home Depot $ 49.95 1:64 Home Depot $ 9.95 - -------------------------------------------------------------------------------- ACCESSORIES - -------------------------------------------------------------------------------- ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- Acrylic Std. $ 25.00 Acrylic Tilt $ 25.00 Acrylic Dbl. $ 60.00 DE * Hood $110.00 Night Light $ 15.00 Switch Plate $ 6.50 DJ * Hood $110.00 Night Light $ 15.00 Switch Plate $ 6.50 JG * Hood $110.00 Night Light $ 15.00 Switch Plate $ 6.50 RW * Hood $110.00 Night Light $ 15.00 Switch Plate $ 6.50 - -------------------------------------------------------------------------------- SOUVENIRS - -------------------------------------------------------------------------------- ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- * 99 Track Map $ 5.95 BL * BL 1:87 Keychain $ 6.50 BL Tattoo $ 2.75 DE * DE 1:87 Keychain $ 6.50 DE Shot Glass $ 6.50 DE Tattoo $ 2.75 DJ * DJ Tattoo $ 2.75 JG * JG 1:87 Keychain $ 6.50 JG Shot Glass $ 6.75 * JG Tattoo $ 2.75 RW * RW Shot Glass $ 6.75 RW Tattoo $ 2.75
97 EXHIBIT G TENANTS INITIAL MERCHANDISE & PRICE LIST 6 OF 6 TL TL 1:87 Keychain $ 6.50 BL BL Hood $ 5.50 DE DE Hood $ 5.50 DJ DJ Hood $ 5.50 JG JG Hood $ 5.50 - -------------------------------------------------------------------------------- SOUVENIRS - -------------------------------------------------------------------------------- ITEM YOUTH RETAIL - -------------------------------------------------------------------------------- Pepsi $ 5.50 RW RWHood $ 5.50 TL TL Hood $ 5.50
98 EXHIBIT H STAIRWAY MODIFICATION 1 OF 2 [FLOOR PLAN] SAM GOODY RENOVATION STAIR MODIFICATION@SC79 EAST EXIT STAIR FIRST LEVEL 6-24-99 99 EXHIBIT H STAIRWAY MODIFICATION 2 OF 2 [FLOOR PLAN] SAM GOODY RENOVATION STAIR MODIFICATION@SC79 EAST EXIT STAIR UPPER PORTION OF SPACE 6-24-99 EX-10.19 21 STANDARD SHOPPING CENTER LEASE, WALDEN GALLERIA 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.19 STANDARD SHOPPING CENTER LEASE Name of Shopping Center: WALDEN GALLERIA Location of Shopping Center: INTERSTATE ROUTE 90, WALDEN AVENUE BUFFALO, NEW YORK Landlord: PYRAMID COMPANY OF BUFFALO Tenant: SILICON ENTERTAINMENT, INC. d/b/a: NASCAR SILICON MOTOR SPEEDWAY 2 TABLE OF CONTENTS ARTICLE 1...................................................................2 Premises..................................................................2 1.01 - Premises.........................................................2 1.02 - Shopping Center..................................................2 1.03 - Use of Premises and Trade Name...................................2 ARTICLE 2...................................................................3 Term of Lease.............................................................3 2.01 - Commencement of Term.............................................3 2.02 - Term of Lease....................................................3 2.03 - Expiration of Term...............................................3 2.04 - Surrender of Premises............................................3 ARTICLE 3...................................................................4 Rent......................................................................4 3.01 - Minimum Rent.....................................................4 3.02 - Percentage Rent..................................................4 3.03 - Gross Receipts Defined...........................................5 3.04 - Tenant's Books and Records.......................................6 3.05 - Reports by Tenant................................................6 3.06 - Non-Waiver.......................................................6 3.07 - Right to Examine and Audit Books and Records.....................6 3.08 - Delinquent Payments..............................................7 3.09 - Additional Rent..................................................7 3.10 - Definition of Lease Year and Partial Lease Year..................7 3.11 - Place for Payments...............................................7 ARTICLE 4...................................................................7 Taxes.....................................................................7 4.01 - Real Property Taxes..............................................7 4.02 - Tenant's Taxes...................................................8 ARTICLE 5...................................................................8 Construction and Financing................................................8 5.01 - Landlord's Work..................................................8 5.02 - Tenant's Work....................................................9 5.03 - Payment..........................................................9 5.04 - Financing........................................................9 ARTICLE 6..................................................................10 Conduct of Business of Tenant............................................10 6.01 - Use of Premises and Trade Name..................................10 6.02 - Tenant's Operating Covenant.....................................10 6.03 - Competition.....................................................10 6.04 - Other Business Practices........................................11 6.05 - Marketing Fund..................................................12 ARTICLE 7..................................................................12 Common Areas and Operating Costs.........................................12 7.01 - Definition......................................................12 7.02 - Development of Common Areas.....................................12 7.03 - Use of Common Areas.............................................13 7.04 - Common Area Costs...............................................13 7.05 - Adjustment to Payment...........................................13 7.06 - Payment of Extraordinary Common Area Costs......................13 ARTICLE 8..................................................................13 Energy, Utility and Sprinkler Costs......................................13 8.01 - Energy and Utility Charges......................................13 8.02 - Intentionally deleted...........................................15 8.03 - Intentionally deleted...........................................15 8.04 - Miscellaneous Utility Provisions................................15 8.05 - Periodic Adjustment.............................................15 ARTICLE 9..................................................................15 Fixtures, Alterations, Signs.............................................15 9.01 - Installation by Tenant..........................................15 9.02 - Removal and Restoration by Tenant...............................16 9.03 - Signs, Awnings and Canopies.....................................16 9.04 - Condition of the Premises.......................................16 ARTICLE 10.................................................................16 Repairs and Maintenance..................................................16 10.01 - Landlord's Obligation to Repair.................................16 10.02 - Tenant's Obligation to Repair...................................17 10.03 - Article Not Applicable to Fire or Condemnation..................17 ARTICLE 11.................................................................17 Indemnity................................................................17 11.01 - Indemnity.......................................................17 ARTICLE 12.................................................................18 Insurance................................................................18 12.01 - Liability Insurance.............................................18 12.02 - Special Causes of Loss and Difference in Conditions Insurance...18 12.03 - Insurance of Common Areas.......................................18 12.04 - Increases in Fire Insurance Premium.............................19 12.05 - Tenant to Share Insurance Costs.................................19 12.06 - Waiver of Subrogation...........................................19 12.07 - Policies........................................................19
i 3 ARTICLE 13.................................................................19 Damage by Fire, Etc......................................................19 13.01 - Restoration of Premises.........................................19 13.02 - Restoration during Last Three Years.............................20 13.03 - Tenant's Obligation Upon Restoration............................20 ARTICLE 14.................................................................20 Eminent Domain...........................................................20 14.01 - Eminent Domain..................................................20 14.02 - Landlord Entitled to Award......................................20 ARTICLE 15.................................................................20 Bankruptcy and Default Provisions........................................20 15.01 - Events of Default and Conditional Limitation....................20 15.02 - Landlord's Remedies.............................................21 ARTICLE 16.................................................................22 Mechanics' Liens.........................................................22 16.01 - Mechanics' Liens................................................22 ARTICLE 17.................................................................23 Assignments, Subleases and Other Transfers of Tenant's Interest..........23 17.01 - Limitations on Tenant's Rights..................................23 17.02 - Effect of Landlord's Consent....................................24 ARTICLE 18.................................................................25 Compliance with Government Orders........................................25 18.01 - Tenant to Comply................................................25 18.02 - Failure to Comply...............................................25 18.03 - Hazardous Material..............................................25 18.04 - Americans With Disabilities Act.................................25 ARTICLE 19.................................................................25 Subordination, Mortgagee's Rights and Assignment of Rents................25 19.01 - Subordination...................................................25 19.02 - Mortgagee's Rights..............................................26 19.03 - Assignment of Rents.............................................26 ARTICLE 20.................................................................26 Entry to Premises........................................................26 20.01 - Entry to Premises by Landlord...................................26 ARTICLE 21.................................................................27 Notices and Certificates.................................................27 21.01 - Notices.........................................................27 21.02 - Estoppel Certificate of Landlord................................27 21.03 - Estoppel Certificate of Tenant..................................27 ARTICLE 22.................................................................28 Covenant of Quiet Enjoyment..............................................28 22.01 - Covenant of Quiet Enjoyment.....................................28 ARTICLE 23.................................................................28 Miscellaneous Provisions.................................................28 23.01 - Holdover........................................................28 23.02 - Limitation on Landlord's Personal Liability.....................28 23.03 - Definition of Tenant's Allocable Share..........................28 23.04 - Force Majeure...................................................29 23.05 - Relocation of Tenant............................................29 23.06 - Changes and Additions...........................................29 23.07 - Attornment by Tenant............................................29 23.08 - Index...........................................................30 23.09 - Survival of Tenant's Obligations................................30 23.10 - Effect of Landlord's Notice to Terminate........................30 23.11 - Effect of Captions..............................................30 23.12 - Tenant Authorized to Do Business................................30 23.13 - Execution in Counterparts.......................................30 23.14 - Law Governing, Effect and Gender................................30 23.15 - Memorandum or Notice of Lease...................................30 23.16 - Complete Agreement..............................................30 23.17 - Guaranty of Lease...............................................31 23.18 - Arbitration.....................................................31 23.19 - Security Agreement..............................................31 23.20 - Invalidity of Particular Provisions.............................31 23.21 - Execution of Lease by Landlord..................................31 23.22 - Relationship of the Parties.....................................31 23.23 - Brokers.........................................................31 23.24 - Representations.................................................31 23.25 - Abatement.......................................................31 23.26 - Special Use Permit..............................................31 23.27 - Allowance or Abatement of Rent..................................32
ii 4 INDEX TO DEFINED TERMS
DEFINED TERM SECTION - ------------ ------- Additional Rent....................................................3.09 Anchor Store......................................................23.03(c) Common Areas.......................................................7.01 Common Area Costs..................................................7.04(b) Energy Charges.....................................................8.01(b) Fixed Annual Minimum Rent..........................................3.01(a) Fixed Monthly Minimum Rent.........................................3.01(a) Gross Receipts.....................................................3.03 Hazardous Material................................................18.03 Landlord..........................................................23.02(b) Lease Year.........................................................3.10 Major Store.......................................................23.03(c) Partial Lease Year.................................................3.10 Percentage Rent....................................................3.02(a) Premises...........................................................1.01 Real Property Taxes................................................4.01 Square Feet.......................................................23.03(c) Tenant's Allocable Share..........................................23.03 Term Commencement Date.............................................2.01
iii 5 SHOPPING CENTER LEASE AGREEMENT made this 12 day of August, 1999, by and between the following parties: Landlord: PYRAMID COMPANY OF BUFFALO a partnership organized and existing under the laws of the State of New York with its mailing address for notices and a principal office at: THE CLINTON EXCHANGE FOUR CLINTON SQUARE SYRACUSE, NEW YORK 13202-1078 Attention: MANAGEMENT DIVISION hereinafter referred to as "Landlord," and Tenant: SILICON ENTERTAINMENT, INC. d/b/a NASCAR SILICON MOTOR SPEEDWAY a corporation organized and existing under the laws of the State of California with its mailing address for notices and a principal office or residence at: 210 Hacienda Avenue - ------------------- (Street Address) Campbell California 95008 - ----------------------------------------------------------------- (City or Town) (County) (State) (ZIP) Attention: President --------- hereinafter referred to as "Tenant." Tenant's Federal Tax Identification or Social Security Number: 77-0389433. 1 6 ARTICLE 1 PREMISES 1.01 - PREMISES (a) Landlord hereby demises and leases to Tenant and Tenant hereby rents from Landlord those certain premises ("Premises") hereinafter described and located in Walden Galleria ("Shopping Center"), which is located in the Town of Cheektowaga, County of Erie, and State of New York. The Premises consist of approximately 4,124 square feet. The Premises are shown cross-hatched on the plan attached hereto and made a part hereof as Exhibit A-1. The Premises shall not be deemed to include either the land lying thereunder or the exterior walls or roof of the building in which said Premises are located or any area beyond the midpoint of any interior wall. Landlord reserves the use of said land, walls and roof of the building, together with the right to install, maintain, use, repair, and replace pipes, ducts, conduits, wires and structural elements leading through the non-sales area of the Premises in locations which will not materially interfere with Tenant's use of the Premises. Any such installation, maintenance, use, repair or replacement, if approved by Tenant, shall be performed by Landlord in such a manner as to avoid unreasonably interfering with Tenant's business operations in the Premises. (b) Within sixty (60) days after Landlord's delivery of possession to Tenant pursuant to the terms of this Lease, Tenant may, at its sole cost and expense, have the size of the Premises verified by an independent architect of Tenant's choice. For purposes of this verification, the square footage of the Premises shall be measured form the midpoints of any interior walls shared in common with another tenant, and from the outside face of any exterior walls of the buildings. In the event that such verification reveals a discrepancy between the measured size of the Premises and the size of the Premises set forth in Section 1.01(a) of this Lease, and Landlord and Tenant are unable to agree upon the square footage for purposes of this Lease, an independent architect acceptable to Landlord and Tenant (the cost of which shall be divided equally between Landlord and Tenant) shall measure the Premises in the manner set forth above. In the event that Tenant's architect, Landlord or its architect, and the independent architect are unable to agree upon the square footage of the Premises for purposes of this Lease, the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof. In the event the square footage of the Premises as determined in accordance with the methodology set forth in this Section 1.01(b) varies from the square footage set forth in Section 1.01(a) above, Landlord and Tenant agree to execute a lease modification agreement (effective retroactive to the Term Commencement Date) adjusting the square footage of the Premises, and appropriately adjusting the Rent, and those items of Additional Rent to the extent that such Additional Rent was originally calculated on a pro rata square foot basis. Any necessary payments or reimbursements shall be paid within thirty (30) days after the full execution of the lease modification agreement. 1.02 - SHOPPING CENTER The Shopping Center includes: (i) the parcel(s) of land and improvements hereinafter referred to as "Landlord's Trust" generally depicted on Exhibit A attached hereto and made a part hereof, whether owned in fee or ground leased by Landlord and (ii) the parcel(s) of land and improvements, if any, generally depicted on Exhibit A as "REA Parcel" made available for use by any reciprocal construction operating and easement agreement ("REA"). Landlord reserves the right to add to or sever the ownership of or title to any portion of the Shopping Center or to add to or reduce the size of any REA Parcel at any time. Landlord represents and warrants that it has the right and authority to lease the Premises. It is agreed that the depiction of the Shopping Center on Exhibit A does not constitute a representation, covenant or warranty of any kind by Landlord. Subject to Section 7.03 of this Lease, Landlord, in its sole and absolute discretion, reserves the right to expand or remodel the Shopping Center and to change the configuration, size and dimensions of the Shopping Center, the number, location and dimensions of buildings, parking areas, driveways, entrances, exits and landscaped areas, the number of floors in any of the buildings, the dimensions, identity, and type of stores or tenancies, and, as provided in Section 7.02, the "Common Areas" (defined in Section 7.01). 1.03 - USE OF PREMISES AND TRADE NAME Throughout the Term, Tenant shall operate the Premises solely under the trade name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" or, with Landlord's approval, not to be unreasonably withheld, any other legally permitted trade name ("Trade Name"); provided that if the trade name of all or substantially all other stores operating under the trade name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" are changed to another legally permissible trade name, Tenant, upon prior written notice to Landlord, shall be permitted to change its Trade Name to such other trade name as has been adopted for all or substantially all such other stores. Tenant shall use the entire Premises solely for the purpose(s) of: (a) as a primary use, conducting an interactive entertainment center featuring among other things the installation and operation of motion-based racing simulators and (b) ancillary thereto, other related retail and entertainment uses; such uses may include but shall not be limited to the sale of motor sports and auto racing merchandise, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR or motor sports (including, without limitation, NASCAR videos, pictures, CD-Roms, DVDs, and other similar media or audio/visual materials); the sale of hot and cold beverage and snack foods, and for no other purpose whatsoever. Tenant shall use its reasonable efforts not to place any food vending machines or other food sales area at the store front of the Premises. Anything contained in this Lease to the contrary notwithstanding, throughout the Term Tenant shall limit the display of merchandise and food or beverage items to no more than forty percent (40%) of the square footage of the Premises. Landlord hereby represents and warrants to Tenant that Tenant's use of the Premises as contemplated in this paragraph does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other Tenant of the Shopping Center, and Landlord shall indemnify, defend, protect, and hold harmless Tenant from any loss, liability, cost, expense, judgment, action or claim of any such party arising from the inaccuracy of such representation and warranty. Anything contained in this Lease to the contrary notwithstanding, Landlord's consent shall not be unreasonably withheld for any change or addition to Tenant's permitted use requested in writing by Tenant. Tenant hereby agrees that the criteria which Landlord may use in determining whether or not to grant such consent shall include, but not be limited to, (i) the impact such change or addition may have on the tenant mix of the Shopping Center, (ii) whether such change or addition violates any use restriction applicable to the Shopping Center, or (iii) the compatibility such change or addition may have with a first-class regional shopping center. 2 7 Notwithstanding anything to the contrary in this Section 1.03 of this Lease, Tenant shall be entitled to use the Premises from time to time for conducting the uses set forth in this Section 1.03 for the exclusive use of groups of private parties ("Private Events"). Tenant may while such Private Events are in progress, temporarily restrict access by the general public to Tenant's simulator rides, provided that the Tenant shall otherwise remain open to the general public for the sale of merchandise and the sale of simulator ride tickets for redemption by the public after any Private Event is concluded. Gross Receipts in connection with Private Events shall be included in Gross Receipts for purposes of calculating Percentage Rent. In connection with Private Events, Tenant may serve, or hire another party to serve, food and beverages (including alcoholic beverages) for on-premises consumption only, provided that Tenant obtains or causes to be obtained, if necessary, all governmental licenses, approvals and permits required in connection therewith and in the case of offering of any alcoholic beverages for consumption within the Premises, Dram Shop or liquor liability insurance coverage. For the preparation and serving of food and alcoholic beverages at Private Events, Tenant shall engage, and cause third parties to use, restaurants and food establishments located within the Shopping Center ("Center Caterer"), provided that up to ten percent (10%) of the total number of Private Events held during a Lease Year may be catered by non-Center Caterers and provided, further, that Tenant shall not be required to use or cause to be used Center Caterers for Private Events within the Shopping Center unless at the time of the related Private Event there are at least three restaurants or other food and beverage vendors in the Shopping Center offering catering services from the Shopping Center at prices equal to or less than the then menu prices of such restaurant or vendor and two of three of such Center Caterers are full service sit down restaurants and one of the three is either a full service restaurant or a limited service restaurant, food court operator or other food and beverage operator (such as by way of example and not limitation Kahunaville, Ruby Tuesday, or Jack Astor's). In the event that Tenant shall be in default of the immediately preceding sentence and a Private Event is conducted in whole or in part by other than a Center Caterer, then, as liquidated damages and not as a penalty, the retail value of food and beverage provided by such third party shall be included in the amount of Gross Receipts used to compute Percentage Rent payable under this Lease on merchandise sold from the Premises. Any Private Events which are held at times when the requirements set forth in the premises above concerning Center Caterers are not met shall be excluded from the total number of Private Events held during any Lease Year for purposes of calculating the ten percent (10%) permissible number of Private Events catered by non-Center Caterers as described above. ARTICLE 2 TERM OF LEASE 2.01 - COMMENCEMENT OF TERM (a) Landlord shall deliver possession of the Premises to Tenant with all of Landlord's work substantially complete by September 1, 1999 and the term of this Lease shall commence, subject to Section 23.04 below and other delays caused solely by Landlord, on the earlier of (1) December 1, 1999, or (2) the date Tenant opens to the public for the conduct of its business in the Premises (hereinafter called "Term Commencement Date"). In the event Landlord does not deliver possession of the Premises to Tenant on or before March 1, 2000, then Tenant shall have the right to terminate this Lease upon written notice to Landlord, which notice shall be given by March 10, 2000. If Tenant does so notify Landlord, then Landlord will reimburse Tenant for its reasonable out-of-pocket costs actually incurred by Tenant as of the date of termination including architectural, design and legal fees which shall not, in the aggregate, exceed [***] and both Landlord and Tenant shall thereafter be relieved of any further obligation and liability hereunder. If Tenant does not so notify Landlord, then this right of termination shall be deemed waived. (b) Tenant acknowledges the importance both to Landlord and the other tenants of the Shopping Center of Tenant opening for business to the public on the Term Commencement Date. In the event Tenant fails to open for business at the Premises not later than forty-five (45) days after the Term Commencement Date or, if the Term Commencement Date has been rescheduled by Landlord, not later than forty-five (45) days after the rescheduled Term Commencement Date, Tenant covenants and agrees to pay to Landlord, upon receipt of notice from Landlord of the amount due under this Section 2.01(b), as liquidated damages suffered by Landlord due to Tenant's failure to open, a sum (in addition to any rent due hereunder) equal to twice the per diem Fixed Monthly Minimum Rent (using a thirty (30) day month) provided in Section 3.01(a) for each and every business day that Tenant has failed to open for business. 2.02 - TERM OF LEASE Subject to Section 2.03 below, the term of this Lease shall expire on the tenth (10th) anniversary of the Term Commencement Date, unless earlier terminated pursuant to the provisions herein (the last day of the term, whether due to expiration or prior termination of this Lease may be referred to herein as the "Termination Date"). 2.03 - EXPIRATION OF TERM If the term of this Lease would expire during the period October 1 through the last day of December, the parties agree that the term of this Lease shall instead expire on the immediately succeeding January 31. 2.04 - SURRENDER OF PREMISES On the Termination Date of this Lease, Tenant agrees, without necessity of any notices from Landlord (statutory or otherwise), to surrender the Premises in accordance with Article 9, and broom clean and in good order, repair and condition, reasonable wear and tear and damage by fire or casualty excepted. *** Confidential treatment requested. 3 8 ARTICLE 3 RENT 3.01 - MINIMUM RENT (a) Except as set forth in Section 23.25 below, Tenant agrees to pay Landlord, without diminution, deduction or set-off whatsoever and without prior notice of demand, and as fixed annual minimum rent ("Fixed Annual Minimum Rent"), the sums set forth in Section 3.01(a)(i) and (ii) below payable in equal consecutive monthly installments ("Fixed Monthly Minimum Rent") each in advance upon the first day of each calendar month during the term hereof. (i) From the Term Commencement Date through the end of the [***] full month of the Lease term, Fixed Annual Minimum Rent shall be [***] per square foot of the Premises, which equals (subject to Section 1.01(b) of this Lease) [***], payable in equal monthly installments of {***} each; and (ii) From the first day of the [***] full month of the Lease term through the end of the Lease term, Fixed Annual Minimum Rent shall be [***] per square foot of the Premises, which equals (subject to Section 1.01(b) of this Lease) [***], payable in monthly installments of [***] each. (b) If the term shall commence upon a day other than the first day of a calendar month or if the term shall terminate upon a day other than the last day of a calendar month, then Tenant shall pay, upon the Term Commencement Date, and on the first day of the last calendar month, a pro rata portion of the Fixed Monthly Minimum Rent for the first and last fractional calendar months of the term. 3.02 - PERCENTAGE RATE (a) In addition to Fixed Annual Minimum Rent, Tenant shall, in the manner, upon the conditions and at the times hereinafter set forth, pay to Landlord percentage rent ("Percentage Rent") equal to [***] of "Gross Receipts" (defined in Section 3.03) in excess of the amounts set forth in Section 3.02(a)(i) and (ii) below ("Annual Minimum Gross Receipts") per Lease Year (defined in Section 3.10). Percentage Rent shall be payable as hereinafter provided without any diminution, deduction or set-off whatsoever, except as provided in Section 3.02(b), and without prior notice or demand; (i) From the Term Commencement Date through the end of the [***] month of the term of the Lease, Annual Minimum Gross Receipts shall be [***]. (ii) From the first date of the [***] month of the term of this Lease through the end of the term of this Lease, Annual Minimum Gross Receipts shall be [***]. (b) Percentage Rent, if any, shall be paid by Tenant to Landlord, in quarter-annual installments computed on all Gross Receipts during each three (3) month period of the term hereof (i.e., periods from January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31 (each a "Quarter-Annual Period" and collectively the "Quarter-Annual Periods")) in excess of one-quarter (1/4) of Annual Minimum Gross Receipts then in effect. Any Percentage Rent becoming due shall be payable on or before the applicable January 15, April 15, July 15 and October 15 next following the applicable quarter end of each Lease Year. In the event that the total of the quarterly installments of Percentage Rent for any Lease Year does not equal the annual Percentage Rent corrupted in accordance with the formula set forth in Subsection 3.02(a), then, on or before January 15 following each such Lease Year, Tenant shall pay to Landlord any deficiency, or Landlord shall refund any overpayment to Tenant within fifteen (15) days after receipt of Tenant's Annual Statement of Gross Receipts. (c) Notwithstanding anything contained in this Section 3.02 to the contrary, the Percentage Rent for any Lease Year having less than twelve (12) full months shall be based upon the Gross Receipts for the twelve (12) month period immediately following the Commencement Date (as to the first Lease Year) and for the twelve (12) month period immediately preceding the expiration or earlier termination of the Lease (as to the final Lease Year). The Percentage Rent due for such period shall be established by multiplying the Percentage Rent which would have been due for such twelve (12) month period had the Gross Receipts for such period been multiplied by the applicable percentage in this Lease, by a fraction, the numerator of which is the number of days in such partial Lease Year and the denominator of which is 365. (d) Provided that Tenant is not in default under this Lease beyond any applicable cure period and has been open and continuously operating its store in the entire Premises from the Term Commencement Date through the last day of the fifth (5th) Lease Year of the Initial Term (except for periods Tenant is not able to be so open and operating as a result of force majeure, casualty, eminent domain, or remodeling (provided Tenant is not closed as a result of remodeling for more than [***] days in the aggregate in any Lease Year)), then in the event that Gross Receipts for the fourth (4th) and fifth (5th) Lease Year of the Initial Term, when averaged, are less than [***]. Tenant may, at its option, elect to terminate this Lease by giving Landlord written notice thereof, which notice shall be given not later than thirty (30) days after the last day of the said fifth (5th) Lease Year. Time is of the essence with respect to the giving of such notice. If Tenant timely gives Landlord such a notice of termination of this Lease and the conditions for such termination as provided above in this Section 3.02(d) have been satisfied, then this Lease shall automatically terminate without any further action or notice by either party hereto, on the date that is thirty (30) days after the date Landlord receives such notice of termination; 4 *** Confidential treatment requested. 9 and from and after such date of termination. Tenant shall have no further right, title or interest in or to the Premises. If Tenant does not notify Landlord of its election to terminate this Lease in accordance with this Section 3.02(d) or if the conditions for such termination as provided above in this Section 3.02(d) have not been satisfied, then this Lease shall continue in full force and effect in accordance with and subject to its terms, and Tenant shall have no further right to terminate this Lease pursuant to this Section 3.02(d). If Tenant is not open and operating in the entire Premises continuously throughout the said fifth (5th) Lease Year, as a result of force majeure, casualty, eminent domain, remodeling or for any other reason, then for purposes of determining whether Tenant has the right to terminate this Lease under this Section 3.02(d), Tenant's Gross Receipts for any such period of time shall be deemed to be the Gross Receipts for the corresponding period of time in the first Lease Year prior to the fifth (5th) Lease Year for which Tenant was open and operating in the entire Premises during such corresponding period of time. 3.03 GROSS RECEIPTS DEFINED (a) The term "Gross Receipts" as used in this Lease is defined to mean receipts from sales of products or services by Tenant exclusively at, in, on, or from the Premises (including any sales via personal computer, "Home Shopping" television sales, catalog, direct mail telephone or electronic sales at, in, on, or from the Premises) whether such sales be evidenced by check, contract rights, credit, charge account, exchange or otherwise, and shall include, but not be limited to, the amounts received from the sale or rental of goods, wares and merchandise, and from fees and charges for the use by customers of Tenant's simulators and racing entertainment center, and for services performed on or off the Premises to the extent relating to sales made from the Premises, together with the amount of all orders taken or received at the Premises, whether such orders are filled from the Premises or elsewhere, and whether such sales are made by means of merchandise or other vending devices in the Premises. Each charge or sale upon installment or credit shall be treated as a sale for the full price in the month during which such charge or sale shall be made, irrespective of the time when Tenant shall receive payment (whether full or partial) therefor. (b) Notwithstanding anything herein to the contrary the following shall not be included in Gross Receipts: (1) Sales of merchandise returned and claimed to be defective or unsatisfactory, provided such sales have been included in Gross Receipts and deducted from Gross Receipts shall be the sales price of merchandise returned by customers for exchange, provided that the sales price of merchandise delivered to the customer in exchange is included in Gross Receipts. (2) The amount of any sales tax, so-called luxury taxes, excise taxes, gross receipt taxes, entertainment taxes, so-called "drop taxes" and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of merchandise or services and collected from customers or included in the retail selling price use, imposed by any federal, state, municipal or governmental authority directly on sales and collected from customers; provided, however, no franchise or capital stock tax and no income or similar tax based upon income or profits as such shall be deducted from Gross Receipts in any event whatsoever. (3) The sales price of merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon. (4) The sums and credits received in settlement of claims for loss or damage to merchandise or other property located at the Premises. (5) The consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee. (6) Receipts from public telephones and vending machines used exclusively by Tenant's employees. (7) Bankcard discounts (e.g., Visa, MasterCard, etc.), interest, carrying charges, or other finance charges in respect of sales made on credit, as well as any penalty charged by Tenant for a returned check. (8) Sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail. (9) The amount of any discounted sales to employees of Tenant, not to exceed [***] of Gross Receipts in any Lease Year; provided, however, that discounted or complimentary use of Tenant's games and entertainment attractions (including, without limitation, the driving simulators) by Tenant's employees during such employees' normal working hours shall not be included in Gross Receipts. (10) The amount of any discount in sales made to senior citizens. (11) Revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers. (12) Tenant's accounts receivable, not to exceed [***] of Gross Receipts in any Lease Year, which have been determined to be uncollectible for federal income tax purposes during the applicable Lease Year, provided however, that if such accounts are actually collected in a later Lease Year, the amount shall be included in Gross Receipts for such later Lease Year. *** Confidential treatment requested. 5 10 (13) Amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licenses) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in, at, or from the Premises. (14) The amount of any discounts given for promotional coupons that are redeemed from time to time. (15) Gift certificates until such time as the certificates are redeemed. (16) Amounts received in connection with remote site promotional activities. (17) Promotional fees earned by Tenant with respect to goods or services offered for sale. (18) Rents, subrents or other consideration received in connection with an assignment, sublease, license, concession or other transfer of any portion of the store (however, Gross Receipts of any such transferee shall be included), including license fees otherwise payable by Tenant in connection with a third party license agreement. (19) To the extent they are not made at a profit to Tenant, sales passed through to caterers or other parties providing services in connection with private parties for Tenant's customers at the Premises. (c) In the event any portion of the Premises shall be operated by one or more of Tenant's departments or divisions, or if Tenant shall, in accordance with all of the terms, covenants, and conditions of this Lease, assign this Lease or enter into any sublease, license, concession or other use or occupancy agreement with respect to all or any part of the Premises, then there shall be included in the Gross Receipts for the purpose of determining the Percentage Rent payable under this Lease all of the Gross Receipts generated by such departments or divisions, subtenants, assignees, licensees, concessionaires and all such other persons, individuals and/or entities (collectively referred to as "Affiliates") generating such Gross Receipts, it being the intention of the parties hereto that all Gross Receipts generated at or from the Premises shall be included in Gross Receipts for the purpose of determining Percentage Rent as defined herein. Tenant agrees that any assignment, sublease, license or concession, use or occupancy agreement entered into by Tenant with any Affiliates shall contain provisions setting forth the procedure for determining, recording and reporting Gross Receipts by Affiliates which are subject to the review and approval of Landlord as being in conformance with this Section 3.03(c). Such provisions shall contractually obligate Affiliates to the same procedures set forth in this Lease for determining, recording and reporting Gross Receipts. 3.04 - TENANT'S BOOKS AND RECORDS Tenant agrees to prepare and keep on the Premises or at its principal office for a period of not less than three (3) years following the end of each Lease Year, accurate books of account and records of daily Gross Receipts, including without limitation all federal, state and local tax returns, and copies of relevant contracts, checks, vouchers, inventory records, dated cash register tapes, sales slips and such other documentation as would enable Landlord to make a full and complete audit of Gross Receipts ("Books and Records"), as more particularly set forth in Section 3.07 below. Tenant agrees that all Gross Receipts shall be registered at the time each sale or transaction is made in cash registers or other devices or other electronic or technology based systems containing locked-in cumulation capacity, such systems to be consistent with Tenant's normal business practices. 3.05 - REPORTS BY TENANT Within twenty (20) days after the end of each Quarter-Annual Period as set forth in Section 3.02 above, or a portion thereof, during the term of this Lease, Tenant shall furnish to Landlord a written statement setting forth the amount of Gross Receipts and an itemization of any deductions or exclusions taken from Gross Receipts for such previous Quarter-Annual Period. Tenant also agrees that it will furnish to Landlord within sixty (60) days after the end of each Lease Year or Partial Lease Year, an annual statement, showing in all reasonable detail the amount of Gross Receipts and an itemization of any deductions or exclusions relating to such Lease Year or Partial Lease Year and the amount of Percentage Rent due Landlord ("Actual percentage Rent"). Each Quarter-Annual and Annual statement required by this Section 3.05 shall be certified by Tenant or one of Tenant's executive officers and shall be subject to further certification as provided in Section 3.07. In the event Tenant fails to furnish Landlord with a Quarter-Annual or Annual statement within the required time period and within ten (10) days after notice from Landlord, and in the manner set forth in this Section 3.05, then the Gross Receipts for such Quarter-Annual Period or year, as the case may be, shall, at Landlord's option, be deemed to be equal to Tenant's highest previously reported quarterly or annual Gross Receipts, and if such failure continues for ten (10) days following notice from Landlord, Tenant shall pay to Landlord, as liquidated damages, the sum of [***] per month until such statement is received. In addition, if Tenant is delinquent in furnishing Landlord with the annual statement of Gross Receipts and such failure continues for ten (10) days following notice from Landlord, the immediately following audit the Landlord conducts pursuant to Section 3.07 below shall be at Tenant's expense. 3.06 - NON-WAIVER The acceptance by Landlord of payments of Percentage Rent and statements of Gross Receipts shall be without prejudice to Landlord's right to examine Tenant's Books and Records in order to verify the amounts thereof. 3.07 - RIGHT TO EXAMINE AND AUDIT BOOKS AND RECORDS At its option, Landlord may, during regular business hours and upon ten (10) days' prior written notice to Tenant, examine the Books and Records or cause a complete audit to be made of the Books and Records (including *** Confidential treatment requested. 6 11 the books and records of any subtenant, operator, concessionaire or licensee or of any other store operated by Tenant within the five (5) mile radius as more specifically set forth in Section 5.03 of this Lease) for the period covered by any statement required to be furnished by Tenant as set forth above; provided, however, any such audit or examination shall be conducted in such a manner as to minimize any interference with Tenant's business operations. In the event such examination discloses that Tenant has intentionally or fraudulently understated Gross Receipts by [***] or more, Tenant agrees to pay to Landlord the reasonable cost of such examination and audit, plus a [***] administrative fee. In the event that such examination or audit discloses that Tenant has understated Gross Receipts by [***] or more, then, in addition to the foregoing, at Landlord's option, the term of this Lease shall expire ten (10) days after Tenant's receipt of a termination notice from Landlord. Any additional Percentage Rent found to be due and owing to Landlord as a result of any examination or audit shall immediately be due and payable and interest shall accrue on the unpaid portion thereof at a per annum rate ("Default Rate") equal to the lesser of (i) the [***] or (ii) the [***]. 3.08 - DELINQUENT PAYMENTS If during the term of this Lease Tenant fails to pay the full amount of the Fixed Monthly Minimum Rent, Percentage Rent or "Additional Rent" (defined in Section 3.09) within five (5) days when the same was due and payable, then interest at the Default Rate, shall accrue on the unpaid amount from and after the date on which any such sum shall be due and payable, and such interest, together with a Late Charge of [***] for each past due payment to cover the extra expense involved in handling such delinquency, shall be paid to Landlord at the time of payment of the delinquent sum. Landlord shall have the right to apply any payments made by Tenant first to any deficiency in the payment of the interest and administrative charges provided for hereunder. Any payment to be made by Tenant under this Lease shall be deemed to have been paid upon the date that it is received by Landlord. The provision for a Late Charge and Interest herein shall not be deemed to grant Tenant any grace period or extension of time or prevent Landlord from exercising its other rights under this Lease. Tenant shall pay to Landlord an administrative fee of [***] for each and every check submitted by Tenant which is dishonored. If Landlord receives from Tenant two or more checks which have been dishonored, all checks from Tenant thereafter shall, at Landlord's option, be either certified or cashier's checks. 3.09 - ADDITIONAL RENT All rents, charges, costs, expenses, reimbursements, fees, interest, and other payments to be made by Tenant to Landlord under this Lease, other than Fixed Annual Minimum Rent and Percentage Rent, shall be deemed to be "Additional Rent." 3.10 - DEFINITION OF LEASE YEAR AND PARTIAL LEASE YEAR The term "Lease Year" is defined to mean a period of twelve (12) consecutive calendar months commencing on the first day of January. Any portion of the term which is less than a Lease Year shall be deemed a "Partial Lease Year" and computations requiring proration shall be made on a per diem basis using a 365 day year. In order to achieve uniformity in the operation of the Shopping Center, Landlord reserves the right to designate and change the beginning and ending day of the Lease Year, notice of which shall be given to Tenant in writing; provided, however, no such change shall in any way increase Tenant's obligations or reduce Tenant's rights hereunder. 3.11 - PLACE FOR PAYMENTS Tenant shall deliver to Landlord all payments of Fixed Monthly Minimum Rent, Percentage Rent and Additional Rent at the office of Landlord shown at the beginning of the Lease or such other place as may be designated by Landlord in writing. Nothing contained in this Section 3.11 shall relieve Tenant of the obligation to pay by the dates due, any and all such payments payable by Tenant under this Lease. ARTICLE 4 TAXES 4.01 - REAL PROPERTY TAXES (a) Landlord will pay in the first instance all real property taxes (which shall include property tax assessments, water and sewer rent rates and charges, parking and environmental surcharges, and any other governmental charges, general and special, ordinary and extraordinary) which may be levied or assessed by any lawful authority against land or improvements located in the Shopping Center (collectively "Real Property Taxes"). The amounts required to be paid by Landlord or any tenant or occupant of the Shopping Center pursuant to any Payment in Lieu of Tax Agreement entered into with a taxing authority having jurisdiction over the Shopping Center shall be considered for the purposes of this Lease to be included within the definition of Real Property Taxes. (b) During the term of this Lease, Tenant shall pay to Landlord as Additional Rent, Tenant's Allocable Share of all Real Property Taxes. Real Property Taxes shall include a charge equal to eighteen percent (18%) of the Real Property Taxes relating to the Common Areas. Tenant's Allocable Share shall be computed under Section 23.03(b) as of the first day of each respective Lease Year. If the Premises are separately assessed, then Tenant agrees to pay to Landlord, as Additional Rent, the amount of the Real Property Taxes separately assessed against the Premises including the land lying thereunder plus Tenant's Allocable Share of the Real Property Taxes assessed against the Common Areas of the Shopping Center. *** Confidential treatment requested. 7 12 (c) Tenant agrees that following the Term Commencement Date, Tenant shall pay to Landlord, as Additional Rent and within thirty (30) days after receipt of a bill therefor, the amount of Tenant's Allocable Share of all Real Property Taxes, computed as of the Term Commencement Date for the then current tax fiscal year(s). Such amount shall be calculated on the basis of the number of days (from the Term Commencement Date) remaining in each such current tax fiscal year. Thereafter, Tenant shall pay to Landlord, as Additional Rent, all sums due pursuant to Section 4.01(b) in monthly installments, in advance and without notice, on or before the first day of each month during the term of the Lease, in an amount estimated by Landlord, such that Landlord will have received the full amount of Tenant's Allocable Share of Real Property Taxes in time for payment to applicable taxing authority when due. In the event Landlord is required to escrow Real Property Taxes, Landlord may, but shall not be obligated to, use the amount required to be escrowed as a basis for its estimate of the monthly installments due from Tenant hereunder. Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's Allocable Share of Real Property Taxes based upon the tax bills or assessment bills for each tax fiscal year. If the total amount paid by Tenant under this Section 4.01(c) for any tax fiscal year during the term of this Lease is less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the deficiency within thirty (30) days after demand therefor by Landlord. If the total amount paid by Tenant hereunder for any year exceeds the amount due from Tenant for such year, Tenant shall be entitled to offset the excess against payments next thereafter becoming due from Tenant under this Section 4.01(c). For the tax fiscal years in which this Lease commences and terminates, the provisions of this paragraph shall apply and, to the extent necessary, Tenant's liability for its Allocable Share of any Real Property Taxes for such year shall be subject to a pro rata adjustment based on the appropriate number of days of said tax fiscal years. A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of Real Property Taxes to which such bill relates. (d) Intentionally deleted. (e) Landlord may seek a reduction in the assessed valuation (for Real Property Tax purposes) of the Shopping Center or any portion thereof by administrative or legal proceeding. Tenant shall pay to Landlord Tenant's Allocable Share of Landlord's costs for said proceedings, including counsel fees, appraisal fees and other similar expenses, within thirty (30) days after Tenant's receipt of a statement from Landlord therefor. Tenant's Allocable Share of such costs shall be computed under Section 23.03(b) hereof. Landlord shall reimburse Tenant for Tenant's Allocable Share of any refund of Real Property Taxes (after deducting any unpaid portion of Tenant's Allocable Share of Landlord's costs for such proceedings) resulting from any proceeding for which Tenant has paid Tenant's Allocable Share of Real Property Taxes. (f) Should any alteration or improvement performed by or for Tenant during the term of this Lease cause an increase in assessment, Tenant shall pay to Landlord the full cost of all Real Property Taxes resulting from such increase in assessment. Any amount paid separately hereunder by Tenant to Landlord shall be in addition to any amounts paid by Tenant pursuant to Section 4.01(c). (g) Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge or assessment upon or against the rents payable by Tenant to Landlord, or upon or against the Common Areas, whether by way of substitution for or in addition to any existing Real Property Tax or otherwise, Tenant shall be responsible for and shall pay Tenant's Allocable Share of such tax in the manner provided in Section 4.01(c). Notwithstanding anything to the contrary in this Section 4.01(g), Tenant shall not be responsible for payment of any income taxes attributable to Landlord. (h) Tenant's 1999 Real Property Taxes will be calculated at $7.20 per square foot of the Premises, subject, however, to increases based upon increases in City and School taxes assessed for the 1999-2000 tax fiscal year. Notwithstanding anything to the contrary in this Article 4, increases in Tenant's contributions for Real Property Taxes shall be limited to the actual increases in Real Property Taxes as imposed by the taxing authorities. Tenant understands that the Town and County portion of Real Property Taxes is calculated on a tax fiscal year of January 1 through December 31, and that the City and School portion of Real Property Taxes is calculated on a tax fiscal year of July 1 through June 30. Figures quoted to Tenant for Real Property Taxes include the actual 1999 Town and County Real Property Taxes and the actual 1998-1999 City and School Real Property Taxes. 4.02 - TENANT'S TAXES Tenant shall, at all times, be responsible for and pay, before delinquency, all municipal, county, state or federal taxes charged against Tenant's income, sales, fixtures, furnishings, equipment, stock-in-trade or other personal property of any kind owned, installed or used in or on the Premises, and any tax now or hereafter charged against Tenant on any other basis. ARTICLE 5 CONSTRUCTION AND FINANCING 5.01 - LANDLORD'S WORK Prior to the Term Commencement Date, Landlord shall perform all items of "Landlord's Work," if any, described in Exhibit B attached hereto and made a part hereof. In accordance with the Outline Specifications set forth in Exhibit D attached hereto and made a part hereof, Tenant agrees to accept the Premises in its "as is" condition on the date possession of the Premises is made available to Tenant without any express or implied warranty concerning the condition of the Premises by Landlord or its agents, and agrees, at its sole cost and expense, to complete all improvements necessary to prepare the Premises for the conduct of Tenant's business in the Premises in accordance with the Outline Specifications set forth in Exhibit D. Tenant represents, warrants and covenants that it shall build out the Premises in full conformance with plans approved by Landlord or Tenant shall be deemed in default of this Lease. In the event of such default, Landlord shall have the right to terminate this Lease, in addition to all other rights and remedies available to Landlord under applicable law or under this Lease. Any non-standard item of Landlord's Work requested by Tenant or necessitated by Tenant's location, space plans or business operation shall be performed by Landlord [***]. *** Confidential treatment requested. 8 13 for administration. Landlord hereby warrants to Tenant that to Landlord's best knowledge the Premises do not contain any asbestos-containing materials or other reportable amounts of hazardous or toxic materials. 5.02 - TENANT'S WORK (a) Prior to the Term Commencement Date, Tenant, shall [***] perform "Tenant's Work" described in Exhibit C attached hereto and made a part hereof, in accordance with the Outline Specifications set forth in Exhibit D. Landlord and Tenant agree that Tenant's store front design shall be substantially similar to Tenant's store located within the Palisades Center in the Town of Clarkstown, County of Rockland, and State of New York. Any item of Tenant's Work which Tenant requests Landlord to perform on the Tenant's behalf and which Landlord agreed to undertake shall be provided to Tenant at Tenant's additional cost, plus [***] for profit and [***] for administration. Tenant acknowledges its ability to perform Tenant's Work, and no delay in its performance shall cause or be deemed to cause any delay or postponement in the Term Commencement Date. Tenant shall be responsible for obtaining, at its sole cost and expense, any necessary permits, approvals or related consents which relate to Tenant's particular use of the Premises or to Tenant's Work or any other work performed by Tenant pursuant to this Lease, including any building permits required for the construction of Tenant's Work. With respect to any permits, approvals or related consents which relate to the Shopping Center in general and not to Tenant's particular use of the Premises or to Tenant's Work or any other work performed by Tenant pursuant to this lease, Landlord and not Tenant shall be obligated therefor. Landlord knows of no such mitigation, impact, or discretionary fees related to the development of the Shopping Center in general which were deferred by Landlord and would result in unexpected costs to Tenant. Notwithstanding anything to the contrary in this Section 5.02(a) or in Section 23.26 of this Lease, Landlord will obtain the special use variance required by virtue of Tenant's designation (by either the Town of Cheektowaga or the New York State Department of Labor) as a so-called "place of public assembly", at Tenant's sole cost and expense. Landlord has already commenced the procedure to obtain such special use variance and will diligently pursue its receipt. In the event that such special use variance cannot be obtained by September 1, 1999, then Tenant shall not be obligated to accept possession of the Premises and there shall be a day for day postponement of the Term Commencement Date until Landlord obtains such special use variance. If Landlord is unable to obtain such special use variance on or before September 1, 1999 then Tenant may terminate this Lease upon ninety (90) days notice to Landlord if Landlord is unable to obtain the special use variance within such ninety (90) day period. On or after September 1, 1999 Landlord may terminate this Lease on ninety (90) days notice to Tenant if Tenant is unable to obtain such special use variance during such ninety (90) day period. Either party, on notice to the other, agrees in good faith to assist the other party in efforts to obtain the special use variance. Tenant agrees that its design plans and its operations shall take into account the potential for unreasonable vibration and noise resulting from Tenant's equipment which may affect adjacent tenants or the Common Areas. Accordingly, Tenant agrees that its design plans shall incorporate such reasonable steps and procedures as known to Tenant or Tenant's contractors to eliminate or substantially reduce any vibration or noise that may be felt or heard outside of the Premises. These steps shall include: i) Soundproofing of walls, floor, and ceiling construction; ii) Isolation of equipment through use of padding, flexible mounts, or other suitable means; iii) Airtight sealing of all openings, cut-outs, and dissimilar surfaces. For purposes of operational standards, Tenant agrees to provide wall, floor and ceiling construction such that noise emitted from the Premises will not exceed 65dbA when measured from outside the Premises. Tenant shall submit its Design Drawings to Landlord in compliance with Exhibit "D". Upon Landlord's approval of Tenant's Design Drawings (as Tenant may agree to modify such plans and specifications in response to Landlord's comments thereto in accordance with the following sentence), then Landlord will be deemed to have approved the measures taken by Tenant to minimize vibration and, thereafter, Tenant shall not be in default under the lease as a result of vibration associated with the permitted use of the Premises. In the event that Landlord and Tenant are unable to agree as to the "reasonableness" of the steps and procedures requested by Landlord to eliminate or substantially reduce any vibration or noise that may be felt or heard outside of the Premises, the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof for a determination as to whether such steps are "reasonable". (b) Tenant agrees to obtain and maintain, or to cause Tenant's contractors to obtain and maintain, at Tenant's or Tenant's contractor's expense, for so long as Tenant's Work continues, public liability insurance, builder's risk property insurance covering Tenant's Work, and Workers' Compensation insurance protecting from and against any and all liability for death of or injury to persons or damage to property caused in or about the Premises, or by reason of the construction of Tenant's work. Tenant shall furnish to Landlord certificates evidencing said coverage prior to the commencement of Tenant's Work (see Exhibit D for further insurance requirements). 5.03 - PAYMENT Any payment to be made by Tenant to Landlord for items of Landlord's Work to be completed by Landlord as provided in Section 5.01, or for any items of Tenant's Work which Tenant requests Landlord to perform and which Landlord agrees to undertake as provided in Section 5.02, shall be paid for by Tenant, as Additional Rent, within ten (10) days after receipt of a bill therefor. 5.04 - FINANCING (a) Intentionally deleted. (b) Intentionally deleted. (c) If Landlord can obtain approval of this Lease from a mortgagee for the purposes of financing or refinancing only upon the basis of reasonable modifications of terms and provisions of this Lease, then Tenant shall not unreasonably withhold its consent thereto provided that such lease modifications do not relate to those provisions pertaining to size or location of the Premises, length of the term, or amount of Fixed Annual Minimum Rent, Percentage Rent, Additional Rent, the Abatement or the Permitted Use and do not increase Tenant's obligations or decrease Tenant's rights. [END OF TEXT THIS PAGE] *** Confidential treatment requested. 9 14 (d) Within fifteen (15) days of request by Landlord in connection with any financing or sale of the Shopping Center, which request shall not be made more than once per Lease Year, Tenant or any Guarantor shall provide to Landlord a statement of Tenant's Gross Sales for the preceding period since the Term Commencement Data. ARTICLE 6 CONDUCT OF BUSINESS BY TENANT 6.01 - USE OF PREMISES AND TRADE NAME Throughout the term, Tenant shall use the entire Premises solely for the purpose as set forth in Section 7.03 and shall operate its store in the Premises under the trade name set forth in Section 1.03. Tenant shall not use or permit, or suffer the use of the Premises, or any part thereof, for any other business or purpose or under any other trade name. 6.02 - TENANT'S OPERATING COVENANT Subject to Section 23.04 below, Tenant shall occupy the Premises on an after the Term Commencement Date and shall continuously operate its store in the entire Premises during the full term of this Lease. Tenant shall operate the Premises in a manner consistent with the majority of the other stores operated by Tenant as of the date hereof under the same trade name and having the same or similar use as the use as provided for in this Lease, and with due diligence and efficiency. Tenant shall carry at all times in the Premises a stock of merchandise of a size, character and quality as is in keeping with a first class regional shopping center. Tenant shall use for office, storage, or other non-selling purposes only such space as a reasonably required for the proper operation of Tenants retail business in the Premises. Tenant shall conduct its business in the Premises during regular published Shopping Center hours of business (as of the date of this Lease, those hours are Monday through Saturday, 10:00 a.m. until 9:30 p.m. and Sunday 11:30 a.m. until 6:00 p.m.), which hours are subject to change at Landlord's discretion from time to time. Tenant acknowledges and agrees that the Shopping Center's success is dependent upon the continued operation of Tenant's business, and that the maintenance of the character and quality of the Shopping Center is enhanced by the continued occupancy of the Premises and the regular conduct of Tenant's business as required herein. In the event Tenant ceases operation prior to the termination date set forth in Section 2.02. Landlord shall have the right to obtain a court order for specific performance of the operating covenant as set forth in this Section 6.02. If during any period Tenant shall fail to operate the Premises provided herein, then after the second (2nd) such failure in any Lease Year. Tenant shall pay as liquidated damages, as a reasonable estimate of damages suffered by Landlord due to the loss of Percentage Rent, the damage to the character and quality of the Shopping Center and other non-quantifiable adverse effects caused by Tenant's failure to continually operate, a sum equal to [***] of the Fixed Annual Minimum Rent for the portion of the term during which such failure continues. The payment of such sums shall not relieve Tenant of any of its obligations under this Lease. Tenant shall have the right to enter the Premises at any time during the term of the Lease. Notwithstanding anything to the contrary in this Section 6.02, Tenant shall be permitted to be open for business until the later of (i) 2:00 a.m. or (ii) as late as any other tenant located on the commons level of the Shopping Center is permitted to be open without incurring any extra hours charge as set forth in Section 7.08 below. Anything contained in the Lease to the contrary notwithstanding. Tenant shall not be obligated to continuously operate from the Premise during periods which (i) Tenant is carrying on remodeling activities, provided prior Notice of such activities has been delivered to Landlord, (ii) Tenant is closed for the taking of inventory (not to exceed four (4) days per Lease Year), or (iii) Tenant's use and occupancy of the Premises is prohibited by any law, ordinance, order or other act of any judicial, governmental or quasi-governmental authority. Notwithstanding anything to the contrary in this Section 6.02, to the effect that Landlord is obligated to do so according to leases between Landlord and any theater in the Shopping Center, Landlord will illuminate and secure the Common Areas and exterior parking areas which are immediately adjacent to the Premises and the exterior entrance to the Shopping Center which is nearest to the Premises. Landlord represents and warrants that it has a lease with General Cinema Corp. of New York, Inc. which commenced on May 1, 1989 and has an initial term of twenty-five (25) years and a full-term operating covenant. In the event Landlord is not obligated by the terms of its lease with any theater in the Shopping Center to illuminate and secure said Common Areas and exterior parking areas after then-current published Shopping Center hours of business, and Tenant requires such illumination and security, then Tenant shall be obligated to pay, as Additional Rent and within thirty (30) days after receipt of a bill therefor, its proportional share of the costs associated with such after-hours illumination and security. Tenant's proportional share of such costs shall be the product of multiplying the amount of said costs by a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is the total number of square feet of premises occupied by any other tenant or occupant of the Shopping Center which is also open and operating its business in the Shopping Center during such additional hours as Tenant requires after-hours illumination and security. 6.03 - COMPETITION During the term of this Lease, Tenant shall not directly or indirectly, without the prior written consent of Landlord, operate, manage, franchise, license or have any interest in any other business located within a radius of five (5) miles from the outside boundary of the Shopping Center, which business is engaged in the same or substantially the same use as the use provided for in this Lease; nor if Tenant is a corporation, shall any then current officer or director, or any then current shareholder owning more than ten percent (10%) of the issued and outstanding stock of Tenant, nor any entity that: (a) 50% or more of which is owned by Tenant, or (b) owns 50% or more of Tenant, or (c) 50% or more of which is owned by any entity that owns 50% or more of Tenant; or of any then current officer, director or ten percent (10%) shareholder of Tenant), have any such interest without the prior written consent of Landlord; nor, if Tenant is a partnership, shall any then current partner or any member of the immediate family of any then current partner have any such interest without prior written consent of Landlord. If, during the first five years of the term, Tenant or any such officer, director, shareholder, affiliate, partner or family member does operate, manage, franchise, license or have any interest in any such business without prior written consent of Landlord. Landlord shall have the right, at its option, as its sole and exclusive remedy, to obtain a court order for specific performance of the operating covenant as set forth in Section 6.02 of this Lease and, as liquidated damages and not as a penalty, to require that gross receipts (defined as in Section 3.03 of this Lease, except that where reference is *** Confidential treatment requested. 10 15 made to the Premises, it shall in this case refer instead to the location of such other business of Tenant or any such officer, director, shareholder, affiliate, partner or family member as more specifically described herein) resulting from such business shall be included in the amount of Gross Receipts used to compute Percentage Rent hereunder. After the first five years of the term, if Tenant or any such officer, director, shareholder, affiliate, partner or family member does operate, manage or have any interest in any such business without the prior written consent of Landlord, Landlord shall have the right, at its option, in addition to all other rights and remedies to which Landlord may avail itself pursuant to this Lease, to require, as liquidated damages and not as a penalty, that [***] of gross receipts resulting from such business shall be paid to Landlord. The prohibitions in this Section 6.03 shall extend to and expire on the termination date set forth in Section 2.02 hereof notwithstanding any earlier termination resulting from Tenant's default hereunder. 6.04 - OTHER BUSINESS PRACTICES (a) Tenant shall keep the Premises and all show windows and signs and any loading area and other areas allocated for the sole use of Tenant in good, neat and clean condition. Tenant shall keep the Premises and any service area contiguous to or part of the Premises free of debris, rubbish, garbage, pasts, rodents and vermin caused by Tenant, and upon two (2) days' written notice by Landlord to Tenant of Tenant's failure to do so, Landlord may remove such debris, snow and ice, rubbish, garbage, pests, rodents and vermin and charge Tenant the reasonable out-of-pocket costs incurred by Landlord for such removal, plus [***] for administration. (b) Tenant shall keep its display windows stocked and electrically lighted during such periods of time as may from time to time be required by Landlord of substantially all other retail businesses in the Shopping Center. (c) Tenant shall load and unload its merchandise, equipment and supplies and remove its rubbish only by way of the loading area and service doors designated by Landlord for Tenant's use; provided, however, that Landlord will not unreasonably withhold its consent to Tenant's use of the service doors or loading dock available for common usage by tenants in the Shopping Center and which is closest to the Premises. (d) Tenant shall not knowingly and willfully commit nor permit any act or practice which may lend to injure the building occupied by Tenant, nor permit its equipment to be a nuisance to other tenants, nor keep goods, foods, rubbish, inventory, or merchandise on or obstruct the mall area or sidewalks or other areas outside the Premises, nor conduct or permit any fire, bankruptcy, auction or going-out-of-business sale, nor erect or retain any sign, light, lettering, inscription, symbol or mark which is not approved by Landlord, not install any antenna, fixture, or improvement outside of the Premises, nor sell or display merchandise outside the Premises. Notwithstanding the foregoing, Tenant shall be permitted to place professionally generated signs, advertisement and decorations within the Premises consistent with Tenant's other operations. Anything contained in this Lease to the contrary notwithstanding, Tenant shall be permitted to install a video wall or mounted video screen or panel within the Premises which may be visible to customers from outside the Premises. Notwithstanding anything contained in this Section 6.04 to the contrary, subject to compliance with Legal Requirements and Landlord's prior written reasonable approval of plans and specifications, and further provided that the satellite dish and/or other electronic transmitter (in either case a "satellite dish") and the screen or covering, if any, hereinafter described shall be for the exclusive use of Tenant, shall not penetrate the roof unless otherwise agreed in writing by Landlord, and shall not be visible from any part of the Common Area or public roadways adjoining the Shopping Center and shall not interfere in any material respect with access to the building roof by any others. Tenant shall have the right to install one (1) three foot (3') or smaller satellite dish on the building roof at the location designated by Landlord. Tenant shall, if necessary and at its sole cost and expense, construct a screen or other covering structure around the satellite dish to prevent visibility from the Common Areas or public roadways adjoining the Shopping Center. The cost of installation and maintenance of the satellite dish and screen or other covering structure (including temporary removal thereof, if required, in connection with any repairs or other work to the Building deemed necessary or desirable by Landlord) shall be borne solely by Tenant. The reasonable cost of any repairs to the roof which are necessitated by the installation and/or repair of the satellite dish and screen or covering, if constructed, shall be borne solely by Tenant and paid to Landlord upon demand as Additional Rent hereunder, Upon expiration or earlier termination of this Lease, Tenant shall, at its sole cost and expense, remove any satellite dish and screen or covering, if constructed, and Tenant shall repair any damage to the roof occasioned by such removal, Tenant further agrees to defend, indemnify and hold harmless Landlord from and against all claims, losses, costs and expenses (including without limitation reasonable attorneys' fees) suffered or incurred by Landlord arising out of the existence of Tenant's satellite dish and screen or covering, if constructed. In addition, Tenant's liability insurance policies shall include special endorsements prefacing Landlord and all other parties required to be additional insureds pursuant to Section 12.06 against any liabilities that may arise out of the existence or installation and removal of Tenant's satellite dish and any screen or covering. In connection with all work related to the installation, repair, maintenance and removal of the satellite dish and screen or other covering structure. Tenant shall request from Landlord a list of three (3) competitively priced contractors acceptable to Landlord, which Landlord shall provide to Tenant within fifteen (15) business say following written request. At such work shall be performed by one of Landlord's designated contractors and shall be conducted with notice to Landlord as provided in Section 10.02(a) of this Lease. (e) In all of Tenant's printed material distributed primarily within Buffalo, New York and that refers to the location of the Premises (by newspaper, radio, television or otherwise), Tenant shall include in any reference to Tenant's place of business the name (and where appropriate the symbol) of the Shopping Center. (f) Tenant agrees to store in the Premises only such merchandise as is to be offered for sale at retail from the Premises within a reasonable time after receipt; to store all trash and refuse in adequate containers within the Premises and to maintain such containers in a healthy, safe, neat, odor free and clean condition and in a location so as not to be visible to members of the public shopping in the Shopping Center, and to attend to the daily disposal thereof in the manner designated by Landlord; and to conform to all rules and regulations which Landlord may make in the management and use of the Shopping Center requiring such conformance by Tenant and Tenant's employees. If the Premises are used for the sale of food, Tenant shall store all trash, refuse and garbage in a garbage storeroom or compartment which Tenant shall install and keep in good repair at its sole expense. Landlord may require that the Premises be periodically treated against pests, rodents or vermin, and in such event, Tenant will, at its sole cost and expense, enter into a contract with a professional pest control service for the performance of such work, which contract and service shall be selected by Tenant but subject to Landlord's prior approval. *** Confidential treatment requested. 11 16 (g) Landlord may establish a central station trash compactor and/or recycling service (including, but not limited to, compactor and container cost, hauling, landfill charges, taxes or any other special charges, relating to such trash compactor and/or recycling service) or contract for the removal of trash at the Shopping Center. If Landlord establishes a central station trash compactor and/or recycling service, Tenant agrees to pay as Additional Rent the sum of $125.00 per month for the cost of Tenant's share of such service. It is agreed that this charge may be increased periodically from the date of this Lease as Landlord's expenses increase (in which event, the cost of Tenant's share of such service shall increase only by the percentage by which Landlord's expenses actually increase) or as the volume of Tenant's trash increases. If at any time Landlord elects to contract for trash removal and/or recycling, Tenant agrees to use said contractor for its trash removal and/or recycling and pay when due all charges at the rate established therefor from time to time. Tenant may, however, contract with an entity other than that designated by Landlord in the event that Landlord's designated contractor's rates are not reasonable and competitive with alternative services available to Tenant. If Tenant fails so to pay for trash removal and/or recycling, Landlord shall have the same remedies (even if such payment is due to such contractor and not to Landlord) as Landlord has for nonpayment of rent hereunder. Tenant shall comply with all applicable Governmental Orders as defined in (Section 18.01) in conjunction with the sorting or recycling of trash or refuse. (h) Tenant shall comply with all further reasonable rules and regulations for the use and occupancy of the Shopping Center as Landlord from time to time promulgates for the best interests of the Shopping Center, provided that if Tenant disputes the reasonableness of any further rule or regulation, Tenant shall notify Landlord within thirty (30) days after Tenant is provided with a copy thereof, and the dispute shall be submitted to arbitration pursuant to Section 23.18. In the event of a conflict between the Lease and such rules or regulations, then the terms of the Lease shall govern. 6.05 - MARKETING FUND (a) Tenant shall make a contribution, in the manner set forth in Section 6.05, to a Marketing Fund to be administered by Landlord. The Marketing Fund will be used for advertising, customer services, promotion, public relations, market research and administrative expenses which, in the sole opinion of Landlord, will sustain and improve the market penetration and promotional needs of the Shopping Center. Landlord acknowledges and agrees that Tenant is a party to a license agreement and that Tenant's advertising, use and display of the Trade Name and the logo and trademarks associated therewith may be subject to the licensor's consent as set forth in the license agreement; therefore, Landlord agrees not to use Tenant's Trade Name in any advertising or promotional medium without Tenant's consent; provided, however, notwithstanding the foregoing, Landlord shall be permitted to (i) use Tenant's Trade Name in any directory or other listing which contains the names of substantially all of the tenants or occupants of the Shopping Center and (ii) utilize photographs, slides, videos, or other similar images of the Shopping Center that may include or depict the Premises or Trade Name. (b) From and after the Term Commencement Date, Tenant shall pay to Landlord, as an annual contribution to the Marketing Fund, the sum of [***] per square foot of the Premises, which sum shall be paid in advance in consecutive equal monthly installments on the first day of each month during the term. For any Partial Lease Year during the term of this Lease, or for any partial month, the amount of Tenant's contribution to the Marketing Fund shall be adjusted on a pro-rata basis to reflect such Partial Lease Year or partial month. (c) Upon the first day of January next following the date of this Lease and upon the first day of January of each Lease Year thereafter, Tenant's annual contribution to the Marketing Fund shall increase by [***] upon the first day of each January thereafter during the term of this Lease. ARTICLE 7 COMMON AREAS AND OPERATING COSTS 7.01 - DEFINITION The term "Common Areas" shall mean the interior and exterior areas and facilities within the Shopping Center which are: (i) not leased to a tenant, or (ii) by nature not leasable to a tenant for the purpose of the sale of merchandise or the rendition of services to the general public. Common Areas shall include but shall not be limited to all parking areas and facilities, roadways, driveways, entrances and exits, truck serviceways and tunnels, utilities, water filtration and treatment facilities, retention ponds or basins located within or outside the Shopping Center, retaining and exterior walls, sidewalks, open and enclosed malls, outside courts, landscaped and planted areas, escalators, stairways, elevators, service corridors, service areas, loading docks, hallways, public restrooms, community rooms or areas, roofs, equipment, signs and any special services provided by Landlord for the common or joint use and benefit of all tenants in the Shopping Center, their employees, customers and invitees. 7.02 - DEVELOPMENT OF COMMON AREAS Landlord shall make available from time to time such Common Areas, which may in part consist of areas made available by means of REA or other agreements, for the common benefit to the tenants and occupants of the Shopping Center as Landlord shall deem appropriate. Subject to the provisions of any REA Agreement, Landlord shall operate, manage, equip, heat, cool, ventilate, insure, repair and maintain such Common Areas for their intended purposes in such a manner as Landlord shall, in its sole discretion, determine. Landlord shall at all times have the right to determine, change or alter the nature, extent, size or location of the Common Areas and Landlord shall not be subject to liability therefor, nor shall Tenant be entitled to any compensation or diminution or abatement of rent on account of any such determination or change, nor shall any such action be deemed an actual or a constructive eviction of Tenant. *** Confidential treatment requested. 12 17 7.03 - USE OF COMMON AREAS Tenant and its officers, employees, agents, customers and invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas as designated from time to time by Landlord, subject to such regulations as Landlord may from time to time impose on a non-discriminatory basis, including the designation of the days and hours of operation and use and designation of specific areas in which motor vehicles owned or used by Tenant, its officers, employees, and agents must be parked. Tenant shall, upon request, furnish to Landlord the license numbers and descriptions of the motor vehicles operated by Tenant and its officers, agents and employees. If Landlord designates such parking areas, and if any motor vehicle of Tenant, or an officer, employee or agent of Tenant is parked in any other portion of the Shopping Center, Tenant shall pay to Landlord, upon demand, the sum of Fifty and 00/100 Dollars ($50.00) for each such motor vehicle for each day, or part thereof, such motor vehicle is so parked, and Tenant hereby authorizes Landlord to tow or cause any such car to be towed to the then designated parking area, and Tenant herby agrees to reimburse Landlord for the cost thereof upon demand. Tenant agrees to abide by such regulations and to use its best efforts to cause the officers, employees, agents, customers and invitees to conform thereto. Landlord may at any time (i) close temporarily the Common Areas or any portion thereof, (ii) make repairs or changes to prevent the acquisition of public rights therein, (iii) discourage noncustomer parking, and (iv) do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Landlord shall have the sole and exclusive right to use the Common Areas for advertising purposes, promotions, exhibits, shows, displays, kiosks and such other similar uses. Notwithstanding the foregoing, Landlord shall not modify the Common Areas in any manner that would have a material adverse effect on pedestrian and vehicular traffic or that would materially limit the number of parking spaces reasonably required for the business and retail activities conducted or that otherwise would adversely affect access to the Premises or the building in which the Premises are located. Notwithstanding the foregoing, Landlord will not materially adversely interfere with (i) visibility of Tenant's storefront signage from the enclosed mall immediately adjacent to the Premises, or (ii) access to the Premises from the enclosed mall immediately adjacent to the Premises. Notwithstanding anything to the contrary in this Section 7.03, Landlord recognizes that Tenant's prototype incorporates an open storefront design and Tenant shall be permitted to incorporate this element into the design of the Premises, provided such design does not violate any applicable laws or compromise the structural integrity of the Shopping Center. With Landlord's approval, not to be unreasonably withheld, Tenant shall have the right to use, at no additional cost to Tenant, a portion of the Common Area in front of the Premises for the purpose of displaying a NASCAR racing vehicle. 7.04 - COMMON AREA COSTS (a) Commencing on the Term Commencement Date, Tenant shall pay to Landlord, as Additional Rent, monthly in advance on the first day of each month, a sum equal to [***] of the Common Area Charge. The "Common Area Charge" shall be an annual charge of [***] per square foot of the Premises for the Common Area Costs defined in Section 7.04(b), subject to adjustment as provided in Section 7.05. (b) "Common Area Costs" shall mean the total costs and expenses incurred in operating, managing and maintaining the Shopping Center and the Common Areas, including but without limitation, such maintenance, repair, replacement and remodeling as shall be required in Landlord's sole and absolute judgment to preserve the utility thereof in the same condition and status as existed at the time of completion of the original construction. Common Area Costs shall also include Tenant's share of insurance costs. 7.05 - ADJUSTMENT TO PAYMENT Upon January 1, 2001 and upon the first day of January of each Lease Year thereafter, the amount of Tenant's Common Area Charge then in effect shall increase by [***]. Tenant acknowledges and agrees that Tenant shall have no right to audit Landlord's books and records concerning Common Area Costs. Notwithstanding anything to the contrary in this Section 7.05, the first such increase in Common Area Charges will be prorated on a per-diem basis. 7.06 - PAYMENT OF EXTRAORDINARY COMMON AREA COSTS If Tenant opens the Premises for business or remains open for business in the Premises at a time when Tenant is not required under the terms of this Lease to be open and when less than fifty percent (50%) of the total leased area of the buildings in the Shopping Center is open for business, then for each such day on which Tenant is open for business in the Premises, Tenant, as Additional Rent, shall pay to Landlord, in addition to and together with Tenant's payment of the Common Area Charge due Landlord as provided by Section 7.04, a sum equal to [***] of the monthly amount of Tenant's Common Area Charge. ARTICLE 8 ENERGY, UTILITY AND SPRINKLER COSTS 8.01 - ENERGY AND UTILITY CHARGES (a) Immediately after delivery of possession of the Premises to Tenant, Tenant shall make application to the appropriate local authority, municipality or other governmental agency to obtain direct service for Tenant's electric, natural gas, and other energy requirements. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing and installing any required motors, conduits, wiring and other facilities and equipment, all of which shall be part of Tenant's Work. However Tenant shall not be obligated to pay any fees to the utility company for the initial connection of energy services to the Premises which relate to the Shopping Center in general and not the Premises, and Landlord and not Tenant shall be obligated for any other fees payable to the utility company which relate to the Shopping Center in general with respect to the initial connection of energy services to the Premises. From and after *** Confidential treatment requested. 13 18 the date Tenant first enters into possession of the Premises (or if the date Tenant obtains such energy service is sooner, then from and after the date such service begins), Tenant covenants and agrees to pay the authority, municipality or agency the cost of all energy provided to Tenant (including but not limited to all energy provided to the Premises, to Tenant's signs and to the HVAC units serving the Premises) when due and payable. As of the date of this Lease, Landlord has no knowledge that the energy provider will not provide direct service, and Tenant acknowledges that provision of such service is within the control of the energy provider and not Landlord. (b) Tenant shall pay the cost of all water and sewer used in or at the Premises. Landlord and Tenant acknowledge that water and sewer services for the Premises are as of the date of this Lease, provided by the local municipality to the Premises through Landlord. Accordingly, Tenant shall, at its cost and as part of Tenant's Work, install a water meter acceptable to Landlord and the local municipality; and Tenant shall pay Landlord for all water and sewer usage in and at the Premises based on the usage recorded by such meter and based on the rates charged to Landlord for water and sewer usage by the local municipality. Such payment calculation is subject to change if, as and when the billing methodology of said municipality for water differs from that set forth in this paragraph. The above payment structure shall continue in effect until such time as the Premises are directly supplied, metered and billed for water and sewer services by the local municipality. Immediately after delivery of possession of the Premises to Tenant, Tenant shall make application to the appropriate local authority, municipality or other governmental agency to obtain direct service for water and sewer services to the Premises. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing and installing any required meters and other facilities and equipment, all of which shall be part of Tenant's Work. From and after the date direct water and/or sewer service is available to the Premises, Tenant covenants and agrees to pay the authority, municipality or agency the cost of same provided to Tenant when due and payable. (c) (i) If as a result of Tenant's inability to obtain direct supply or Tenant's election not to obtain direct supply and metering for Tenant's natural gas, electric and other energy requirements as provided in subsection (a) hereof, and if Landlord supplies service for Tenant's electric, natural gas, or other energy requirements, from and after the date which is the later of either the date when Tenant firsts enters into possession of the Premises or the date when Landlord commences supplying energy to the Premises, Tenant shall pay to Landlord monthly in advance on the first day of each month its "Energy Charges," as hereinafter defined. (ii) As used in this Lease "Energy Charges" shall be the product of multiplying the Energy Charge Calculation (herein defined) for all energy used or consumed in the Premises including without limitation, electricity, oil and gas times the unit prices for such energy determined in accordance with the then current utility rate schedules applicable to Landlord, plus a charge of twenty-five percent (25%) of such amount. Following the date that Tenant opens for business in the Premises, Landlord shall calculate Tenant's energy requirements on the basis of Tenant's construction plans, equipment and lighting lists, and the as-built condition of the Premises, assuming (1) a usage of not less than one hour before through one hour after the daily hours of operation of the Shopping Center and (2) a loading factor based upon the total connected load of all electrical fixtures and equipment in the Premises ("Energy Charge Calculation"). If Tenant requires additional hours of usage of energy within the Premises, Tenant shall make such request in writing to Landlord and Tenant's Energy Charges shall be adjusted accordingly. Prior to the completion of such Energy Charge Calculation and the submission to Tenant of a statement setting forth such calculation, Tenant shall pay Energy Charges as estimated by Landlord based upon the energy requirements of a typical store layout comparable to Tenant's proposed use and size of the Premises. Following completion of the Energy Charge Calculation, Tenant's energy billings and payment of Energy Charges shall be adjusted accordingly. Any delay in Landlord furnishing such Energy Charge Calculation to Tenant shall not in any way affect Tenant's obligation herein. (iii) Notwithstanding the provisions of subparagraph (c)(ii) of this Section 8.01 relating to use of the Energy Charge Calculation to calculate Energy Charges to the contrary, Tenant shall have the option to verify the amount of electrical energy used or consumed within the Premises by the installation of a checkmeter as hereinafter set forth. Such option may be exercised by Tenant upon not less than thirty (30) days' prior written notice to Landlord given prior to either (i) 60 days after Landlord commences supplying energy to the Premises (provided, however, that in no event shall the checkmeter period begin until after Tenant's Work is fully completed and operational and Tenant is open for business to the public), or (ii) the first day of any Lease Year during the term of this Lease. Following such notice, Tenant shall install in the Premises, in accordance with the Outline Specifications set forth in Exhibit D and at Tenant's sole cost and expense, a utility-quality checkmeter for the purpose of verification of the electrical consumption within the Premises (the "checkmeter"). The checkmeter will be monitored monthly by Landlord and Tenant for a period of thirteen (13) consecutive full months (the "checkmeter period") beginning on the first day of the first full month following initial installation thereof and approval by Landlord. The first month's reading of the checkmeter will be used solely for determining a usage base reading over which subsequent readings will be measured. Landlord and Tenant shall on or about the first day of each month concurrently observe and record the checkmeter readings on forms provided by Landlord. The checkmeter shall be reset (for demand only) in the presence of both Landlord and Tenant representatives following the recording of monthly readings. During the checkmeter period Tenant shall pay Energy Charges for the Premises based on the Energy Charge Calculation. Following completion of the checkmetering period, Landlord shall calculate the average monthly utility usage within the Premises utilizing the checkmeter readings taken during the checkmeter period. The average monthly charge for consumption (KWH) shall be calculated by dividing the total KWH by the number of days comprising the checkmeter period; the resulting quotient will then be multiplied by 30.42. The average monthly demand charge (KW), if applicable, shall be calculated by dividing the total KW readings by the number of months comprising the checkmeter period. If Tenant has made the election to utilize a checkmeter, for purposes of calculating Energy Charges for electricity under subparagraph (b) of this Section 8.01, the product of the resulting average monthly KWH usage readings and KW demand readings times the unit prices for such energy determined in accordance with then current utility rate schedules charged to Landlord shall be used in lieu of the Energy Charge Calculation. Tenant's energy billings based on the checkmeter readings and payment of Energy Charges retroactive to the commencement of the checkmeter period shall be adjusted accordingly. Any delay in Landlord furnishing a checkmeter reconciliation to Tenant shall in no way affect Tenant's obligation herein. The average monthly KWH usage charges and KW demand charges once determined pursuant to the checkmeter procedure shall be the basis for calculation of Energy Charges for the balance of the term of this Lease. The checkmeter procedure shall be used solely to verify energy use within the Premises in accordance with the terms of this Lease and shall not be utilized for billing purposes. The use of the checkmeter procedure set forth in this subparagraph (c) shall be the sole and exclusive remedy between Landlord and Tenant to resolve any 14 19 dispute concerning the amount of electrical usage within the Premises. The results of the checkmetering procedures set forth herein shall be conclusive and determinative of all disputes, claims and controversies with respect to energy usage or demand within the Premises pursuant to this Lease. Following the checkmeter period, Tenant shall disconnect and remove the checkmeter from the Premises. The monitoring of energy service by means if a checkmeter shall not take place more than once during the term of this Lease unless Tenant has varied its equipment, service, use or load demand or has remodeled the Premises. In any such event either Landlord or Tenant may request the other party to reinstitute the checkmeter procedures but in no event more than once in any thirty-six (36) month period following the completion of any checkmeter period. (iv) At any time during the term hereof, Landlord may cease providing energy to the Premises without thereby affecting this Lease in any manner or otherwise incurring any liability to Tenant. In such event, Tenant shall have no further obligation to pay to Landlord the charge for Energy Charges as provided in this Section 8.01. Landlord will notify Tenant at least (30) days prior to such termination in order that Tenant may make application to the appropriate utility companies serving the Shopping Center. In the event Tenant fails to pay energy or utility charges when the same become due and payable, Landlord reserves the right, in addition to all other rights and remedies to which Landlord may avail itself pursuant to this Lease, to discontinue the furnishing of energy to the Premises. Landlord shall not be liable for any damages resulting from or arising out of any such discontinuance, and the same shall not constitute a termination of this Lease or an actual or constructive eviction of Tenant. (v) The charges defined in Section 8.01(c), if any, may be adjusted by Landlord periodically based upon changes in the number of hours during which the Premises remains open, connected load, recalculations, rate changes imposed by utility companies, rate changes imposed by fuel companies (including but not limited to fuel adjustment rates), any changes, alterations or improvements done to the Premises, or any taxes or surcharges imposed upon energy costs or usage. Notwithstanding anything to the contrary in this Section 8.01, in the event Landlord's energy provider is not competitively priced, Tenant shall have the right to secure energy service from an alternative energy provider (where available). Tenant understands and agrees that in the event it elects to use such alternative energy provider, it shall do so at Tenant's sole cost and expense and such energy service must be provided to the Premises from such alternative energy provider's facilities and shall not come through Landlord's switchgear. 8.02 - INTENTIONALLY DELETED. 8.03 - INTENTIONALLY DELETED. 8.04 - MISCELLANEOUS UTILITY PROVISIONS. (a) Tenant shall not install within the Premises any equipment, fixtures or appliances which exceed the capacity of the utility facilities within or serving the Premises. If any such equipment, fixtures or appliances installed by Tenant requires additional utility facilities, the same shall be installed by Tenant at Tenant's sole cost and expense. (b) Tenant shall operate the heating, ventilating and cooling systems serving the Premises such that the temperature in the Premises will be substantially the same as that in the Common Areas, and Tenant shall set Tenant's thermostat at substantially the same temperature as exists in the Common Areas. Tenant shall operate ventilation equipment such that the relative air pressure in the Premises will be substantially the same as or less than that in the Common Areas. (c) Intentionally deleted. (d) Tenant agrees that Landlord shall not be responsible for any interruption of business or damage to the Premises resulting from interruption of utility service caused by any utility company or governmental regulatory agency. 8.05 - PERIODIC ADJUSTMENT Intentionally deleted. ARTICLE 9 FIXTURES, ALTERATIONS, SIGNS 9.01 - INSTALLATION BY TENANT After the completion of Tenant's Work, Tenant shall not make or cause to be made any alterations, additions or improvements or install or cause to be installed any trade fixtures, exterior sign, floor covering, interior or exterior lighting, plumbing fixtures, shades or awnings, or make any changes to its store-front or interior decor without first obtaining Landlord's written approval and consent in each instance, which shall not be unreasonably withheld. Notwithstanding the foregoing, Tenant shall be permitted to make interior, non-structural alterations, changes and modifications not exceeding [***] per Lease Year without Landlord's prior consent, provided Tenant notifies Landlord in writing prior to the commencement of such alterations, changes, or modifications. Tenant shall present to Landlord plans and specifications of such work at the time approval is sought. All permitted alterations, additions or improvements shall be done in a good and workmanlike manner in compliance with all applicable laws and ordinances and shall not unreasonably interfere with the conduct of Tenant's normal business. Notwithstanding anything to the contrary in this Section 9.01, Tenant shall be permitted to close for a *** Confidential treatment requested. 15 20 period not to exceed five (5) days during any Lease Year, for the sole purpose of completing such alterations, changes, or modifications. Where Landlord's approval is required per this Section 9.01, any alteration, addition or improvement done to the Premises by Tenant without Landlord's approval shall be returned to its original condition within thirty (30) days after receipt of written notice from Landlord and at Tenant's expense upon request by Landlord at any time. All fixtures installed by Tenant shall be new or completely reconditioned; provided, however, Tenant makes no representation or warranty that such fixtures will be free form defects in material, workmanship, or design; provided, further, that Tenant shall use its commercially reasonable efforts to ensure that such fixtures are installed in the Premises in a safe manner so as not to be hazardous to persons who may come on to the Premises. Tenant shall (i) be responsible for all costs, including attorneys' fees, and (ii) Tenant shall indemnify and hold harmless Landlord from all liability, incurred by Landlord as a result of any failure in material, workmanship or design of such fixtures. 9.02 - REMOVAL AND RESTORATION BY TENANT All alterations, additions, improvements or installations made by Tenant, or made by Landlord on Tenant's behalf and at Tenant's expense, shall remain the property of Tenant for the term of the Lease. Such alterations, additions, improvements, trade fixtures and equipment shall not be removed from the Premises prior to the end of the term hereof without the prior consent in writing from Landlord, except in the case of routine maintenance, refurbishment or replacement of defective or broken items. Upon expiration of the term of the Lease or upon Tenant's vacating the Premises upon eviction or surrender of the Premises prior to expiration of the term, any permanent leasehold improvements and fixtures or equipment permanently attached to the real estate shall become the property of Landlord (unless, as a condition of its consent to install same, Landlord shall have required the subsequent removal thereof by Tenant), if not removed by Tenant. With respect to any improvements and fixtures which Tenant does not remove, Tenant shall be obligated to repair any damage resulting from such removal, and Tenant's possession of the Promises shall not be deemed terminated until such repairs have been completed. Tenant shall surrender all keys for the Premises to Landlord and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Within five (5) days following the expiration or earlier termination of this Lease, Tenant shall remove furnishings, equipment, trade fixtures and personal property and, if Tenant fails to so remove such property, then Landlord shall have the option of retaining or removing such property at Tenant's expense. Tenant shall repair or cause to be repaired any damage to the Premises caused by such removal. 9.03 - SIGNS, AWNINGS AND CANOPIES Tenant will not place, maintain or suffer to be placed or maintained on or in an exterior door, wall or window of the Premises any sign, awning or canopy, decoration, lettering or advertising matter or other thing of any kind without first obtaining Landlord's written approval, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, Landlord's consent shall not be required for any professionally prepared signs or banners, or for the installation of an awning or canopy at the store front of the Premises, provided such awning or canopy complete with all applicable building codes and further provided that such awning or canopy does not utilize any supports which cannot be integrated into the store front of the Premises. Tenant further agrees to maintain such sign, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times. In the event that Landlord at any time during the term of this Lease elects to erect signage within the interior of the Shopping Center which in a general fashion depicts any so-called entertainment wing of the Shopping Center, then Tenant may, at its option, be included in such signage at Landlord's cost and expense. Notwithstanding anything to the contrary in this Lease and subject to governmental and Anchor Store approval, Tenant shall be permitted to erect on the exterior facade of the Shopping Center a fiberglass model stock car to be used as exterior signage. Tenant shall erect, maintain, and at the expiration or earlier termination of this Lease, remove, such exterior signage at its sole cost and expense. Landlord reserves the right to relocate Tenant's exterior signage to another area on the exterior facade of the Shopping Center in the event of a change in local ordinance, rules, regulations or applicable laws, or in the event of a demand by an Anchor Store, at Landlord's sole cost and expense, subject to the following: (a) in the event of a change in local ordinance, regulations, rules or applicable laws, Tenant agrees to act reasonably with respect to relocation of Tenant's exterior signage so long as Tenant is not treated any more adversely than similarly situated tenants of the Shopping Center (i.e., tenants having similar signage in substantially the same location), or (b) if required by an Anchor Store, Landlord may make immaterial changes in the location, size, or illumination of Tenant's exterior signage so long as Tenant is not treated any more adversely than similarly situated tenants of the Shopping Center (i.e., tenants having similar signage in substantially the same location). 9.04 - CONDITION OF THE PREMISES Throughout the Term, Tenant shall maintain the Premises in a manner consistent with a first class shopping center. ARTICLE 10 REPAIRS AND MAINTENANCE 10.01 - LANDLORD'S OBLIGATION TO REPAIR Landlord agrees to repair and maintain, at Landlord's sole cost and expense, the outside walls, structure and foundation of the building containing the Premises in good order and serviceable condition. Landlord agrees to commence any such repair within a reasonable time (not to exceed thirty (30) days, unless by the nature of such repair, it cannot reasonably be commenced within said thirty (30) day period) after written notice from Tenant that the same is necessary. There is excepted from this covenant the following, which shall be Tenant's responsibility: (a) Repair of damage caused by the act or omission of Tenant, its employees, agents, and contractors; (b) Repair of any loading areas not used in common with others; and (c) Repairs which are the responsibility of Tenant in accordance with Section 10.02. [END OF TEXT THIS PAGE] 16 21 10.02. - TENANT'S OBLIGATION TO REPAIR (a) Tenant agrees, at its sole cost and expense, to repair and maintain the Premises in good order and condition, including but not limited to the non-structural portions of the Premises, including store front, loading areas, show windows, doors, windows, plate and window glass, ceilings, floor coverings, Tenant's HVAC systems, and the plumbing, sprinkler, electric and sewage systems, facilities, appliances, lighting fixtures and other systems and improvements located within the Premises. In addition, Tenant shall be responsible, at its sole expense, for the repair and maintenance of its rooftop HVAC unit(s) (if any) and any other equipment or improvement located outside the Premises which is constructed or installed by Tenant or at Tenant's request and is used exclusively by or for Tenant. Tenant shall obtain Landlord's prior consent before making any repair or performing any maintenance which may adversely effect any aspect of the Shopping Center's operation. (b) During the entire term, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with an independent HVAC contractor approved by Landlord covering at least the routine items of maintenance for Tenant's HVAC systems as are recommended by the manufacturer of such systems, provided that the cost thereof at all times shall be reasonable and competitive. Tenant agrees to provide Landlord with a copy of such HVAC service contract within thirty (30) days following the Term Commencement Date. Further, Tenant agrees during the entire term of this Lease to use the sprinkler service company designated by Landlord for any repairs or maintenance required for Tenant's sprinkler system, provided that the cost thereof at all times shall be reasonable and competitive. (c) If repairs are required to be made by Tenant pursuant to the terms of the Lease, Landlord may demand (but shall not be required to do so) that Tenant make the same forthwith, and if Tenant refuses or neglects to commence to such repairs and complete the same with reasonable dispatch after such demand, and if Tenant's failure to commence such repairs continues for fifteen (15) days after receipt of notice from Landlord, Landlord may make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to its stock or business by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will, on demand, pay as Additional Rent to Landlord, reasonable out-of-pocket costs incurred by Landlord therefor, and a twelve percent (12%) administration fee, and if Tenant defaults in such payment, Landlord shall have the remedies provided in Article 15 hereof. Likewise, if repairs are required under the terms hereof to be made by Landlord and it fails or refuses after twenty (20) days' notice and demand by Tenant to commence such repairs and thereafter diligently prosecute same to completion, then Tenant shall have the right to make such required repairs. Landlord shall reimburse Tenant for the cost of such repairs within twenty (20) days after receipt by Landlord of evidence of payment therefor by Tenant; additionally, Tenant shall have the right to offset such costs against the payment of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent if Landlord shall fail to reimburse Tenant for the cost of such repairs within thirty (30) days after receipt by Landlord of evidence of payment therefor by Tenant. (d) If Tenant's use of the Premises requires a grease trap, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with an independent service contractor approved by Landlord to inspect, clean and repair such grease trap at such intervals as may be required by Tenant's use but in no event less frequently than once a month. (e) Tenant shall not, and shall not permit any of its employees, invitees, contractors or agents to, enter or otherwise be on the roof of the Building without prior written notice to Landlord. Tenant shall give landlord not less than five (5) days' prior written notice of the date any such person will be on the roof of the Building (however, Landlord agrees to use reasonable efforts to respond sooner if necessary - e.g., satellite dish requires adjustment). 10.03 - ARTICLE NOT APPLICABLE TO FIRE OR CONDEMNATION The provisions of this Article shall not apply to the repair of damage caused by fire, casualty, which matter is covered under Article 13, nor shall these provisions apply to a taking under the power of Eminent Domain, which matter is covered under Article 14. ARTICLE 11 INDEMNITY 11.01 - INDEMNITY Tenant will indemnify and hold harmless Landlord, Landlord's managing agent and such other persons who are in privity of estate with Landlord, or to whom Landlord is legally responsible (collectively, "Landlord's Party"), from and against any and all claims, actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Premises, from or out of the occupancy or use by Tenant of the Premises or the Shopping Center or any part thereof, or occasioned wholly or in part by any negligent act or omission of Tenant, its agents, contractors, employees, licensees, invitees or concessionaires; provided, however, Tenant shall not be required to indemnify, defend, hold harmless, protect, release or otherwise exculpate Landlord or any member of Landlord's Party from and against any claims, actions, damages, liabilities or expenses to the extent the same results from Landlord's or any member of Landlord's Party's or their respective agents, employees, contractors, licensees, invitees or servants' negligence, willful misconduct, failure to comply with applicable laws or breach of this Lease. In case Landlord or any member of Landlord's Party shall be made a party to any action or proceeding commenced by or against Tenant, then Tenant agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Tenant shall pay to Landlord all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Landlord in enforcing the terms, conditions, convenants and agreements in this Lease. Landlord shall indemnify, hold harmless and defend Tenant, Tenant's managing agent, if any, and such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible (collectively, "Tenant's Party"), from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property 17 22 arising from or out of any occurrence in, upon or at the Shopping Center, or occasioned wholly or in part by any negligent act or omission of Landlord, its agents, contractors, employees, lessees, invitees or concessionaires; provided, however, Landlord shall not be required to indemnify, defend, hold harmless, protect, release or otherwise exculpate Tenant or any member of Tenant's party from and against any claims, actions, damages, liabilities or expenses to the extent the same results from Tenant's or any member of Tenant's Party's or their respective agents, employees, contractors, licensees, invitees or servants' negligence, willful misconduct, failure to comply with applicable laws or breach of this Lease. In case Tenant, Tenant's managing agent or such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible, shall be made a party to any action or proceeding commenced by or against Landlord, then Landlord agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Landlord shall pay to Tenant all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Tenant in enforcing the terms, conditions, covenants and agreements in this Lease. ARTICLE 12 Insurance 12.01 - LIABILITY INSURANCE Throughout the term of this Lease, Tenant, at its sole cost and expense, for the mutual benefit of Landlord and Tenant, shall maintain personal injury and property damage liability insurance against claims for personal injury, bodily injury, death or property damage occurring on, in or about the Premises, or arising from, in or about Tenant's use of the Common Areas, or resulting from or arising out of products sold from the Premises or Tenant's use of the Common Areas during the term of this Lease, of not less than [***] in respect of personal injury, bodily injury, death or property damage (combined single limit). Such policy shall expressly contain a contractual endorsement to provide coverage for Tenant's indemnification set forth in Section 11.01 of this Lease and shall contain the "Per Location Aggregate" endorsement. Such policy shall be endorsed (1) as primary and (2) to waive rights of subrogation against Landlord. Prior to the Term Commencement Date, Tenant shall provide Landlord with a certificate containing evidence of such coverage and of the coverage required in Sections 12.02(c) and (d) below, and Tenant shall thereafter provide Landlord with appropriate evidence of said coverage upon each anniversary date of the policy. In the event that Tenant fails to provide the certificate as set forth herein or fails to provide such evidence of such coverage at least [***] prior to the expiration date of each expiring policy, Landlord may obtain such insurance at Tenant's sole cost and expense and upon demand of Landlord, Tenant shall reimburse Landlord for the cost of procuring such insurance coverage together with [***] for administration costs. 12.02 - SPECIAL CAUSES OF LOSS AND DIFFERENCE IN CONDITIONS INSURANCE (a) At all times during the term of this Lease, Landlord shall keep all Permanent Improvements, as hereinafter defined, insured for the benefit of Landlord against loss or damage by risks now or hereafter embraced by "Special Causes of Loss" and "Difference in Conditions" coverages and against such other risks as Landlord from time to time reasonably may designate in amounts sufficient to prevent Landlord from becoming a coinsurer under the terms of the applicable policies. In any event, the amount applicable to "Special Causes of Loss" policies shall be not less than [***] of the "Then Full Replacement Cost" (being the cost of replacing the Permanent Improvements exclusive of the costs of excavations and footings below the lowest grade level). The Then Full Replacement Cost shall be determined from time to time (but not more frequently than once in any twelve (12) calendar months) by an appraiser, architect or other person or firm as designated by Landlord. (b) The Permanent Improvements for purposes of this Section 12.02 shall be deemed to mean the building in which the Premises is situated, the appurtenances thereto and the equipment and other improvements constructed by Landlord and Tenant pursuant to Exhibits B and C. Such Permanent Improvements shall exclude, however, Tenant's merchandise, trade fixtures, furnishings, equipment, wall covering, carpeting, drapes, and all personal property (collectively "Tenant's Personal Property"). Tenants shall provide Landlord with a certificate setting forth the cost of Tenant's Work no less than [***] days prior to the Term Commencement Date. (c) At all times during the term of this Lease, Tenant shall keep all of Tenant's Personal Property situated at or on the Premises, insured with "Special Causes of Loss" and "Difference in Conditions" and "Plate Glass" coverages for not less than the full replacement cost thereof, with the deductible on the "Plate Glass" and "Special Causes of Loss" policies not to exceed [***] and with a [***] deductible on the "Difference in Conditions" policy (provided, however, by way of illustration and not limitation, it shall be deemed commercially reasonable for the "Difference in Conditions" policy to have a deductible of [***] of the value of the insured property or a deductible of [***]. (d) Tenant shall maintain, and shall cause all parties performing work on or about the Premises or on behalf of the Tenant to maintain statutory Workers' Compensation coverage according to the laws of the state in which the Shopping Center is located and Employer's Liability coverage in limits of not less than [***]. 12.03 - INSURANCE ON COMMON AREAS At all times during the term of this Lease, Landlord shall keep the Common Areas insured for personal injury, bodily injury and property damage liability, "Special Causes of Loss" and "Difference in Conditions" property coverage, Workers' Compensation, Employer's Liability and any other casualty or risk insurance which Landlord or Landlord's insurance carrier deems necessary or appropriate. If and to the extent Landlord elects to self insure up to the first [***] of any claims for personal injury or bodily injury, or under Workers' Compensation, there shall be included within insurance costs the amount of any personal injury, bodily injury or Workers' Compensation claim(s) or judgment(s) paid by Landlord, limited, however, in each *** Confidential treatment requested. 18 23 instance to the lesser of (i) [***], or (ii) the self insured amount of such claim or judgment. 12.04 - INCREASE IN FIRE INSURANCE PREMIUM Tenant covenants and agrees to promptly pay to Landlord as Additional Rent, upon demand, the amount of any increase in the rate of insurance on the Premises or on any other part of the Shopping Center that results by reason of Tenant's act(s) or Tenant's permitting certain activities to take place. 12.05 - TENANT TO SHARE INSURANCE COSTS Tenant's obligation for the payment of Insurance Costs is included in Common Area costs, as set forth in Section 7.04 of this Lease. 12.06 - WAIVER OF SUBROGATION Each party releases and waives on behalf of itself and on behalf of the insurers of such party's property, any and all claims and any rights of subrogation of any such insurer against the other party, its employees and agents for loss (other than loss or damage resulting from the willful act of such other party, its employees and agents) sustained from any peril to property required to be insured against herein, whether or not such insurance is actually in force, or from any peril to property actually insured against, though not required to be under this Lease. The policies of the respective parties shall contain an express waiver of subrogation to this effect. 12.07 - POLICIES All insurance provided in this Article 12 shall be effected under valid and enforceable policies of at minimum a Best rating of A-, XII and issued by insurers of recognized responsibility which are licensed to do business in the state in which the Shopping Center is located. All of Tenant's policies of insurance as required in this Article 12 shall name Landlord, Tenant, Landlord's managing agent and any mortgagee having an interest in any or all part of the Shopping Center the name and address of which Tenant has received written notice, as additional insureds, as their respective interests may appear. Tenant agrees that such policies shall also be made payable, if required by Landlord, to a mortgagee or ground lessor, as the interest of such mortgagee or ground lessor may appear. The loss, if any, under any policies provided for hereunder may be adjusted with the insurance company by Landlord. Each of Tenant's policies shall contain an agreement by the insurer that such policy shall not be terminated, canceled or reduced in coverage without at least thirty (30) days' prior written notice to Landlord and to any mortgagee or ground lessor to whom a loss thereunder is payable. The minimum limits of coverage for all of Tenant's policies of insurance required by this Article 12 shall be increased by Tenant if reasonably required by Landlord. ARTICLE 13 DAMAGE BY FIRE, ETC. 13.01 - RESTORATION OF PREMISES (a) The parties hereto mutually agree that if the Premises are partially or totally destroyed or damaged by fire or otherwise, then Landlord (subject to being able to obtain all necessary permits and approvals therefor) shall repair and restore the Premises as soon as is reasonably practicable to substantially the same condition in which the Premises existed before such damage; provided that if the insurance proceeds (other than the amount of any deductible, self insured retention or co-insurance requirement) collected or collectible and available to Landlord to pay the cost of such repairs and restorations by Landlord as a consequence of such destruction or damage are less than the cost of such repairs and restoration as estimated by Landlord's architect, Landlord shall not be obligated to commence or perform such repairs and restorations, and this Lease upon notice by Landlord to Tenant shall at the option of Landlord terminate unless Tenant undertakes (in form and upon terms satisfactory to Landlord) to pay the difference between such estimated cost and such insurance proceeds. Within forty-five (45) days following the date of damage or destruction, Landlord shall notify Tenant of its intentions with respect to the repairs or restoration of the Premises, and in the event Landlord elects to repair or restore the Premises, Landlord shall diligently pursue such repair or restoration to completion following commencement of the repairs or restoration. If, however, the Premises are completely destroyed or so damaged that Landlord cannot complete restoration or rebuilding in four (4) months to substantially the same condition in which the Premises were before such damage, then Landlord shall not be required to rebuild or restore, and this Lease shall be terminable by either party serving written notice upon the other. In any event, if repairs have not been commenced within sixty (60) days after the date on which Landlord receives the insurance proceeds, or if the repairs have been commenced within such time but Landlord is not diligently pursuing such repairs or restoration, then this Lease may be terminated by Tenant serving notice upon Landlord following the expiration of such sixty (60) days by giving Landlord not less than thirty (30) days' advanced written notice of such election. Except as otherwise provided in this Section 13.01(a), provided Landlord is diligently pursuing such repairs or restoration, in no event may Tenant terminate this Lease after such repairs have been commenced by Landlord. (b) In the event the Premises are completely or partially destroyed or so damaged by fire or other hazard that the Premises cannot be reasonably used by Tenant or can only be partially used by Tenant and this Lease is not terminated as above provided, there shall be no abatement of rent for the first sixty (60) days following the date of damage or destruction, it being understood and agreed that the Tenant at its discretion, cost and expense shall procure insurance necessary to protect itself against any interruption of its business during such sixty (60) day period. In the event that Tenant is prevented from using the Premises in excess of sixty (60) days, then Fixed Annual Minimum Rent and Additional Rent shall be abated, and there shall be a proportionate reduction to the Annual Minimum Gross Receipts, from and after said sixtieth (60th) day until the date Tenant is able to reopen for business within the Premises. *** Confidential treatment requested. 19 24 13.02 - RESTORATION DURING LAST THREE YEARS Anything in Section 13.01 to the contrary notwithstanding, if, within three (3) years prior to the expiration of the initial term or at any time during any renewal term (if any) of this Lease the Premises shall be damaged or destroyed by fire or otherwise and the estimated cost of restoration exceeds Fifty Thousand and 00/100 Dollars ($50,000.00), then at the election of Landlord or Tenant and by notice to the other, the Lease shall terminate. 13.03 - TENANT'S OBLIGATION UPON RESTORATION In the event of damage or destruction to the Premises and unless this Lease is terminated by Landlord or Tenant as provided in this Article 13, Tenant shall, as soon as reasonably possible, repair, redecorate and refixture the Premises and restock the contents thereof in a manner and to at least a condition equal to that existing prior to its destruction or casualty, and reopen the entire Premises for business. All proceeds of insurance carried by Tenant on Tenant's Personal Property shall be held in trust for such purposes. ARTICLE 14 EMINENT DOMAIN 14.01 - EMINENT DOMAIN If the Premises, or such portion thereof as to render the balance wholly unsuitable for the purpose of Tenant, is taken by condemnation or the right of eminent domain, or by agreement between Landlord and those authorized to exercise such right (collectively the "Condemnation Proceedings"), either party upon written notice to the other shall be entitled to terminate this Lease provided that such notice is given not later than thirty (30) days after Tenant has been deprived possession of use by such taking. Should any part of the Premises be so taken and should this Lease not be terminated in accordance with the foregoing provisions, Landlord covenants and agrees promptly after such taking to expend so much as may be necessary of the net amount which may be awarded to and received by it in such Condemnation Proceedings in restoring the Premises to an architectural unit as nearly like its condition prior to such taking as shall in the reasonable judgment of Landlord be practicable, with an appropriate abatement to be made in Fixed Annual Minimum Rent and a corresponding reduction in Annual Minimum Gross Receipts. Should the net amount so awarded to and received by Landlord be insufficient to cover the cost of restoring the Premises as estimated by Landlord's architect, Landlord may at its election, supply the amount of such insufficiency and restore the Premises, as above provided, or terminate this Lease. Where Tenant has not already exercised any right of termination accorded to it under this Section 14.01, Landlord shall notify Tenant of Landlord's election within ninety (90) days after the final determination of the amount of the award. 14.02 - LANDLORD ENTITLED TO AWARD Out of any award for any such taking of the Premises or any part thereof, Landlord shall be entitled to receive and retain the amounts awarded for such Premises, except that Tenant shall be entitled to receive and retain only amounts which may be specially awarded to it in any such condemnation proceedings because of the taking of its trade fixtures and its leasehold improvements which have not become a part of the realty, and such business loss as Tenant shall specifically and separately establish, but not otherwise. It is understood in the event of the termination of this Lease as aforesaid, Tenant shall have no claim against the Landlord or the condemning authority for the value of any unexpired term of its Lease and no right or claim to any part of the award on account thereof. Tenant hereby waives each such claim or right and assigns any such claim or right to Landlord. Anything contained in this Lease to the contrary notwithstanding, Tenant shall have the right to bring any claim during any Condemnation Proceedings, provided such claim does not reduce the claim of Landlord in said Condemnation Proceedings. ARTICLE 15 BANKRUPTCY AND DEFAULT PROVISIONS 15.01 - EVENTS OF DEFAULT AND CONDITIONAL LIMITATION (a) If at any time prior to or during the term any one or more of the following events occurs, each such event shall constitute an "event of default": (i) Tenant or Tenant's Guarantor, if any, makes an assignment for the benefit of its creditors; (ii) The leasehold estate hereby created in Tenant is taken on execution or by other process of law; (iii) Any petition is filed against Tenant or Tenant's Guarantor, if any, in any court, whether or not pursuant to any bankruptcy, reorganization, composition extension, arrangement or insolvency proceedings, and Tenant or Tenant's Guarantor is thereafter adjudicated bankrupt, or such petition is approved by the Court, or the Court assumes jurisdiction of the subject matter and such proceedings are not dismissed within ninety (90) days after the institution of the same; or any such petition is so filed by Tenant, or Tenant's Guarantor; (iv) In any proceedings, a receiver or trustee is appointed for Tenant's property or the property of Tenant's Guarantor and such receivership or trusteeship is not vacated or set aside within ninety (90) days after the appointment of such receiver or trustee; (v) Tenant intentionally or fraudulently understates Gross Receipts by five percent (5%) or more; 20 25 (vi) There is a transfer or an attempted transfer of this Lease or of Tenant's interest thereof in violation of the restrictions set forth in Article 17 of this Lease; (vii) Tenant ceases operation in or vacates or abandons the Premises or is otherwise in breach of Sections 6.01 or 6.02 of this Lease, and such breach is not cured within ten (10) days following written notice from Landlord; provided, however, that if such default cannot be cured within said time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; (viii) Tenant fails to comply with any local, state or federal law, rule or regulation governing the use, handling and disposal of Hazardous Materials or is otherwise in violation of the obligations contained in Section 18.03 of this Lease, and Tenant fails to commence a cure of such violation within thirty (30) days following written notice from Landlord (or such shorter time period if required by law); provided, however, that if such default cannot be cured within said time period. Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; (ix) Tenant fails to comply with the obligations contained in Section 21.03 of this Lease, and such failure continues for fifteen (15) days following written notice from Landlord; (x) Tenant or Tenant's Guarantor, if any, fails to pay any installment of the Fixed Annual Minimum Rent, Percentage Rent, Additional Rent or any portion of any such payment, when the same becomes due and payable, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; (xi) Tenant or Tenant's Guarantor, if any, fails to pay any installment of the Fixed Annual Minimum Rent, Percentage Rent, Additional Rent or any portion of such payment, when same becomes due and payable, and such failure occurs on three (3) or more occasions in any Lease Year or Partial Lease Year; (xii) Tenant fails to comply with the obligations contained in Section 1.03 of this Lease, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; provided, however, that if such default cannot be cured within such time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within such time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; or (xiii) Tenant or Tenant's Guarantor, if any, fails to perform or observe any other material requirement of this Lease (not hereinbefore specifically referred to) on the part of Tenant to be performed or observed and such failure continues for thirty (30) days after receipt of written notice from Landlord to Tenant; provided, however, that if such default cannot be cured within such time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within such time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant or Tenant's Guarantor, if any, shall promptly notify Landlord of Tenant's or Tenant's Guarantor's (if any) commencement of such cure. (b) This Lease and the term are expressly subject to the conditional limitation that upon the happening of any one or more of the aforementioned events of default, Landlord, in addition to the other rights and remedies it may have, shall have the right, upon notice to Tenant, to declare this Lease terminated and the term ended, in which event all of the right, title and interest of Tenant hereunder shall wholly cease and expire upon receipt by Tenant of a Notice of Termination. Tenant shall then quit and surrender the Premises to Landlord in the manner and under the conditions as provided for under this Lease, but Tenant shall remain liable as hereinafter provided. Notwithstanding anything to the contrary in this Section 15.01(b), the parties hereby agree that the following events shall be deemed "material" for the limited purposes of determining Landlord's right to terminate this Lease according to the terms of this Section 15.01(b) following an event of default for which notice and any applicable opportunity to cure has expired: (i) failure to open and commence and continue operation of Tenant's business within the entire Premises according to Section 6.02 of this Lease; (ii) failure to make repairs to the Premises according to Section 10.02 of this Lease; (iii) failure to comply with Tenant's indemnification obligations according to Article 11 of this Lease; (iv) failure to comply with Tenant's insurance obligations pursuant to Article 12 of this Lease; (v) failure to comply with Tenant's obligations with regard to Restoration of the Premises according to Section 13.03 of this Lease; (vi) an assignment, sublet or other transfer not in compliance with the terms of Article 17 of this Lease; and (vii) failure to comply with Government Orders, Insurance Matters, Hazardous Material or the ADA, all according to the terms of Article 18 of this Lease. It is specifically understood and agreed that this provision shall not in any way modify any other termination right of Landlord which is otherwise specifically provided for in this Lease. 15.02 - LANDLORD'S REMEDIES (a) If this Lease shall be terminated as provided in Section 15.01, Landlord or Landlord's agents or employees may immediately or at any time thereafter re-enter the Premises and remove therefrom Tenant, its agents, employees, licensees, and any sub-tenants and other persons, firms or corporations, and all or any of its or their property therefrom, either by summary dispossess proceedings or by any suitable action or proceedings at law or in equity, without being liable to indictment or prosecution of damages therefor, and repossess and enjoy the Premises, together with all alterations, additions and improvements thereto. Landlord, in the event of such re-entry and repossession, may store Tenant's Personal Property in a public warehouse or elsewhere at the cost of and for the account of Tenant. (b) In case of any such termination, re-entry or dispossession by summary proceedings or otherwise, the rents and all other charges required to be paid up to the time of such termination, re-entry or dispossession, shall be paid by Tenant, and Tenant also shall pay to Landlord all reasonable expenses which Landlord may then or thereafter incur for legal expenses, attorneys' fees, brokerage commissions and all other costs paid or incurred by Landlord as the result of such termination, re-entry or dispossession, and for restoring the Premises to good order and condition and for altering and otherwise preparing the same for reletting and for reletting thereof. Landlord may, at any time and from time to time, relet the Premises, whole or in part, for any rental then obtainable either in its own name or as agent of Tenant, for a term which, at Landlord's option, may be for the remainder of the then current term of this Lease or for any longer or shorter period. 21 26 (c) If this Lease is terminated as aforesaid, Tenant nevertheless covenants and agrees notwithstanding any entry or re-entry by Landlord whether by summary proceedings, termination or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal to the several installments of Fixed Annual Minimum Rent. Percentage Rent and Additional Rent reserved as they would, under the terms of this Lease, become due if this Lease had not been terminated or if Landlord had not entered or re-entered as aforesaid, and whether the Premises is resist or remains vacant in whole or in part or for a period less than the remainder of the term, and for the whole thereof. In the event the Premises be relet by Landlord, Tenant shall be entitled to a credit (but not in excess of the Fixed Annual Minimum Rent, Percentage Rent and Additional Rent reserved under the terms of this Lease) in the net amount of rent received by Landlord in reletting the Premises after deduction of the reasonable out-of-pocket expenses and costs incurred or paid as aforesaid in reletting the Premises and in collecting the rent in connection therewith. If Tenant fails to make such payments in accordance with the final sentence of this subsection 15.02(c) for any two (2) consecutive months following the termination of this Lease, Landlord shall at any time thereafter, in lieu of collecting any monthly deficiencies, or any further monthly deficiencies, aforesaid, at Landlord's option, be entitled to recover from Tenant, in addition to any other relief, such a sum as at the time of such termination represents the amount of the then [***]. Tenant shall be entitled to a credit against the Present Value Amount for Fixed Annual Minimum Rent, Percentage Rent and Additional Rent subsequently received by Landlord from a replacement tenant against amounts paid by the Tenant to Landlord after deducting the allowance paid by Landlord to Tenant and all expenses and costs incurred or paid (including any allowances, construction costs and administrative costs) by Landlord in reletting the Premises and in collecting the rent in connection therewith, which right to a credit shall terminate on the date this Lease would have expired pursuant to Section 2.02. Suit or suits for the recovery of the deficiency or damages referred to in this Subsection 15.02(c) or for any installment or installments of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent hereunder, or for a sum equal to any such installment or installments, may be brought by Landlord all at once or from time to time at Landlord's election, and nothing in this Lease shall be deemed to require Landlord to await the date whereon this Lease or the term hereof would have naturally expired had there been no such default by Tenant or no such termination. (d) For the purpose of this Section 15.02, it shall be deemed that the Percentage Rent for any period after any such default and entry by Landlord would have been at the monthly rate thereafter equal to the average Percentage Rent which Tenant was obligated to pay to Landlord under this Lease within the two (2) Lease Years (or lesser number of Lease Years since the Term Commencement Date) immediately preceding the date of such entry. (e) Tenant hereby expressly waives, so far as permitted by law, any and all right of redemption or re-entry or repossession under present or future laws arising after Landlord's recovery of possession, including any amendments hereafter, or to restore the operation of this Lease. Landlord and Tenant, so far as permitted by law, waive and will waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with the Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, or any claim or injury or damage. The terms "enter," "re-enter," "entry" or "re-entry" as used in this Lease are not restricted to their technical legal meaning. In the event Landlord commences any proceedings for the recovery of possession of the Premises or to recover for non-payment of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent, Tenant shall not interpose any non-compulsory counterclaim in any such proceedings. This may not, however, be construed as a waiver of Tenant's rights to assort such claim in any separate action or actions initiated by Tenant. (f) No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach shall be deemed an accord and satisfaction thus Landlord may accept any check or payment without prejudice to Landlord's rights to recover the balance due, nor shall it constitute a waiver of any such breech or of such covenant, agreement, term and condition, and this Lease shall continue in full force and effect with respect to any other than existing or subsequent breech thereof. (g) In the event of any breech or threatened breech by Tenant of any of the covenants, agreements, terms or conditions contained in this Lease, Landlord shall be entitled to enjoin such breech or threatened breech and shall have the right to invoke any right or remedy allowed at law or in equity, by statute or otherwise. (h) Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereinafter existing at law or in equity, by statute or otherwise. ARTICLE 16 MECHANICS' LIENS 16.01 MECHANICS' LIENS (a) If any mechanics' liens are filed against the Premises or any portion of the Shopping Center based upon any act of Tenant or anyone claiming through Tenant, Tenant shall hold Landlord harmless from all damages, claims and expenses arising therefrom, and Tenant, after notice from Landlord (or any person in privity of estate with Landlord), shall forthwith commence such action by bonding, deposit, payment or otherwise as will remove or satisfy such lien within thirty (30) days. In the event Tenant does not remove or satisfy said lien within said thirty (30) day period, Landlord shall have the right to do so by posting a bond or undertaking, and Tenant agrees to reimburse Landlord for all reasonable out-of-pocket expenses incurred by Landlord in connection therewith five (5) days after receipt by Tenant of Landlord's invoice therefor. These expenses shall include, but not be limited to, filing fees, legal fees and bond premiums. *** Confidential treatment requested. 22 27 (b) Nothing in this Article 16 shall be deemed or construed as (i) Landlord's consent to any person, firm or corporation for the performance of any work or services or the supply of any materials to the Premises or any improvement thereon, or (ii) giving Tenant of any other person, firm or corporation any right to contract for or to perform or supply any work, services or materials that would permit to give rise to a lien against the Premises or any part thereof. ARTICLE 17 Assignments, Subleases and Other Transfers of Tenant's Interest 17.01 - Limitations on Tenant's Rights (a) Neither this Lease nor the interest of Tenant in this Lease shall be sold, assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation of law or otherwise, nor shall the Premises or any part thereof be sublet or subject to any license or concession without the prior written consent of Landlord in each instance. The sale or transfer of stock constituting a controlling interest in Tenant or Tenant's Guarantor shall be considered for the purpose of this Lease to be an assignment, and likewise shall require Landlord's prior written consent, except where Tenant or Tenant's Guarantor is a corporation having its shares traded on the New York, American or Over-The-Counter stock exchange or market. Tenant shall make available to Landlord the stock record books of Tenant and Tenant's Guarantor and shall produce the same on request of Landlord. Similarly, if Tenant is a partnership, the interest of any partner shall not be transferred without Landlord's prior written consent. For the purposes of this Lease, the entering into of any management agreement or any similar agreement which transfers control of the business operations of Tenant in the Premises shall be treated as an assignment of this Lease and shall require Landlord's prior written consent. Any attempted transfer, assignment, subletting, license or concession agreement, hypothecation or other transfer herein that is prohibited without Landlord's prior written consent shall be void and confer no rights upon any third party. Anything contained in this Section 17.01(a) to the contrary notwithstanding, Tenant shall have the right without Landlord's consent to assign this Lease or sublet the Premises, subject to the terms of this Lease, in conjunction with the sale of substantially all of the other assets and other store locations of Tenant to Tenant's parent, Tenant's subsidiary, or a subsidiary of Tenant's parent, provided that at least seventy-five percent (75%) of Tenant's other stores located in the United States are simultaneously transferred to such entity. Tenant shall remain primarily liable under this Lease following any assignment of the Lease or subletting of the Premises. Subject to paragraph (f) hereinbelow, Landlord shall not unreasonably withhold its consent to any assignment or subleasing and shall respond to any request by Tenant for permission to sublease or assign with thirty (30) days after receipt of written request. If Landlord objects to such assignment or sublease, Landlord shall advise Tenant of the reasons for such objections. If Landlord fails to respond to such request within said thirty (30) days, and such failure continues for ten (10) days following Notice from Tenant, then such failure shall be deemed approval of such sublease or assignment. Notwithstanding the terms of the immediately preceding grammatical paragraph provided Tenant is not in default beyond any applicable cure period, named Tenant may, without the consent of Landlord, assign this Lease or sublet the entire Premises to any corporation which owns all of the issued and outstanding common stock of named Tenant, or to a wholly owned subsidiary corporation of named Tenant, or to any corporation resulting from the consolidation or merger of named Tenant, in or with any other business organization or any person, firm or corporation acquiring all of the issued and outstanding capital stock of named Tenant, or all or substantially all of the assets, store locations and no less than eighty percent (80%) of leases (including this Lease) of named Tenant to the same entity; however, no such assignment shall be deemed effective unless and until such assignee executes and delivers to Landlord, at no cost to Landlord, a written agreement in form and substance acceptable to Landlord whereby such assignee assumes for the benefit of Landlord the performance and observance of all of the terms, conditions and convenants contained in this Lease. The foregoing is subject to Tenant providing Landlord with thirty (30) days' written notice in advance, including statements of fact certified by an authorized officer of Tenant, certifying the facts upon which Tenant is claiming the right to assign this Lease pursuant to this grammatical paragraph. In addition, any private placement or public offering of ownership interest in Tenant shall not require Landlord's prior consent, provided that as a result of any private placement the day-to-day management of Tenant remains unchanged. Notwithstanding anything contained in this Section 17.01 to the contrary, a public offering of Tenant's voting stock on a nationally recognized public stock exchange shall not be deemed an assignment of this Lease, provided (i) Tenant shall have given Landlord ten (10) days' prior written notice of such intended public offering, and (ii) this Lease is not further assigned except as provided for in this Article 17. (b) No permitted assignment made shall be effective until there are delivered to Landlord (i) an agreement in recordable form, executed by Tenant and the proposed assignee, wherein such assignee assumes due performance of the obligations of Tenant's part to be performed under this Lease to the end of the term hereof and (ii) a written consent to such assignment by the holder of any fee or leasehold mortgage affecting the Premises to which this Lease is then subject and such consent shall have been obtained and delivered to Landlord if so required by the terms of such mortgage or by a collateral document securing the same obligations as are secured by such mortgage. (c) Any assignment of this Lease or any sublease affecting the Premises or any other permitted transfer hereunder shall be subject and subordinate to the full terms and conditions of this Lease. Regardless of either the assumption by any assignee or sublessee of due performance or the Landlord's acceptance of rent or other charges from such assignee or sublessee, Tenant shall not be released by any assignment or sublease but shall continue to be fully responsible for the due performance of Tenant's obligations hereunder in the same manner and to the same extent as if no such assignment or sublease had been made. Notwithstanding anything to the contrary in this Section 17.01(c), for any assignment of this Lease for which Landlord's consent is required and such consent is granted, Tenant shall be released from any future obligations under this Lease provided that the proposed assignee maintains a net worth of at least [***] for the twenty-four (24) month period immediately preceding the assignment and for the twelve (12) months immediately following the assignment. *** Confidential treatment requested. 23 28 (d) In the event Tenant assigns or subleases all or any portion of the Premises as set forth in this Article 17 and the amounts due to Tenant under such assignment or sublease exceed the amounts reserved to be paid to Landlord by Tenant under this Lease, then Tenant shall pay to Landlord one-half of the amount by which such assignment or sublease rent exceeds Rent as set forth in Section 3.01(a) above. In the event Tenant assigns or subleases only a portion of the Premises, the assignment or sublease rent shall be calculated on a per square foot basis and then compared to the then applicable per square foot Rent reserved in Section 3.01(a) above to determine whether or not such assignment or sublease rent exceeds Rent. (e) Any transfer made in violation of the provisions of subsections (a), (b) or (c) in this section 17.01 shall constitute an event of default under Section 15.01 herein and give rise to Landlord's right to re-enter the Premises in accordance with Section 15.02. (f) Notwithstanding anything in this Section 17.01 to the contrary, if Tenant desires to assign its interest under this Lease or to sublet all of the Premises to a Permitted Party (as hereinafter defined), Tenant shall deliver to Landlord written notice, requesting Landlord's consent to such transaction, which consent request shall include (i) a fully executed letter of intent containing the material terms of the proposed assignment or sublet transaction (including proposed rent (including additional rent), square foot area, term and use), (ii) current reasonable financial information with respect to the proposed assignee or sublessee, including without limitation its most recent financial report, (iii) a statement that the proposed assignment or sublease relates to the entire Premises for the remaining term of this Lease, and (iv) an express statement to the effect that the proposed assignee or sublessee is a Permitted Party within the meaning of this paragraph and that Landlord has the right to terminate this Lease in connection with the assignment or sublease pursuant to this Section 17.01(f) or such assignment or sublease shall be deemed consented to by Landlord. A notice that contains the information described in clauses (i) through (iv) shall be deemed an offer ("Takeback Offer") from Tenant to Landlord whereby Landlord may terminate this Lease. If Tenant's notice does not expressly state the items described in clauses (i) through (iv) including that the proposed assignee or sublessee is to a Permitted Party, such notice shall constitute a request by Tenant for Landlord's consent to sublease the Premises or assign this Lease subject to the other terms of this Section 17.01; such notice shall not constitute a Takeback Offer and Landlord shall not be entitled to terminate this Lease under this Section 17.01(f). The Takeback Offer may be exercised by Landlord by written notice ("Takeback Notice") to Tenant at any time within thirty (30) days after such Takeback Offer has been given by Tenant to Landlord; and during such thirty (30) day period Tenant shall not assign this Lease to such prospective assignee or sublet the Premises to such prospective sublessee unless such assignment is expressly conditioned upon and not effective until the expiration of the 30-day period for Landlord to deliver the Takeback Notice. The term "Permitted Party" shall mean a third party (i) who will operate the Premises for a lawful bona fide retail use consistent with uses at other first-class shopping centers or for the use permitted under Section 6.01 of this Lease, and not in violation of any use restriction in effect for the Shopping Center of which Tenant has been advised within twenty (20) days after Landlord's receipt of Tenant's Takeback Offer; (ii) who has a net worth equal to or greater than the then net worth of Tenant; and (iii) who is a national or regional chain of retail stores, or is then operating (directly or indirectly) at least five (5) stores in the States of New York, New Jersey, Pennsylvania, Massachusetts and Connecticut for the same or similar use, or has at least ten (10) years of retail operating experience. Upon such termination, all obligations of Landlord and Tenant (other than those that expressly are stated to survive termination) shall cease to be of further force and effect. Notwithstanding anything in this Section 17.01 to the contrary, Tenant shall have the right, without Landlord's consent, to secure furniture, fixture and equipment financing in the ordinary course of business and to grant to the financing party a security interest in the furniture, fixtures, or equipment. If Landlord exercises its option to terminate this Lease pursuant to this subsection in connection with an assignment or sublet of all of the Premises, then, unless Tenant, within fifteen (15) days after receipt of the Takeback Notice, withdraws Tenant's request for Landlord's consent to the proposed assignment or sublet, this Lease shall end and expire on the effective date designated by Landlord in its Takeback Notice (which date shall not be less than sixty (60) days nor more than one hundred twenty (120) days after the date of the Takeback Notice) as fully and completely as if such early termination date were the original expiration date of the Term, and all Rent shall be apportioned as of such date. If (x) Landlord shall not elect to send a Takeback Notice within said 30-day period and (y) Tenant is not then in default under this Lease beyond any applicable notice or cure periods, Tenant shall be entitled, without any consent by Landlord, to assign this Lease or sublet all of the Premises on substantially the terms for proposed rent (including additional rent), square foot area, term and use and to the Permitted Party, described in Tenant's request for Landlord's consent, provided that if Tenant shall then be in default under this Lease beyond any applicable notice or cure period, then any such assignment or sublet shall not be effective until such defaults are cured. Any assignment or sublet to a Permitted Party shall be subject and subordinate to the terms, conditions and covenants of this Lease (other than with respect to the use set forth in Section 1.03), provided that if the assignee or sublessee will not operate any racing simulator or other rides within the Premises, then notwithstanding anything to the contrary in Section 3.02, Percentage Rent shall be an amount equal to [***]. To the extent necessary, Tenant and Landlord shall execute and deliver a Lease Modification Agreement or other agreement reflecting the new use clause, if any. 17.02 - EFFECT OF LANDLORD'S CONSENT (a) Any consent by Landlord to a sale, assignment, sublease, mortgage, pledge, license, concession, hypothecation, or transfer of this Lease, shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from the requirement of obtaining prior written consent of Landlord to any further sale, assignment, sublease, mortgage, pledge, hypothecation, or transfer of this Lease. When the consent of Landlord is required hereunder to any proposed assignment or sublease of this Lease, or to the mortgaging, pledging, licensing, concession or hypothecation of this Lease, contemporaneously with the request of Tenant therefor, Tenant shall submit in writing information reasonably sufficient to enable Landlord to make a decision with respect thereto. (b) With respect to any of the consents requested by Tenant, whether or not the Landlord has consented thereto, Tenant shall pay to the Landlord the reasonable counsel fees and disbursements and other expenses incurred by the Landlord in connection therewith. Notwithstanding anything to the contrary in this Section 17.02(b), in no event shall this sum exceed [***]. *** Confidential treatment requested. 24 29 ARTICLE 18 COMPLIANCE WITH GOVERNMENT ORDERS 18.01 - TENANT TO COMPLY Tenant, at its own expense, shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state and local governments and of any and all other departments and bureaus applicable to Tenant's particular use of the Premises or to the business conducted by Tenant at the Premises, whether ordinary, extraordinary, foreseen or unforeseen ("Governmental Orders"). In addition, Tenant, at its own expense, shall comply promptly with and execute all rules, orders, regulations and recommendations of the Board of Fire Underwriters, Rating Board and Landlord and Tenant's insurance companies with respect to the prevention of fires and the exposure of liability risks ("Insurance Matters"). Tenant, at its own expense, shall furnish and maintain in good order an adequate number and type of fire extinguishers on the Premises at all times. Notwithstanding the foregoing, in no event shall Tenant ever be responsible for any violation of Governmental Orders or Insurance Matters arising directly out of Landlord's Work. Landlord hereby represents that the Premises shall comply with all applicable Governmental Orders and insurance Matters on the date Landlord delivers possession of the Premises to Tenant. 18.02 - FAILURE TO COMPLY In case Tenant fails or neglects to comply with any of the Government Orders, Insurance Matters or the ADA (as hereinafter defined) as herein required of Tenant, then Landlord or its agent may enter the Premises and make said repairs and comply with any and all of the Government Orders, Insurance Matters or the ADA at the cost and expense of Tenant, and in case Tenant fails to pay therefor upon notice within five (5) days thereafter, the said cost and expenses, including [***] for administration costs, shall be added to the next month's installment of Fixed Annual Minimum Rent and be due and payable as such or Landlord may deduct the same from any balance remaining in Landlord's hands. This provision is in addition to the right of Landlord to terminate this Lease under Article 15 hereof by reason of default on the part of Tenant. 18.03 - HAZARDOUS MATERIAL Tenant shall, at all times, comply with all local, state and federal laws, rules and regulation governing the use, handling and disposal by Tenant of Hazardous Material in the Premises and that portion of the Common Areas which Tenant employs for the display of its model NASCAR racing vehicle, as specifically set forth in Section 7.03 of this Lease, including, but not limited to Section 1004 of the Federal Resource Conservation and Recovery Act 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) and any additions, amendments, or modifications thereto. As used herein, the term "Hazardous Material" shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the Premises is located or the United States Government. Landlord and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Tenant is complying with the terms of this Section. If Tenant is not in compliance with this Section, Landlord shall have the right to immediately enter upon the Premises and take whatever actions as are reasonably necessary to comply including, but not limited to, the removal from the Premises of any Hazardous Material and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Tenant shall pay reasonable out-of-pocket costs incurred by Landlord plus twelve percent (12%) for administration within ten (10) days after Tenant's receipt of a bill therefor. The covenants in this Section 18.03 shall survive the expiration or earlier termination of this Lease. Landlord hereby consents to Tenant's use of (i) hydraulic oil in connection with the operation of the driving simulators and related equipment associated with Tenant's permitted use and (ii) cleaning and office products customarily used in retail or office premises, so long as all of such materials are used, handled, and disposed of in accordance with applicable laws and at no cost to Landlord. 18.04 - AMERICANS WITH DISABILITIES ACT Tenant, at its own expense, shall at all times comply with and shall cause the Premises and that portion of the Common Areas which Tenant employs for the display of its model NASCAR racing vehicle, as specifically set forth in Section 7.03 of this Lease, to be in compliance with the requirements of the Americans With Disabilities Act of 1990, and any additions, amendments or modifications thereto and all related regulations (the "ADA"). Landlord, at Landlord's sole cost and expense, shall be responsible for insuring that Landlord's Work and the Common Areas are in compliance with the ADA. ARTICLE 19 SUBORDINATION, MORTGAGEE'S RIGHTS AND ASSIGNMENT OF RENTS 19.01 - SUBORDINATION The rights and interests of Tenant under this Lease shall be subject and subordinate to any ground lease, mortgage or trust deed now or hereafter placed upon any portion of the Shopping Center, and to any advances made hereunder, and to the interest thereon, and to all renewals, modifications, consolidations, replacements, extensions and refinancings thereof. Tenant agrees that any ground lessor, mortgagee or trustee may elect to give the rights and interest of Tenant under this Lease priority over the lien of its ground lease, mortgage or trust deed. In the event of such election, the rights and interest of Tenant under this Lease automatically shall have priority in whole or in part, over the lien of said ground lease, mortgage or trust deed, and no additional consent or instrument shall be necessary or required. However, Tenant agrees to execute and deliver such instruments as may be reasonably requested by any ground lessor, mortgages or trustee for such purposes, and in the event Tenant fails to do so within ten (10) days after demand in writing. Tenant does hereby make, constitute and irrevocably appoint Landlord as its attorney-in-fact (which shall be deemed to be coupled with an interest) and in its name, place and signage so to do in the event Landlord shall elect to refinance the Shopping Center during the term, Tenant's subordination to such fixture *** Confidential treatment requested. 25 30 lender shall be expressly conditioned upon Tenant's receipt of a non-disturbance agreement reasonably acceptable to both Tenant and such future lender. Landlord will deliver to Tenant, on or before September 15, 1999, a non-disturbance agreement from each existing ground lessor and lender with an interest in the Shopping Center, and will use reasonable efforts to obtain the non-disturbance agreement in a form reasonably acceptable to Tenant. In the event Landlord is unable to obtain such non-disturbance agreement by September 15, 1999, then Tenant shall not be obligated to accept possession of the Premises and there shall be a day for day postponement of the Term Commencement Date until Landlord obtains such non-disturbance agreement. If Landlord is unable to obtain such non-disturbance agreement by September 15, 1999, then Tenant may terminate this Lease upon thirty (30) days notice to Landlord. Landlord, at anytime after the execution of this Lease, may, in good faith, give notice to Tenant that Landlord is unable despite its reasonable efforts to obtain the non-disturbance agreement on the form requested by Tenant. At such time, if Tenant refuses to accept the form of non-disturbance agreement that Landlord is able to secure from its Lender, Landlord may terminate this Lease upon thirty (30) days notice to Tenant. 19.02 - MORTGAGEE'S RIGHTS (a) So long as any such ground lease, trust deed or mortgage remains a lien on any portion of the Shopping Center, Tenant agrees, simultaneously with the giving of any notice to Landlord which is required to be given by this Lease, to give a duplicate copy thereof to the respective ground lessor, mortgagee or trustee, provided Landlord has given Tenant notice of the name and address of any such ground lessor, mortgagee or trustee. Landlord agrees to notify Tenant of any ground lessor, mortgagee or trustee to whom such notice must be sent. Further, Tenant agrees that if Landlord defaults in its performance of any of the covenants under this Lease and if such default entitles Tenant to terminate this Lease, the ground lessor, mortgagee or trustee may cure said default within thirty (30) days after any time period required of Landlord; provided, however, that if such default cannot be cured within such time period, Landlord shall be deemed to have cured such default if cure of the default is commenced within such time period, and thereafter diligently and in good faith continued with and actually completed. Landlord shall promptly notify Tenant of its commencement of such cure, and, if necessary, be permitted entry upon the Premises for the purpose of curing any such default. The giving of any such notice to Landlord shall not be property given under the terms of this Lease and shall be of no force and effect until a duplicate copy thereof is also given to the ground lessor, mortgagee or trustee pursuant to this Section 19.02. (b) Tenant hereby acknowledges that so long as any ground lease, mortgage or trust deed is a lien upon the Premises, Landlord cannot agree to reduce the rents below that provided for in this Lease, provide for payments of rent prior to the time herein provided for, nor terminate the Lease prior to the end of the term, except as otherwise provided in this Lease, without first obtaining the written consent of the ground lessor, mortgagee or trustee, and that any such proposed modification or termination without the written consent of said ground lessor, mortgagee or trustee shall be void as against said ground lessor, mortgagee, or trustee. 19.03 - ASSIGNMENT OF RENTS (a) With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees: (i) that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage or the ground lessor, shall never be treated as an assumption by such holder or ground lessor any of the obligations of Landlord hereunder, unless such holder or ground lessor shall, by notice sent to Tenant, specifically otherwise elect; and (ii) that except as aforesaid, such holder or ground lessor shall be treated as having assumed Landlord's obligations hereunder with respect only to those obligations that arise following a foreclosure or deed in lieu thereof, or assumption of Landlord's position by a ground lessor only upon foreclosure of such holder's mortgage and the taking of possession of the Premises, or, in the case of a ground lessor, the assumption of Landlord's position hereunder by such ground lessor. Tenant agrees that with respect to those obligations of Landlord that arise prior to a foreclosure or deed in lieu thereof, or assumption of Landlord's position by a ground lessor, such foreclosing mortgagee in possession or ground lessor shall have no liability, provided that nothing contained herein shall be deemed to relieve Landlord from performance of any obligations arising under this Lease prior to the date of such assumption nor any such foreclosing mortgagee or ground lessor, as applicable, from performance of non-monetary obligations of a continuing nature arising under this Lease prior to the date of such assumption. (b) Where a party acquires Landlord's interest in property (whether land only, or land and buildings) which includes the Premises, and simultaneously leases the same back, such acquisition shall not be treated as an assumption of Landlord's position hereunder, and this Lease shall thereafter be subject and subordinate at all times to such lease (subject to the provisions of Section 10.01 above). ARTICLE 20 ENTRY TO PREMISES 20.01 - ENTRY TO PREMISES BY LANDLORD Landlord shall have the right to enter the Premises at all reasonable times acceptable to both Landlord and Tenant for the purpose of: (i) inspecting the same, (ii) making any repairs to the Premises and performing any work therein that may be necessary or desirable, (iii) exhibiting the Premises for the purpose of sale, ground lease, mortgage or other financing, (iv) exhibiting the Premises (within one year prior to the expiration of the term of this Lease) to prospective tenants. Except in the case of an emergency, Landlord shall be accompanied by a representative of Tenant during any entity to the Premises unless Tenant waives such requirement in writing, in advance of such entry. During any such entry, Landlord shall not interfere with Tenant's access to the Premises. (END OF TEXT THIS PAGE) 26 31 (ii) making any repairs to the Premises and performing any work therein that may be necessary or desirable, (iii) exhibiting the Premises for the purpose of sale, ground lease, mortgage or other financing, (iv) exhibiting the Premises (within one year prior to the expiration of the term of this Lease) to prospective tenants. Except in the case of an emergency, Landlord shall be accompanied by a representative of Tenant during any entity to the Premises unless Tenant waives such requirement in writing, in advance of such entry. During any such entry, Landlord shall not interfere with Tenant's access to the Premises. (END OF TEXT THIS PAGE) 32 Nothing in this Lease shall imply any duty on the part of Landlord to do work or perform obligations which, under any of the provisions of this Lease, Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a constructive eviction nor a waiver of Tenant's default. ARTICLE 21 Notices and Certificates 21.01 - NOTICES (a) Any notice, statement, certificate, request or demand required or permitted to be given or delivered in this Lease shall be in writing, and personally delivered, sent by reputable overnight courier, or sent by registered or certified mail, postage prepaid, return receipt requested and addressed to Landlord at the address shown at the beginning of this Lease, and to Tenant at the address shown at the beginning of this Lease, or to such other addresses as Landlord or Tenant shall designate in the manner herein provided. In the case of any default notice sent by Landlord to Tenant, Landlord shall send a copy to: Paul, Hastings, Janofsky & Walker, LLP, 555 South Flower Street, 23rd Floor, Los Angeles, California 90071-2371, Attn: Rick S. Kirkbride. Landlord's managing agent, Pyramid Management Group, Inc, is hereby authorized and designated to give or deliver to Tenant any notice under this Lease. Any such notice, statement, certificate, request or demand shall be deemed given, (i) when actually delivered, if personally delivered or delivered by overnight or other courier or delivery service which confirms delivery in writing, or (ii) within two (2) business days after deposit in the US mail, if sent by register or certified mail, postage pre-paid, return receipt requested, except in case of notice of change of address or revocation or a prior notice, which shall only be effective upon receipt. (b) At any time or times when Tenant's interest herein is vested in more than one person, firm or corporation, jointly, in common or in severalty, a notice given by Landlord to any one such person, firm or corporation shall be conclusively deemed to have been given to all such persons, firms or corporations. Any notices by Tenant pursuant to the provisions hereof shall be void and ineffective unless signed by all such persons, firms and corporations, unless all such persons, firms and corporations have previously given notice to Landlord, signed by each of them and designating and authorizing one or more of them to give the notice referred to, and such notice shall then be unrevoked by any notice to Landlord. 21.02 - ESTOPPEL CERTIFICATE OF LANDLORD Within ten (10) days after request by Tenant, Landlord, from time to time and without charge, shall deliver to Tenant or to a person, firm or corporation specified by Tenant, a duly executed and acknowledged instrument certifying: (i) that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; and (ii) whether Landlord knows or does not know, as the case may be, of any default by Tenant in the performance by Tenant of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any. Such certification shall not estop Landlord from thereafter asserting any existing default of which Landlord did not have actual knowledge on the date of execution thereof. 21.03 - ESTOPPEL CERTIFICATE OF TENANT Within ten (10) days after request by Landlord or Landlord's ground lessor or mortgagee, Tenant, from time to time and without charge, shall deliver to Landlord or the requesting party, or to a person, firm or corporation, specified by Landlord, a duly executed and acknowledged instrument, certifying: (i) that this Lease is unmodified and in full force and effect or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; (ii) whether Tenant knows or does not know, as the case may be, of any default by Landlord in performance by Landlord of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any; (iii) whether or not there are any then existing permitted set-offs or defenses by Tenant, and if so, specifying them; (iv) the dates to which the Fixed Annual Minimum Rent, Percentage Rent, and Additional Rent have been paid; (v) that the operation and use of the Premises do not involve the generation, treatment, storage, disposal or release of any Hazardous Material or a solid waste into the environment in reportable amounts or in manners which do not comply with all environmental laws and that the Premises is being operated in accordance with all environmental laws, zoning ordinances and building codes; and (vi) such other information as Landlord or Landlord's ground lessor or mortgagee may reasonably request. Such certification shall not estop Tenant from thereafter asserting any existing default of which Tenant did not have actual knowledge on the date of execution thereof. 27 33 ARTICLE 22 COVENANT OF QUIET ENJOYMENT 22.01 - COVENANT OF QUIET ENJOYMENT (a) So long as no event of default is existing pursuant to Section 15.01 of this Lease, Tenant shall lawfully, peaceably and quietly have, hold and enjoy the Premises during the term hereof on and after the Term Commencement Date without hindrance or ejection by any persons lawfully claiming under Landlord; but it is understood and agreed that this covenant, and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownership of Landlord's interest hereunder. (b) With respect to any services to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish the same when prevented from doing so by strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, or because of war or other emergency, or for any cause beyond Landlord's control. (c) Landlord shall be in default of this Lease if Landlord fails to perform any obligation required to be performed by Landlord under this Lease and if such failure is not cured within thirty (30) days after receipt of Notice from Tenant specifying the nature of such failure. In the event of any such default by Landlord, Tenant shall have the right to exercise all rights and remedies available at law or in equity. Landlord shall reimburse Tenant for any reasonable expenses incurred by Tenant in curing Landlord's failures within twenty (20) days following receipt by Landlord of paid invoices from Tenant. In the event Landlord fails to reimburse Tenant for such amounts within thirty (30) days following receipt by Landlord of paid invoices from Tenant, then Tenant shall have the right to offset such amounts against the next ensuing installments of Rent, Percentage Rent and Additional Rent coming due under this Lease until the entire amount has been recouped by Tenant. ARTICLE 23 MISCELLANEOUS PROVISIONS 23.01 - HOLDOVER (a) It is expressly understood by Tenant that Tenant's right to possession of the Premises under this Lease shall terminate at the expiration or earlier termination of the term, and should Tenant continue thereafter to remain in possession, Landlord, should it so elect, shall be entitled to the benefits of all provisions of law with respect to summary recovery of possession from a holdover tenant. Tenant shall indemnify and save harmless Landlord from any claim, damage, expenses, cost or loss which Landlord may incur by reason of such holding over, including without limitation, any claim of a succeeding tenant, or any loss by Landlord with respect to a lost opportunity to re-let the Premises. (b) Should Tenant continue to occupy the Premises after the expiration or earlier termination of the term with the consent of the Landlord, such tenancy shall be from month-to-month, and such month-to-month tenancy shall be under the same terms, covenants and conditions as set forth in this Lease, except that Tenant shall pay Fixed Annual Minimum Rent on the basis of one and one-half (1 1/2) times the Fixed Annual Minimum Rent for the last year of the term. 23.02 - LIMITATION ON LANDLORD'S PERSONAL LIABILITY (a) It is understood and agreed that Tenant shall look solely to the estate and property of Landlord in the Shopping Center for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of the Lease to be observed or performed by the Landlord, and any other obligation of Landlord created by or under this Lease, and no other property or assets of Landlord or of its partners, beneficiaries, co-tenants, shareholders, members, or principals (as the case may be) shall be subject to levy, execution or other enforcement procedures for the satisfaction of Tenant's remedies. In no event shall Tenant name Landlord's partners, members, beneficiaries, co-tenants, shareholders or principals to any suit or other proceeding to which Tenant and/or Landlord are a party arising out of or relating to this Lease, unless the naming of such partners, members, beneficiaries, co-tenants, shareholders or principals is required in order to permit the Tenant to obtain jurisdiction over Landlord herein. (b) The term "Landlord," as used in Subsection 23.02(a) and throughout this Lease, shall be limited to mean and include only the owner or owners at the time in question of Landlord's interest in this Lease. Further, in the event of any transfer by Landlord of Landlord's interest in this Lease, Landlord herein named (and in case of any subsequent transfers or conveyances, the then assignor), including each of its partners, beneficiaries, co-tenants, shareholders, members, or principals (as the case may be), shall be automatically freed and relieved, from and after the date of such transfer or conveyance, of all liability for the performance of any covenants and agreements on the part of Landlord that accrue after the date of said transfer (but not for any obligation that accrued prior to the date of said transfer, for which the party assigning Landlord's interest in this Lease shall remain liable, subject to and in accordance with the terms of this Lease). 23.03 - DEFINITION OF TENANT'S ALLOCABLE SHARE (a) Intentionally deleted. 28 34 (b) Tenant's Allocable Share of Real Property Taxes pursuant to Section 4.01 shall be the product of multiplying the amount of said Real Property Taxes by a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is the total number of square feet of all buildings then leased in the Shopping Center on the date as of which such computation is required to be made under the terms of this Lease, after deducting therefrom the square footage of (i) any REA Parcel or other parcel which is separately assessed and the Real Property Taxes of which are paid directly to the taxing authority by the tenant or occupant thereof, (ii) any anchor store and (iii) any theater, within the Shopping Center. (c) Whenever used herein, the term "square feet" shall consist of the area of floor space on all floors measured from the outside face of all exterior walls of the buildings (or the midpoints of any interior walls) and any outdoor sales areas which are mechanically heated or air-conditioned. It shall not include the floor area of any roof structures used for mechanical equipment. Whenever used in this Lease, an "anchor store" is defined to mean a premises in the Shopping Center containing not less than fifty thousand (50,000) square feet. In the event that, at any time the computation of Tenant's Allocable Share under Section 23.03(b) is required to be made, less than ninety-two and one-half percent (92.5%) of the total number of leasable square feet of all buildings in the Shopping Center is "then leased," then the minimum denominator used in the fraction used for determining Tenant's Allocable Share under Section 23.03(b) shall not be less than ninety-two and one-half percent (92.5%) of the total number of leasable square feet of all buildings then comprising the Shopping Center (less the deductions set forth in Section 23.03(b)). 23.04 - FORCE MAJEURE The period of time during which either party is prevented or delayed in any performance or the making of any improvements or repairs or fulfilling any obligation under this Lease, other than the payment of Fixed Annual Minimum Rent, Percentage Rent and Additional Rent, due to unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil commotion, Acts of God, the public enemy, governmental prohibitions or regulations or inability to obtain materials by reason thereof, or any other causes beyond such party's reasonable control, shall be added to such party's time for performance, and such party shall have no liability by reason of such delay, except that as a condition to Tenant's right to avail itself of Force Majeure, Tenant must give Landlord written notice of such claimed Force Majeure. 23.05 - RELOCATION OF TENANT Landlord shall have the right to relocate Tenant to another space, the mall frontage of which shall be equal to or greater than that of the Premises, and the square footage of which shall not vary from that of the Premises by greater than one hundred (100) square feet within the Shopping Center after the expiration of the first thirty-six (36) months of the term of this Lease, upon one hundred twenty (120) days Notice to Tenant, at Landlord's cost and expense, which relocation shall in no way affect the obligation or duties of either party hereunder. Landlord shall be obligated for all expenses associated with such relocation, including but not limited to the construction of the new space to a condition and level of quality of finishes at least equivalent to the condition and level of the Premises on the date of Landlord's relocation notice and any actual out-of-pocket costs incurred by Tenant for the printing of new stationary and business cards, and the costs of moving Tenant's Personal Property. In the event Tenant shall fail or refuse to accept the new location within twenty (20) days of such Notice, Landlord at its option, may terminate this Lease upon forty-five (45) days written Notice to Tenant, provided that if Landlord shall fail to give the Notice of Landlord's election to terminate within forty-five (45) days after the expiration of such twenty (20) days, then Landlord's termination right under this Section 23.05 shall be waived and this Lease shall remain in full force and effect through the Termination Date as defined in Section 2.02. Tenant's written consent, which may be withheld in Tenant's sole discretion, shall be required for any relocation which moves the Premises outside the cross-hatched areas shown on Exhibit A-2. 23.06 - CHANGES AND ADDITIONS Landlord hereby reserves the right at any time, and from time to time, to make alterations or additions to, and to build additional stories on the building in which the Premises are located and to build adjoining the same. Landlord also reserves the right at any time, and from time to time, to construct other buildings and improvements in Landlord's Tract, to enlarge or otherwise modify the Shopping Center, to make alterations therein or additions thereto, to build additional stories on any building or buildings within the Landlord's Tract, to build adjacent thereto, to construct decks or elevated parking facilities, to install, maintain, use, repair and replace ducts, wires, pipes and conduits passing through or under the Premises serving other parts (now existing or hereafter added) of Shopping Center, and to sell or lease any part of Landlord's Tract. The purpose of the attached Site Plan is to show the approximate location of the Premises within the Shopping Center, and Landlord reserves the right at any time to relocate the various buildings, parking areas and other Common Areas shown on said Site Plan; provided, however, that there shall not be caused thereby any unreasonable obstruction of Tenant's right of access to the Premises or any unreasonable interference with Tenant's use of the Premises for the purpose hereinabove set forth, or the access to and visibility of the Premises as more fully set forth in Section 7.03 of this Lease. 23.07 - ATTORNMENT BY TENANT If at any time during the term of this Lease the Landlord hereunder shall be the holder of a leasehold estate covering premises which include the Premises, and if such leasehold estate shall be canceled or otherwise terminated prior to the expiration date thereof and prior to the expiration of the term of this Lease, or in the event of the surrender thereof whether voluntary, involuntary or by operation of law, Tenant shall make full and complete attornment to the lessor of such leasehold estate, provided the lessor of such leasehold estate assumes all of Landlord's obligations under this Lease, for the balance of the term of this Lease upon the same covenants and conditions as are contained herein so as to establish direct privity between such lessor and Tenant and with the same force and effect as though this Lease was made directly from such lessor to Tenant. Tenant shall then make all rent payments thereafter directly to such lessor. In the event any proceedings are brought for the foreclosure of, or in the event of conveyance by deed in lieu of foreclosure of, or in the event of the exercise of the power of sale under, any mortgage or deed of trust made by Landlord covering the Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the Premises. Tenant shall 29 35 attorn to and hereby covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as the Landlord under this Lease. 23.08 - INDEX As used in this Lease, "Index" means the then higher of either of the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or the Consumer Price Index for All Urban Consumers (CPI-U) of the United States Department of Labor's Bureau of Labor Statistics in effect and generally published at the time the computation is to be made. If the aforesaid price indices are no longer published, then another price index, generally recognized as authoritative, shall be substituted by Landlord. In the event the parties are unable to so agree, the matter shall be submitted to arbitration pursuant to Section 23.18. During any period while the determination of such a dispute is pending, Tenant shall continue to pay the sum previously in effect; provided, however, that the adjusted sum as finally determined shall be retroactive from the prescribed date and any deficiency owed by Tenant shall be paid promptly upon a final determination of the dispute. 23.09 - SURVIVAL OF TENANT'S OBLIGATIONS Any sums due either party from the other that by the terms herein would be payable, or are incapable of calculation, until after the expiration or earlier termination of this Lease shall survive and remain a continuing obligation until paid. 23.10 - EFFECT OF LANDLORD'S NOTICE TO TERMINATE Any right on the part of Landlord to terminate this Lease shall, when exercised, require no further act, to the end that at the expiration of the applicable time period, if any, contained in the particular termination provision, this Lease and the term hereunder shall end and expire as fully and completely as if such termination date was the date herein definitely fixed for the end and expiration of this Lease and the term hereof, and upon such date Tenant shall quit and surrender the Premises to Landlord. 23.11 - EFFECT OF CAPTIONS The captions, bold-faced type, underlining, notational references, or legends in this Lease are intended only for convenient reference or identification of the particular paragraphs. They are in no way intended to describe, interpret, define or limit the scope, extent or interest of this Lease, or any paragraph or provision thereof. 23.12 - TENANT AUTHORIZED TO DO BUSINESS Tenant represents, warrants and covenants that it is upon the date of execution, and throughout the term of this Lease it shall be authorized to do business and in good standing in the state in which the Premises is located. Tenant, if a partnership or corporation, agrees to furnish to Landlord, upon request, evidence of authority for entering into this Lease. 23.13 - EXECUTION IN COUNTERPARTS This Lease may be executed in one or more counterparts, any one of all of which shall constitute but one agreement. 23.14 - LAW GOVERNING, EFFECT AND GENDER This Lease, and any dispute concerning this Lease, shall be governed by the laws of the state in which the Premises is located, and any dispute concerning an interpretation of any portion of the Lease or the conduct of the parties hereunder shall be brought in either Syracuse, New York, or in the jurisdiction where the Premises is located. Tenant hereby consents to service of process at the Premises in the event that Tenant does not maintain a separate business office within the state where the Premises is located. This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns, except as expressly provided otherwise. Use of the neutral gender shall be deemed to include the masculine and feminine. 23.15 - MEMORANDUM OR NOTICE OF LEASE Upon request by either party, Landlord and Tenant agree to execute a Memorandum or Notice of Lease in recordable form pursuant to applicable state law. Upon the expiration or earlier termination of this Lease, the party who shall have recorded such Memorandum or Notice of Lease shall promptly execute any necessary instrument and remove the Memorandum or Notice of Lease from the public records, and upon failure to do so, the other party is hereby appointed attorney-in-fact to execute any such instrument in the recording party's name, place and stead. 23.16 - COMPLETE AGREEMENT This Lease contains and embraces the entire agreement between the parties hereto with respect to the matters contained herein, and it or any part of it may not be changed, altered, modified, limited, terminated, or extended orally or by any agreement between the parties unless such agreement is in writing and signed by the parties hereto, their legal representatives, successors or assigns. Tenant acknowledges and agrees that neither Landlord nor any representative of Landlord nor any broker has made any representation to or agreement with Tenant relating to the Premises, this Lease or the Shopping Center which is not contained in the express terms of this Lease. Tenant acknowledges and agrees that Tenant's execution and delivery of this Lease is based upon Tenant's independent investigation and analysis of the business potential and expenses represented by this Lease, and Tenant hereby expressly waives any and all claims or defenses by Tenant against the enforcement of this Lease which are based upon allegations of representations, projections, estimates, understandings or agreements by Landlord or Landlord's representative that are not contained in the express terms of this Lease. 30 36 23.17 - GUARANTY OF LEASE Intentionally deleted. 23.18 - ARBITRATION Any controversy or claim arising from or relative to any matter in connection with this Lease, with reference to which this Lease shall expressly provide that this paragraph governs, shall be settled by arbitration in the City of Syracuse, New York, in accordance with the rules of the American Arbitration Association or its successor organization, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. 23.19 - SECURITY AGREEMENT Intentionally deleted. 23.20 - INVALIDITY OF PARTICULAR PROVISIONS If any term or provision of this Lease or the application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be effected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 23.21 - EXECUTION OF LEASE BY LANDLORD The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall be effective and binding only upon the execution and delivery hereof by both the Landlord and Tenant. 23.22 - RELATIONSHIP OF THE PARTIES Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent nor any other provision herein contained, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than landlord and tenant. 23.23 - BROKERS Landlord represent and warrants to Tenant that it has not employed any realtors or brokers in connection with the negotiation of this Lease. Tenant represents that Tenant has retained as its broker Russell J. Friend of Blatteis Realty ("Tenant's Broker"), and Tenant specifically acknowledges and agrees that any fee payable to Tenant's Broker is the sole and exclusive responsibility of Tenant and Landlord shall have no liability therefor. Landlord and Tenant shall each indemnify, defend and hold harmless the other from any cost, expenses or claim for brokerage or other commission arising from or out of any breach of the foregoing representation and warranty. 23.24 - REPRESENTATIONS Landlord warrants to Tenant that the Shopping Center is in good condition and repair, free of material defects, and that the Shopping Center has been constructed in accordance with applicable laws and requirements. 23.25 - ABATEMENT In the event Tenant is prevented from using the Premises or any portion thereof, for five (5) consecutive business days or ten (10) days in any twelve (12) month period (the "Eligibility Period") as a result of the failure of Landlord to maintain and repair the Shopping Center and the Premises in accordance with its obligations as set forth in this Lease, and such failure interferes with Tenant's operations and use of the Premises, or as a result of any failure to provide services or access to the Premises, or because of the presence of Hazardous Materials in or on the Shopping Center or the land on which the Shopping Center is located resulting from the acts or omissions of any party other than Tenant which pose a health risk to occupants of the Premises, then Tenant's Rent shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using the Premises or a portion thereof, in the proportion that the square footage of the portion of the Premises that Tenant is prevented from using bears to the Tenant Area of the entire Premises. However, in the event that Tenant is prevented from conducting its business in any portion of the Premises under such circumstances for period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not reasonably sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the square footage of such reoccupied portion of the Premises bears to the Tenant Area of the Premises, shall be payable by Tenant from the date such business operations commence. 23.26 - SPECIAL USE PERMIT Except as may be otherwise set forth in Section 5.02(a) of this Lease, Landlord represents that as of the date hereof, no "special" use permit from local governmental authorities is required for Tenant's operation for the permitted use in Section 6.01 within the Premises in accordance with this Lease. The foregoing representation shall not extend to any building or similar permits required for Tenant's Work or a certificate of use and occupancy for the 31 37 Premises or licenses to conduct business and the like. 23.27 - TENANT IMPROVEMENT REBATE Notwithstanding anything contained herein to the contrary, provided Tenant is not in default under this Lease beyond the expiration of any applicable notice and cure period, Tenant shall be entitled to an allowance in the amount of [***] per square foot of the Premises ("Tenant Improvement Rebate") (e.g., if the Premises are 4,124 square feet in size, then Tenant shall be entitled to a Tenant Allowance from Landlord in the amount of [***]. The Tenant Improvement Rebate shall be paid to Tenant by Landlord in the form of an abatement (the "Abatement") of any and all charges, fees and reimbursements that otherwise would be due and owing from Tenant to Landlord (including, without limitation, Fixed Monthly Minimum Rent, Percentage Rent, Common Area Charges, Insurance, and contributions to the Marketing Fund), except Tenant shall be obligated to pay Tenant's Allocable Share of all Real Property Taxes despite the Abatement. The Abatement shall commence on the Term Commencement Date and shall continue until the amount of the Abatement equals the amount of the Tenant Improvement Rebate. If this Lease is terminated prior to the expiration of the term, Tenant shall pay to Landlord, as Additional Rent, any amount of the Tenant Improvement Rebate received by Tenant (whether in the form of the Abatement or otherwise) in excess of the earned portion of the Tenant Improvement Rebate, which "earned portion" shall be determined by dividing the Tenant Improvement Rebate by the total number of months that would make up the term if not for the prior termination of this Lease (e.g., 120 months if the term is not extended pursuant to Section 2.03 above) and multiplying the result by the number of months (including whole and partial months) that occurred commencing on the Term Commencement Date and ending on the date that this Lease was terminated. For example, if the term is comprised of 120 months and if Tenant operated the Premises after the Term Commencement Date for 70 whole and partial months, then Tenant shall pay to Landlord any amount received by Tenant in excess of 7/12 (i.e., based on 70/120, or the "earned portion") of the Tenant Improvement Rebate. Such amount shall be deemed due as of the date the Lease is terminated and shall be payable within five (5) days following such date. Such amount shall not be subject to credit, offset or mitigation as otherwise provided in Section 15.02(c) of the Lease. IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date first above written. PYRAMID COMPANY OF BUFFALO By: /s/ [ILLEGIBLE] ---------------------------- Partner/Authorized Agent SILICON ENTERTAINMENT, INC. By: /s/ [ILLEGIBLE] ---------------------------- Title: V.P. ------------------------- *** Confidential treatment requested. 32 38 (Acknowledgment of LANDLORD) State of New York ss: County of Onondaga On the 12th day of August in the year 1999, before me the undersigned, a notary public in and for said state, personally appeared [ILLEGIBLE], personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual or the person upon behalf of which the individual acted, executed the instrument. /s/ JENNIFER B. HUSE -------------------- (Notary Public) (Acknowledgement of TENANT) JENNIFER B. HUSE Notary Public, State of New York No. 01HU5086563 Qualified in Onondaga County Commission Expires October 20 1999 State of California ss: County of Santa Clara On the 5th day of August in the year 1999, before me the undersigned, a notary public in and for said state, personally appeared Chris Morse, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acted, executed the instrument. /s/ LAURIE H. SHERMER --------------------- (Notary Public) LAURIE H. SHERMER Commission # 1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 33 39 TABLE OF EXHIBITS ----------------- EXHIBIT A..............................................................Site Plan EXHIBIT A-1.............................................................Premises EXHIBIT B.........................................Description of Landlord's Work EXHIBIT C...........................................Description of Tenant's Work EXHIBIT D.................................................Outline Specifications
34 40 EXHIBIT A [DIAGRAM] Note: This is a schematic plan and is intended to show only the proposed layout of the Shopping Center. All measures, dimensions and distance are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 41 EXHIBIT A-1 [DIAGRAM] Note: This diagram is an approximate lease plan of the Shopping Center. All measures, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 42 EXHIBIT A-2 [DIAGRAM] Note: This diagram is an approximate lease plan of the Shopping Center. All measures, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 43 EXHIBIT A-2 Note: This diagram is an approximate lease plan of the Shopping Center. All measures, dimensions, and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. [FLOOR PLAN] 44 EXHIBIT B LANDLORD'S WORK The Premises have already been constructed and Tenant accepts the Premises in its "as is" condition. All other work required to prepare the Premises for Tenant's use and occupancy shall be performed by Tenant at its sole cost and expense. Notwithstanding anything to the contrary in this Lease, Landlord shall be responsible, at its sole cost and expense, for the demolition of the interior of the former "Pizzeria Uno" store which occupied the Premises, as well as the removal of exterior awnings which were formerly utilized by "Pizzeria Uno". 45 EXHIBIT C TENANTS WORK Tenant accepts the Premises in its "as is" condition on the date that possession of the Premises is made available by Landlord, and shall, at its sole cost and expense, and in accordance with the Outline Specifications attached hereto and made a part hereof as Exhibit D, furnish all labor, material, fixtures and equipment necessary to complete, in a good, substantial and approved manner, all work required to bring the Premises to a finished condition ready for the conduct of Tenant's business therein. Landlord and Tenant agree that Tenant's store front design shall be substantially similar to Tenant's store located within the Palisades Center in the Town of Clarkstown, County of Rockland, and State of New York. 1 46 EXHIBIT C WALDEN GALLERIA, BUFFALO, NEW YORK CONDITION OF SPACE: 1. HVAC is: one (1) 12.5 Ton unit and one (1) 10 Ton unit in good working condition. 2. Floor to deck height is 21 feet. 3. Electrical service is 277-4808 3 phase 4 watt. 4. Conduit is 5 inches. 5. Tenant's location is 200 feet form electrical room. 6. Please see attached DCP for further detail. 7. Tenant will visit site before 8/18/99 to review and tag items that exist in restaurant condition that Tenant may revise. Landlord will not begin to demolish prior to such visit. 8. Floor load is 100 lbs. EXHIBIT C Page 2 47 NOTE: ALL EXISTING CONDITIONS AND DIMENSIONS TO BE FILED VERIFIED BY TENANT. ALL UTILITY LOCATION SHOWN ARE APPROXIMATE, FIELD VERIFY EXACT LOCATIONS. [FLOOR PLAN] 48 EXHIBIT D OUTLINE SPECIFICATIONS A. DESIGN AND CONSTRUCTION Tenant will retain the services of architect(s) and engineer(s) licensed in the sate in which the Shopping Center is located for the design of Tenant's Work. Tenant will retain contractors for the completion of Tenant's Work. Tenant and its contractors will at all times cooperate fully with Landlord's employees and contractors, and with other tenants and their contractors. Tenant's architect and engineer will design all Tenant's Work in full compliance with all federal, state and local codes, ordinances, rules and zoning regulations applicable to the Shopping Center and to Tenant's Premises. Tenant's architect and engineer will incorporate by reference or by duplication the Tenant Design Handbook into the final contract documents. Landlord will complete Landlord's Work as set forth in Exhibit B of this Lease under a blanket building permit. Tenant will complete Tenant's Work as set forth in Exhibit C of this Lease under an individual building permit. Tenant will be responsible for all building permit costs and/or any other municipal permit(s) and/or fees required for Tenant's Work. All building permit questions, as they relate to Tenant's Work (Exhibit C) should be directed to the Landlord. B. DIMENSION CONTROL PLAN Landlord will furnish Tenant with two (2) prints of a Dimension Control Plan, setting forth dimensions and design information necessary to complete the design of Tenant's Work. The Dimension Control Plan will be made available following the execution of this Lease. C. TENANT'S DESIGN All final submissions will bear the seal and signature of an architect (and engineer if applicable) licensed to practice in the state in which the Shopping Center is located. Tenant's design will employ the best available technology to provide for maximum energy conservation within the Premises. All HVAC, plumbing and electrical work will be in compliance with ASHRAE Standard 90-80, or the most recent edition thereof. Within two (2) weeks from the later of (a) receipt by Tenant of a Dimension Control Plan from Landlord, or (b) the date of execution of this Lease, Tenant shall submit by overnight delivery service "Preliminary Design Drawings," for Landlord's review, showing the intended design concept and character of proposed finishes. Tenant's submission shall consist of one (1) sepia set and one (1) blueline set of prints. Preliminary Design Drawings will contain basic dimensions of the Premises and shall include, but not necessarily be limited to, the following: 1. Preliminary floor plan with fixturing layout; 2. Preliminary reflected ceiling plan; 3. Storefront elevation showing intended materials and signage, complete with sample of all finish materials; 4. Section through storefront and bulkhead; and 5. Material and color finish sample board of interior and storefront finishes. Landlord will return to Tenant one (1) set of prints marked with Landlord's comments relative to Tenant's preliminary submission within fifteen (15) days after Landlord's receipt of such submission. Tenant agrees to incorporate Landlord's comments into Tenant's final submission. Within thirty (30) days after the later of (a) receipt by Tenant of the Dimension Control Plans from Landlord, or (b) the date of execution of this Lease, Tenant will submit to Landlord two (2) sets of reproducible prints and six (6) sets of blueline prints of Tenant's "Design Drawings" showing final design, character, and finishes. All design shall conform to the design criteria set forth herein. Tenant's Design Drawings shall include, without limitation, the following for review: 1. Architectural: Floor plan, fixturing layout, room finish schedule, door schedule, partition types, ceiling plan, interior wall and storefront elevations describing signage elevators and shop drawings, sections, and details as appropriate. 2. Mechanical: All equipment, locations, distributions and return systems, diffuser locations, load calculations, controls, and details as appropriate. 3. Electrical: Floor and ceiling plans showing type and location of power and lighting, equipment, controls, projected loads, panel schedules, riser diagram, and details as appropriate. 4. Plumbing: Location and type of water meter, fixtures, supply and waste piping schematics and details as appropriate. 5. Specifications on materials and methods of construction for the above items. 6. Signage Shop Drawings indicating finishes, type, and mounting location. Food merchants will submit "menu board" specifications and/or photographs. 7. Manufacturer's Cuts of fixtures and equipment with finishes. 1 49 8. Certificate of Completion and Affidavit (Appendix 2). 9. Tenant Electrical Load Summary (Appendix 1A). 10. Tenant Design Checklist (Appendix 1). Landlord will return to Tenant one (1) set of sepias of Tenant's Final Design Drawings marked with review comments and required modifications. If Tenant's Design Drawings are returned to Tenant with comments but not bearing the approval of Landlord, Tenant's Design Drawings shall be revised by Tenant, incorporating Landlord's comments, and resubmitted to Landlord for review within ten (10) days of receipt. *Plans will not be returned until Receipt of Appendices 1 and 1A. If the final submission of Tenant's architectural drawings are stamped "Final Approved for Construction as Noted," it is Tenant's or Tenant's representative's responsibility to distribute copies of the final drawings, stamped as such, to the contractors at the job site. Landlord's design review is solely for the purpose of assisting the Tenant and coordinating the store design of the various tenants in the Shopping Center. If in the design review process Landlord does not denote items that are not in compliance with the provisions of the Lease, including these Outline Specifications, the same will not relieve Tenant, Tenant's contractor, Tenant's architect and engineer of their obligations to construct in compliance with these Outline Specifications, and any applicable federal, state and local codes, ordinances, rules and regulations. Any modifications to Tenant's Premises during the term of the Lease must conform to all provisions of the Lease including this Exhibit or, at Landlord's option, Landlord's then-current design criteria, including design review and payment of the fee therefor. Tenant's contractor will construct Tenant's space in accordance with Tenant's final drawings as approved by Landlord and will furnish a signed Certificate of Completion as provided below. Receipt of Appendix 2 (attached) will be required prior to the release of Tenant's security deposit. D. SUBMISSION OF AS-BUILT DRAWINGS AND CERTIFICATE OF COMPLETION (Appendix 1) As a condition of Landlord's approval for Tenant to initially open for business in the Shopping Center, and upon completion of the Premises, Tenant will submit to Landlord for Landlord's permanent project construction files: (1) a set of reproducible "As-Built" drawings which contain all of the information required in Tenant's Design Drawings, updated to accurately reflect the as-built conditions of Tenant's HVAC, electrical and plumbing systems; and (2) a Certificate of Completion (Appendix 2) signed by Tenant, Tenant's architect and contractor, certifying that the Premises have been constructed and completed in accordance with the plans, drawings and specifications previously submitted to and reviewed by Landlord. Tenant must also submit a completed a Stipulation of Cost with appropriate backup documentation as a condition of Landlord's approval. Landlord will be entitled to rely on this Certificate as evidence of Tenant's completion of construction of the Premises pursuant to the provisions of this Lease. E. OUTLINE SPECIFICATIONS The following Outline Specifications will apply to the performance of all work carried out with regard to the Premises: 1. Floor System a. Upper-level Floor System (if applicable) The upper-level floor system will consist of a structural framing system and a concrete slab. Depressions in the slab for floor covering will not be permitted. Electrical floor boxes or plumbing lines must be installed by core drilling through the concrete slab to the lower-level tenant's ceiling space. All such work will be coordinated directly with Landlord. No piping, conduit or other related items may be placed in the concrete slab or on the steel decking. The floor system will be designed for a maximum allowable live load of 100 pounds per square foot. b. Level Floor System The lower level floor system will consist of a concrete floor slab. All work which Tenant desires to be placed below the slab will be installed prior to the slab construction, or Tenant may cut and replace said slab at Tenant's expense only upon approval from Landlord. c. Waterproofing (if applicable) All tenants will ensure the water tightness of their restroom floor system. Waterproofing membranes will extend no less than 4" vertically at all demising walls. Additionally, all food merchants, pet stores and salons will provide a waterproof membrane over their entire floor area with water-tight connections at all floor penetrations. All tenants will ensure water tightness of all floor slab penetrations. Tenant will be responsible for any damage which occurs as a result of, or which is caused directly or indirectly by the failure of Tenant or its contractors to adequately construct, install, or adequately seal all floor penetrations. Food use tenants must install a single waterproof membrane as specified by specific mall. 2. Walls, Partitions and Doors 2 50 a. Demising Partitions All demising partitions will be finished with a minimum of 5/8" fire code gypsum wallboard (unless otherwise required by code), from the floor to the deck, with all joints taped. Exposed walls will be finished with three layers of spackling, sanded and left in paint-ready condition. 1) Insulation in Demising Partitions All demising partitions constructed by the following types of merchants will be insulated with vapor barriers (installed to the warm side of the wall) and sound attenuation blanketing from the floor to the underside of the deck. 1. Food establishments; 2. Game rooms, arcades, video, record and tape stores; 3. Pet stores; 4. Salons; 5. Any other use which produces unusual noise or odor, or heats or cools the Premises 10 degrees (Fahrenheit) +/- beyond the normal range within the Shopping Center or is deemed by Landlord to potentially impact other mall tenants adversely. b. Exterior/Interior Partitions All interior partitions of the Premises will be constructed of metal studs, with gypsum wallboard or other non-combustible finish on all sides. Any combustible materials applied to partitions must receive a U.L. labeled fire-retardent coating, or be placed over a non-combustible substrate material. All exterior walls will be insulated with fiberglass insulation from the floor to the underside of the deck. Insulation will have an integral vapor barrier with an R value of 19 or greater if required by any federal, state or local code, ordinance, rule or regulation. The insulation will be covered by one (1) layer of 5/8" type "X" gypsum wallboard from the floor to the underside of the deck. c. Storefront Bulkhead Tenant's storefront bulkhead, if any, will be constructed and finished subject to Landlord's review of signage and overall design. The mall side of Landlord's bulkhead will be finished by Landlord. Tenant's side will be finished with a minimum of 5/8" fire code gypsum wall board running the full height to the structure above (1 hour rated). All materials applied on the mall side of the storefront will be non-combustible as per code and local building regulations. Storefront bulkheads will have an insulation "R" value of at least 11 (except at Walden Galleria, Independence Mall, Carousel Center, Galleria at Crystal Run, Silver City Galleria and Crossroads Mall, where this insulation is not required at this time). d. Plumbing Chases Plumbing chases, whether in Tenant's Premises or beyond, will be constructed with access panels in full compliance with all applicable codes and will be insulated to prevent freezing of water and waste piping. e. Doors Service doors which open into a corridor or Tenant's exterior service areas will be framed and installed in locations approved by Landlord. These doors must open in the direction of exit travel, and must be recessed so as not to restrict use of any service corridor as an emergency exit corridor. Tenant will cut and patch the wall provided by Landlord as necessary to properly recess the door(s). Door frames will be made of hollow metal, 14-gauge size, fully welded, with a reinforced head. Doors will be 3'-8" by 7'-0", 15-gauge steel, reinforced, hollow metal. Hardware will include a locking device which is always operable from the interior, a door bumper, corner guards and a hydraulic door closer. Service doors opening into a service corridor will be 1-1/2 hour rated. Tenant will properly identify its Premises with an engraved sign attached to the exterior of its service door. f. Exits Fire exits will be clearly marked and maintained in accordance with governing codes and ordinances. Tenants will not install any hardware or other device(s) that would prohibit the use of an emergency fire exit. g. Finishes Paint finishes will be minimum of two (2) even coats with no skips, runs or sags. Before applying any wall covering(s), the underlying surface will be prime coated. 3. Storefront a. Scope The total separation between the Premises and mall, herein referred to as "Storefront" including any show windows, platforms, glass and glazing, lobbies or entries, doors, grilles, bracing and supports, depressions, and any walls between the Premises and the 3 51 mail will be furnished and installed by Tenant in accordance with Design Drawings bearing Landlord's approval. b. Design Review Tenant's Storefront design will be subject to Landlord's approval and will be in harmony with the overall quality and character of the mall. Landlord will review each Storefront design carefully to ensure the suitability of the design to the merchandise sold within the store and to the store's location within the mall. Landlord also reserves the right to modify Tenant's design and material election for the Storefront. c. Storefront Design Guidelines It is the intent of these guidelines to encourage the design of Storefronts which reinforce the concept of the mall as a streetscape. The streetscape is comprised of tenant's Storefronts which have varying shapes, sizes and materials and which also vary in the degree to which they project beyond or are recessed from the bulkhead line. Creativity in the streetscape name and the use of new and innovative materials is highly encouraged by Landlord: our Design Department is available and willing to assist tenants in creating a noteworthy and exciting design. Landlord's review of Tenant's Design Drawings is for design purposes only. Tenant's architect and/or engineer accepts all responsibility for any con-compliance with federal, state or local codes, ordinances, rules or regulations applicable to Tenant's Premises. d. Storefront "Pop-Out" Criteria The following sets forth the required criteria for allowable Storefront projections: PLEASE NOTE: Refer to the Dimension Control Plan for the "Condition" which pertains to the 'pop-out' criteria listed below. Tenant may occupy an enclosed projected area beyond the bulkhead line containing up to sixty percent (60%) of the area bounded by the maximum Storefront projection line, the bulkhead line, and the "no build zone" (as defined below), while respecting other setback liners as conditions apply (see Dimension Control Plan). A "no build zone" of either 1'-6" or 1'-0" is required between tenants' Storefronts. See Tenant Design Handbook for details. Overhead projections (minimum 8'-0" A.F.F.) may be constructed anywhere within the area bounded by the maximum Storefront projection line, the "no build zone" and other setback lines as conditions apply (subject to Landlord's approval) (see Dimension Control Plan). The Storefront will or may be built to a height no higher than the bottom of Landlord's bulkhead and shall not project outside the maximum Storefront projection line as shown on the Dimension Control Plan. At all mall Storefront feature columns, any partition of Tenant's storefront which must attach to Landlord's feature column must be full height glass. This glass must intersect at the center line of the feature column and run parallel to Landlord's mall bulkhead for a minimum of 12 inches from the face of the feature column before changing direction. At all Storefront(s), illuminated signs mounted to the outside of the Storefront will not extend below 8'-0" A.F.F. Tenant must appropriately finish the top portion of its projected Storefront with a finish of the same quality and material as that used on the vertical surfaces of Tenant's projected Storefront. Particular Storefront conditions require reference to Tenant's Dimension Control Plan for the location(s) of any column(s) for the purpose of respecting the 12'-8" radius setback of Tenant's "pop-out." In no case will there be a limit on the amount of storefront which may be recessed behind the bulkhead line. e. Characteristics and Materials No artificial images such as applied roofs, dormers, thatch, veneer brick, veneer field stone, pegboard, cork products, carpet, painted gypsum wallboard, vinyl, plastic or metal laminate, nor zolatone will be permitted in the construction of Tenant's Storefront. Backpainted glass, ceramic tile (used in any area of the mall other than in the Food Court) will be permitted only at the sole discretion and with the consent of Landlord. Landlord reserves the right to modify any Storefront design and Tenant's material selection. The use of combustible materials, fire retardant wood, permitted only by code. It is recommended that Tenant's Storefront design utilize full height tempered glass from floor to bottom of bulkhead as a basic design element. f. Security 4 52 Storefront security can be provided by utilizing coiling, sliding, or folding closures of glass, painted steel, anodized aluminum, or other material approved by Landlord. All security closures must be fully concealed when open. Overhead door soffits will be constructed and finished in such a way as to conceal all internal areas of the Storefront construction. The opening will be finished on the inside faces of gate/door pocket 12" above the soffit line and 12" inside of the side wall pockets. Side wall gate/door pockets will be constructed with flush, overlay pocket doors to conceal the door and pocket. All such doors will have concealed hardware. g. Construction Materials All Storefront construction and construction materials are subject to federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center. h. Safety All Storefront design and construction shall comply with all federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center regarding transparent glass doors and fixed adjacent transparent glass sidelights to avoid injury from accidental human impact. All markings on glass expanses will be subject to Landlord's review. i. Tempered Glass Any glass or mirror used in Tenant's Storefront construction in any type of vertical planes will be minimum 3/8" tempered glass. All overhead glass or mirror used in a horizontal or sloped application must be heat-strengthened laminated glass installed in accordance with governing codes. j. Storefront Base All Storefront construction, excluding doors, must have a tile base. Applicable mall tile may be purchased by Tenant from Landlord and installed by Tenant or by Landlord for Tenant if installed prior to the opening of the Shopping Center. However, Tenant is strongly recommended to utilize a material that compliments the overall storefront design. k. Maximum Projection No element of the Storefront, except signage, will project across Tenant's maximum Storefront projection line. No element of Tenant's Storefront, including signage, will project across Tenant's lease line. l. Hinged Doors Doors in the Storefront, if hinged, will swing toward the mall and be locked in an open position whenever the store is occupied. Such doors will be recessed in the Storefront so as not to swing past Tenant's maximum Storefront projection line. m. Non-Swing Doors Non-swing doors such as sliding glass or folding doors or coiling grilles are acceptable if they are locked in an open position whenever the store is occupied. n. Floor Track Any floor track will be flush with the finished floor. o. Floor Level Tenant will adjust the level of the slab in Tenant's Premises by flash patching or another method to ensure that the level of the finished floor in the Premises corresponds with that of the mall. p. Display Windows All display windows must be adequately illuminated and vented. Direct visual exposure of conventional incandescent lamps will not be permitted. Fluorescent lights will not be permitted in display window areas. q. Structural Support All Storefront work requiring structural support, including sliding door tracks and housing boxes for grilles, will be supported at the head sections by a welded structural steel framework installed by the Tenant. Connection to Landlord's roof structure or overhead floor structure for purposes other than horizontal bracing will not be permitted. All overhead rolling grille tube columns will be specified and installed by Tenant with base plates. r. Open Storefronts Where Tenant's Storefront is not enclosed, Tenant's merchandise or fixtures may not be extended farther than Tenant's maximum Storefront projection line. 5 53 4. Floor Covering a. Materials Carpeting will not be permitted within eight feet (8'0") of the Storefront enclosure line. Areas of the store subject to high traffic will be surfaced with ceramic, marble, or stone pavers or prefinished durable wood flooring. Vinyl composition tile is not allowed in Tenant's sales areas under any circumstances. All flame spread specifications for all flooring material must be provided prior to Tenant's construction for review by the local building department. b. Cutting, Patching and Core Drilling Tenant will cut and patch for any underslab work which is performed after Landlord's original pouring of the slab. Excavated materials must be removed and the subgrade must be thoroughly compacted before restoring the floor slab. Upper-level tenants will not cut the concrete slab. Penetrations for all mechanical, electrical, or plumbing work will be core drilled. c. Flush with Mall Tenant's floor finish will be flush with the mall floor finish, and Tenant will provide necessary finish trim where Tenant's floor finish meets the mall floor finish. d. Mall, Tenant Floor Finish Transition Prior to the opening of the Shopping Center, the mall floor finish will be installed by Landlord to Tenant's lease line at Landlord's cost. Tenant will be responsible for the cost to extend the mall floor finish from Tenant's lease line to the carrier line of Tenant's Storefront enclosure. At Landlord's option, this work may be completed by Landlord; all such work shall be done at Tenant's expense. After the opening of the Shopping Center, the Tenant is responsible for furnishing and installing any and all mall floor finish necessary to the center line of Tenant's storefront enclosure. 5. Ceilings a. Non-Combustible System All ceilings, related framing, blocking and accessories will be non-combustible. No combustible materials may be used above finished ceilings surfaces. b. Suspension System All ceiling suspension systems will be metal. Support for ceiling hangers will be from the structural members. Support will not be permitted from (but not limited to) the following: metal roof deck, mall duct work, sprinkler pipes, or conduits. Tenant is encouraged to include creative ceiling systems in its sales areas. The ceiling must be suspended drywall, concealed spinal acoustical tile, 2' x 2' acoustical T-Bar ceiling with 3/8" revealed edge, or lath and plaster construction. Acoustical ceiling is to be of regular tile type only. Acoustical ceiling with 2'x 4' modules (including tiles to simulate 2'x 2' look) will NOT be permitted in sales areas. c. Food Court Ceilings in vent areas must be constructed with greenboard and finished with an enamel paint or other paint which resists moisture penetration. d. Insulation All upper-level ceilings for Crossgates and Poughkeepsie will have an insulation of "R" value of at least 19. Upper-level tenants for Walden Galleria, Carousel Center and Galleria at Crystal Run do not need to insulate their ceilings. All ceilings in one-level centers will have an insulation "R" value of at least 19 and not less than a three-quarter (3/4) hour fire rating. Ceilings in lower-level stores will have a fire rating of not less than one (1) hour. e. Design Where ceilings are omitted for aesthetic or other purposes, design will incorporate all federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center. 6. Sign Criteria a. Design Tenant's sign design will be coordinated with Tenant's Storefront design and will not be installed until the design is approved by Landlord. Landlord will have the right to remove or require the removal of any signs which either do not meet the Sign Criteria or which are 6 54 not expressly approved by Landlord. The cost of such removal will be at Tenant's expense. Shop drawings of all proposed signage shall be submitted by Tenant to Landlord for approval. The submittal shall include an elevation of the Storefront with signage completely dimensioned and drawn to scale. A material sample board with proposed sign materials is also required. Fabrication and installation of signage will comply with all applicable local codes, ordinances, rules, regulations, and national electrical codes applicable to the Shopping Center. All signage materials will be U.L. rated. All signage shall be incorporated into Tenant's design as an integral part of the Storefront. To add individuality, creativity and variety, Tenant is strongly encouraged to incorporate into its design scheme the following recommendations: 1) Signage etched in Storefront glazing or mirror; 2) Back-painted glass with signage etched & back lit; 3) Neon graphics; 4) Illuminated halo-effect letters; 5) Metal letters such as cast bronze, polished brass, polished chrome and stainless steel; and 6) Fiber optics. b. Store Identity Tenant's sign will be limited to the identification of Tenant's tradename and/or logo. c. Characteristics Tenant's sign and logo will comply with the following design requirements: 1) Dimensional, individual, internally illuminated metal letters and/or logo may not be taller than eighteen inches (18"), unless in the opinion of Landlord, a larger size would be preferable. Maximum allowable projection from the Storefront will be six inches (6"). 2) Dimensional metal back-lit ("halo-effect") letters or logo with a height of six inches (6") to eighteen inches (18"). Each letter must be at least one inch (1") but no more than five inches (5") in thickness and must be projecting from the Tenant bulkhead surface with one inch (1") maximum spacers. 3) Exposed neon tubes forming letters and/or logos will be permitted at the discretion of Landlord on an individual basis. Dimmer switches will be attached to the sign transformers on all exposed neon tubes. No exposed neon crossovers, raceways, ballast boxes, or transformer boxes will be permitted. 4) Non-dimensional letters and/or logos applied or painted directly on the inside face of the glass Storefront area will be permitted as supplemental signs only. 5) Supergraphic or relief treatments of large amounts of Storefront area will be permitted only at the discretion of Landlord on an individual basis. 6) Signage will not exceed five percent (5%) of the area of Tenant's Storefront or twelve (12) square feet (whichever is greater). 7) Signage will not exceed two-thirds (2/3) of the width of Tenant's demised Premises. d. Prohibited Signs The following types of signs or signage will be prohibited: 1) Boxed or cabinet type signs; 2) Vacuum-formed plastic luminous letters and/or logos; 3) Blade signs; 4) Paper signs of any type; 5) Artificial wood and wood grain plastic laminate; 6) Animated components, flashing lights, or noise making signs of any type; 7) Signs utilizing plastic laminate; 8) Exposed neon; and 9) Dimensional graphic signage. e. Illumination All signage will be adequately illuminated by Tenant, utilizing a method which is approved by Landlord. f. Exterior Signage Except for Tenant's approved mall Storefront sign, no exterior signage by Tenant will be allowed. 7 55 g. Menu Boards Menu boards and price lists are subject to Landlord's review and approval. All such signage will be compatible with the remainder of the Premises and with the overall quality and design of the mall, and will be of a size, color and illumination level to be readily visible. "Photo signage" will be reviewed by Landlord. No "supplier" signs or advertising will be permitted. 7. Furnishings and Trade Fixtures All furnishings and trade fixtures will be new and of first quality, including installation. 8. Heating, Ventilating and Air Conditioning Delivery schedules required HVAC units to be ordered prior to Landlord's receipt of specific Tenant's specific store design data. Should Tenant require other and/or additional HVAC units due to Tenant's design or other specific use, such information should be immediately relayed to Landlord in writing separate from the plans submission process (upon completion of Tenant's architect's and/or engineer's calculations). Landlord will make arrangements for such additional or upgraded equipment required if so desired by Tenant at Tenant's expense. Prior to the opening of the Shopping Center, any and all additional, upgraded or other equipment requested by Tenant is at the control of Landlord and at Tenant's expense. Other design criteria relating to Tenant's work includes: a. Ductwork Ductwork will be sized, fabricated and installed in accordance with ASHRAE 90-50 or later edition thereof and SMACNA standards. Ductwork will be installed with fiberglass insulation and vapor barrier. Ductwork which passes through fire rated walls will be equipped with U.L. approved fire dampers as required by code, and with adequate access to such dampers. All return air will be run in insulated ducts. Any flex duct used from main trunk lines to diffusers shall be limited to six (6) feet in length. Tenant must provide condensate drains for all split system equipment used by Tenant. Ductboard is NOT allowed. Ceiling plenums will not be permitted. b. Exhaust Upper-level tenants will furnish and install complete exhaust systems where required. Lower-level and upper-level tenants may be required to connect their exhaust system to a master system provided by Landlord. All tenants are to ensure that systems are independent of each other for toilet rooms, equipment requiring venting including refrigeration or hot presses, cooking, heat, and/or other processes permitted by Landlord which produce air contaminants. Additionally, all tenants are to ensure that the discharge through the roof to the atmosphere properly vents odors and/or fumes away from the building, building openings and fresh air intakes. Tenant restroom exhaust duct systems will have a maximum external static pressure drop of .25 w.g. All roof penetrations must be performed by Landlord's designated contractor at Tenant's expense. See Exhibit C, Item 14, "Roof Work" for required special protection. c. Outside Air Landlord will provide a common outside air duct accessible to all lower-level tenants and applicable upper-level tenants not having direct roof access. All hood exhausts must be installed with tempered make up air, including ductwork directly through the roof. Additionally, all Food tenants' hood exhaust systems will have a minimum of ninety-five percent (95%) of its capacity of make up air introduced into the food preparation area directly from the outside. d. Supplementary Heating Tenant will provide electric unit heaters or wall heaters where required at exterior wall exposures to maintain minimum comfortable winter temperature levels. Tenant's design will provide for a constant ambient minimum temperature of 45 degrees (Fahrenheit) above Tenant's ceiling through the use of ceiling transfer grills, additional electric resistance units, or other methods approved by Landlord. e. Temporary Construction Heat During Tenant's construction period, Tenant will provide any necessary temporary heat required for protection and completion of Tenant's Work. f. Water Cooled or Heated Equipment No water cooled or heated equipment will be permitted unless water is recirculated and may be used only when specific permission is granted by Landlord. g. "As-Built" HVAC Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's HVAC system. 8 56 9. Plumbing a. Quality Tenant, in designing the plumbing system, will use the best and most recent technology available for conservation of water and energy. Fixtures will be of good standard manufacture at least equal in quality to American Standard. Flush valves will not be permitted. All faucets will have water saving aerators. Tenant will supply and install or purchase from the applicable municipality, if required, a water meter of sufficient size to serve the Premises. b. Hot Water Heaters Water heaters will be automatic electric, 480 or 227 volt, 3 phase, with all necessary safety controls and drains. Water heaters located overhead will be supported independently of Landlord's structural framing system. Appropriate structural detailing will be included with Tenant's submission to Landlord for approval by Landlord and Landlord's engineer. Tenants whose only water usage is for small toilet room(s) may utilize "instant hot" hot water heaters or conventional heaters up to a maximum six (6) gallon capacity. c. Hair Interceptors Individual hair interceptors will be installed on all sinks, basins, and special sanitary units which may in any way receive human or animal hair. All hair interceptors must be made accessible and must be regularly maintained. d. Grease Interceptors Individual grease interceptors, adequately sized, and in compliance with state, local and other government health departments having jurisdiction over the Shopping Center will be installed and maintained on all grease producing and other kitchen equipment, and will bear the seal of the Plumbing Drainage Institute (PDI). All grease interceptors will be the type that will plug solid if not maintained. e. Decor No fountains or decorative devices will be used unless they are a recirculating type device. f. Sanitary Sewer Vents Tenant will connect sanitary sewer vent pipes to Landlord's common vent system, or vent through the roof, as applicable. Any roof penetrations must be made by Landlord's designated roofing contractor at Tenant's expense. g. Trash Compactors All tenants serving food to the public will install individual trash compactors within the Premises to precompact all trash into sealed, leak-proof containers. h. "As-Built" Plumbing Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's entire plumbing system. 10. Electrical a. Quality All electrical materials will be new, and bear the U.L. label. Selection of fixtures and lighting levels within the Premises will be in strict accordance with the provisions outlined in the latest editions of ASHRAE 90-80, and the I.E.S. Lighting Handbook, and will be in conformance with the applicable energy conservation codes. b. Codes All work will meet the requirements of the latest National Electric Code, and all applicable local, state and federal codes, applicable regulations of the local telephone and power companies, and ASHRAE 90-80 or the latest edition thereof. c. Certificates Tenant will be responsible for making all necessary applications for certificates regarding Tenant's Work. Upon completion of all electrical work, Tenant will furnish to Landlord a copy of the certificate of approval, issued by the local authority having jurisdiction over such installation. d. Voltage All fluorescent lighting and all heating and cooling equipment must be operated on 480 or 277 volts from Tenant's high-voltage panel. All Tenant transformers must be supported independently of Landlord's structure. 9 57 e. Night Lighting Tenant must provide a separate night lighting circuit on a non-controlled panel (one (1) light fixture per 2,000 square feet), and a lock-on breaker for this circuit, or as designated by local authorities. f. Door Bell Tenant will install an electrical, push-button operated door bell immediately adjacent to Tenant's service door, mounted at 6'-9" A.F.F. in the door jamb. Installations in exterior wall surface will NOT be permitted. g. Controls HVAC and non-constant electrical loads will be monitored by Landlord's Building Management System. Constant loads, such as night lights, emergency lights, exit lights, exit signs, alarm systems, employee time clocks, computer cash register systems, electric rolling grills and refrigeration and/or life safety equipment systems will be on non-controlled electrical panels. In locations where lighting is not controlled by Landlord's Building Management System, Tenant will install a seven-day time clock system with reserve spring capacity to control all non-constant loads. h. Wiring No exposed wiring of any sort (extension cords, etc.) will be permitted subsequent to the period of Tenant's initial build-out. i. Ceiling Lighting In Tenant's sales areas, 2' x 4' fluorescent ceiling lighting fixtures are prohibited. Exposed tube fluorescent lights are not permitted. Fluorescent lighting must have parabolic reflective lenses satisfactory to Landlord. j. "As-Built" Electrical Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's electrical system. k. Checkmeter Upon Tenant's request, Landlord will furnish Tenant with the specifications for a utility-quality checkmeter acceptable to Landlord's and with Landlord's specifications for installation thereof. 11. General Lighting The general lighting of the mall has been designed to allow each tenant's Storefront and sales area to be a prominent focal point. The following required lighting criteria has been established: a. All lighting in "pop-out" Storefronts will be incandescent. Storefront lighting must meet all requirements as set forth by Landlord and its consultants; b. All accent lighting for the Storefront "pop-out" areas must meet the criteria stated in the Tenant Design Handbook and is subject to Landlord's review; c. All fluorescent lighting will be low brightness type. Acceptable lamp colors are warm white and deluxe warm white. Acrylic lenses or non-shielded fluorescent tubes will NOT be permitted in Tenant's sales area. All fluorescent lighting will be 277 volt, deep cell louver, or parabolic reflective lenses; d. Fluorescent lighting will NOT be permitted within eight (8) feet of the Storefront closure line; e. Installation of Tenant's lighting in mall Common Areas is NOT permitted; and f. Tenant will comply with all applicable energy conservation and construction codes. 12. Fire Protection a. Other Fire Protection Tenant will install and maintain above the ceiling any and all fire protection devices and equipment, smoke barriers, etc. as required by code(s) in the jurisdiction where the Shopping Center is located. Tenant will install and maintain automatic exhaust hood extinguisher systems and any special equipment or retardant required by the nature of Tenant's design or business, as determined by Landlord or applicable codes. b. Damage Any damage caused by Tenant to Landlord's sprinkler system will be repaired by Landlord at Tenant's expense. c. Hindrance of Sprinkler System 10 58 Tenant's merchandising, fixturing, storage, and other practices will not be conducted in such a manner as to hinder the effectiveness of the sprinkler system. d. Fire Extinguishers Tenant will install and maintain Type ABC fire extinguishers as approved by the local fire department and Landlord's fire and casualty insurer. e. Modifications All modifications, additions, repairs or relocations to the sprinkler system required for Tenant's use, prior to the Grand Opening, will be performed by Landlord's sprinkler contractor, at Tenant's expense. f. Smoke Detections Tenant will install smoke detectors which automatically shut down the HVAC unit(s) if activated. Smoke detectors will be ceiling mounted in both sales and stock/storage areas with one (1) smoke detector for every 2,000 square feet of each area and/or in the return or supply air duct as required by governing authorities and/or Landlord's fire and casualty insurer. Depending on the local code jurisdiction, the strictest of the three above-referenced requirements will apply. 13. Sanitary Tenant will be responsible for its own toilet requirements per all applicable codes. Common Areas toilets will not be used in Tenant's calculations. a. Temporary Sanitary Tenant will be responsible for all temporary sanitary facilities required during the construction of Tenant's space. 14. Food Court Tenant Criteria a. All wall surfaces visible by the public in Tenant's food preparation areas will be faced with glazed ceramic tile. All other wall surfaces will also be finished with FRP, marlite panel or stainless steel. b. Tenant will furnish and install a minimum of R-11 insulation with a vapor barrier from the floor to the underside of the structure above at all demising walls and in all ceiling areas. At exterior walls, the value of insulation will be a minimum of R-19. c. Tenant will furnish and install ceramic or quarry life flooring throughout Tenant's floor area. d. Tenant will have the option of using the following countertop finishes: 1) Plastic slab (Corian, Avonite Formica 2000X, or its equivalent): 2) Stainless steel; 3) Wood butcher block; 4) Ceramic tile; 5) Marble, or other smooth finish stone. e. Locations for any additional rooftop equipment required by Tenant's design will be subject to approval by Landlord; any such additional equipment required will be at Tenant's expense. f. In addition to all of the other submittal requirements, Tenant will submit with its preliminary submittal all proposed finished for all equipment, signage, etc., which will be visible to the public. 15. General Conditions a. Occupancy Date Landlord will notify Tenant of the date on which the Premises will be available for Tenant's Work ("Occupancy Date"). Except as otherwise set forth in the lease and to the extent legally permissible, Tenant agrees that time is of the essence and agrees to commence installation of Tenant's Work no later than five (5) days following the Occupancy Date. b. Occupancy Period The period beginning on the Occupancy Date and terminating on the Term Commencement Date of this Lease will be known as the "Occupancy Period." c. Establishment of Schedules Tenant, its agents, contractors and employees will comply with schedules which Landlord will establish from time to time, governing submittables by Tenant of design information for Landlord's approval, construction operations, occupancy by Tenant, opening for business, and other occurrences, for the purpose of coordinating the efforts of Tenant or Tenant's contractors, and Landlord. All parties will cooperate with Landlord in expediting work, and 11 59 will provide work schedules, status reports, and updates upon Landlord's request until Tenant opens for business. d. Failure to meet Schedule Any cost incurred by Landlord as a result of Tenant's failure to meet the schedule requirements herein described will be Tenant's responsibility, such costs will be payable by Tenant to Landlord upon Landlord's demand. Any modification to Landlord's Work or Tenant's Work necessitated by Tenant's failure to undertake or complete Tenant's Work as required under the Lease will become the responsibility of Tenant. Upon three (3) days written notice thereof, Landlord may request that Tenant's general contractor cease work, and Landlord may complete, at Tenant's expense, any work deemed by Landlord to jeopardize Tenant's required opening date. Upon three (3) days written notice thereof, Landlord may remove Tenant's general contractor due to non-compliance with rules and regulations listed below or published on site. e. Construction Rules and Regulations of the Mall after Grand Opening 1) Tenant will erect and maintain a temporary barrier throughout the construction period. Said barrier is subject to the following requirements - it shall: a) Not extent beyond three feet (3') into the walking corridors. At all times, a ten foot (10') minimum clearance must be maintained in the mall Common Areas; b) Be constructed of metal studs and 5/8" or 1/2" fire rated gypsum wallboard; c) Be taped and finished; d) Be painted (paint number to be specified by Landlord) and have a finished vinyl or rubber base; e) Be twelve feet (12') high, sealed to contain dust, and insulated minimize sound transmission; f) Have a factory-made door with lockset which will be kept closed. The door will swing into the store and be equipped with a door closer. A working copy of the key will be marked accordingly and left in the mall office; g) Be maintained on a daily basis as necessary (i.e., paint, sheetrock, repair, etc.); h) Any such temporary Storefront barrier may not be dismantled until the permanent Storefront is completed; i) Any such temporary Storefront barrier may not be fastened to the finished floor, demise piers or any other permanent finishes or fixtures in the mall; j) Not contain advertising of contractors or associated trades. 2) No jackhammering, or use of other equipment producing a high noise or dust level during shopping hours will be permitted. 3) All construction materials will be delivered via service entrances. For stores without service entrances, all materials will be delivered either before or after standard mall operating hours. 4) Doors are not to be wedged open. 5) Contractor and employee vehicles will be parked in areas as directed by Landlord. 6) Tenant will dispose of all waste materials (except concrete, masonry or structural steel) in dumpsters or other approved containers provided by Tenant which are located in areas designated by Landlord. Absolutely no waste material is to be discarded in adjoining spaces, other vacant spaces, mall areas or Landlord's compactor. 7) No building systems will be shut own without the express prior permission of Landlord. 8) All work will be performed in a neat and orderly fashion. 9) Tenant will notify the mall office personnel of the following prior to starting work: a) The name, address and temporary residence location of contractors working in the space; and b) The starting date and anticipated completion date of all work. 12 60 10) If Exhibit C established that Tenant accepts the Premises "As is," then any demolition which may be required will be performed by Tenant at Tenant's expense. f. Compliance with Construction Rules and Regulations As a condition of Landlord's approval of Tenant or Tenant's contractor taking occupancy of the Premises, Tenant or Tenant's contractor will be required to deposit with Landlord the sum of [***] to be held by Landlord as security for the compliance by Tenant and Tenant's contractor with the Construction Rules and Regulations set forth herein and the other construction requirements as set forth in Exhibits C and D. Tenant and Tenant's contractor will reimburse Landlord for the cost of any damage or disruption caused by the failure of Tenant or Tenant's contractor to comply with the Construction Rules and Regulations. Any such cost(s) will be first recovered by Landlord from the security deposit made hereunder. Upon the recovery of cost(s), Tenant will restore the security deposit to the original sum of [***]. Landlord will return the security deposit or the amount remaining thereof upon satisfaction of the following conditions: (i) the satisfactory completion of Tenant's Work as required under the Lease, including Landlord's punchlist; (ii) delivery of a Certificate of Occupancy to Landlord; (iii) within sixty (60) days following Landlord's acceptance of Tenant's properly completed Certificate of Completion, the submission of "As-Built" drawings as may be required hereunder; (iv) the receipt of copies of lien releases issued to Tenant from each subcontractor and the general contractor. Request for the return of the security deposit must be made to Landlord in writing. g. Compliance with Laws Tenant and Tenant's contractor will, at its/their expense, comply with all applicable statutes, ordinances, rules, orders, laws, regulations, codes and recommendations of all governmental agencies and their authorized agents which have jurisdiction over Tenant's Work; and, with respect to the prevention of fire and exposure to liability risks, to the Board of Fire Underwriters, Rating Board, and Landlord and Tenant's insurance companies. Tenant and/or Tenant's contractor will apply for, pay all fees for, and obtain all necessary permits, licenses and certificates. A copy of same will be delivered to Landlord and will be posted in a prominent place within the Premises before Tenant begins work. Tenant will furnish Landlord with a copy of a Certificate of Occupancy prior to opening for business. h. Non-Interference Tenant will perform its work so as not to interfere with the completion of Landlord's Work or the work of other tenants. i. Quality of Materials; Warranty All materials furnished and incorporated in Tenant's Work will be new, unused, and of the quality and characteristics specified herein. If the quality and characteristics of certain materials are not specifically set forth herein, materials used will be those customarily used in first-class work of similar nature and character. Tenant will guarantee, and will require all parties furnishing and incorporating materials in Tenant's Work to guarantee said work to be fee from any and all defects in workmanship and material for a period of five (5) years from the date of completion thereof. Tenant will be responsible for the costs of correction of such defects, which costs will include any and all expenses and damages resulting from said defects. Tenant's agreements with its contractors will contain language so providing and further providing that all guarantees and warranties will inure to the benefit of both Landlord and Tenant, as their respective interests appear, and that such guarantees and warranties can be directly enforced by either. j. Easements Tenant will install and maintain proper access panels as may be required for the regular maintenance of Tenant's and Landlord's equipment. Where applicable, tenants will recognize the rights of Landlord and of tenants located above or below to run pipes, ducts, conduits, or related items servicing the mall or other areas through Tenant's Premises. Tenant will cooperate with Landlord and other tenants; hours and times when work will be performed will be agreed upon by the parties involved. Any dispute arising hereunder will be resolved by Landlord. k. Insurance 1) Tenant will secure, pay for and maintain, or cause its contractor(s) to secure, pay for and maintain, during Tenant's construction and fixturing work within the Premises, all of the insurance policies required herein in the amounts as set forth below. Tenant will not permit its contractor(s) to commence any work until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. 2) Tenant's Contractors' and Subcontractors' Required Minimum Coverages and Limits of Liability. [***] Confidential treatment requested. 13 61 a) Comprehensive General Liability, including personal injury and property damage, completed operations, explosions, collapse, and underground operations, if any, broad form property damage, contractor's protective liability, in the minimum amount of [***] Combined Single Limit. b) Auto Liability, Bodily Injury and Property Damage (including non-owned and hired vehicles) in the minimum amount of [***] Combined Single Limit; and c) Statutory Workers' Compensation, Employer's Liability and Disability Benefits. Umbrella Coverage in the minimum amount of [***]. Such insurance will insure the contractor and/or subcontractor against any and all claims for personal injury, including death resulting therefrom and damage to the property of others caused by accident and arising from the contractors' and/or subcontractors' operations and whether such operations are performed by the contractor(s), subcontractor(s), or by anyone directly or indirectly employed by them. 3) Protective Liability Insurance Tenant will provide Owner's Protective Liability insurance that will insure Landlord and Tenant against any and all liability to third parties for damages because of personal injury liability (or death resulting therefrom) and property damage liability of others or a combination thereof which may arise from work in connection with the Premises, and any other liability for damages which Tenant's contractor or subcontractors are required to insure against under any provisions herein. Said insurance will be provided in the minimum amount of [***] Combined Single Limit. 4) Tenant's Builder's Risk Insurance - Completed Value Builder's Risk Material Damage Insurance Tenant will provide an "All Physical Loss" Builder's Risk insurance policy on all Tenant's Work to be performed in the Premises as it relates to the building within which the Premises is located. The policy will include Tenant, its contractor and subcontractors and Landlord as named insureds, as their interests appear. The amount of insurance to be provided will be [***] of the full replacement cost. 5) All such insurance policies required above will name Landlord as an additional insured, except Workers' Compensation Insurance, which will contain an endorsement waiving all rights of subrogation against Landlord. Certificates of Insurance will provide that no reduction in the amounts or limits of liability or cancellation of such insurance coverage will be undertaken without thirty (30) days prior written notice to Landlord. All insurance policies required above will be written by companies authorized under the laws of the state in which the Shopping Center is located and such policies must be satisfactory to Landlord. l. Indemnity Tenant will fully protect, defend, indemnify and hold harmless Landlord and Landlord's Managing Agent(s) and their employees, partners, officers, directors, agents, heirs, executors, administrators, successors, and assigns against any and all claims, actions, damages, liabilities, costs and expenses, including any and all attorneys' fees, arising from, because of, or out of the performance or non-performance of Tenant's Work or the use or occupancy of the Premises for Tenant's Work. m. Hazardous Materials Tenant will not install, nor cause or allow to be installed, nor use any hazardous materials in Tenant's Work without the express prior written consent of Landlord. Tenant will guarantee and require all parties furnishing and incorporating materials in Tenant's Work to guarantee that hazardous materials have not been furnished or incorporated in Tenant's Work. Tenant will be responsible for any and all cost(s) of correction which will include all expenses and damages, whether direct or indirect, resulting from the installation or use of hazardous materials. Tenant's agreements with its contractor(s) and subcontractor(s), if any, will contain language so providing and further, warranting that hazardous materials were neither installed nor used in the Premises; such warranties shall inure to the benefit of both Landlord and Tenant, and can therefore be directly enforced by either. *** Confidential treatment requested. 14 62 APPENDIX 1A TENANT ELECTRICAL LOAD SUMMARY (Please complete the following form and include as part of the Final Drawing Submittal to the Landlord.) Tenant: ____________________________ Space No.: ____________________________ Mall: ____________________________ GLA: ____________________________ Landlord provides as standard 10 watts per square foot. Food Court Tenants are provided with 15 watts per square foot. The information provided below is necessary in order to properly size the Mall's electrical distribution capacity. Upgrades over the Landlord's supplied wattage will be billed to the Tenant. Winter: Summer: 1. Connected Cooling Load: Compressor(s): ________ Watts Inside Fan: ________ Watts Outside Fan(s): ________ Watts Power Exhaust: ________ Watts 2. Connected Heating Load: Compressor(s): ________ Watts (Heat Pump) Inside Fan: ________ Watts Outside Fan(s): ________ Watts (Heat Pump) Heat Coil(s): ________ Watts 3. Connected Constant Lighting Load: (not to be included in occupied lighting load below) ________ Watts 4. Connected Constant Equipment Load: (not to be included in occupied equipment load below) ________ Watts 5. Connected Occupied Lighting Load: (not to be included in constant lighting load above) ________ Watts 6. Connected Occupied Equipment Load: (not to be included in constant equipment load above) ________ Watts 7. Total Connected Load: (the greater of item 1 or 2 plus items 3 through 6) ________ Watts Completed By: Electrical Engineer's Name:_____________________ Date:____________________ Firm Name:______________________________________ Address:________________________________________ Stamp:___________________ Phone:__________________________________________
1 63 APPENDIX 2 CERTIFICATE OF COMPLETION AND AFFIDAVIT OF CONTRACTOR'S COMPLIANCE WITH APPROVED PLANS (Complete and submit to Landlord upon completion of Tenant's Work construction) RE: Construction of STORE ----------------------- MALL ---------------------------------------- This is to state that I have made an inspection of the site on completion, and I hereby certify that the Premises has been completed in accordance with the Landlord approved final plans and specifications except as noted below. Dated: , 19 Tenant: -------------- -- ---------------------------------- By: --------------------------------- Title: --------------------------------- Dated: , 19 Contractor: -------------- -- --------------------------------- Name: --------------------------------- Address: --------------------------------- Signature: --------------------------------- Title: --------------------------------- - --------------------------------------------------------------------------- List all changes, if any, to previously approved plans and specifications required during construction: - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- As-Built Drawings Enclosed (if applicable): -------------- -------------- Certificate of Occupancy Attached (where required): -------------- -------------- Underwriter's Certificate Attached (where required): -------------- - ------------- 2 EX-10.20 22 STANDARD SHOPPING CENTER LEASE, CROSSGATES MALL 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.20 STANDARD SHOPPING CENTER LEASE Name of Shopping Center: CROSSGATES MALL Location of Shopping Center: INTERSTATE ROUTE 87 AND ROUTE 20 TOWN OF GUILDERLAND COUNTY OF ALBANY, NEW YORK Landlord: PYRAMID CROSSGATES COMPANY Tenant: SILICON ENTERTAINMENT, INC. d/b/a: NASCAR SILICON MOTOR SPEEDWAY 2 TABLE OF CONTENTS ARTICLE 1...................................................................2 Premises..................................................................2 1.01 - Premises.........................................................2 1.02 - Shopping Center..................................................2 1.03 - Use of Premises and Trade Name...................................2 ARTICLE 2...................................................................3 Term of Lease.............................................................3 2.01 - Commencement of Term.............................................3 2.02 - Term of Lease....................................................3 2.03 - Expiration of Term...............................................3 2.04 - Surrender of Premises............................................3 ARTICLE 3...................................................................4 Rent......................................................................4 3.01 - Minimum Rent.....................................................4 3.02 - Percentage Rent..................................................4 3.03 - Gross Receipts Defined...........................................5 3.04 - Tenant's Books and Records.......................................6 3.05 - Reports by Tenant................................................6 3.06 - Non-Waiver.......................................................6 3.07 - Right to Examine and Audit Books and Records.....................7 3.08 - Delinquent Payments..............................................7 3.09 - Additional Rent..................................................7 3.10 - Definition of Lease Year and Partial Lease Year..................7 3.11 - Place for Payments...............................................7 ARTICLE 4...................................................................7 Taxes.....................................................................7 4.01 - Real Property Taxes..............................................7 4.02 - Tenant's Taxes...................................................8 ARTICLE 5...................................................................8 Construction and Financing................................................8 5.01 - Landlord's Work..................................................8 5.02 - Tenant's Work....................................................9 5.03 - Payment..........................................................9 5.04 - Financing........................................................9 ARTICLE 6..................................................................10 Conduct of Business by Tenant............................................10 6.01 - Use of Premises and Trade Name..................................10 6.02 - Tenant's Operating Covenant.....................................10 6.03 - Competition.....................................................10 6.04 - Other Business Practices........................................11 6.05 - Marketing Fund..................................................12 ARTICLE 7..................................................................12 Common Areas and Operating Costs.........................................12 7.01 - Definition......................................................12 7.02 - Development of Common Areas.....................................12 7.03 - Use of Common Areas.............................................12 7.04 - Common Area Costs...............................................13 7.05 - Adjustment to Payment...........................................13 7.06 - Payment of Extraordinary Common Area Costs......................13 ARTICLE 8..................................................................13 Energy, Utility and Sprinkler Costs......................................13 8.01 - Energy and Utility Charges......................................13 8.02 - Intentionally deleted...........................................15 8.03 - Intentionally deleted...........................................15 8.04 - Miscellaneous Utility Provisions................................15 8.05 - Periodic Adjustment.............................................15 ARTICLE 9..................................................................15 Fixtures, Alterations, Signs.............................................15 9.01 - Installation by Tenant..........................................15 9.02 - Removal and Restoration by Tenant...............................16 9.03 - Signs, Awnings and Canopies.....................................16 9.04 - Condition of the Premises.......................................16 ARTICLE 10.................................................................16 Repairs and Maintenance..................................................16 10.01 - Landlord's Obligation to Repair.................................16 10.02 - Tenant's Obligation to Repair...................................17 10.03 - Article Not Applicable to Fire or Condemnation..................17 ARTICLE 11.................................................................17 Indemnity................................................................17 11.01 - Indemnity.......................................................17 ARTICLE 12.................................................................18 Insurance................................................................18 12.01 - Liability Insurance.............................................18 12.02 - Special Causes of Loss and Difference in Conditions Insurance...18 12.03 - Insurance of Common Areas.......................................18 12.04 - Increases in Fire Insurance Premium.............................18 12.05 - Tenant to Share Insurance Costs.................................19 12.06 - Waiver of Subrogation...........................................19 12.07 - Policies........................................................19
i 3 ARTICLE 13.................................................................19 Damage by Fire, Etc......................................................19 13.01 - Restoration of Premises.........................................19 13.02 - Restoration During Last Three Years.............................19 13.03 - Tenant's Obligation Upon Restoration............................20 ARTICLE 14.................................................................20 Eminent Domain...........................................................20 14.01 - Eminent Domain..................................................20 14.02 - Landlord Entitled to Award......................................20 ARTICLE 15.................................................................20 Bankruptcy and Default Provisions........................................20 15.01 - Events of Default and Conditional Limitation....................20 15.02 - Landlord's Remedies.............................................21 ARTICLE 16.................................................................22 Mechanics' Liens.........................................................22 16.01 - Mechanics' Liens................................................22 ARTICLE 17.................................................................23 Assignments, Subleases and Other Transfers of Tenant's Interest..........23 17.01 - Limitations on Tenant's Rights..................................23 17.02 - Effect of Landlord's Consent....................................24 ARTICLE 18.................................................................25 Compliance with Government Orders........................................25 18.01 - Tenant to Comply................................................25 18.02 - Failure to Comply...............................................25 18.03 - Hazardous Material..............................................25 18.04 - Americans With Disabilities Act.................................25 ARTICLE 19.................................................................25 Subordination, Mortgagee's Rights and Assignment of Rents................25 19.01 - Subordination...................................................25 19.02 - Mortgagee's Rights..............................................26 19.03 - Assignment of Rents.............................................26 ARTICLE 20.................................................................27 Entry to Premises........................................................27 20.01 - Entry to Premises by Landlord...................................27 ARTICLE 21.................................................................27 Notices and Certificates.................................................27 21.01 - Notices.........................................................27 21.02 - Estoppel Certificate of Landlord................................27 21.03 - Estoppel Certificate of Tenant..................................27 ARTICLE 22.................................................................28 Covenant of Quiet Enjoyment..............................................28 22.01 - Covenant of Quiet Enjoyment.....................................28 ARTICLE 23.................................................................28 Miscellaneous Provisions.................................................28 23.01 - Holdover........................................................28 23.02 - Limitation on Landlord's Personal Liability.....................29 23.03 - Definition of Tenant's Allocable Share..........................29 23.04 - Force Majeure...................................................29 23.05 - Relocation of Tenant............................................29 23.06 - Changes and Additions...........................................30 23.07 - Attornment by Tenant............................................30 23.08 - Index...........................................................30 23.09 - Survival of Tenant's Obligations................................30 23.10 - Effect of Landlord's Notice to Terminate........................30 23.11 - Effect of Captions..............................................30 23.12 - Tenant Authorized to Do Business................................30 23.13 - Execution in Counterparts.......................................30 23.14 - Law Governing, Effect and Gender................................31 23.15 - Memorandum or Notice of Lease...................................31 23.16 - Complete Agreement..............................................31 23.17 - Guaranty of Lease...............................................31 23.18 - Arbitration.....................................................31 23.19 - Security Agreement..............................................31 23.20 - Invalidity of Particular Provisions.............................31 23.21 - Execution of Lease by Landlord..................................31 23.22 - Relationship of the Parties.....................................31 23.23 - Brokers.........................................................31 23.24 - Representations.................................................32 23.25 - Abatement.......................................................32 23.26 - Special Use Permit..............................................32 23.27 - Allowance or Abatement of Rent..................................32
ii 4 INDEX OF DEFINED TERMS
DEFINED TERM SECTION - ------------ ------- Additional Rent....................................................3.09 Anchor Store......................................................23.03(c) Common Areas.......................................................7.01 Common Area Costs..................................................7.04(b) Energy Charges.....................................................8.01(b) Fixed Annual Minimum Rent..........................................3.01(a) Fixed Monthly Minimum Rent.........................................3.01(a) Gross Receipts.....................................................3.03 Hazardous Material................................................18.03 Landlord..........................................................23.02(b) Lease Year.........................................................3.10 Major Store.......................................................23.03(c) Partial Lease Year.................................................3.10 Percentage Rent....................................................3.02(a) Premises...........................................................1.01 Real Property Taxes................................................4.01 Square Feet.......................................................23.03(c) Tenant's Allocable Share..........................................23.03 Term Commencement Date.............................................2.01
iii 5 SHOPPING CENTER LEASE AGREEMENT made this 12 day of August, 1999, by and between the following parties: Landlord: PYRAMID CROSSGATES COMPANY a partnership organized and existing under the laws of the State of New York with its mailing address for notices and a principal office at: THE CLINTON EXCHANGE FOUR CLINTON SQUARE SYRACUSE, NEW YORK 13202-1076 Attention: MANAGEMENT DIVISION hereinafter referred to as "Landlord," and Tenant: SILICON ENTERTAINMENT, INC. d/b/a NASCAR SILICON MOTOR SPEEDWAY a corporation organized and existing under the laws of the State of California with its mailing address for notices and a principal office or residence at: 210 Hacienda Avenue - ------------------- (Street Address) Campbell California 95008 - --------------------------------------------------------- (City or Town) (County) (State) (ZIP) Attention: President ---------- hereinafter referred to as "Tenant." Tenant's Federal Tax Identification or Social Security Number: 77-0389433. 1 6 ARTICLE 1 PREMISES 1.01 - PREMISES (a) Landlord hereby demises and leases to Tenant and Tenant hereby rents from Landlord those certain premises ("Premises") hereinafter described and located in Crossgates Mall ("Shopping Center"), which is located in the Town of Guilderland, County of Albany, and State of New York. The Premises consist of approximately 4,167 square feet. The Premises are shown cross-hatched on the plan attached hereto and made a part hereof as Exhibit A-1. the Premises shall not be determined to include either the land lying thereunder or the exterior walls or roof of the building in which said Premises are located or any area beyond the midpoint of any interior wall. Landlord reserves the use of said land, walls and roof of the building, together with the right to install, maintain, use, repair, and replace pipes, ducts, conduits, wires and structural elements leading through the non-sales area of the Premises in locations which will not materially interfere with Tenant's use of the Premises. Any such installation, maintenance, use, repair or replacement, if approved by Tenant, shall be performed by Landlord in such manner as to avoid unreasonably interfering with Tenant's business operations in the Premises. (b) Within sixty (60) days after Landlord's delivery of possession to Tenant pursuant to the terms of this Lease, Tenant may, at its sole cost and expense, have the size of the Premises verified by an independent architect of Tenant's choice. For purposes of this verification, the square footage of the Premises shall be measured from the midpoints of any interior walls shared in common with another tenant, and from the outside face of any exterior walls of the buildings. In the event that such verification reveals a discrepancy between the measured size of the Premises and the size of the Premises set forth in Section 1.01(a) of this Lease, and Landlord and Tenant are unable to agree upon the square footage for purposes of this Lease, and independent architect acceptable to Landlord and Tenant (the cost of which shall be divided equally between Landlord and Tenant) shall measure the Premises in the manner set forth above. In the event that Tenant's architect, Landlord or its architect, and the independent architect are unable to agree upon the square footage of the Premises for purposes of this Lease, the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof. In the event that square footage of the Premises as determined in accordance with the methodology set forth in Section 1.01(b) varies from the square footage set forth in Section 1.01(a) above, Landlord and Tenant agree to execute a lease modification agreement (effective retroactive to the Term Commencement Date) adjusting the square footage of the Premises, and appropriately adjusting the Rent, and those items of Additional Rent to the extent that such Additional Rent was originally calculated on a pro rata square foot basis. Any necessary payments or reimbursements shall be paid within thirty (30) days after the full execution of the lease modification agreement. 1.02 - SHOPPING CENTER The Shopping Center includes: (i) the parcel(s) of land and improvements hereinafter referred to as "Landlord's Trust" generally depicted on Exhibit A attached hereto and made a part hereof, whether owned in fee or ground leased by Landlord and (ii) the parcel(s) of land and improvements, if any, generally depicted on Exhibit A as "REA Parcel" made available for use by any reciprocal construction operating and easement agreement ("REA"). Landlord reserves the right to add to whenever the ownership of or like to any portion of the Shopping Center or to add to or reduce the size of any REA Parcel at any time. Landlord represents and warrants that it has the right and authority to lease the Premises. It is agreed that the depiction of the Shopping Center on Exhibit A does not constitute a representation, covenant or warranty of any kind by Landlord. Subject to Section 7.03 of this Lease, Landlord, in its sole and absolute discretion, reserves the right to expand or remodel the Shopping Center and to change the configuration, size and dimensions of the Shopping Center, the number, location and dimensions of buildings, parking areas, driveways, entrances, exits and landscaped areas, the number of floors in any of the buildings, the dimensions, identity, and type of stores or tenancies, and, as provided in Section 7.02, the "Common Areas" (defined in Section 7.01). 1.03 - USE OF PREMISES AND TRADE NAME Throughout the Term, Tenant shall operate the Premises solely under the trade name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" or, with Landlord's approval, not to be unreasonably withheld, any other legally permitted trade name ("Trade Name"): provided that it the trade name of all or substantially all other stores operating under the trade name, "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" are changed to another legally permissible trade name, Tenant, upon prior written notice to Landlord, shall be permitted to change its Trade Name to such other trade name as has been adopted for all or substantially all such other stores. Tenant shall use the entire Premises solely for the purpose(s) of: (a) as a primary use, conducting an interactive entertainment center featuring among other things the installation and operation of motion-based racing simulators and (b) ancillary thereto, other related retail and entertainment uses; such uses may include but shall not be limited to the sale of motor sports and auto racing merchandise, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR or motor sports (including, without limitation, NASCAR videos, pictures, CD-Roms, DVDs, and other similar media or audio/visual materials); the sale of hot and cold beverages and snack foods, and for no other purpose whatsoever. Tenant shall use the reasonable effort not to place any food vending machines or other food sales area at the store front of the Premises. Anything contained in this Lease to the contrary notwithstanding, throughout the Term Tenant shall limit the display of merchandise and food or beverage come to no more than forty percent (40%) of the square footage of the Premises. Landlord hereby represents and warrants to Tenant that Tenant's use of the Premises as contemplated in this paragraph does not violate any exclusivity clause of other agreement between Landlord and any other party, including any other Tenant of the Shopping Center, and Landlord shall indemnify, defend, protect, and hold harmless Tenant form any loss, liability, cost, expense, judgement, action or claim of any such party arising from the inaccuracy of such representations and warranty. Anything contained in this lease to the contrary notwithstanding, Landlord's consent shall not be unreasonably withheld for any change or addition to Tenant's permitted use requested in writing by Tenant. Tenant hereby agrees that the criteria which Landlord may use in determining whether or not to grant such consent shall include, but not be limited to, (i) the impact such change or addition may have on the tenant mix of the Shopping Center, (ii) whether such change or addition violates any use restriction applicable to the Shopping Center, or (iii) the compatibility such change or addition may have with a first-class super-regional shopping center. 2 7 Notwithstanding anything to the contrary in this Section 1.03 of this Lease, Tenant shall be entitled to use the Premises from time to time for conducting the uses set forth in this Section 1.03 for the exclusive use of groups of private parties ("Private Events"). Tenant may while such Private Events are in progress, temporarily restrict access by the general public to Tenant's simulator rides, provided that the Tenant shall otherwise remain open to the general public for the sale of merchandise and the sale of simulator ride tickets for redemption by the public after any Private Event is concluded. Gross Receipts in connection with Private Events shall be included in Gross Receipts for purposes of calculating Percentage Rent. In connection with Private Events, Tenant may serve, or hire another party to serve, food and beverages (including alcoholic beverages) for on-premises consumption only, provided that Tenant obtains or causes to be obtained, if necessary, all governmental licenses, approvals and permits required in connection therewith and in the case of offering of any alcoholic beverages for consumption within the Premises, Dram Shop or liquor liability insurance coverage. For the preparation and serving of food and alcoholic beverages at Private Events, Tenant shall engage, and cause third parties to use, restaurants and food establishments located within the Shopping Center ("Center Caterer"), provided that up to [***] of the total number of Private Events held during a Lease Year may be catered by non-Center Caterers and provided, further, that Tenant shall not be required to use or cause to be used Center Caterers for Private Events within the Shopping Center unless at the time of the related Private Event there are at least [***] restaurants or other food and beverage vendors in the Shopping Center offering catering services from the Shopping Center at prices equal to or less than the menu prices of such restaurant or vendor and [***] of [***] of such Center Caterers are full service sit down restaurants and [***] of the [***] is either a full service restaurant or a limited service restaurant, food court operator or other food and beverage operator (such as by way of example and not limitation Jonny Rockets, Pizzeria Uno, Houlihan's Ruby Tuesday, Bugaboo Creek Steakhouse, or Sbarros). In the event that Tenant shall be in default of the immediately preceding sentence and a Private Event is conducted in whole or in part by other than a Center Caterer, then, as liquidated damages and not as a penalty, the [***] shall be included in the amount of Gross Receipts used to compute Percentage Rent payable under this Lease on merchandise sold from the Premises. Any Private Events which are held at times when the requirements set forth in the provisos above concerning Center Caterers are not met shall be excluded from the total number of Private Events held during any Lease Year for purposes of calculating the [***] permissible number of Private Events catered by non-Center Caterers as described above. ARTICLE 2 TERM OF LEASE 2.01 - COMMENCEMENT OF TERM (a) Landlord shall deliver possession of the Premises to Tenant, with all of Landlord's work, if any substantially complete, by September 1, 1999 and the term of this Lease shall, subject to Section 23.04 below and other delays caused solely by Landlord commence on the earlier of: (1) December 15, 1999, or (2) the date Tenant opens to the public for the conduct of its business in the Premises (hereinafter called "Term Commencement Date"). In the event Landlord does not deliver possession of the Premises to Tenant on or before March 1, 2000, then Tenant shall have the right to terminate this Lease upon written notice to Landlord, which notice shall be given by March 15, 2000. If tenant does so notify Landlord, then Landlord will reimburse Tenant for its reasonable out-of-pocket costs actually incurred by Tenant as of the date of termination including architectural, design and legal fees which shall not, in the aggregate, exceed [***] and both Landlord and Tenant shall thereafter be relived of any further obligation and liability hereunder. If Tenant does not so notify Landlord, then this right of termination shall be deemed waived. (b) Tenant acknowledges the importance both to Landlord and the other tenants of the Shopping Center of Tenant opening for business to the public on the Term Commencement Date. In the event Tenant fails to open for business at the Premises not later than forty-five (45) days after the Term Commencement Date or, if the Term Commencement Date has been rescheduled by Landlord, not later than forty-five (45) days after the rescheduled Term Commencement Date. Tenant covenants and agrees to pay to Landlord, upon receipt of notice from Landlord of the amount due under this Section 2.01(b), as liquidated damages suffered by Landlord due to Tenant's failure to open, a sum (in addition to any rent due hereunder) equal to [***] the per diem Fixed Monthly Minimum Rent (using a thirty (30) day month) provided in Section 3.01(a) for each and every business day that Tenant has failed to open for business. 2.02 - TERM OF LEASE Subject to Section 2.03 below, the term of this Lease shall expire on the tenth (10th) anniversary of the Term Commencement Date, unless earlier terminated pursuant to the provisions herein (the last day of the term, whether due to expiration or prior termination of this Lease may be referred to herein as the "Termination Date"). 2.03 - EXPIRATION OF TERM If the term of this Lease would expire during the period October 1 through the last day of December, the parties agree that the term of this Lease shall instead expire on the immediately succeeding January 31. 2.04 - SURRENDER OF PREMISES On the Termination Date of this Lease, Tenant agrees, without necessity of any notices from Landlord (statutory or otherwise), to surrender the Premises in accordance with Article 9, and broom clean and in good order, repair and condition, reasonable, wear and tear and damage by fire or casualty expected. *** Confidential treatment requested. 3 8 ARTICLE 3 RENT 3.01 - MINIMUM RENT (a) Except as set forth in Section 23.25 below, Tenant agrees to pay Landlord, without diminution, deduction or set-off whatsoever and without prior notice or demand, and as fixed annual minimum rent ("Fixed Annual Minimum Rent"), the sums set forth in Section 3.01(a)(i) and (ii) below payable in equal consecutive monthly installments ("Fixed Monthly Minimum Rent") each in advance upon the first day of each calendar month during the term hereof. (i) From the Term Commencement Data through the end of the [***] full month of the Lease term, Fixed Annual Minimum Rent shall be [***] per square foot of the Premises, which equals (subject to Section 1.01(b) of this Lease) [***], payable in equal monthly installments of [***] each; and (ii) From the first day of the [***] full month of the Lease term through the end of the Lease term, Fixed Annual Minimum Rent shall be [***] per square foot of the Premises, which equals (subject to Section 1.01(b) of this Lease) [***], payable in monthly installments of [***] each. (b) If the term shall commence upon a day other than the first day of a calendar month or if the term shall terminate upon a day other than the last day of a calendar month, then Tenant shall pay, upon the Term Commencement Date, and on the first day of the last calendar month, a pro rata portion of the Fixed Monthly Minimum Rent for the first and last fractional calendar months of the term. 3.02 - PERCENTAGE RENT (a) In addition to Fixed Annual Minimum Rent, Tenant shall, in the manner, upon the conditions and at the times hereafter set forth, pay to Landlord percentage rent ("Percentage Rent") equal to [***] of "Gross Receipts" (defined in Section 3.03) in excess of the amounts set forth in Section 3.02(a)(i) and (ii) below ("Annual Minimum Gross Receipts") per Lease Year (defined in Section 3.10). Percentage Rent shall be payable as hereinafter provided without any diminution, deduction or set-off whatsoever, except as provided in Section 3.02(b), and without prior notice or demand: (i) From the Term Commencement Date through the end of the [***] month of the term of this Lease, Annual Minimum Gross Receipts shall be [***]. (ii) From the first day of the [***] month of the term of this Lease through the end of the term of this Lease, Annual Minimum Gross Receipts shall be [***]. (b) Percentage Rent, if any, shall be paid by Tenant to Landlord, in quarter-annual installments computed on all Gross Receipts during each three (3) month period of the term hereof (i.e., periods from January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31 (each a "Quarter-Annual Period" and collectively the "Quarter-Annual Periods"), in excess of one-quarter (1/4) of Annual Minimum Gross Receipts then in effect. Any Percentage Rent becoming due shall be payable on or before the applicable January 15, April 15, July 15 and October 15 next following the applicable quarter end of each Lease Year. In the event that the total of the quarterly installments of Percentage Rent for any Lease Year does not equal the annual Percentage Rent computed in accordance with the formula set forth in Subsection 3.02(a), then, on or before the January 15 following each such Lease Year, Tenant shall pay to Landlord any deficiency, or Landlord shall refund any overpayment to Tenant within fifteen (15) days after receipt of Tenant's Annual Statement of Gross Receipts. (c) Notwithstanding anything contained in this Section 3.02 to the contrary, the Percentage Rent for any Lease Year having less than twelve (12) full months shall be based upon the Gross Receipts for the twelve (12) month period immediately following the Commencement Date (as to the first Lease Year) and for the twelve (12) month period immediately preceding the expiration or earlier termination of the Lease (as to the final Lease Year). The Percentage Rent due for such period shall be established by multiplying the Percentage Rent which would have been due for such twelve (12) month period had the Gross Receipts been multiplied by the applicable percentage in this Lease, by a fraction, the numerator of which is the number of days in such partial Lease Year and the denominator of which is 365. (d) Provided that Tenant is not in default under this Lease beyond any applicable cure period and has been open and continuously operating its store in the entire Premises from the Term Commencement Date through the last day of the fifth (5th) Lease Year of the Initial Term (except for periods Tenant is not able to be so open and operating as a result of force majeure, casualty, eminent domain, or remodeling (provided Tenant is not closed as a result of remodeling for more than five (5) days in the aggregate in any Lease Year), then in the event that Gross Receipts for the fourth (4th) and fifth (5th) Lease Year of the Initial Term, when averaged, are less than [***], Tenant may, at its option, elect to terminate this Lease by giving Landlord written notice thereof, which notice shall be given not later than thirty (30) days after the last day of the said fifth (5th) Lease Year. Time is of the essence with respect to the giving of such notice. If Tenant timely gives Landlord such a notice of termination of this Lease and the conditions for such termination as provided above in this Section 3.02(d) have been satisfied, then this Lease shall automatically terminate without any further action or notice. *** Confidential treatment requested. 4 9 by either party hereto, on the date that is thirty (30) days after the date Landlord receives such notice of termination; and from and after such date of termination, Tenant shall have no further right, title or interest in or to the Premises. If Tenant does not notify Landlord of its election to terminate this Lease in accordance with this Section 3.02(d) or if the conditions for such termination as provided above in this Section 3.02(d) have not been satisfied, then this Lease shall continue in full force and effect in accordance with and subject to its terms, and Tenant shall have no further right to terminate this Lease pursuant to this Section 3.02(d). If Tenant is not open and operating in the entire Premises continuously throughout the said [***] Lease Year, as a result of force majeure, casualty, eminent domain, remodeling or for any other reason, then for purposes of determining whether Tenant has the right to terminate this Lease under this Section 3.02(d), Tenant's Gross Receipts for any such period of time shall be deemed to be the Gross Receipts for the corresponding period of time in the [***] Lease Year prior to the [***] Lease Year for which Tenant was open and operating in the entire Premises during such corresponding period of time. 3.03 - GROSS RECEIPTS DEFINED (a) The term "Gross Receipts" as used in this Lease is defined to mean receipts from sales of products or services by Tenant exclusively at, in, on, or from the Premises (including any sales made via personal computer, "Home Shopping" television sales, catalog, direct mail telephone or electronic sales at, in, on, or from the Premises) whether such sales be evidenced by check, contract rights, credit, charge account, exchange or otherwise, and shall include, but not be limited to, the amounts received from the sale of rental of goods, wares and merchandise, and from fees and charges for the use by customers of Tenant's simulators and racing entertainment center, and for services performed on or off the Premises to the extent relating to sales made from the Premises, together with the amount of all orders taken or received at the Premises, whether such orders are filled from the Premises or elsewhere, and whether such sales are made by means of merchandise or other vending devices in the Premises. Each charge or sale upon installment or credit shall be treated as a sale for the full price in the month during which such charge or sale shall be made, irrespective of the time when Tenant shall receive payment (whether full or partial) therefor. (b) Notwithstanding anything herein to the contrary the following shall not be included in Gross Receipts: (1) Sales of merchandise returned and claimed to be defective or unsatisfactory, provided such sales have been included in Gross Receipts and deducted from Gross Receipts shall be the sales price of merchandise returned by customers for exchange, provided that the sales price of merchandise delivered to the customer in exchange is included in Gross Receipts. (2) The amount of any sales tax, so-called luxury taxes, excise taxes, gross receipt taxes, entertainment taxes, so-called "drop taxes" and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of merchandise or services and collected from customers or included in the retail selling price use, imposed by any federal, state, municipal or governmental authority directly on sales and collected from customers; provided, however, no franchise or capital stock tax and no income or similar tax based upon income or profits as such shall be deducted from Gross Receipts in any event whatsoever. (3) The sales price of merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon. (4) The sums and credits received in settlement of claims for loss or damage to merchandise or other property located at the Premises. (5) The consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee. (6) Receipts from public telephones and vending machines used exclusively by Tenant's employees. (7) Bankcard discounts (e.g., Visa, MasterCard, etc.). Interest, carrying charges, or other finance charges in respect of sales made on credit, as well as any penalty charged by Tenant for a returned check. (8) Sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail. (9) The amount of any discounted sales to employees of Tenant, not to exceed [***] of Gross Receipts in any Lease Year; provided, however, that discounted or complimentary use of Tenant's games and entertainment attractions (including, without limitation, the driving simulators) by Tenant's employees during such employees' normal working hours shall not be included in Gross Receipts. (10) The Amount of any discount in sales made to senior citizens. (11) Revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers. (12) Tenant's accounts receivable, not to exceed [***] of Gross Receipts in any Lease Year, which have been determined to be uncollectible for federal income tax purposes during the applicable Lease Year, provided however, that if such accounts are actually collected in a later Lease Year, the amount shall be included in Gross Receipts *** Confidential treatment requested. 5 10 for such Later Lease Year. (13) Amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in, at, or from the Premises. (14) The amount of any discounts given for promotional coupons that are redeemed from time to time. (15) Gift certificates until such time as the certificates are redeemed. (16) Amounts received in connection with remote site promotional activities. (17) Promotional fees earned by Tenant with respect to goods or services offered for sale. (18) Rents, subrents or other consideration received in connection with an assignment, sublease, license, concession or other transfer of any portion of the store (however, Gross Receipts of any such transferee shall be included), including license fees otherwise payable by Tenant in connection with a third party license agreement. (19) To the extent they are not made at a profit to Tenant, sales passed through to caterers or other parties providing services in connection with private parties for Tenant's customers at the Premises. (c) In the event any portion of the Premises shall be operated by one or more of Tenant's departments or divisions, or if Tenant shall, in accordance with all of the terms, covenants, and conditions of this Lease, assign this Lease or enter into any sublease, license, concession or other use or occupancy agreement with respect to all or any part of the Premises, then there shall be included in the Gross Receipts for the purpose of determining the Percentage Rent payable under this Lease all of the Gross Receipts generated by such departments or divisions, subtenants, assignees, licensees, concessionaires and all such other persons, individuals and/or entities (collectively referred to as "Affiliates") generating such Gross Receipts, it being the intention of the parties hereto that all Gross Receipts generated at or from the Premises shall be included in Gross Receipts for the purpose of determining Percentage Rent as defined herein. Tenant agrees that any assignment, sublease ,license or concession, use of occupancy agreement entered into by Tenant with any Affiliate shall contain provisions setting forth the procedure for determining, recording and reporting Gross Receipts by Affiliates which are subject to the review and approval of Landlord as being in conformance with this Section 3.03(c). Such provisions shall contractually obligate Affiliates to the same procedures set forth in this Lease for determining, recording and reporting Gross Receipts. 3.04 - TENANT'S BOOKS AND RECORDS Tenant agrees to prepare and keep on the Premises or at its principal office for a period of not less than three (3) years following the end of each Lease Year, accurate books of account and records of daily Gross Receipts, including without limitation all federal, state and local tax returns, and copies of relevant contracts, checks, vouchers, inventory records, dated cash register tapes, sales slips and such other documentation as would enable Landlord to make a full and complete audit of Gross Receipts ("Books and Records"), as more particularly set forth in Section 3.07 below. Tenant agrees that all Gross Receipts shall be registered at the time each sale or transaction is made in cash registers or other devices or other electronic or technology based systems containing locked-in cumulation capacity, such systems to be consistent with Tenant's normal business practices. 3.05 - REPORTS BY TENANT Within twenty (20) days of the end of each Quarter-Annual Period as set forth in Section 3.02 above, or a portion thereof, during the term of this Lease, Tenant shall furnish to Landlord a written statement setting forth the amount of Gross Receipts and an itemization of any deductions or exclusions taken from Gross Receipts for such previous Quarter Annual Period. Tenant also agrees that it will furnish to Landlord within sixty (60) days after the end of each Lease Year or Partial Lease Year, an annual statement, showing in all reasonable detail the amount of Gross Receipts and an itemization of any deductions or exclusions relating to such Lease Year or Partial Lease Year and the amount of Percentage Rent due Landlord ("Actual Percentage Rent"). Each Quarter Annual and Annual statement required by this Section 3.05 shall be certified by Tenant or one of Tenant's executive officers and shall be subject to further certification as provided in Section 3.07. In the event Tenant fails to furnish Landlord with a Quarter-Annual or Annual statement within the required time period and within ten (10) days after notice from Landlord, and in the manner set forth in this Section 3.05, then the Gross Receipts for such Quarter-Annual Period or year, as the case may be, shall, at Landlord's option, be deemed to be equal to Tenant's highest previously reported quarterly or annual Gross Receipts, and if such failure continues for ten (10) days following notice from Landlord, Tenant shall pay to Landlord, as liquidated damages, the sum of [***] per month until such statement is received. In addition, if Tenant is delinquent in furnishing Landlord with the annual statement of Gross Receipts and such failure continues for ten (10) days following notice from Landlord, the immediately following audit the Landlord conducts pursuant to Section 3.07 below shall be at Tenant's expense. 3.06 - NON-WAIVER The acceptance by Landlord of payments of Percentage Rent and statements of Gross Receipts shall be without prejudice to Landlord's right to examine Tenant's Books and Records in order to verify the amounts thereof. *** Confidential treatment requested. 6 11 3.07 - RIGHT TO EXAMINE AND AUDIT BOOKS AND RECORDS At its option, Landlord may, during regular business hours and upon ten (10) days' prior written notice to Tenant, examine the Books and Records or cause a complete audit to be made of the Books and Records (including the books and records of any subtenant, operator, concessionaire or licensee or of any other store operated by Tenant within the five (5) mile radius as more specifically set forth in Section 6.03 of this Lease) for the period covered by any statement required to be furnished by Tenant as set forth above; provided, however, any such audit or examination shall be conducted in such a manner as to minimize any interference with Tenant's business operations. In the event such examination discloses that Tenant has intentionally or fraudulently understated Gross Receipts by [***] or more; Tenant agrees to pay to Landlord the [***] administrative fee. In the event that such examination or audit discloses that Tenant has understated Gross Receipts by [***] or more, then, in addition to the foregoing, at Landlord's option, the term of this Lease shall expire [***] after Tenant's receipt of a termination notice from Landlord. Any additional Percentage Rent found to be due and owing to Landlord as a result of any examination or audit shall immediately be due and payable and interest shall accrue on the unpaid portion thereof at a per annum rate ("Default Rate") equal to the lesser of (i) [***], or (ii) [***]. 3.08 - DELINQUENT PAYMENTS If during the term of this Lease Tenant fails to pay the full amount of the Fixed Monthly Minimum Rent, Percentage Rent or "Additional Rent" (defined in Section 3.08) within five (5) days when the same was due and payable, then interest at the Default Rate, shall accrue on the unpaid amount from and after the date on which any such sum shall be due and payable, and such interest, together with a Late Charge of [***] for each past due payment to cover the extra expense involved in handling such delinquency, shall be paid to Landlord at the time of payment of the delinquent sum. Landlord shall have the right to apply any payments made by Tenant first to any deficiency in the payment of the interest and administrative charges provided for hereunder. Any payment to be made by Tenant under this Lease shall be deemed to have been paid upon the date that it is received by Landlord. The provisions for a Late Charge and interest herein shall not be deemed to grant Tenant any grace period or extension of time or prevent Landlord from exercising its other rights under this Lease. Tenant shall pay to Landlord an administrative fee of [***] for each and every check submitted by Tenant which is dishonored. If Landlord receives from Tenant two or more checks which have been dishonored, all checks from Tenant thereafter shall, at Landlord's option, be either certified or cashier's checks. 3.09 - ADDITIONAL RENT All rents, charges, costs, expenses, reimbursements, fees, interest, and other payments to be made by Tenant to Landlord under this Lease, other than Fixed Annual Minimum Rent and Percentage Rent, shall be deemed to be "Additional Rent." 3.10 - DEFINITION OF LEASE YEAR AND PARTIAL LEASE YEAR The term "Lease Year" is defined to mean a period of twelve (12) consecutive calendar months commencing on the first day of January. Any portion of the term which is less than a Lease Year shall be deemed a "Partial Lease Year" and computations requiring proration shall be made on a per diem basis using a 365 day year. In order to achieve uniformity in the operation of the Shopping Center, Landlord reserves the right to designate and change the beginning and ending day of the Lease Year, notice of which shall be given to Tenant in writing; provided, however, no such change shall in any way increase Tenant's obligations or reduce Tenant's rights hereunder. 3.11 - PLACE FOR PAYMENTS Tenant shall deliver to Landlord all payments of Fixed Monthly Minimum Rent, Percentage Rent and Additional Rent at the office of Landlord shown at the beginning of this Lease or such other place as may be designated by Landlord in writing. Nothing contained in this Section 3.11 shall relieve Tenant of the obligation to pay by the dates due, any and all such payments payable by Tenant under this Lease. ARTICLE 4 TAXES 4.01 - REAL PROPERTY TAXES (a) Landlord will pay in the first instance all real property taxes (which shall include property tax assessments, water and sewer rent rates and charges, parking and environmental surcharges, and any other governmental charges, general and special, ordinary and extraordinary) which may be levied or assessed by any lawful authority against land or improvements located in the Shopping Center (collectively "Real Property Taxes"). The amounts required to be paid by Landlord or any tenant or occupant of the Shopping Center pursuant to any Payment in Lieu of Tax Agreement entered into with a taxing authority having jurisdiction over the Shopping Center shall be considered for the purposes of this Lease to be included within the definition of Real Property Taxes. (b) During the term of this Lease, Tenant shall pay to Landlord as Additional Rent, Tenant's Allocable Share of all Real Property Taxes. Real Property Taxes shall include a charge equal to eighteen percent (18%) of the Real Property Taxes relating to the Common Areas. Tenant's Allocable Share shall be computed under Section 23.03(b) as of the first day of each respective Lease Year. If the Premises are separately assessed, then Tenant *** Confidential treatment requested. 7 12 agrees to pay to Landlord, as Additional Rent, the amount of the Real Property Taxes separately assessed against the Premises including the land lying thereunder plus Tenant's Allocable Share of the Real Property Taxes assessed against the Common Areas of the Shopping Center. (c) Tenant agrees that following the Term Commencement Date, Tenant shall pay to Landlord, as Additional Rent and within thirty (30) days after receipt of a bill therefor, the amount of Tenant's Allocable Share of all Real Property Texas, computed as of the Term Commencement Date for the then current tax fiscal year(s). Such amount shall be calculated on the basis of the number of days (from the Term Commencement Date) remaining in each such current tax fiscal year. Thereafter, Tenant shall pay to Landlord, as Additional Rent, all sums due pursuant to Section 4.01(b) in monthly installments, in advance and without notice, on or before the first day of each month during the term of this Lease, in an amount estimated by Landlord, such that Landlord will have received the full amount of Tenant's Allocable Share of Real Property Taxes in time for payment to applicable taxing authority when due. In the event Landlord is required to escrow Real Property Taxes, Landlord may, but shall not be obligated to, use the amount required to be escrowed as a basis for its estimate of the monthly installments due from Tenant hereunder. Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's Allocable Share of Real Property Taxes based upon the tax bills or assessment bills for each tax fiscal year. If the total amount paid by Tenant under this Section 4.01(c) for any tax fiscal year during the term of this Lease is less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the deficiency within thirty (30) days after demand therefor by Landlord. If the total amount paid by Tenant hereunder for any year exceeds the amount due from Tenant for such year, Tenant shall be entitled to offset the excess against payments next thereafter becoming due from Tenant under this Section 4.01(c). For the tax fiscal years in which this Lease commences and terminates, the provisions of this paragraph shall apply and, to the extent necessary, Tenant's liability for its Allocable Share of any Real Property Taxes for such year shall be subject to a pro rata adjustment based on the appropriate number of days of said tax fiscal years. A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of Real Property taxes to which such bill relates. (d) Intentionally deleted. (e) Landlord may seek a reduction in the assessed valuation (for Real Property Tax purposes) of the Shopping Center or any portion thereof by administrative or legal proceeding. Tenant shall pay to Landlord Tenant's Allocable Share of Landlord's costs for said proceedings, including counsel fees, appraisal fees and other similar expenses, within thirty (30) days after Tenant's receipt of a statement from Landlord therefor. Tenant's Allocable Share of such costs shall be computed under Section 23.03(b) hereof. Landlord shall reimburse Tenant for Tenant's Allocable Share of any refund of Real Property Taxes (after deducting any unpaid portion of Tenant's Allocable Share of Landlord's costs for such proceedings) resulting from any proceeding for which Tenant has paid Tenant's Allocable Share of Real Property Taxes. (f) Should any alteration or improvement performed by or for Tenant during the term of this Lease cause an increase in assessment, Tenant shall pay to Landlord the full cost of all Real Property Taxes resulting from such increase in assessment. Any amount paid separately hereunder by Tenant to Landlord shall be in addition to any amounts paid by Tenant pursuant to Section 4.01(b). (g) Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge or assessment upon or against the rents payable by Tenant to Landlord, or upon or against the Common Areas, whether by way or substitution for or in addition to any existing Real Property Tax or otherwise, Tenant shall be responsible for and shall pay Tenant's Allocable Share of such tax in the manner provided in Section 4.01(c). Notwithstanding anything to the contrary in this Section 4.01(g). Tenant shall not be responsible for payment of any income taxes attributable to Landlord. (h) Tenant's 1999 Real Property Texas will be calculated at $10.70 per square foot of the Premises, subject, however to increases based upon increases in City and School taxes assessed for the 1999-2000 tax fiscal year. Notwithstanding anything to the contrary in this Lease, increases in Tenant's contributions for Real Property Taxes shall be limited to the actual increases in Real Property Taxes as imposed by the taxing authorities. Tenant understands that the Town and County portion of Real Property Taxes is calculated on a tax fiscal year of January 1 through December 31, and that the City and School portion of Real Property Taxes is calculated on a tax fiscal year of July 1 through June 30. Figures quoted to Tenant for Real Property Taxes include the actual 1999 Town and County Real Property Taxes and the actual 1998-1999 City and School Real Property Taxes. 4.02. - TENANT'S TAXES Tenants shall, at all times, be responsible for and pay, before delinquency, all municipal, county, state or federal taxes charged against Tenant's income, sales, fixtures, furnishings, equipment, stock-in-trade or other personal property of any kind owned, installed or used in or on the Premises, and any tax now or hereafter charged against Tenant on any other basis. ARTICLE 5 CONSTRUCTION AND FINANCING 5.01. - LANDLORD'S WORK Prior to the Term Commencement Date, Landlord shall perform all items of "Landlord's Work," if any, described in Exhibit D attached hereto and made a part hereof, in accordance with the Outline Specifications set forth in Exhibit D attached hereto and made a part hereof. Tenant agrees to accept the Premises in its "as is" condition on the date possession of the Premises is made available to Tenant without any express or implied warranty concerning the condition of the Premises by Landlord or its agents, and agrees, [***], to complete all improvements necessary to prepare the Premises for the conduct of Tenant's business in the Premises in accordance with the Outline Specifications set forth in Exhibit D. Tenant represents, warrants and covenants that it shall build out the Premises in full conformance with plans approved by Landlord or Tenant shall be deemed in default of this Lease. In the event of such default, Landlord shall have the right to terminate this Lease, in addition to *** Confidential treatment requested. 8 13 all other rights and remedies available to Landlord under applicable law or under this Lease. Any non-standard item of Landlord's Work requested by Tenant or necessitated by Tenant's location, space plans or business operation shall be performed by Landlord at Tenant's additional cost, plus [***] for profit and [***] for administration. Landlord hereby warrants to Tenant that to Landlord's best knowledge the Premises do not contain any asbestos-containing materials or other reportable amounts of hazardous or toxic materials. 5.02 - TENANT'S WORK (a) Prior to the Term Commencement Date, Tenant, shall [***] perform "Tenant's Work" described in Exhibit C attached hereto and made a part hereof, in accordance with the Outline Specifications set forth in Exhibit D. Landlord and Tenant agree that Tenant's store front design shall be substantially similar to Tenant's store located within the Palisades Center in the Town of Clarkstown, County of Rockland, and State of New York. Any item of Tenant's Work which Tenant requests Landlord to perform on the Tenant's behalf and which Landlord agrees to undertake shall be provided to Tenant at Tenant's additional cost, plus [***] for profit and [***] for administration. Tenant acknowledges its ability to perform Tenant's Work, and no delay in its performance shall cause or be deemed to cause any delay or postponement in the Term Commencement Date. Tenant shall be responsible for obtaining, at its sole cost and expense, any necessary permits, approvals or related consents which relate to Tenant's particular use of the Premises or to Tenant's Work or any other work performed by Tenant pursuant to this Lease, including any building permits required for the construction of Tenant's Work. With respect to any permits, approvals or related consents which relate to the Shopping Center in general and not to Tenant's particular use of the Premises or to Tenant's Work or any other work performed by Tenant pursuant to this Lease, Landlord and not Tenant shall be obligated therefor. Landlord knows of no such mitigation, impact, or discretionary fees related to the development of the Shopping Center in general which were deferred by Landlord and would result in unexpected costs to Tenant. Tenant specifically understands and agrees that Tenant's Real Property Taxes include a road bond, but that the costs associated with said road bond are included in Tenant's Real Property Taxes as quoted and thus are not excepted as set forth in this Section 6.02(a). Tenant agrees that its design plans and its operations shall take into account the potential for unreasonable vibration and noise resulting from Tenant's equipment which may affect adjacent tenants or the Common Areas. Accordingly, Tenant agrees that its design plans shall incorporate such reasonable steps and procedures as known to Tenant to eliminate or substantially reduce any vibration or noise that may be felt or heard outside of the Premises. These steps shall include: i) Soundproofing of walls, floor, and ceiling construction; ii) Isolation of equipment through use of padding, flexible mounts, or other suitable means; iii) Airtight sealing of all openings, cut-outs, and dissimilar surfaces. For purposes of operational standards, Tenant agrees to provide wall, floor and ceiling construction such that noise emitted from the Premises will not exceed 65dba when measured from outside the Premises. Tenant shall submit its Design Drawings to Landlord in compliance with Exhibit "D". Upon Landlord's approval of Tenant's Design Drawings (as Tenant may agree to modify such plans and specifications in response to Landlord's comments thereto in accordance with the following sentence), then Landlord will be deemed to have approved the measures taken by Tenant to minimize vibration and, thereafter, Tenant shall not be in default under the Lease as a result of vibration associated with the permitted use of the Premises. In the event the Landlord and Tenant are unable to agree upon the steps and procedures requested by Landlord to eliminate or substantially reduce any vibration or noise that may be felt or heard outside of the Premises, the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof. (b) Tenant agrees to obtain and maintain, or to cause Tenant's contractors to obtain and maintain, at Tenant's or Tenant's contractor's expense, for so long as Tenant's Work continues, public liability insurance, builder's risk property insurance covering Tenant's Work, and Worker's Compensation insurance protecting from and against any and all liability for death of or injury to persons or damage to property caused in or about the Premises, or by reason of the construction of Tenant's Work. Tenant shall furnish to Landlord certificates evidencing said coverage prior to the commencement of Tenant's Work (see Exhibit D for further insurance requirements). 5.03 - PAYMENT Any payment to be made by Tenant to Landlord for items of Landlord's Work to be completed by Landlord as provided in Section 5.01, or for any items of Tenant's Work which Tenant requests Landlord to perform and which Landlord agrees to undertake as provided in Section 5.02, shall be paid for by Tenant, as Additional Rent, within ten (10) days after receipt of a bill therefor. 5.04 - FINANCING (a) Intentionally deleted. (b) Intentionally deleted. (c) If Landlord can obtain approval of this Lease from a mortgage for the purposes of financing or refinancing only upon the basis of reasonable modifications of terms and provisions of this Lease, then Tenant shall not unreasonably withhold its consent thereto provided that such lease modifications do not relate to those provisions pertaining to size or location of the Premises, length of the term, or amount of Fixed Annual Minimum Rent, Percentage Rent, Additional Rent, the Abatement of the Permitted Use and do not increase Tenant's obligations or decrease Tenant's rights. (d) Within fifteen (15) days of request by Landlord in connection with any financing or sale of the Shopping Center, which request shall not be made more than once per Lease Year, Tenant or any Guarantor shall provide to Landlord a statement of Tenant's Gross Sales for the preceding period since the Term Commencement Date. *** Confidential treatment requested. 9 14 ARTICLE 6 CONDUCT OF BUSINESS BY TENANT 6.01 - USE OF PREMISES AND TRADE NAME Throughout the term, Tenant shall use the entire Premises solely for the purpose as set forth in Section 1.03 and shall operate its store in the Premises under the trade name set forth in Section 1.03. Tenant shall not use or permit, or suffer the use of the Premises, or any part thereof, for any other business or purpose or under any other trade name. 6.02 - TENANT'S OPERATING COVENANT Subject to Section 23.04 below, Tenant shall occupy the Premises on and after the Term Commencement Date and shall continuously operate its store in the entire Premises during the full term of this Lease. Tenant shall operate the Premises in a manner consistent with the majority of the other stores operated by Tenant as of the date hereof under the same trade name and having the same or similar use as the use as provided for in this Lease, and with due diligence and efficiency. Tenant shall carry at all times in the Premises a stock of merchandise of a size, character and quality as is in keeping with a first class regional shopping center. Tenant shall use for office, storage, or other non-selling purposes only such space as is reasonably required for the proper operation of Tenant's retail business in the Premises. Tenant shall conduct its business in the Premises during regular published Shopping Center hours of business (as of the date of this Lease, those hours are Monday through Saturday, 10:00 a.m. until 9:30 pm and Sunday 11:30 am until 6:00 pm), which hours are subject to change at Landlord's direction from time to time. Tenant acknowledges and agrees that the Shopping Center's success is dependent upon the continued operation of Tenant's business, and that the maintenance of the character and quality of the Shopping Center is enhanced by the continued occupancy of the Premises and the regular conduct of Tenant's business as required herein. In the event Tenant ceases operation prior to the termination date set forth in Section 2.02, Landlord shall have the right to obtain a court order for specific performance of the operating covenant as set forth in this Section 6.02. If during any period Tenant shall fail to operate the Premises provided herein, then after the second (2nd) such failure in any Lease Year, Tenant shall pay as liquidated damages, as a reasonable estimate of damages suffered by Landlord due to the loss of Percentage Rent, the damage to the character and quality of the Shopping Center and other non-quantifiable adverse effects caused by Tenant's failure to continually operate, a sum equal to 125% of the Fixed Annual Minimum Rent for the portion of the term during which such failure continues. The payment of such sums shall not relieve Tenant of any of its obligations under this Lease. Tenant shall have the right to enter the Premises at any time during the term of the Lease. Notwithstanding anything to the contrary in this Section 6.02, Tenant shall be permitted to be open for business until the later of (i) 2:00 a.m. or (ii) as late as any other tenant located on the commons level of the Shopping Center is permitted to be open without incurring any extra hours charge as set forth in Section 7.05 below. Anything contained in this Lease to the contrary notwithstanding, Tenant shall not be obligated to continuously operate from the Premise during periods which (i) Tenant is carrying on remodeling activities, provided prior Notice of such activities has been delivered to Landlord, (ii) Tenant is closed for the taking of inventory (not to exceed four (4) days per Lease Year), or (iii) Tenant's use and occupancy of the Premises is prohibited by any law, ordinance, order or other act of any judicial, governmental or quasi-governmental authority. Notwithstanding anything to the contrary in this Section 6.02, to the extent that Landlord is obligated to do so according to leases between Landlord and any theater in the Shopping Center, Landlord will illuminate and secure the Common Areas and exterior parking areas which are immediately adjacent to the Premises and the exterior entrance to the Shopping Center which is nearest to the Premises. Landlord represents and warrants that it currently has a lease with Hoyt's Cinemas (New York) Corporation which commenced on July 18, 1997 and has an initial term of twenty-five (25) years and a full-term operating covenant. In the event Landlord is not obligated by the terms of its lease with any theater in the Shopping Center to illuminate and secure said Common Areas and exterior parking areas after Shopping Center hours of business, and Tenant requires such illumination and security, then Tenant shall be obligated to pay, as Additional Rent and within thirty (30) days after receipt of a bill therefor, its proportional share of the costs associated with such after-hours illumination and security. Tenant's proportional share of such costs shall be the product of multiplying the amount of said costs by a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is the total number of square feet of premises occupied by any other tenant or occupant of the Shopping Center which is also open and operating its business in the Shopping Center during such additional hours as Tenant requires after-hours illumination and security. 6.03 - COMPETITION During the term of this Lease, Tenant shall not directly or indirectly, without the prior written consent of Landlord, operate, manage, franchise, license or have any interest in any other business located within a radius of five (5) miles from the outside boundary of the Shopping Center, which business is engaged in the same or substantially the same use as the use provided for in this Lease; nor, if Tenant is a corporation, shall any then current officer or director, or any then current shareholder owning more than ten percent (10%) of the issued and outstanding stock of Tenant, nor any entity that: (a) 50% or more of which is owned by Tenant, or (b) owns 50% or more of Tenant, or (c) 50% or more of which is owned by an entity that owns 50% or more of Tenant; or of any then current officer, director or ten percent (10%) shareholder of Tenant), have any such interest without the prior written consent of Landlord; nor, if Tenant is a partnership, shall any then current partner or any member of the immediate family of any then current partner have any such interest without prior written consent of Landlord. If, during the first five years of the term, Tenant or any such officer, director, shareholder, affiliate, partner or family member does operate, manage, franchise, license or have any interest in any such business without the prior written consent of Landlord, Landlord shall have the right, at its option, as its sole and exclusive remedy, to obtain a court order for specific performance of the operating covenant as set forth in Section 6.02 of this Lease and, as liquidated damages and not as a penalty, to require that gross receipts (defined as in Section 3.03 of this Lease, except that where reference is made to the Premises, it shall in this case refer instead to the location of such other business of Tenant or any such officer, director, shareholder, affiliate, partner or family member as more specifically described herein) resulting from such business shall be included in the amount of Gross Receipts used to compute Percentage Rent hereunder. After the first five years of the term, if Tenant or any such officer, director, shareholder, affiliate, partner or family member does operate, manage or have any interest in any such business without the prior written consent of Landlord, Landlord shall have the right, at its option, in addition to all other rights and remedies to which Landlord may avail 10 15 itself pursuant to this Lease, is required, as liquidated damages and not as a penalty, that [***] of gross receipts resulting from such business shall be paid to Landlord. The prohibitions in this Section 6.03 shall extend to and expire on the termination date set forth in Section 2.02 hereof notwithstanding any earlier termination resulting from Tenant's default hereunder. 6.04 - OTHER BUSINESS PRACTICES (a) Tenant shall keep the Premises and all show windows and signs and any loading area and other areas allocated for the sole use of Tenant in good, neat and clean condition. Tenant shall keep the Premises and any service area contiguous to or part of the Premises free of debris, rubbish, garbage, pests, rodents and vermin caused by Tenant, and, upon two (2) day's written notice by Landlord to Tenant of Tenant's failure to do so. Landlord may remove such debris, snow and ice, rubbish, garbage, pests, rodents and vermin and charge Tenant the reasonable out-of-pocket costs incurred by Landlord for such removal, plus [***] for administration. (b) Tenant shall keep its display windows stocked and electrically lighted during such periods of time as may from time to time be required by Landlord of substantially all other retail businesses in the Shopping Center. (c) Tenant shall load and unload its merchandise, equipment and supplies and remove its rubbish only by way of the loading area and service doors designated by Landlord for Tenant's use; provided, however, that Landlord will not unreasonably withhold its consent to Tenant's use of the service doors or loading dock invaluable for common usage by tenants in the Shopping Center and which is closest to the Premises. (d) Tenant shall not knowingly and willingly commit nor permit any act or practice which may tend to injure the building occupied by Tenant, nor permit its equipment to be a nuisance to other tenants, nor keep goods, foods, rubbish, inventory, or merchandise on or obstruct the mall area or sidewalks or other areas outside the Premises, nor conduct or permit any fire, bankruptcy, auction or going-out-of-business sale, nor erect or retain any sign, light, lettering, inscription, symbol or mark which is not approved by Landlord, nor install any antenna, fixture, or improvement outside of the Premises, nor sell or display merchandise outside the Premises. Notwithstanding the foregoing, Tenant shall be permitted to place professionally generated signs, advertisements and decorations within the Premises consistent with Tenant's other operations. Anything contained in this Lease to the contrary notwithstanding, Tenant shall be permitted to install a video wall or mounted video screen or panel within the Premises which may be visible to customers from outside the Premises. Notwithstanding anything contained in this Section 6.04 to the contrary, subject to compliance with Legal Requirements and Landlord's prior written reasonable approval of plans and specifications, and further provided that the satellite dish and/or other electronic transmitter (in either case a "satellite dish") and the screen or covering, if any, hereinafter described shall be for the exclusive use of Tenant, shall not penetrate the roof unless otherwise agreed in writing by Landlord, and shall not be visible from any part of the Common Area or public roadways adjoining the Shopping Center and shall not interfere in any material respect with access to the Building roof by any others, Tenant shall have the right to install one (1) three foot (3') or smaller satellite dish on the Building roof at the location designated by Landlord. Tenant shall, if necessary and at its sole cost and expense, construct a screen or other covering structure around the satellite dish to prevent visibility from the Common Areas or public roadways adjoining the Shopping Center. The cost of installation and maintenance of the satellite dish and screen or other covering structure (including temporary removal thereof, if required, in connection with any repairs or other work to the Building deemed necessary or desirable by Landlord) shall be borne solely by Tenant. The reasonable cost of any repairs to the roof which are necessitated by the installation and/or repair of the satellite dish and screen or covering, if constructed, shall be borne solely by Tenant and paid Landlord upon demand as Additional Rent hereunder. Upon expiration or earlier termination of this Lease, Tenant shall, at its sole cost and expenses, remove any satellite dish and screen or covering, if constructed, and Tenant shall repair any damage to the roof occasioned by such removal. Tenant further agrees to defend, indemnity and hold harmless Landlord from and against all claims, losses, costs and expenses (including without limitation reasonable attorneys' fees) suffered or incurred by Landlord arising out of the existence of Tenant's satellite dish and screen or covering, if constructed. In addition, Tenant's liability insurance policies shall include special endorsements protecting Landlord and all other parties required to be additional insureds pursuant to Section 12.08 against any liabilities that may arise out of the existence or installation and removal of Tenant's satellite dish and any screen or covering. In connection with all work related to the installation, repair, maintenance and removal of the satellite dish and screen or other covering structure, Tenant shall request from Landlord a list of three (3) competitively priced contractors acceptable to Landlord, which Landlord shall provide to Tenant within fifteen (15) business days following written request. All such work shall be performed by one of Landlord's designated contractors and shall be conducted with notice to Landlord as provided in Section 10.02(e) of this Lease. (e) In all of Tenant's printed material distributed primarily within Albany, New York and that refers to the location of the Premises (by newspaper, radio, television or otherwise), Tenant shall include in any reference to Tenant's place of business the name (and where appropriate the symbol) of the Shopping Center. (f) Tenant agrees to store in the Premises only such merchandise as is to be offered for sale at retail from the Premises within a reasonable time after receipt; to store all trash and refuse in adequate containers within the Premises and to maintain such containers in a healthy, safe, neat, odor free and clean condition and in a location so as not to be visible to members of the public shopping in the Shopping Center, and to attend to the daily disposal thereof in the manner designated by Landlord; and to conform to all rules and regulations which Landlord may make in the management and use of the Shopping Center requiring such conformance by Tenant and Tenant's employees. If the Premises are used for the sale of food, Tenant shall store all trash, refuse and garbage in a garbage storeroom or compartment which Tenant shall install and keep in good repair at its sole expense. Landlord may require that the Premises be periodically treated against pests, rodents or vermin, and in such event, Tenant will, at its sole cost and expense, enter into a contract with a professional pest control service for the performance of such work, which contract and service shall be selected by Tenant but subject to Landlord's prior approval. (g) Landlord may establish a central station trash compactor and/or recycling service (including, but not limited to, compactor and container cost, hauling, landfill charges, taxes or any other special charges, relating to such trash compactor and/or recycling service) or contract for the removal of trash at the Shopping Center. If Landlord establishes a central station trash compactor and/or recycling service, Tenant agrees to pay as Additional Rent the sum of [***] per month for the cost of Tenant's share of such service. It is agreed that this charge may *** Confidential treatment requested. 11 16 be increased periodically from the date of this Lease as Landlord's expenses increase (in which event, the cost of Tenant's share of such service shall increase only by the percentage by which Landlord's expenses actually increase) or as the volume of Tenant's trash increases. If at any time Landlord elects to contract for trash removal and/or recycling, Tenant agrees to use said contractor for its trash removal and/or recycling and pay when due all charges at the rate established therefor from time to time. Tenant may, however, contract with an entity other than that designated by Landlord in the event that Landlord's designated contractor's rates are not reasonable and competitive with alternative services available to Tenant. If Tenant fails so to pay for trash removal and/or recycling, Landlord shall have the same remedies (even if such payment is due to such contractor and not to Landlord) as Landlord has for nonpayment of rent hereunder. Tenant shall comply with all applicable Governmental Orders as defined in (Section 18.01) in conjunction with the sorting or recycling of trash or refuse. (n) Tenant shall comply with all further reasonable rules and regulations for the use and occupancy of the Shopping Center as Landlord from time to time promulgates for the best interests of the Shopping Center, provided that if Tenant disputes the reasonableness of any further rule or regulation, Tenant shall notify Landlord within thirty (30) days after Tenant is provided with a copy thereof, and the dispute shall be submitted to arbitration pursuant to Section 23.18. In the event of a conflict between the Lease and such rules or regulations, then the terms of the lease shall govern. 6.05 - MARKETING FUND (a) Tenant shall make a contribution, in the manner set forth in Section 8.05, to a Marketing Fund to be administered by Landlord. The Marketing Fund will be used for advertising, customer services, promotion, public relations, market research and administrative expenses which, in the sole opinion of Landlord, will sustain and improve the market penetration and promotional needs of the Shopping Center. Landlord acknowledges and agrees that Tenant is a party to a license agreement and that Tenant's advertising, use and display of the Trade Name and the logo and trademarks associated therewith may be subject to the licensor's consent as set forth in the license agreement; therefore, Landlord agrees not to use Tenant's Trade Name in any advertising or promotional medium without Tenant's consent; provided, however, notwithstanding the foregoing, Landlord shall be permitted to (i) use Tenant's Trade Name in any directory or other listing which contains the names of substantially all of the tenants or occupants of the Shopping Center and (ii) utilize photographs, slides, videos, or other similar images of the Shopping Center that may include or depict the Premises or Trade Name. (b) From and after the Term Commencement Date, Tenant shall pay to Landlord, as an annual contribution to the Marketing Fund, the sum of [***] per square foot of the Premises, which sum shall be paid in advance in consecutive equal monthly installments on the first day of each month during the term. For any Partial Lease Year during the term of this Lease, or for any partial month, the amount of Tenant's contribution to the Marketing Fund shall be adjusted on a pro-rata basis to reflect such Partial Lease Year or partial month. (c) Upon the first day of January next following the date of this Lease and upon the first day of January of each Lease Year thereafter, Tenant's annual contribution to the Marketing Fund shall increase by [***] upon the first day of each January thereafter during the term of this Lease. ARTICLE 7 COMMON AREAS AND OPERATING COSTS 7.01 - DEFINITION The term "Common Areas" shall mean the interior and exterior areas and facilities within the Shopping Center which are: (i) not leased to a tenant, or (ii) by nature not leasable to a tenant for the purpose of the sale of merchandise or the rendition of services to the general public. Common Areas shall include but shall not be limited to all parking areas and facilities, roadways, driveways, entrances and exits, truck serviceways and tunnels, utilities, water filtration and treatment facilities, retention ponds or basins located within or outside the Shopping Center, retaining and exterior walls, sidewalks, open and enclosed malls, outside courts, landscaped and planted areas, escalators, stairways, elevators, service corridors, service areas, loading docks, hallways, public restrooms, community rooms or areas, roofs, equipment, signs and any special services provided by Landlord for the common or joint use and benefit of all tenants in the Shopping Center, their employees, customers and invitees. 7.02 - DEVELOPMENT OF COMMON AREAS Landlord may make available from time to time such Common Areas, which may in part consist of areas made available by means of REA or other agreements, for the common benefit to the tenants and occupants of the Shopping Center as Landlord shall deem appropriate. Subject to the provisions of any REA Agreement, Landlord shall operate, manage, equip, heat, cool, ventilate, insure, repair and maintain such Common Areas for their intended purposes in such a manner as Landlord shall, in its sole discretion, determine. Landlord shall at all times have the right to determine, change or alter the nature, extent, size or location of the Common Areas and Landlord shall not be subject to liability therefor, nor shall Tenant be entitled to any compensation or diminution or abatement of rent on account of any such determination or change, nor shall any such action be deemed an actual or a constructive eviction of Tenant. 7.03 - USE OF COMMON AREAS Tenant and its officers, employees, agents, customers and invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas as designated from time to time by Landlord, subject to such regulations as Landlord may from time to time impose on a non-discriminatory basis, including the designation of the days and hours of operation and use and designation of specific areas in which motor vehicles owned or used by Tenant, its officers, employees, and agents must be parked. Tenant shall, upon request, furnish to Landlord the license numbers and descriptions of the motor vehicles operated by Tenant and its officers, agents and employees. If Landlord designates such parking areas, and if any *** Confidential treatment requested. 12 17 motor vehicle of Tenant, or an officer, employee or agent of Tenant is parked in any other portion of the Shopping Center, Tenant shall pay to Landlord, upon demand, the sum of [***] for each such motor vehicle for each day, or part thereof, such motor vehicle is so parked, and Tenant hereby authorizes Landlord to tow or cause any such car to be towed to the then designated parking area, and Tenant hereby agrees to reimburse Landlord for the cost thereof upon demand. Tenant agrees to abide by such regulations and to use its best efforts to cause its officers, employees, agents, customers and invitees to conform thereto. Landlord may at any time (i) close temporarily the Common Areas or any portion thereof, (ii) make repairs or changes to prevent the acquisition of public rights therein, (iii) discourage noncustomer parking, and (iv) do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Landlord shall have the sole and exclusive right to use the Common Areas for advertising purposes, promotions, exhibits, shows, displays, kiosks and such other similar uses. Notwithstanding the foregoing, Landlord shall not modify the Common Areas in any manner that would have a material adverse affect on pedestrian and vehicular traffic or that would materially limit the number of parking spaces reasonably required for the business and retail activities conducted or that otherwise would adversely affect access to the Premises or the building in which the Premises are located. Notwithstanding the foregoing, Landlord will not materially adversely interfere with (i) visibility of Tenant's storefront signage from the enclosed mall immediately adjacent to the Premises, or (ii) access to the Premises from the enclosed mall immediately adjacent to the Premises. Notwithstanding anything to the contrary in this Section 7.03, Landlord recognizes that Tenant's prototype incorporates an open storefront design and Tenant shall be permitted to incorporate this element into the design of the Premises, provided such design does not violate any applicable laws or compromise the structural integrity of the Shopping Center. With Landlord's approval, not to be unreasonably withheld, Tenant shall have the right to use, at no additional cost to Tenant, a portion of the Common Area in front of the Premises for the purpose of displaying a NASCAR racing vehicle. 7.04 - COMMON AREA COSTS (a) Commencing on the Term Commencement Date, Tenant shall pay to Landlord, as Additional Rent, monthly in advance on the first day of each month, a sum equal to one-twelfth (1/12) of the Common Area Charge. The "Common Area Charge" shall be an annual charge of [***] per square foot of the Premises for the Common Area Costs defined in Section 7.04(b), subject to adjustment as provided in Section 7.05. (b) "Common Area Costs" shall mean the total costs and expenses incurred in operating, managing and maintaining the Shopping Center and the Common Areas, including but without limitation, such maintenance, repair, replacement and remodeling as shall be required in Landlord's sole and absolute judgment to preserve the utility thereof in the same condition and status as existed at the time of completion of the original construction. Common Area Costs shall also include Tenant's share of insurance costs. 7.05 - ADJUSTMENT TO PAYMENT Upon January 1, 2001 and upon the first day of January of each Lease Year thereafter, the amount of Tenant's Common Area Charge then in effect shall increase by [***]. Tenant acknowledges and agrees that Tenant shall have no right to audit Landlord's books and records concerning Common Area Costs. Notwithstanding anything to the contrary in this Section 7.05, the first such increase in Common Areas Charges will be prorated on a per-diem basis. 7.06 - PAYMENT OF EXTRAORDINARY COMMON AREA COSTS If Tenant opens the Premises for business or remains open for business in the Premises at a time when Tenant is not required under the terms of this Lease to be open and when less than fifty percent (50%) of the total leased area of the buildings in the Shopping Center is open for business, then for each such day on which Tenant is open for business in the Premises, Tenant, as Additional Rent, shall pay to Landlord, in addition to and together with Tenant's payment of the Common Area Charge due Landlord as provided by Section 7.04, a sum equal to one thirtieth (1/30) of the monthly amount of Tenant's Common Area Charge. ARTICLE 8 ENERGY, UTILITY AND SPRINKLER COSTS 8.01 - ENERGY AND UTILITY CHARGES (a) Immediately after delivery of possession of the Premises to Tenant, Tenant shall make application to the appropriate local authority, municipality or other governmental agency to obtain direct service for Tenant's electric, natural gas, and other energy requirements. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing and installing any required meters, conduits, wiring and other facilities and equipment, all of which shall be part of Tenant's Work. However Tenant shall not be obligated to pay any fees to the utility company for the initial connection of energy services to the Premises which relate to the Shopping Center in general and not to the Premises, and Landlord and not Tenant shall be obligated for any other fees payable to the utility company which relate to the Shopping Center in general with respect to the initial connection of energy services to the Premises. From and after the date Tenant first enters into possession of the Premises (or if the date Tenant obtains such energy service is sooner, then from and after the date such service begins). Tenant covenants and agrees to pay the authority, municipality or agency the cost of all energy provided to Tenant (including but not limited to all energy provided to the Premises, to Tenant's signs and to the HVAC units serving the Premises) when due and payable. As of the date of this Lease, Landlord has no knowledge that the energy provider will not provide direct service, and Tenant acknowledges that provision of such services is within the control of the energy provider and not Landlord. *** Confidential treatment requested. 13 18 (b) Tenant shall pay the cost of all water and sewer used in or at the Premises. Landlord and Tenant acknowledge that water and sewer services for the Premises are as of the date of this Lease, provided by the local municipality to the Premises through Landlord. Accordingly, Tenant shall, at its cost and as part of Tenant's Work, install a water meter acceptable to Landlord and the local municipality; and Tenant shall pay Landlord for all water and sewer usage in and at the Premises based on the usage recorded by such meter and based on the rates charged to Landlord for water and sewer usage by the local municipality. Such payment calculation is subject to change if, as and when the billing methodology of said municipality for water differs from that set forth in this paragraph. The above payment structure shall continue in effect until such time as the Premises are directly supplied, metered and billed for water and sewer services by the local municipality. Immediately after delivery of possession of the Premises to Tenant, Tenant shall make application to the appropriate local authority, municipality or other governmental agency to obtain direct service for water and sewer services to the Premises. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing and installing any required meters and other facilities and equipment, all of which shall be part of Tenant's Work. From and after the date direct water and/or sewer service is available to the Premises, Tenant covenants and agrees to pay the authority, municipality or agency the cost of same provided to Tenant when due and payable. (c) (i) If as a result of Tenant's inability to obtain direct supply or Tenant's election not to obtain direct supply and metering for Tenant's natural gas, electric and other energy requirements as provided in subsection (a) hereof, and if Landlord supplies service for Tenant's electric, natural gas, or other energy requirements, from and after the date Tenant first enters into possession of the Premises, Tenant shall pay to Landlord monthly in advance on the first day of each month its "Energy Charges," as hereinafter defined. (ii) As used in this Lease "Energy Charges" shall be the product of multiplying the Energy Charge Calculation (herein defined) for all energy used or consumed in the Premises including without limitation, electricity, oil and gas times the unit prices for such energy determined in accordance with the then current utility rate schedules applicable to Landlord, plus a charge of twenty-five percent (25%) of such amount. Following the date that Tenant opens for business in the Premises, Landlord shall calculate Tenant's energy requirements on the basis of Tenant's construction plans, equipment and lighting sets, and the as-built condition of the Premises, assuming (1) a usage of not less than one hour before through one hour after the daily hours of operation of the Shopping Center and (2) a loading factor based upon the total connected load of all electrical fixtures and equipment in the Premises ("Energy Charge Calculation"). If Tenant requires additional hours of usage of energy within the Premises, Tenant shall make such request in writing to Landlord and Tenant's Energy Charges shall be adjusted accordingly. Prior to the completion of such Energy Charge Calculation and the submission to Tenant of a statement setting forth such calculation, Tenant shall pay Energy Charges as estimated by Landlord based upon the energy requirements of a typical store layout comparable to Tenant's proposed use and size of the Premises. Following completion of the Energy Charge Calculation, Tenant's energy billings and payment of Energy Charges shall be adjusted accordingly. Any delay in Landlord furnishing such Energy Charge Calculation to Tenant shall not in any way affect Tenant's obligation herein. (iii) Notwithstanding the provisions of subparagraph (c)(ii) of this Section 8.01 relating to use of the Energy Charge Calculation to calculate Energy Charges to the contrary, Tenant shall have the option to verify the amount of electrical energy used or consumed within the Premises by the installation of a checkmeter as hereinafter set forth. Such option may be exercised by Tenant upon not less than thirty (30) days' prior written notice to Landlord given prior to either (i) the Term Commencement Date, or (ii) the first day of any Lease Year during the term of this Lease. Following such notice, Tenant shall install in the Premises, in accordance with the Outline Specifications set forth in Exhibit D and at Tenant's sole cost and expense, a utility-quality checkmeter for the purpose of verification of the electrical consumption within the Premises (the "checkmeter"). The checkmeter will be monitored monthly by Landlord and Tenant for a period of thirteen (13) consecutive full months (the "checkmeter period") beginning on the first day of the first full month following initial installation thereof and approval by Landlord. The first month's reading of the checkmeter will be used solely for determining a usage base reading over which subsequent readings will be measured. Landlord and Tenant shall on or about the first day of each month concurrently observe and record the checkmeter readings on forms provided by Landlord. The checkmeter shall be reset (for demand only) in the presence of both Landlord and Tenant representatives following the recording of monthly readings. During the checkmeter period Tenant shall pay Energy Charges for the Premises based on the Energy Charge Calculation. Following completion of the checkmetering period, Landlord shall calculate the average monthly utility usage within the Premises utilizing the checkmeter readings taken during the checkmeter period. The average monthly charge for consumption (KWH) shall be calculated by dividing the total KWH by the number of days comprising the checkmeter period; the resulting quotient will then be multiplied by 30.42. The average monthly demand charge (KW), if applicable, shall be calculated by dividing the total KW readings by the number of months comprising the checkmeter period. If Tenant has made the election to utilize a checkmeter, for purposes of calculating Energy Charges for electricity under subparagraph (b) of this Section 8.01, the product of the resulting average monthly KWH usage readings and KW demand readings times the unit prices for such energy determined in accordance with then current utility rate schedules charged to Landlord shall be used in lieu of the Energy Charge Calculation. Tenant's energy billings based on the checkmeter readings and payment of Energy Charges retroactive to the commencement of the checkmeter period shall be adjusted accordingly. Any delay in Landlord furnishing a checkmeter reconciliation to Tenant shall in no way affect Tenant's obligation herein. The average monthly KWH usage charges and KW demand charges once determined pursuant to the checkmeter procedure shall be the basis for calculation of Energy Charges for the balance of the term of this Lease. The checkmeter procedure shall be used solely to verify energy use within the Premises in accordance with the terms of this Lease and shall not be utilized for billing purposes. The use of the checkmeter procedure set forth in this subparagraph (c) shall be the sole and exclusive remedy between Landlord and Tenant to resolve any dispute concerning the amount of electrical usage within the Premises. The results of the checkmetering procedures set forth herein shall be conclusive and determinative of all disputes, claims and controversies with respect to energy usage or demand within the Premises pursuant to this Lease. Following the checkmeter period, Tenant shall disconnect and remove the checkmeter from the Premises. The monitoring of energy service by means if a checkmeter shall not take place more than once during the term of this Lease unless Tenant has varied its equipment, service, use or load demand or has remodeled the Premises. In any such event either Landlord or Tenant may request the other party to reinstitute the checkmeter procedures but in no event more than once in any thirty-six (36) month period following the completion of any checkmeter period. 14 19 (iv) At any time during the term hereof, Landlord may cease providing energy to the Premises without thereby affecting this Lease in any manner or otherwise incurring any liability to Tenant. In such event, Tenant shall have no further obligation to pay to Landlord the charge for Energy Charges as provided in this Section 8.01. Landlord will notify Tenant at least thirty (30) days prior to such termination in order that Tenant may make application to the appropriate utility companies serving the Shopping Center. In the event Tenant fails to pay energy or utility charges when the same become due and payable, Landlord reserves the right, in addition to all other rights and remedies to which Landlord may avail itself pursuant to this Lease, to discontinue the furnishing of energy to the Premises. Landlord shall not be liable for any damages resulting from or arising out of any such discontinuance, and the same shall not constitute a termination of this Lease or an actual or constructive eviction of Tenant. (v) the charges defined in Section 8.01(c), if any, may be adjusted by Landlord periodically based upon changes in the number of hours during which the Premises remains open, connected load, recalculations, rate changes imposed by utility companies, rate changes imposed by fuel companies (including but not limited to fuel adjustment rates), any changes, alterations or improvements done to the Premises, or any taxes or surcharges imposed upon energy costs or usage. Notwithstanding anything to the contrary in this Section 8.01, in the event Landlord's energy provider is not competitively priced, Tenant shall have the right to secure energy service from an alternative energy provider (where available). Tenant understands and agrees that in the event it elects to use such alternative energy provider, it shall do so at Tenant's sole cost and expense and such energy service must be provided to the Premises from such alternative energy provider's facilities and shall not come through Landlord's switchgear. 8.02 - INTENTIONALLY DELETED. 8.03 - INTENTIONALLY DELETED. 8.04 - MISCELLANEOUS UTILITY PROVISIONS (a) Tenant shall not install within the Premises any equipment, fixtures or appliances which exceed the capacity of the utility facilities within or serving the Premises. If any such equipment, fixtures or appliances installed by Tenant requires additional utility facilities, the same shall be installed by Tenant at Tenant's sole cost and expense. (b) Tenant shall operate the heating, ventilating and cooling systems serving the Premises such that the temperature in the Premises will be substantially the same as that in the Common Areas, and Tenant shall set Tenant's thermostat at substantially the same temperature as exists in the Common Areas. Tenant shall operate ventilation equipment such that the relative air pressure in the Premises will be substantially the same as or less than that in the Common Areas. (c) Intentionally deleted. (d) Tenant agrees that Landlord shall not be responsible for any interruption of business or damage to the Premises resulting from interruption of utility service caused by any utility company or governmental regulatory agency. 8.05 - PERIODIC ADJUSTMENT Intentionally deleted. ARTICLE 9 FIXTURES, ALTERATIONS, SIGNS 9.01 - INSTALLATION BY TENANT After the completion of Tenant's Work, Tenant shall not make or cause to be made any alterations, additions or improvements or install or cause to be installed any trade fixtures, exterior sign, floor covering, interior or exterior lighting, plumbing fixtures, shades or awnings, or make any changes to its store-front or interior decor without first obtaining Landlord's written approval and consent in each instance, which shall not be unreasonably withheld. Notwithstanding the foregoing, Tenant shall be permitted to make interior, non-structural alterations, changes and modifications not exceeding [***] per Lease Year without Landlord's prior consent, provided Tenant notifies Landlord in writing prior to the commencement of such alterations, changes, or modifications. Tenant shall present to Landlord plans and specifications of such work at the time approval is sought. All permitted alterations, additions or improvements shall be done in a good and workmanlike manner in compliance with all applicable laws and ordinances and shall not unreasonably interfere with the conduct of Tenant's normal business. Notwithstanding anything to the contrary in this Section 9.01, Tenant shall be permitted to close for a period not to exceed five (5) days during any Lease Year, for the sole purpose of completing such alterations, changes, or modifications. Where Landlord's approval is required per this Section 9.01, any alteration, addition or improvement done to the Premises by Tenant without Landlord's approval shall be returned to its original condition within thirty (30) days after receipt of written notice from Landlord and at Tenant's expense upon request by Landlord at any time. All fixtures installed by Tenant shall be new or completely reconditioned; provided, however, Tenant makes to representation or warranty that such fixtures will be free from defects in material, workmanship, or design; provided, further, that Tenant shall use its commercially reasonable efforts to ensure that such fixtures are installed in the Premises in a safe manner so as not to be hazardous to persons who may come on to the Premises. Tenant shall (i) be responsible for all costs, including attorneys' fees, and (ii) Tenant shall indemnify and hold harmless *** Confidential treatment requested. 15 20 Landlord from all liability, incurred by Landlord as a result of any failure in material, workmanship or design of such fixtures. 9.02 - REMOVAL AND RESTORATION BY TENANT All alterations, additions, improvements or installations made by Tenant, or made by Landlord on Tenant's behalf and at Tenant's expense, shall remain the property of Tenant for the term of the Lease. Such alterations, additions, improvements, trade fixtures and equipment shall not be removed from the Premises prior to the end of the term hereof without the prior consent in writing from Landlord, except in the case of routine maintenance, refurbishment or replacement of defective or broken items. Upon expiration of the term of the Lease or upon Tenant's vacating the Premises upon eviction or surrender of the Premises prior to expiration of the term, any permanent leasehold improvements and fixtures or equipment permanently attached to the real estate shall become the property of Landlord (unless, as a condition of its consent to install same, Landlord shall have required the subsequent removal thereof by Tenant), if not removed by Tenant. With respect to any improvements and fixtures which Tenant does not remove, Tenant shall be obligated to repair any damage resulting from such removal, and Tenant's possession of the Premises shall not be deemed terminated until such repairs have been completed. Tenant shall surrender all keys for the Premises to Landlord and shall inform Landlord of all combinations on locks, gates and vaults, if any, in the Premises. Within five (5) days following the expiration or earlier termination of this Lease, Tenant shall remove furnishings, equipment, trade fixtures and personal property and, if Tenant fails to so remove such property, then Landlord shall have the option of retaining or removing such property at Tenant's expense. Tenant shall repair or cause to be repaired any damage to the Premises caused by such removal. 9.03 - SIGNS, AWNINGS AND CANOPIES Tenant will not place, maintain or suffer to be placed or maintained on or in an exterior door, wall or window of the Premises any sign, awning or canopy, decoration, lettering or advertising matter or other thing of any kind without first obtaining Landlord's written approval, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, Landlord's consent shall not be required for any professionally prepared signs or banners, or for the installation of an awning or canopy at the store front of the Premises, provided such awning or canopy complies with all applicable building codes and further provided that such awning or canopy does not utilize any supports which cannot be integrated into the store front of the Premises. Tenant further agrees to maintain such sign, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times. In the event that Landlord at any time during the term of this Lease elects to erect signage within the interior of the Shopping Center which in a general fashion depicts any so-called entertainment wing of the Shopping Center, then Tenant may, at its option, be included in such signage at Landlord's cost and expense. Notwithstanding anything to the contrary in this Lease, Tenant shall be permitted to erect exterior signage of approximately fifty (50) square feet in size and as depicted on Exhibit F attached hereto and made a part hereof, which approximately fifty (50) square feet is a part of the approximately 5,953 square feet of external mall signage already approved by the local municipality or other governing body, as the case may be. Tenant shall erect, maintain, and at the expiration or earlier termination of this Lease, remove, such exterior signage at its sole cost and expense. Landlord reserves the right to relocate Tenant's exterior signage to another area on the exterior facade of the Shopping Center in the event of a change in local ordinances, rules, regulations or applicable laws, or in the event of a demand by an Anchor Store, at Landlord's sole cost and expense, subject to the following: (a) in the event of a change in local ordinance, regulations, rules or applicable laws, Tenant agrees to act reasonably with respect to relocation of Tenant's exterior signage so long as Tenant is not treated any more adversely than similarly situated tenants of the Shopping Center (i.e., tenants having similar signage in substantially the same location), or (b) if required by an Anchor Store, Landlord may make immaterial changes in the location, size, or illumination of Tenant's exterior signage so long as Tenant is not treated any more adversely than similarly [ILLEGIBLE] tenants of the Shopping Center (i.e., tenants having similar signage in substantially the same location). 9.04 - CONDITION OF THE PREMISES Throughout the Term, Tenant shall maintain the Premises in a manner consistent with a first class shopping center. ARTICLE 10 REPAIRS AND MAINTENANCE 10.01 - LANDLORD'S OBLIGATION TO REPAIR Landlord agrees to repair and maintain, at Landlord's sole cost and expense, the outside walls, structure and foundation of the building containing the Premises in good order and serviceable condition. Landlord agrees to commence any such repair within a reasonable time (not to exceed thirty (30) days, unless by the nature of such repair, it cannot reasonably be commenced within said thirty (30) day period) after written notice from Tenant that the same is necessary. There is excepted from this covenant the following, which shall be Tenant's responsibility: (a) Repair of damage caused by the act or omission of Tenant, its employees, agents and contractors; (b) Repair any loading areas not used in common with others; and (c) Repairs which are the responsibility of Tenant in accordance with Section 10.02. 16 21 10.02 - TENANT'S OBLIGATION TO REPAIR (a) Tenant agrees, at its sole cost and expense, to repair and maintain the Premises in good order and condition, including but not limited to the non-structural portions of the Premises, including store front, loading areas, show windows, doors, windows, plate and window glass, ceilings, floor coverings, Tenant's HVAC systems, and the plumbing, sprinkler, electric and sewage systems, facilities, appliances, lighting fixtures and other systems and improvements located within the Premises. In addition, Tenant shall be responsible, at its sole expense, for the repair and maintenance of its rooftop HVAC unit(s) (if any) and any other equipment or improvement located outside the Premises which is constructed or installed by Tenant or at Tenant's request and is used exclusively by or for Tenant. Tenant shall obtain Landlord's prior consent before making any repair or performing any maintenance which may adversely affect any aspect of the Shopping Center's operation. (b) During the entire term, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with an independent HVAC contractor approved by Landlord covering at least the routine items of maintenance for Tenant's HVAC systems as are recommended by the manufacturer of such systems, provided that the cost thereof at all times shall be reasonable and competitive. Tenant agrees to provide Landlord with a copy of such HVAC service contract within thirty (30) days following the Term Commencement Date. Further, Tenant agrees during the entire term of this Lease to use the sprinkler service company designated by Landlord for any repairs or maintenance required for Tenant's sprinkler system, provided that the cost thereof at all times shall be reasonable and competitive. (c) If repairs are required to be made by Tenant pursuant to the terms of the Lease, Landlord may demand (but shall not be required to do so) that Tenant make the same forthwith, and if Tenant refuses or neglects to commence to such repairs and complete the same with reasonable dispatch after such demand, and if Tenant's failure to commence such repairs continues for fifteen (15) days after receipt of notice from Landlord, Landlord may make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to its stock or business by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will, on demand, pay as Additional Rent to Landlord, reasonable out-of-pocket costs incurred by Landlord therefor, and a [***] administration fee, and if Tenant defaults in such payment, Landlord shall have the remedies provided in Article 15 hereof. Likewise, if repairs are required under the terms hereof to be made by Landlord and it fails or refuses after twenty (20) days' notice and demand by Tenant to commence such repairs and thereafter diligently prosecute same to completion, then Tenant shall have the right to make such required repairs. Landlord shall reimburse Tenant for the cost of such repairs within twenty (20) days after receipt by Landlord of evidence of payment therefor by Tenant; additionally, Tenant shall have the right to offset such costs against the payment of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent if Landlord shall fail to reimburse Tenant for the cost of such repairs within thirty (30) days after receipt by Landlord of evidence of payment therefor by Tenant. (d) If Tenant's use of the Premises requires a grease trap, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with an independent service contractor approved by Landlord to inspect, clean and repair such grease trap at such intervals as may be required by Tenant's use but in no event less frequently than once a month. (e) Tenant shall not, and shall not permit any of its employees, invitees, contractors or agents to enter or otherwise be on the roof of the Building without prior written notice to Landlord. Tenant shall give landlord not less than five (5) days' prior written notice of the date any such person will be on the roof of the Building. 10.03 - ARTICLE NOT APPLICABLE TO FIRE OR CONDEMNATION The provisions of this Article shall not apply to the repair of damage caused by fire, casualty, which matter is covered under Article 13, nor shall these provisions apply to a taking under the power of Eminent Domain, which matter is covered under Article 14. ARTICLE 11 INDEMNITY 11.01 - INDEMNITY Tenant will indemnify and hold harmless Landlord, Landlord's managing agent and such other persons who are in privity of estate with Landlord, or to whom Landlord is legally responsible (collectively, "Landlord's Party"), from and against any and all claims, actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Premises, from or out of the occupancy or use by Tenant of the Premises or the Shopping Center or any part thereof, or occasioned wholly or in part by any negligent act or omission of Tenant, its agents, contractors, employees, lessees, invitees or concessionaires; provided, however, Tenant shall not be required to indemnify, defend, hold harmless, protect, lease or otherwise exculpate Landlord or any member of Landlord's Party from and against any claims, actions, damages, liabilities or expenses to the extent the same results from Landlord's or any member of Landlord's Party's or their respective agents, employees, contractors, licensees, invitees or servants' negligence, willful misconduct, failure to comply with applicable laws or breach of this Lease. In case Landlord or any member of Landlord's Party shall be made a party to any action or proceeding commenced by or against Tenant, then Tenant agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Tenant shall pay to Landlord all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Landlord in enforcing the terms, conditions, covenants and agreements in this Lease. Landlord shall indemnify, hold harmless and defend Tenant, Tenant's managing agent, if any, and such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible (collectively, "Tenant's Party"), from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Shopping Center, or occasioned wholly or in part by any negligent act or omission of Landlord, its agents, contractors, employees, lessees, invitees or concessionaires; provided, however, Landlord shall not be required to indemnify, defend, hold harmless, protect, release or otherwise exculpate Tenant or any member of Tenant's Party from and against any claims, actions, damages, liabilities or expenses to the extent the same results from Tenant's or any member of Tenant's Party's or their respective agents, employees, contractors, licensees, invitees or servants' negligence, willful misconduct, failure to comply with applicable laws or breach of this Lease. In case Tenant, Tenant's managing agent or such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible, shall be made a party to any action or *** Confidential treatment requested. 17 22 proceeding commenced by or against Landlord, then Landlord agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Landlord shall pay to Tenant all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Tenant in enforcing the terms, conditions, covenants and agreements in this Lease. ARTICLE 12 INSURANCE 12.01 - LIABILITY INSURANCE Throughout the term of this Lease, Tenant, [***] for the mutual benefit of Landlord and Tenant, shall maintain personal injury and property damage liability insurance against claims for personal injury, bodily injury, death or property damage occurring on, in or about the Premises, or arising from, in or about Tenant's use of the Common Areas, or resulting from or arising out of products sold from the Premises or Tenant's use of the Common Areas during the term of this Lease, of not less than [***] in respect of personal injury, bodily injury, death or property damage (combined single limit). Such policy shall expressly contain a contractual endorsement to provide coverage for Tenant's indemnification set forth in Section 11.01 of this Lease and shall contain the "Per Location Aggregate" endorsement. Such policy shall be endorsed (1) as primary and (2) to waive rights of subrogation against Landlord. Prior to the Term Commencement Date, Tenant shall provide Landlord with a certificate containing evidence of such coverage and of the coverage required in Sections 12.02(c) and (d) below, and Tenant shall thereafter provide Landlord with appropriate evidence of said coverage upon each anniversary date of the policy. In the event that Tenant fails to provide the certificate as set forth herein or fails to provide such evidence of such coverage at least fifteen (15) days prior to the expiration date of each expiring policy, Landlord may obtain such insurance at Tenant's sole cost and expense and upon demand of Landlord, Tenant shall reimburse Landlord for the cost of procuring such insurance coverage together with [***] for administration costs. 12.02 - SPECIAL CAUSES OF LOSS AND DIFFERENCE IN CONDITIONS INSURANCE (a) At all times during the term of this Lease, Landlord shall keep all Permanent Improvements, as hereinafter defined, insured for the benefit of Landlord against loss or damage by risks now or hereafter embraced by "Special Causes of Loss" and "Difference in Conditions" coverages and against such other risks as Landlord from time to time reasonably may designate in amounts sufficient to prevent Landlord from becoming a coinsurer under the terms of the applicable policies. In any event, the amount applicable to "Special Causes of Loss" policies shall be not less than [***] of the "Then Full Replacement Cost" (being the cost of replacing the Permanent improvements exclusive of the costs of excavations and footings below the lowest grade level). The Then Full Replacement Cost shall be determined from time to time (but not more frequently than once in any twelve (12) calendar months) by an appraiser, architect or other person or firm designated by Landlord. (b) The Permanent Improvements for purposes of this Section 12.02 shall be deemed to mean the building in which the Premises is situated, the appurtenances thereto and the equipment and other improvements constructed by Landlord and Tenant pursuant to Exhibits B and C. Such Permanent Improvements shall exclude, however, Tenant's merchandise, trade fixtures, furnishings, equipment, wall covering, carpeting, drapes, and all personal property (collectively "Tenant's Personal Property"). Tenants shall provide Landlord with a certificate setting forth the cost of Tenant's Work no less than fifteen (15) days prior to the Term Commencement Date. (c) At all times during the term of this Lease, Tenant shall keep all of Tenant's Personal property situated at or on the Premises, insured with "Special Causes of Loss" and "Difference in Conditions" and "Plate Glass" coverages for not less than the full replacement cost thereof, with the deductible on the "Plate Glass" and "Special Causes of Loss" policies not to exceed [***] and with a commercially reasonable deductible on the "Difference in Conditions" policy (provided, however, by way of illustration and not limitation, it shall be deemed commercially reasonable for the "Difference in Conditions" policy to have a deductible of [***] of the value of the insured property or a deductible of [***]. (d) Tenant shall maintain, and shall cause all parties performing work on or about the Premises or on behalf of Tenant to maintain, statutory Workers' Compensation coverage according to the laws of the state in which the Shopping Center is located and Employer's Liability coverage in limits of not less than [***]. 12.03 - INSURANCE ON COMMON AREAS At all times during the term of this Lease, Landlord shall keep the Common Area Insured for personal injury, bodily injury and property damage liability, "Special Causes of Loss" and "Difference in Conditions" property coverage, Workers' Compensation, Employer's Liability and any other casualty or risk insurance which Landlord or Landlord's insurance carrier deems necessary or appropriate. If and to the extent Landlord elects to self insure up to the first [***], of any claims for personal injury or bodily injury, or under Workers' Compensation, there shall be included within insurance costs the amount of any personal injury, bodily injury or Workers' Compensation claim(s) or judgment(s) paid by Landlord, limited, however, in each instance to the lesser of (i) [***], or (ii) [***]. 12.04 - INCREASE IN FIRE INSURANCE PREMIUM Tenant covenants and agrees to promptly pay to Landlord as Additional Rent, upon demand, the amount of any increase in the rate of insurance on the Premises or on any other part of the Shopping Center that results by reason of Tenant's act(s) or Tenant's permitting certain activities to take place. *** Confidential treatment requested. 18 23 12.05 - TENANT TO SHARE INSURANCE COSTS Tenant's obligation for the payment of Insurance Costs is included in Common Area costs, as set forth in Section 7.04 of this Lease. 12.06 - WAIVER OF SUBROGATION Each party releases and waives on behalf of itself and on behalf of the insurers of such party's property, any and all claims and any rights of subrogation of any such insurer against the other party, its employees and agents for loss (other than loss or damage resulting from the willful act of such other party, its employees and agents) sustained from any peril to property required to be insured against herein, whether or not such insurance is actually in force, or from any peril to property actually insured against, though not required to be under this Lease. The policies of the respective parties shall contain an express waiver of subrogation to this effect. 12.07 - POLICIES All insurance provided in this Article 12 shall be effected under valid and enforceable policies of at minimum a Best rating of A-, XII and issued by insurers of recognized responsibility which are licensed to do business in the state in which the Shopping Center is located. All of Tenant's policies of insurance as required in this Article 12 shall name Landlord, Tenant, Landlord's managing agent and any mortgagee having an interest in any or all part of the Shopping Center the name and address of which Tenant has received written notice, as additional insureds, as their respective interests may appear. Tenant agrees that such policies shall also be made payable, if required by Landlord, to a mortgagee or ground lessor, as the interest of such mortgagee or ground lessor may appear. The loss, if any, under any policies provided for hereunder may be adjusted with the insurance company by Landlord. Each of Tenant's policies shall contain an agreement by the insurer that such policy shall not be terminated, canceled or reduced in coverage without at least thirty (30) days' prior written notice to Landlord and to any mortgagee or ground lessor to whom a loss thereunder is payable. The minimum limits of coverage for all of Tenant's policies of Insurance required by this Article 12 shall be increased by Tenant if reasonably required by Landlord. ARTICLE 13 DAMAGE BY FIRE, ETC. 13.01 - RESTORATION OF PREMISES (a) The parties hereto mutually agree that if the Premises are partially or totally destroyed or damaged by fire or otherwise, then Landlord (subject to being able to obtain all necessary permits and approvals therefor) shall repair and restore the Premises as soon as is reasonably practicable to substantially the same condition in which the Premises existed before such damage; provided that if the insurance proceeds (other than the amount of any deductible, self insured retention of co-insurance requirement) collected or collectible and available to Landlord to pay the cost of such repairs and restorations by Landlord as a consequence of such destruction or damage are less than the cost of such repairs and restoration as estimated by Landlord's architect, Landlord shall not be obligated to commence or perform such repairs and restorations, and this Lease upon notice by Landlord to Tenant shall at the option of Landlord terminate unless Tenant undertakes (in form and upon terms satisfactory to Landlord) to pay the difference between such estimated cost and such insurance proceeds. Within forty-five (45) days following the date of damage or destruction, Landlord shall notify Tenant of its intentions with respect to the repairs or restoration of the Premises, and in the event Landlord elects to repair or restore the Premises, Landlord shall diligently pursue such repair or restoration to completion following commencement of the repairs or restoration. If, however, the Premises are completely destroyed or so damaged that Landlord cannot complete restoration or rebuilding in four (4) months to substantially the same condition in which the Premises were before such damage, then Landlord shall not be required to rebuild or restore, and this Lease shall be terminated by either party serving written notice upon the other. In any event, if repairs have not been commenced within sixty (60) days after the date on which Landlord receives the insurance proceeds, or if the repairs have been commenced within such time but Landlord is not diligently pursuing such repairs or restoration, then this Lease may be terminated by Tenant serving notice upon Landlord following the expiration of such sixty (60) days by giving Landlord not less than thirty (30) days' advanced written notice of such election. Except as otherwise provided in this Section 13.01(a), provided Landlord is diligently pursuing such repairs or restoration, in no event may Tenant terminate this lease after such repairs have been commenced by Landlord. (b) In the event the Premises are completely or partially destroyed or so damaged by the fire or other hazard that the Premises cannot be reasonably used by Tenant or can only be partially used by Tenant and this Lease is not terminated as above provided, there shall be no abatement of rent for the first sixty (60) days following the date of damage or destruction, it being understood and agreed that the Tenant at its discretion, cost and expense shall procure insurance necessary to protect itself against any interruption of its business during such sixty (60) day period. In the event that Tenant is prevented from using the Premises in excess of sixty (60) days, then Fixed Annual Minimum Rent and Additional Rent shall be abated, and there shall be a proportionate reduction to the Annual Minimum Gross Receipts, from and after said sixtieth (60th) day until the date Tenant is able to reopen for business within the Premises. 13.02 - RESTORATION DURING LAST THREE YEARS Anything in Section 13.01 to the contrary notwithstanding, if, within three (3) years prior to the expiration of the initial term or at any time during any renewal term (if any) of this Lease the Premises shall be damaged or destroyed by the fire or otherwise and the estimated cost of restoration exceeds Fifty Thousand and 00/100 Dollars ($50,000.00), then at the election of Landlord or Tenant and by notice to the other, the Lease shall terminate. 19 24 13.03 - TENANT'S OBLIGATION UPON RESTORATION In the event of damage or destruction to the Premises and unless this Lease is terminated by Landlord or Tenant as provided in this Article 13, Tenant shall, as soon as reasonably possible, repair, redecorate and refixture the Premises and restock the contents thereof in a manner and to at least a condition equal to that existing prior to its destruction or casualty, and reopen the entire Premises for business. All proceeds of insurance carried by Tenant on Tenant's Personal Property shall be held in trust for such purposes. ARTICLE 14 EMINENT DOMAIN 14.01 - EMINENT DOMAIN If the Premises, or such portion thereof as to render the balance wholly unsuitable for the purpose of Tenant, is taken by condemnation or the right of eminent domain, or by agreement, between Landlord and those authorized to exercise such right (collectively the "Condemnation Proceedings"), either party upon written notice to the other shall be entitled to terminate this Lease provided that such notice is given not later than thirty (30) days after Tenant has been deprived possession of use by such taking. Should any part of the Premises be so taken and should this Lease not be terminated in accordance with the foregoing provisions, Landlord covenants and agrees promptly after such taking to expend so much as may be necessary of the net amount which may be awarded to and received by it in such Condemnation Proceedings in restoring the Premises to an architectural unit as nearly like its condition prior to such taking as shall in the reasonable judgment of Landlord be practicable, with an appropriate abatement to be made in Fixed Annual Minimum Rent and a corresponding reduction in Annual Minimum Gross Receipts. Should the net amount so awarded to and received by Landlord be insufficient to cover the cost of restoring the Premises as estimated by Landlord's architect, Landlord may at its election, supply the amount of such insufficiency and restore the Premises, as above provided, or terminate this Lease. Where Tenant has not already exercised any right of termination accorded to it under this Section 14.01, Landlord shall notify Tenant of Landlord's election within ninety (90) days after the final determination of the amount of the award. 14.02 - LANDLORD ENTITLED TO AWARD Out of any award for any such taking of the Premises or any part thereof, Landlord shall by entitled to receive and retain the amounts awarded for such Premises, except that Tenant shall be entitled to receive and retain only amounts which may be specially awarded to it in any such condemnation proceedings because of the taking of its trade fixtures and its leasehold improvements which have not become a part of the realty, and such business loss as Tenant shall specially and separately establish, but not otherwise. It is understood in the event of the termination of this Lease as aforesaid, Tenant shall have no claim against the Landlord or the condemning authority for the value of any unexpired term of its Lease and no right or claim to any part of the award on account thereof. Tenant hereby waives each such claim or right and assigns any such claim or right to Landlord. Anything contained in this Lease to the contrary notwithstanding, tenant shall have the right to bring any claim during any Condemnation Proceedings, provided such claim does not reduce the claim of Landlord in said Condemnation Proceedings. ARTICLE 15 BANKRUPTCY AND DEFAULT PROVISIONS 15.01 - EVENTS OF DEFAULT AND CONDITIONAL LIMITATION (a) If at any time prior to or during the term any one or more of the following events occurs, each such event shall constitute an "event of default". (i) Tenant or Tenant's Guarantor, if any, makes an assignment for the benefit of its creditors; (ii) The leasehold estate hereby created in Tenant is taken on execution or by other process of law; (iii) Any petition is filed against Tenant or Tenant's Guarantor, if any, in any court, whether or not pursuant to any bankruptcy, reorganization, composition extension, arrangement or insolvency proceedings, and Tenant or Tenant's Guarantor is thereafter adjudicated bankrupt, or such petition is approved by the Court, or the Court assumes jurisdiction of the subject matter and such proceedings are not dismissed within ninety (90) days after the institution of the same; or any such petition is so filed by Tenant, or Tenant's Guarantor; (iv) In any proceedings, a receiver or trustee is appointed for Tenant's property or the property of Tenant's Guarantor and such receivership or trusteeship is not vacated or set aside within ninety (90) days after the appointment of such receiver or trustee; (v) Tenant intentionally or fraudulently understates Gross Receipts by [***] or more; (vi) There is a transfer or an attempted transfer of this Lease or of Tenant's interest thereof in violation of the restrictions set forth in Article 17 of this Lease; (vii) Tenant ceases operation in or vacates or abandons the Premises or is otherwise in breach of Sections 6.01 or 6.02 of this Lease, and such breach is not cured within ten (10) days following written notice from Landlord; provided, however, that if such default cannot be cured within said time period. Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter *** Confidential treatment requested. 20 25 diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure: (viii) Tenant fails to comply with any local, state or federal law, rule or regulation governing the use, handling and disposal of Hazardous Materials or is otherwise in violation of the obligations contained in Section 16.03 of this Lease, and Tenant fails to commence a cure of such violation within thirty (30) days following written notice from Landlord (or such shorter time period if required by law); provided, however, that if such default cannot be cured within said time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; (ix) Tenant fails to comply with the obligations contained in Section 21.03 of this Lease, and such failure continues for fifteen (15) days following written notice from Landlord; (x) Tenant or Tenant's Guarantor, if any, fails to pay any installment of the Fixed Annual Minimum Rent, Percentage Rent, Additional Rent or any portion of any such payment, when the same becomes due and payable, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; (xi) Tenant or Tenant's Guarantor, if any, fails to pay any installment of the Fixed Annual Minimum Rent, Percentage Rent, Additional Rent or any portion of such payment, when same becomes due and payable, and such failure occurs on three (3) or more occasions in any Lease Year or Partial Lease Year; (xii) Tenant fails to comply with the obligations contained in Section 1.03 of this Lease, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; provided, however, that if such default cannot be cured within such time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within such time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; or (xiii) Tenant or Tenant's Guarantor, if any, fails to perform or observe any other material requirement of this Lease (not hereinbefore specifically referred to) on the part of Tenant to be performed or observed and such failure continues for thirty (30) days after receipt of written notice from Landlord to Tenant; provided, however, that if such default cannot be cured within such time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within such time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant or Tenant's Guarantor, if any, shall promptly notify Landlord of Tenant's or Tenant's Guarantor's (if any) commencement of such cure. (b) This Lease and the term are expressly subject to the conditional limitation that upon the happening of any one or more of the aforementioned events of default, Landlord, in addition to the other rights and remedies it may have, shall have the right, upon notice to Tenant, to declare this Lease terminated and the term ended. In which event all of the right, this and interest of Tenant hereunder shall wholly cease and expire upon receipt by Tenant of a Notice of Termination. Tenant shall then quit and surrender the Premises to Landlord in the manner and under the conditions as provided for under this Lease, but Tenant shall remain liable as hereinafter provided. Notwithstanding anything to the contrary in this Section 15.01(b), the parties hereby agree that the following events shall be deemed "material" for the limited purposes of determining Landlord's right to terminate this Lease according to the terms of this Section 15.01(b) following an event of default for which notice and any applicable opportunity to cure has expired; (i) failure to open and commence and continue operation of Tenant's business within the entire Premises according to Section 6.02 of this Lease; (ii) failure to make repairs to the Premises according to Section 10.02 of this Lease; (iii) failure to comply with Tenant's indemnification obligations according to Article 11 of this Lease; (iv) failure to comply with Tenant's insurance obligations pursuant to Article 12 of this Lease; (v) failure to comply with Tenant's obligations with regard to Restoration of the Premises according to Section 13.03 of this Lease; (vi) an assignment, sublet or other transfer not in compliance with the terms of Article 17 of this Lease; and (vii) failure to comply with Government Orders, Insurance Matters, Hazardous Material or the ADA, all according to the terms of Article 16 of this Lease. It is specifically understood and agreed that this provision shall not in any way modify any other termination right of Landlord which is otherwise specifically provided for in this Lease. 15.02 - LANDLORD'S REMEDIES (a) If this Lease shall be terminated as provided in Section 15.01, Landlord or Landlord's agents or employees may immediately or at any time thereafter re-enter the Premises and remove therefrom Tenant, its agents, employees, licenses, and any sub-tenants and other persons, firms or corporations, and all or any of its or their property therefrom, either by summary dispossess proceedings or by any suitable action or proceedings at law or in equity, without being liable to indictment or prosecution of damages therefor, and repossess and enjoy the Premises, together with all alterations, additions and improvements thereto. Landlord, in the event of such re-entry and repossession, may store Tenant's Personal Property in a public warehouse or elsewhere at the cost of and for the account of Tenant. (b) In case of any such termination, re-entry or dispossession by summary proceedings or otherwise, the rents and all other charges required to be paid up to the time of such termination, re-entry or dispossession, shall be paid by Tenant, and Tenant also shall pay to Landlord all reasonable expenses which Landlord may then or thereafter incur for legal expenses, attorneys' fees, brokerage commissions and all other costs paid or incurred by Landlord as the result of such termination, re-entry or dispossession, and for restoring the Premises to good order and condition and for altering and otherwise preparing the same for reletting and for reletting thereof. Landlord may, at any time and from time to time, relet the Premises, whole or in part, for any rental then obtainable either in its own name or as agent of Tenant, for a term which, at Landlord's option, may be for the remainder of the then current term of this Lease or for any longer or shorter period. (c) If this Lease is terminated as aforesaid, Tenant nevertheless covenants and agrees notwithstanding any entry or re-entry by Landlord whether by summary proceedings, termination or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal to the several installments of Fixed Annual Minimum Rent, Percentage Rent and Additional Rent reserved as they would, under the terms of this Lease, become due if this Lease had not been terminated or if Landlord had not entered or re-entered as aforesaid, and whether the Premises is relet or remains vacant in whole or in part or for a period less than the remainder of the term, and for the whole thereof. In the event the Premises be relet by Landlord, Tenant shall be entitled to a credit 21 26 (but not in excess of the Fixed Annual Minimum Rent, Percentage Rent and Additional Rent reserved under the terms of this Lease) in the net amount of rent received by Landlord in reletting the Premises after deduction of the reasonable out-of-pocket expenses and costs incurred or paid as aforesaid in reletting the Premises and in collecting the rent in connection therewith. If Tenant fails to make such payments in accordance with the first sentence of this subsection 15.02(c) for any two (2) consecutive months following the termination of this Lease, Landlord shall at any time thereafter, in lieu of collecting any monthly deficiencies, or any further monthly deficiencies, aforesaid, at Landlord's option, be entitled to recover from Tenant, in addition to any other relief, such a sum as at the time of such termination represents the amount of the [***] which would have accrued to Landlord under this Lease for the remainder of the Lease term, as if the Lease had been fully complied with by Tenant, less any monthly deficiencies for such period previously paid to Landlord by Tenant. The present value ("Present Value Amount") shall be calculated by discounting all amounts due by a discount rate equal to the great of (i) the then current yield of U.S. Treasury debt securities with an original term equal to the same number of calendar years then remaining in the original Term (without regard to earlier termination) and maturity date nearest to the original expiration date of the term (without regard to the earlier termination) or (ii) six percent (6%). Tenant shall be entitled to a credit against the Present Value Amount for Fixed Annual Minimum Rent, Percentage Rent and Additional Rent subsequently received by Landlord from a replacement tenant against amounts paid by Tenant to Landlord after deducting the allowance paid by Landlord to Tenant and all expenses and costs incurred or paid (including any allowances, construction costs and administrative costs) by Landlord in reletting the Premises and in collecting the rent in connection therewith, which right to a credit shall terminate on the date this Lease would have expired pursuant to Section 2.02. Suit or suits for the recovery of the deficiency or damages referred to in this Subsection 15.02(c) or for any installment or installments of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent hereunder, or for a sum equal to any such installment or installments, may be brought by Landlord all at once or from time to time at Landlord's election, and nothing in this Lease shall be deemed to require Landlord to await the date whereon this Lease or the term hereof would have naturally expired had there been no such default by Tenant or no such termination. (d) For the purpose of this Section 15.02, it shall be deemed that the Percentage Rent for any period after any such default and entry by Landlord would have been at the monthly rate thereafter equal to the average Percentage Rent which Tenant was obligated to pay to Landlord under this Lease within the two (2) Lease Years (or lesser number of Lease Years since the Term Commencement Date) immediately preceding the date of such entry. (e) Tenant hereby expressly waives, so far as permitted by law, any and all right of redemption or re-entry or repossession under present or future laws arising after Landlord's recovery of possession, including any amendments hereafter, or to restore the operation of this Lease. Landlord and Tenant, so far as permitted by law, waive and will waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, or any claim or injury or damage. The terms "enter," "re-enter," "entry" or "re-entry" as used in this Lease are not restricted to their technical legal meaning. In the event Landlord commences any proceedings for the recovery of possession of the Premises or to recover for non-payment of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent, [***]. This may not, however, be construed as a waiver of Tenant's rights to assert such claim in any separate action or actions initiated by Tenant. (f) No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach shall be deemed an accord and satisfaction thus Landlord may accept any check or payment without prejudice to Landlord's rights to recover the balance due, nor shall it constitute a waiver of any such breach or of such covenant, agreement, term and condition, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. (g) In the event of any breach or threatened breach by Tenant of any of the covenants, agreements, terms or conditions contained in this Lease, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity, by statute or otherwise. (h) Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereinafter existing at law or in equity, by statute or otherwise. ARTICLE 16 MECHANICS' LIENS 16.01 - MECHANICS' LIENS (a) If any mechanics' liens are filed against the Premises or any portion of the Shopping Center based upon any act of Tenant or anyone claiming through Tenant, Tenant shall hold Landlord harmless from all damages, claims and expenses arising therefrom, and Tenant, after notice from Landlord (or any person in privity of estate with Landlord), shall forthwith commence such action by bonding, deposit, payment or otherwise as will remove or satisfy such lien within thirty (30) days. In the event Tenant does not remove or satisfy said lien within said thirty (30) day period, Landlord shall have the right to do so by posting a bond or undertaking, and Tenant agrees to reimburse Landlord for all reasonable out-of-pocket expenses incurred by Landlord in connection therewith five (5) days after receipt by Tenant of Landlord's invoice therefor. These expenses shall include, but not be limited to, filing fees, legal fees and bond premiums. (b) Nothing in this Article 16 shall be deemed or construed as (i) Landlord's consent to any person, firm or corporation for the performance of any work or services or the supply of any materials to the Premises or any improvement thereon, or (ii) giving Tenant of any other person, firm or corporation any right to contract for or to perform or supply any work, services or materials that would permit or give rise to a lien against the Premises or any part thereof. *** Confidential treatment requested. 22 27 ARTICLE 17 ASSIGNMENTS, SUBLEASES AND OTHER TRANSFERS OF TENANT'S INTEREST 17.01 - LIMITATIONS ON TENANT'S RIGHTS (a) Neither this Lease nor the interest of Tenant in this Lease shall be sold, assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation of law or otherwise, nor shall the Premises or any part thereof be sublet or subject to any license or concession without the prior written consent of Landlord in each instance. The sale or transfer of stock constituting a controlling interest in Tenant or Tenant's Guarantor shall be considered for the purpose of this Lease to be an assignment, and likewise shall require Landlord's prior written consent, except where Tenant or Tenant's Guarantor is a corporation having its shares traded on the New York, American or Over-The-Counter stock exchange or market. Tenant shall make available to Landlord the stock record books of Tenant and Tenant's Guarantor and shall produce the same on request of Landlord. Similarly, if Tenant is a partnership, the interest of any partner shall not be transferred without Landlord's prior written consent. For the purposes of this Lease, the entering into of any management agreement or any similar agreement which transfers control of the business operations of Tenant in the Premises shall be treated as an assignment of this Lease and shall require Landlord's prior written consent. Any attempted transfer, assignment, subletting, license or concession agreement, hypothecation or other transfer herein that is prohibited without Landlord's prior written consent shall be void and confer no rights upon any third party. Anything contained in this Section 17.01(a) to the contrary notwithstanding, Tenant shall have the right without Landlord's consent to assign this Lease or sublet the Premises, subject to the terms of this Lease, in conjunction with the sale of substantially all of the other assets and other store locations of Tenant to Tenant's parent, Tenant's subsidiary, or a subsidiary of Tenant's parent, provided that at least seventy-five percent (75%) of Tenant's other stores located in the United States are simultaneously transferred to such entity. Tenant shall remain primarily liable under this Lease following any assignment of the Lease or subletting of the Premises. Subject to paragraph (f) hereinbelow, Landlord shall not unreasonably withhold its consent to any assignment or subleasing and shall respond to any request by Tenant for permission to sublease or assign with thirty (30) days after receipt of written request. If Landlord objects to such assignment or sublease, Landlord shall advise Tenant of the reasons for such objections. If Landlord fails to respond to such request within said thirty (30) days, and such failure continues for ten (10) days following Notice from Tenant, then such failure shall be deemed approval of such sublease or assignment. Notwithstanding the terms of the immediately preceding grammatical paragraph provided Tenant is not in default beyond any applicable cure period, named Tenant may, without the consent of Landlord, assign this Lease or sublet the entire Premises to any corporation which owns all of the issued and outstanding common stock of named Tenant, or to a wholly owned subsidiary corporation of named Tenant, or to any corporation resulting from the consolidation or merger of named Tenant, in or with any other business organization or any person, firm or corporation acquiring all of the issued and outstanding capital stock of named Tenant, or all or substantially all of the assets, no less than eighty percent (80%) of store locations and leases (including this Lease) of named Tenant to the same entity; however, no such assignment shall be deemed effective unless and until such assignee executes and delivers to Landlord, at no cost to Landlord, a written agreement in form and substance acceptable to Landlord whereby such assignee assumes for the benefit of Landlord the performance and observance of all of the terms, conditions and covenants contained in this Lease. The foregoing is subject to Tenant providing Landlord with thirty (30) days' written notice in advance, including statements of fact certified by an authorized officer of Tenant, certifying the facts upon which Tenant is claiming the right to assign this Lease pursuant to this grammatical paragraph. In addition, any private placement or public offering of ownership interest in Tenant shall not require Landlord's prior consent, provided that as a result of any private placement the day-to-day management of Tenant remains unchanged. Notwithstanding anything contained in this Section 17.01 to the contrary, a public offering of Tenant's voting stock on a nationally recognized public stock exchange shall not be deemed an assignment of this Lease, provided (i) Tenant shall have given Landlord ten (10) days' prior written notice of such intended public offering, and (ii) this Lease is not further assigned except as provided for in this Article 17. (b) No permitted assignment made shall be effective until there are delivered to Landlord (i) an agreement, in recordable form, executed by Tenant and the proposed assignee, wherein such assignee ensures due performance of the obligations of Tenant's part to be performed under this Lease to the end of the term hereof and (ii) a written consent to such assignment by the holder of any fee or leasehold mortgage affecting the Premises to which this Lease is then subject and such consent shall have been obtained and delivered to Landlord if so required by the terms of such mortgage or by a collateral document securing the same obligations as are secured by such mortgage. (c) Any assignment of this Lease or any sublease affecting the Premises or any other permitted transfer hereunder shall be subject and subordinate to the full terms and conditions of this Lease. Regardless of either the assumption by any assignee or sublessee of due performance or the Landlord's acceptance of rent or other charges from such assignee or sublessee, Tenant shall not be released by any assignment or sublease but shall continue to be fully responsible for the due performance of Tenant's obligations hereunder in the same manner and to the same extent as if no such assignment or sublease had been made. Notwithstanding anything to the contrary in this Section 17.01(c), for any assignment of this Lease for which Landlord's consent is required and such consent is granted, Tenant shall be released from any future obligations under this Lease provided that the proposed assignee maintains a net worth of at least [***] month period immediately preceding the assignment and for the [***] months immediately following the assignment. (d) In the event Tenant assigns or subleases all or any portion of the Premises as set forth in this Article 17 and the amounts due to Tenant under such assignment or sublease exceed the amounts reserved to be paid to Landlord by Tenant under this Lease, then Tenant shall pay to Landlord one-half of the amount by which such assignment or sublease rent exceeds Rent as set forth in Section 3.01(a) above. In the event Tenant assigns or subleases only a portion of the Premises, the assignment or sublease rent shall be calculated on a per square foot basis and then compared to the then applicable per square foot Rent reserved in Section 3.01(a) above to determine whether or not such assignment or sublease rent exceeds Rent. *** Confidential treatment requested. 23 28 (e) Any transfer made in violation of the provisions of subsections (a), (b) or (c) in this section 17.01 shall constitute an event of default under Section 15.01 herein and give rise to Landlord's right to re-enter the Premises in accordance with Section 15.02. (f) Notwithstanding anything in this Section 17.01 to the contrary, if tenant desires to assign its interest under this Lease or to sublet all of the Premises to a Permitted Party (as hereinafter defined), Tenant shall deliver to Landlord written notice, requesting Landlord's consent to such transaction, which consent request shall include (i) a fully executed letter of intent containing the material terms of the proposed assignment or sublet transaction (including proposed rent (including additional rent), square foot area, term and use), (ii) current reasonable financial information with respect to the proposed assignee or sublessee, including without limitation its most recent financial report, (iii) a statement that the proposed assignment or sublease relates to the entire Premises for the remaining term of this Lease, and (iv) an express statement to the effect that the proposed assignee or sublessee is a Permitted Party within the meaning of this paragraph and that Landlord has the right to terminate this Lease in connection with the assignment or sublease pursuant to this Section 17.01(f) or such assignment or sublease shall be deemed consented to by Landlord. A notice that contains the information described in clauses (i) through (iv) shall be deemed an offer ("Takeback Offer") from Tenant to Landlord whereby Landlord may terminate this Lease. If Tenant's notice does not expressly state the items described in clauses (i) through (iv) including that the proposed assignee or sublessee is to a Permitted Party, such notice shall constitute a request by Tenant for Landlord's consent to sublease the Premises or assign this Lease subject to the other terms of this Section 17.01; such notice shall not constitute a Takeback Offer and Landlord shall not be entitled to terminate this Lease under this Section 17.01(f). The Takeback Offer may be exercised by Landlord by written notice ("Takeback Notice") to Tenant at any time within thirty (30) days after such Takeback Offer has been given by Tenant to Landlord, and during such thirty (30) day period Tenant shall not assign this Lease to such prospective assignee or sublet the Premises to such prospective subleases unless such assignment is expressly conditioned upon and not effective until the expiration of the 30-day period for Landlord to deliver the Takeback Notice. The term "Permitted Party" shall mean a third party (i) who will operate the Premises for a lawful bona fide retail use consistent with uses at other first-class shopping centers or for the use permitted under Section 6.01 of this Lease, and not in violation of any use restriction in effect for the Shopping Center of which Tenant has been advised within twenty (20) days after Landlord's receipt of Tenant's Takeback Offer; (ii) who has a net worth equal to or greater than the then net worth of Tenant; and (iii) who is a national or regional chain of retail stores, or is then operating (directly or indirectly) at least five (5) stores in the States of New York, New Jersey, Pennsylvania, Massachusetts and Connecticut for the same or similar use, or has at least ten (10) years of retail operating experience. Upon such termination, all obligations of Landlord and Tenant (other than those that expressly are stated to survive termination) shall cease to be of further force and effect. Notwithstanding anything in this Section 17.01 to the contrary, Tenant shall have the right, without Landlord's consent, to secure furniture, fixture and equipment financing in the ordinary course of business and to grant to the financing party a security interest in the furniture, fixtures, or equipment. If Landlord exercises its option to terminate this Lease pursuant to this subsection in connection with an assignment or sublet of all of the Premises, then, unless Tenant, within fifteen (15) days after receipt of the Takeback Notice, withdraws Tenant's request for Landlord's consent to the proposed assignment or sublet, this Lease shall end and expire on the effective date designated by Landlord in its Takeback Notice (which date shall not be less than sixty (60) days nor more than one hundred twenty (120) days after the date of the Takeback Notice) as fully and completely as if such early termination date were the original expiration date of the Term, and all Rent shall be apportioned as of such date. If (x) Landlord shall not elect to send a Takeback Notice within said 30-day period and (y) Tenant is not then in default under this Lease beyond any applicable notice or cure periods, Tenant shall be entitled, without any consent by Landlord, to assign this Lease or sublet all of the Premises on substantially the terms for proposed rent (including additional rent), square foot area, term and use and to the Permitted Party, described in Tenant's request for Landlord's consent, provided that if Tenant shall then be in default under this Lease beyond any applicable notice or cure period, then any such assignment or sublet shall not be effective until such defaults are cured. Any assignment or sublet to a Permitted Party shall be subject and subordinate to the terms, conditions and covenants of this Lease (other than with respect to the use set forth in Section 1.03), provided that if the assignee or sublessee will not operate any racing simulator or other rides within the Premises, then notwithstanding anything to the contrary in Section 3.02. Percentage Rent shall be an amount equal to [***] of Gross Receipts in excess of [***]. To the extent necessary, Tenant and Landlord shall execute and deliver a Lease Modification Agreement or other agreement reflecting the new use clause, if any. 17.02 - EFFECT OF LANDLORD'S CONSENT (a) Any consent by Landlord to a sale, assignment, sublease, mortgage, pledge, license, concession, hypothecation, or transfer of this Lease, shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from the requirement of obtaining prior written consent of Landlord to any further sale, assignment, sublease, mortgage, pledge, hypothecation, or transfer of this Lease. When the consent of Landlord is required hereunder to any proposed assignment or sublease of this Lease, or to the mortgaging, pledging, licensing, concession or hypothecation of this Lease, contemporaneously with the request of Tenant therefor, Tenant shall submit in writing information reasonably sufficient to enable Landlord to make a decision with respect thereto. (b) With respect to any of the consents requested by Tenant, whether or not the Landlord has consented thereto, Tenant shall pay to the Landlord the reasonable counsel fees and disbursements and other expenses incurred by the Landlord in connection therewith. Notwithstanding anything to the contrary in this Section 17.02(b), in no event shall this sum exceed [***]. *** Confidential treatment requested. 24 29 ARTICLE 18 COMPLIANCE WITH GOVERNMENT ORDERS 18.01 - TENANT TO COMPLY Tenant, at its own expense, shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state and local governments and of any and all other departments and bureaus applicable to Tenant's particular use of the Premises or to the business conducted by Tenant at the Premises, whether ordinary, extraordinary, foreseen or unforeseen ("Governmental Orders"). In addition, Tenant, at its own expense, shall comply promptly with and execute all rules, orders, regulations and recommendations of the Board of Fire Underwriters, Rating Board and Landlord and Tenant's insurance companies with respect to the prevention of fires and the exposure of liability risks ("Insurance Matters"). Tenant, at its own expense, shall furnish and maintain in good order an adequate number and type of fire extinguishers on the Premises at all times. Notwithstanding the foregoing, in no event shall Tenant ever be responsible for any violation of Governmental Orders or Insurance Matters arising directly out of Landlord's Work. Landlord hereby represents that the Premises shall comply with all applicable Governmental Orders and Insurance Matters on the date Landlord delivers possession of the Premises to Tenants. 18.02 - FAILURE TO COMPLY In case Tenant fails or neglects to comply with any of the Government Orders, Insurance Matters or the ADA (as hereinafter defined) as herein required of Tenant, then Landlord or its agent may enter the Premises and make said repairs and comply with any and all of the Government Orders, Insurance Matters or the ADA at the cost and expense of Tenant, and in case Tenant fails to pay therefor upon notice within five (5) days thereafter, the said cost and expenses, including [***] for administration costs, shall be added to the next month's installment of Fixed Annual Minimum Rent and be due and payable as such or Landlord may deduct the same from any balance remaining in Landlord's hands. This provision is in addition to the right of Landlord to terminate this Lease under Article 15 hereof by reason of default on the part of Tenant. 18.03 - HAZARDOUS MATERIAL Tenant shall, at all times, comply with all local, state and federal laws, rules and regulations governing the use, handling and disposal by Tenant of Hazardous Material in the Premises and that portion of the Common Areas which Tenant employs for the display of its model NASCAR racing vehicle, as specifically set forth in Section 7.03 of this Lease, including, but not limited to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) and any additions, amendments, or modifications thereto. As used herein, the term "Hazardous Material" shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the Premises is located or the United States Government. Landlord and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Tenant is complying with the terms of this Section. If Tenant is not in compliance with this Section, Landlord shall have the right to immediately enter upon the Premises and take whatever actions as are reasonably necessary to comply including, but not limited to, the removal from the Premises of any Hazardous Material and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Tenant shall pay reasonable out-of-pocket costs incurred by Landlord plus [***] for administration within ten (10) days after Tenant's receipt of a bill therefor. The covenants in this Section 18.03 shall survive the expiration or earlier termination of this Lease. Landlord hereby consents to Tenant's use of (i) hydraulic oil in connection with the operation of the driving simulators and related equipment associated with Tenant's permitted use and (ii) cleaning and office products customarily used in retail or office premises, so long as all of such materials are used, handled, and disposed of in accordance with applicable laws and at no cost to Landlord. 18.04 - AMERICANS WITH DISABILITIES ACT Tenant, at its own expense, shall at all times comply with and shall cause the Premises and that portion of the Common Areas which Tenant employs for the display of its model NASCAR racing vehicle, as specifically set forth in Section 7.03 of this Lease, to be in compliance with the requirements of the Americans With Disabilities Act of 1990, and any additions, amendments or modifications thereto and all related regulations (the "ADA"). Landlord, at Landlord's sole cost and expense, shall be responsible for insuring that Landlord's Work and the Common Areas are in compliance with the ADA. ARTICLE 19 SUBORDINATION, MORTGAGEE'S RIGHTS AND ASSIGNMENT OF RENTS 19.01 - SUBORDINATION (a) The rights and interests of Tenant under this Lease shall be subject and subordinate to any ground lease, mortgage or trust deed now or hereafter placed upon any portion of the Shopping Center, and to any advances made thereunder, and to the interest thereon, and to all renewals, modifications, consolidations, replacements, extensions and re-financings thereof. Tenant agrees that any ground lessor, mortgage or trustee may elect to give the rights and interest of Tenant under this Lease priority over the lien of its ground lease, mortgage or trust deed. In the event of such election, the rights and interest of Tenant under this Lease automatically shall have priority in whole or in part, over the lien of said ground lease, mortgage or trust deed, and no additional consent or instrument shall be necessary or required. However, Tenant agrees to execute and deliver such instruments as may be reasonably requested by any ground lessor, mortgagee or trustee for such purposes, and in the event Tenant fails to do so within ten (10) days after demand in writing, Tenant does hereby make, constitute and irrevocably appoint Landlord as its attorney-in-fact (which shall be deemed to be coupled with an interest) and in its name, place and stead so to do. In the event Landlord shall elect to refinance the Shopping Center during the term, Tenant's subordination in such future *** Confidential treatment requested. 25 30 lender shall be expressly conditioned upon Tenant's receipt of a non-disturbance agreement reasonably acceptable to both Tenant and such future lender. Landlord will deliver to Tenant, on or before September 15, 1999, a non-disturbance agreement from each existing ground lessor and lender with an interest in the Shopping Center, and will use reasonable efforts to obtain the non-disturbance agreement in a form reasonably acceptable to Tenant. In the event Landlord is unable to obtain such non-disturbance agreement by September 15, 1999, then Tenant shall not be obligated to accept possession of the Date until Landlord obtains such non-disturbance agreement. If Landlord is unable to obtain such non-disturbance agreement by September 15, 1999, then Tenant may terminate this Lease upon thirty (30) days notice to Landlord. Landlord, at any time after the execution of this Lease, may, in good faith, give notice to Tenant that Landlord in unable despite its reasonable efforts to obtain the non-disturbance agreement on the form requested by Tenant. At such time, if Tenant refuses to accept the form of non-disturbance agreement that Landlord is able to secure from its Lender, Landlord may terminate this Lease upon thirty (30) days notice to Tenant. (b) Notwithstanding anything to the contrary contained in this Section 19.01, so long as Teachers Insurance and Annuity Association of America ("TIAA") and Connecticut General Life Insurance Company ("CGLIC") have an interest in the property, the rights of Tenant under this Lease shall be subject and subordinate only to any first mortgage and to any subordinate mortgage approved by TIAA and CGLIC, provided however, nothing contained in this Section 19.01(b) shall be construed to in any way limit Landlord's obligations under this Lease to provide Tenant with a non-disturbance agreement pursuant to Section 19.01(a). 19.02 - Mortgagee's Rights (a) So long as any such ground lease, trust deed or mortgage remains a lien on any portion of the Shopping Center, Tenant agrees, simultaneously with the giving of any notice to Landlord which is required to be given by this Lease, to give a duplicate copy thereof to the respective ground lessor, mortgagee or trustee, provided Landlord has given Tenant notice of the name and address of any such ground lessor, mortgagee or trustee. Landlord agrees to notify Tenant of any ground lessor, mortgagee or trustee to whom such notice must be sent. Further, Tenant agrees that if Landlord defaults in its performance of any of the covenants under this Lease and if such default entitles Tenant to terminate this Lease, the ground lessor, mortgagee or trustee may cure said default within thirty (30) days after any time period required of Landlord; provided, however, that if such default cannot be cured within such time period, Landlord shall be deemed to have cured such default if cure of the default is commenced within such time period, and thereafter diligently and in good faith continued with and actually completed. Landlord shall promptly notify Tenant of its commencement of such cure, and, if necessary, be permitted entry upon the Premises for the purpose of curing any such default. The giving of any such notice to Landlord shall not be properly given under the terms of this Lease and shall be of no force and effect until a duplicate copy thereof is also given to the ground lessor, mortgagee or trustee pursuant to this Section 19.02. (b) Tenant hereby acknowledges that so long as any ground lease, mortgage or trust deed is a lien upon the Premises, Landlord cannot agree to reduce the rents below that provided for in this Lease, provide for payments of rent prior to the time herein provided for, nor terminate this Lease prior to the end of the term, except as otherwise provided in this Lease, without first obtaining the written consent of the ground lessor, mortgagee or trustee, and that any such proposed modification or termination without the written consent of said ground lessor, mortgagee or trustee shall be void as against said ground lessor, mortgagee, or trustee. (c) So long as a mortgage remains a lien on any portion of the Shopping Center neither Tenant nor any other person having an interest in the possession, use, occupancy or utilization of the Premises shall enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the Premises which provides for rental or other payment for such use, occupancy or utilization based, in whole or in part, on the net income or profits derived from any person from the premises leased, used, occupied or utilized (other than an amount based upon a fixed percentage or percentages of Gross Receipts, as defined herein), and any purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the Premises. 19.03 - Assignment of Rents (a) With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees: (i) that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage or the ground lessor, shall never be treated as an assumption by such holder or ground lessor any of the obligations of Landlord hereunder, unless such holder or ground lessor shall, by notice sent to Tenant, specifically otherwise elect; and (ii) that except as aforesaid, such holder or ground lessor shall be treated as having assumed Landlord's obligations hereunder with respect only to those obligations that arise following a foreclosure or deed in lieu thereof, or assumption of Landlord's position by a ground lessor only upon foreclosure of such holder's mortgage and the taking of possession of the Premises, or, in the case of a ground lessor, the assumption of Landlord's position hereunder by such ground lessor. Tenant agrees that with respect to those obligations of Landlord that arise prior to a foreclosure or deed in lieu thereof, or assumption of Landlord's position by a ground lessor, such foreclosing mortgagee in possession or ground lessor shall have no liability, provided that nothing contained herein shall be deemed to relieve Landlord from performance of any obligations arising under this Lease prior to the date of such assumption nor any such foreclosing mortgagee or ground lessor, as applicable, from performance of non-monetary obligations of a continuing nature arising under this Lease prior to the date of such assumption. (b) Where a party acquires Landlord's interest in property (whether land only, or land and buildings) which includes the Premises, and simultaneously leases the same back, such acquisition shall not be treated as an assumption of Landlord's position hereunder, and this Lease shall thereafter be subject and subordinate at all times to such lease (subject to the provisions of Section 19.01 above). 26 31 ARTICLE 20 ENTRY TO PREMISES 20.01 - ENTRY TO PREMISES BY LANDLORD Landlord shall have the right to enter the Premises at all reasonable times acceptable to both Landlord and Tenant for the purposes of: (i) inspecting the same, (ii) making any repairs to the Premises and performing any work therein that may be necessary or desirable, (iii) exhibiting the Premises for the purpose of sale, ground lease, mortgage or other financing, (iv) exhibiting the Premises (within one year prior to the expiration of the term of this Lease) to prospective tenants. Except in the case of an emergency, Landlord shall be accompanied by a representative of Tenant during any entry to the Premises unless Tenant waives such requirement in writing, in advance of such entry. During any such entry, Landlord shall not interfere with Tenant's access to the Premises. Nothing in this Lease shall imply any duty on the part of Landlord to do work or perform obligations which, under any of the provisions of this Lease, Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a constructive eviction nor a waiver of Tenant's default. ARTICLE 21 NOTICES AND CERTIFICATES 21.01 - NOTICES (a) Any notice, statement, certificate, request or demand required or permitted to be given or delivered in this Lease shall be in writing, and personally delivered, sent by reputable overnight courier, or sent by registered or certified mail, postage prepaid, return receipt requested and addressed to Landlord at the address shown at the beginning of this Lease, and to Tenant at the address shown at the beginning of this Lease, or to such other addresses as Landlord or Tenant shall designate in the manner herein provided. In the case of any default notice sent by Landlord to Tenant, Landlord shall send a copy to: Paul, Hastings, Janofsky & Walker, LLP, 555 South Flower Street, 23rd Floor, Los Angeles, California 90071-2371, Attn: Rick S. Kirkbride. Landlord's managing agent, Pyramid Management Group, Inc., is hereby authorized and designated to give or deliver to Tenant any notice under this Lease. Any such notice, statement, certificate, request or demand shall be deemed given, (i) when actually delivered, if personally delivered or delivered by overnight or other courier or delivery service which confirms delivery in writing, or (ii) within two (2) business days after deposit in the US mail, if sent by registered or certified mail, postage pre-paid, return receipt requested, except in case of notice of change of address or revocation of a prior notice, which shall only be effective upon receipt. (b) At any time or times when Tenant's interest herein is vested in more than one person, firm or corporation, jointly, in common or in severalty, a notice given by Landlord to any one such person, firm or corporation shall be conclusively deemed to have been given to all such persons, firms or corporations. Any notices by Tenant pursuant to the provisions hereof shall be void and ineffective unless signed by all such persons, firms and corporations, unless all such persons, firms or corporations have previously given notice to Landlord, signed by each of them and designating and authorizing one or more of them to give the notice referred to, and such notice shall then be unrevoked by any notice to Landlord. 21.02 - ESTOPPAL CERTIFICATE OF LANDLORD Within ten (10) days after request by Tenant, Landlord, from time to time and without charge, shall deliver to Tenant or to a person, firm or corporation specified by Tenant, a duly executed and acknowledged instrument, certifying: (i) that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the data of any such modification; and (ii) whether Landlord knows or does not know, as the case may be, of any default by Tenant in the performance by Tenant of the terms, covenants, and conditions of this Lease, and specifying the nature of such defaults, if any. Such certification shall not estop Landlord from thereafter asserting any existing default of which Landlord did not have actual knowledge on the date of execution thereof. 21.03 - ESTOPPAL CERTIFICATE OF TRUST Within ten (10) days after request by Landlord or Landlord's ground lessor or mortgagee, Tenant, from time to time and without charge, shall deliver to Landlord or the requesting party, or to a person, firm or corporation, specified by Landlord, a duly executed and acknowledged instrument, certifying: 27 32 (i) that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; (ii) whether Tenant knows or does not know, as the case may be, of any default by Landlord in the performance by Landlord of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any; (iii) whether or not there are any then existing permitted set-offs or defenses by Tenant, and if so, specifying them; (iv) the dates to which the Fixed Annual Minimum Rent, Percentage Rent, and Additional rent have been paid; (v) that the operation and use of the Premises do not involve the generation, treatment, storage, disposal or release of any Hazardous Material or a solid waste into the environment in reportable amounts or in manners which do not comply with all environmental laws and that the Premises is being operating in accordance with all environmental laws, zoning ordinances and building codes; and (vi) such other information as Landlord or Landlord's ground lessor or mortgagee may reasonably request. Such certification shall not estop Tenant from thereafter asserting any existing default of which Tenant did not have actual knowledge on the date of execution thereof. ARTICLE 22 COVENANT OF QUIET ENJOYMENT 22.01 - COVENANT OF QUIET ENJOYMENT (a) So long as no event of default is existing pursuant to Section 15.01 of this Lease, Tenant shall lawfully, peaceably and quietly have, hold and enjoy the Premises during the term hereof on and after the Term Commencement Date without hindrance or ejection by any persons lawfully claiming under Landlord; but it is understood and agreed that this covenant, and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownership of Landlord's interest hereunder. (b) With respect to any services to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish the same when prevented from doing so by strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, or because of war or other emergency, or for any cause beyond Landlord's control. (c) Landlord shall be in default of this Lease if Landlord fails to perform any obligation required to be performed by Landlord under this Lease and if such failure is not cured within thirty (30) days after receipt of Notice from Tenant specifying the nature of such failure. In the event of any such default by Landlord, Tenant shall have the right to exercise all rights and remedies available at law or in equity. Landlord shall reimburse Tenant for any reasonable expenses incurred by Tenant in curing Landlord's failures within twenty (20) days following receipt by Landlord of paid invoices from Tenant. In the event Landlord fails to reimburse Tenant for such amounts within thirty (30) days following receipt by Landlord of paid invoices from Tenant, then Tenant shall have the right to offset such amounts against the next ensuing installments of Rent, Percentage Rent and Additional Rent coming due under this Lease until the entire amount has been recouped by Tenant. ARTICLE 23 MISCELLANEOUS PROVISIONS 23.01 - HOLDOVER (a) It is expressly understood by Tenant that Tenant's right to possession of the Premises under this Lease shall terminate at the expiration or earlier termination of the term, and should Tenant continue thereafter, to remain in possession, Landlord, should it so elect, shall be entitled to the benefits of all provisions of law with respect to summary recovery of possession from a holdover tenant. Tenant shall indemnify and save harmless Landlord from any claim, damage, expense, cost or loss which Landlord may incur by reason of such holding over, including without limitation, any claim of a succeeding tenant, or any loss by Landlord with respect to a lost opportunity to re-let the Premises. (b) Should Tenant continue to occupy the Premises after the expiration or earlier termination of the term with the consent of the Landlord, such tenancy shall be from month-to-month, and such month-to-month tenancy shall be under the same terms, covenants and conditions as set forth in this Lease, except that Tenant shall pay Fixed Annual Minimum Rent on the basis of one and one-half (1-1/2) times the Fixed Annual Minimum Rent for the last year of the term. 28 33 23.02 - LIMITATION ON LANDLORD'S PERSONAL LIABILITY (a) It is understood and agreed that Tenant shall look solely to the estate and property of Landlord in the Shopping Center for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of the Lease to be observed or performed by the Landlord, and any other obligation of Landlord created by or under this Lease, and no other property or assets of Landlord or of the partners, beneficiaries, co-tenants, shareholders, members, or principals (as the case may be) shall be subject to levy, execution or other enforcement procedures for the satisfaction of Tenant's remedies. In no event shall Tenant name Landlord's partners, members, beneficiaries, co-tenants, shareholders or principals to any suit or other proceeding to which Tenant and/or Landlord are a party arising out of or relating to this Lease, unless the naming of such partners, members, beneficiaries, co-tenants, shareholders or principals is required in order to permit the Tenant to obtain jurisdiction over Landlord herein, (b) The term "Landlord," as used in Subsection 23.02(a) and throughout this Lease, shall be limited to mean and include only the owner or owners at the time in question of Landlord's interest in this Lease. Further, in the event of any transfer by Landlord of Landlord's interest in this Lease, Landlord herein named (and in case of any subsequent transfers or conveyances, the then assignor), including each of its partners, beneficiaries, co-tenants, shareholders, members, or principals (as the case may be), shall be automatically freed and relieved, from and after the date of such transfer or conveyance, of all liability for the performance of any covenants and agreements on the part of Landlord that accrue after the date of said transfer (but not for any obligation that accrued prior to the date of said transfer, for which the party assigning Landlord's interest in this Lease shall remain liable, subject to and in accordance with the terms of this Lease). 23.03 - DEFINITION OF TENANT'S ALLOCABLE SHARE (a) Intentionally deleted. (b) Tenant's Allocable Share of Real Property Taxes pursuant to Section 4.01 shall be the product of multiplying the amount of said Real Property Taxes by a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is the total number of square feet of all buildings then leased in the Shopping Center on the date as of which such computation is required to be made under the terms of this Lease, after deducting therefrom the square footage of (i) any REA Parcel or other parcel which is separately accessed and the Real Property Taxes of which are paid directly to the taxing authority by the tenant or occupant thereof, (ii) any anchor store and (iii) any theater, within the Shopping Center. (c) Whenever used herein, the term "square feet" shall consist of the area of floor space on all floors measured from the outside face of all exterior walls of the buildings (or the midpoints of any interior walls) and any outdoor sales areas which are mechanically heated or air-conditioned. It shall not include the floor area of any roof structures used for mechanical equipment. Whenever used in this Lease, an "anchor store" is defined to mean a premises in the Shopping Center containing not less than fifty thousand (50,000) square feet. In the event that at any time the computation of Tenant's Allocable Share under Section 23.03(b) is required to be made, less than ninety-two and one-half percent (92.5%) of the total number of leasable square feet of all buildings in the Shopping Center is "than leased," then the minimum denominator used in the fraction used for determining Tenant's Allocable Share under Section 23.03(b) shall not be less than ninety-two and one-half percent (92.5%) of the total number of leasable square feet of all buildings then comprising the Shopping Center (less the deductions set forth in Section 23.3(b)). 23.04 - FORCE MAJEURE The period of time during which either party is prevented or delayed in any performance or the making of any improvements or repairs or fulfilling any obligation under this Lease, other than the payment of Fixed Annual Minimum Rent, Percentage Rent and Additional Rent, due to unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil commotion, Acts of God, the public enemy, governmental prohibitions or regulations or inability to obtain materials by reason thereof, or any other causes beyond such party's reasonable control, shall be added to such party's time for performance, and such party shall have no liability by reason of such delay, except that as a condition to Tenant's right to avail itself of Force Majeure, Tenant must give Landlord written notice of such claimed Force Majeure. 23.05 - RELOCATION OF TENANT Landlord shall have the right to relocate Tenant to another space, the mall frontage of which shall be equal to or greater than that of the Premises, and the square footage of which shall not vary from that of the Premises by greater than one hundred (100) square feet within the Shopping Center after the expiration of the first thirty-six (36) months of the term of this Lease, upon one hundred twenty (120) days Notice to Tenant, at Landlord's cost and expense, which relocation shall in no way affect the obligation or duties of either party hereunder. Landlord shall be obligated for all expenses associated with such relocation, including but not limited to the construction of the new space to a condition and level of quality of finishes at least equivalent to the condition and level of the Premises on the date of Landlord's relocation notice and any actual out-of-pocket costs incurred by Tenant for the printing of new stationary and business cards, and the costs of moving Tenant's Personal Property. In the event Tenant shall fall or refuse to accept the new location within twenty (20) days of such Notice, Landlord at its option, may terminate this Lease upon forty-five (45) days written Notice to Tenant, provided that if Landlord shall fail to give the Notice of Landlord's election to terminate within forty-five (45) days after the expiration of such twenty (20) days, then Landlord's termination right under this Section 23.05 shall be waived and this Lease shall remain in full force and effect through the Termination Date as defined in Section 2.02. Tenant's written consent, which may be withheld in Tenant's sole discretion, shall be required for any relocation which moves the Premises outside the cross-hatched area shown on Exhibit A-2. 29 34 23.06 - CHANGES AND ADDITIONS Landlord hereby reserves the right at any time, and from time to time, to make alterations or additions to, and to build additional stories on the building in which the Premises are located and to build adjoining the same. Landlord also reserves the right at any time, and from time to time, to construct other buildings and improvements in Landlord's Tract, to enlarge or otherwise modify the Shopping Center, to make alterations therein or additions thereto, to build additional stories on any building or building within the Landlord's Tract, to build adjacent thereto, to construct decks or elevated parking facilities, to install, maintain, use, repair and replace ducts, wires, pipes and conduits passing through or under the Premises serving other parts (now existing or hereafter added) of Shopping Center, and to sell or lease any part of Landlord's Tract. The purpose of the attached Site Plan is to show the approximate location of the Premises within the Shopping Center, and Landlord reserves the right at any time to relocate the various buildings, parking areas and other Common Areas shown on said Site Plan; provided, however, that there shall not be caused thereby any unreasonable obstruction of Tenant's right of access to the Premises or any unreasonable interference with Tenant's use of the Premises for the purposes hereinabove set forth, or the access to and viability of the Premises as more fully set forth in Section 7.03 of this Lease. 23.07 - ATTORNMENT BY TENANT If any time during the term of this Lease the Landlord hereunder shall be the holder of a leasehold estate covering purposes which include the Premises, and if such leasehold estate shall be canceled or otherwise terminated prior to the expiration date thereof and prior to the expiration of the term of this Lease, or in the event of the surrender thereof whether voluntary, involuntary or by operation of law. Tenant shall make full and complete attornment to the lessor of such leasehold estate, provided the lessor of such leasehold estate assumes all of Landlord's obligations under this Lease, for the balance of the term of this Lease upon the same covenants and conditions as are contained herein so as to establish direct privity between such lessor and Tenant and with the same force and effect as though this Lease was made directly from such lessor to Tenant. Tenant shall then make all rent payments thereafter directly to such lessor. In the event any proceedings are brought for the foreclosure of, or in the event of conveyance by deed in lieu of foreclosure of, or in the event of the exercise of the power of sale under, any mortgage or deed of trust made by Landlord covering the Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the Premises. Tenant shall attorn to and hereby covenants and agrees to execute and instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognize such successor as the Landlord under this Lease. 23.08 - INDEX As used in this Lease, "Index" means the then higher of either of the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or the Consumer Price Index for All Urban Consumers (CPI-U) of the United States Department of Labor's Bureau of Labor Statistics in effect and generally published at the time the computation is to be made. If the aforesaid price indices are no longer published, then another price index, generally recognized as authoritative, shall be substituted by Landlord. In the event the parties are unable to so agree, the matter shall be submitted to arbitration pursuant to Section 23.18. During any period while the determination of such a dispute is pending, Tenant shall continue to pay the sum previously in effect; provided, however, that the adjusted sum as finally determined shall be retroactive from the prescribed deficiency owed by Tenant shall be paid promptly upon a final determination of the dispute. 23.09 - SURVIVAL OF TENANT'S OBLIGATIONS Any sums due either party from the other that by the terms herein would be payable, or are incapable of calculation, until after the expiration or earlier termination of this Lease shall survive and remain a continuing obligation until paid. 23.10 - EFFECT OF LANDLORD'S NOTICE TO TERMINATE Any right on the part of Landlord to terminate this Lease shall, when exercised, require no further act, to the end that at the expiration of the applicable time period, if any, contained in the particular termination provision, this Lease and the term hereunder shall end and expire as fully and completely as if such termination date was the date herein definitely fixed for the end and expiration of the Lease and the term hereof, and upon such date Tenant shall quit and surrender the Premises to Landlord. 23.11 - EFFECT OF CAPTIONS The captions, bold-faced type, underlining, notational references, or legends in this Lease are inserted only for convenient reference or identification of the particular paragraphs. They are in no way intended to describe, interpret, define or limit the scope, extent or interest of this Lease, or any paragraph or provision thereof. 23.12 - TENANT AUTHORIZED TO DO BUSINESS Tenant represents, warrants and covenants that it is upon the date of execution, and throughout the term of this Lease it shall be authorized to do business and in good standing in the state in which the Premises is located. Tenant, if a partnership or corporation, agrees to furnish to Landlord, upon request, evidence of authority for entering into this Lease. 23.13 - EXECUTION IN COUNTERPARTS This Lease may be executed in one or more counterparts, any one or all of which shall constitute but one agreement. 30 35 23.14 - LAW GOVERNING, EFFECT AND GENDER This Lease, and any dispute concerning this Lease, shall be governed by the laws of the state in which the Premises is located, and any dispute concerning an interpretation of any portion of the Lease or the conduct of the parties hereunder shall be brought in either Syracuse, New York, or in the jurisdiction where the Premises is located. Tenant hereby consents to service of process at the Premises in the event that Tenant does not maintain a separate business office within the state where the Premises is located. This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns, except as expressly provided otherwise. Use of the natural gender shall be deemed to include the masculine and feminine. 23.15 - MEMORANDUM OR NOTICE OF LEASE Upon request by either party, Landlord and Tenant agree to execute a Memorandum or Notice of Lease in recordable form pursuant to applicable state law. Upon the expiration or earlier termination of this Lease, the party who shall have recorded such Memorandum or Notice of Lease shall promptly execute any necessary instrument and remove the Memorandum or Notice of Lease from the public records, and upon failure to do so, the other party is hereby appointed attorney-in-fact to execute any such instrument in the recording party's name, place and stead. 23.16 - COMPLETE AGREEMENT This Lease contains and embraces the entire agreement between the parties hereto with respect to the matters contained herein, and it or any part of it may not be changed, altered, modified, limited, terminated, or extended orally or by any agreement between the parties unless such agreement is in writing and signed by the parties hereto, their legal representatives, successors or assigns. Tenant acknowledges and agrees that neither Landlord nor any representative of Landlord nor any broker has made any representation to or agreement with Tenant relating to the Premises, this Lease or the Shopping Center which is not contained in the express terms of this Lease. Tenant acknowledges and agrees that Tenant's execution and delivery of this Lease is based upon Tenant's independent investigation and analysis of the business potential and expenses represented by this Lease, and Tenant hereby expressly waives any and all claims or defenses by Tenant against the enforcement of this Lease which are based upon allegations of representations, projections, estimates, understandings or agreements by Landlord or Landlord's representative that are not contained in the express terms of this Lease. 23.17 - GUARANTY OF LEASE Intentionally deleted. 23.18 - ARBITRATION Any controversy or claim arising from or relative to any matter in connection with this Lease, with reference to which this Lease shall expressly provide that this paragraph governs, shall be settled by arbitration in the City of Syracuse, New York, in accordance with the rules of the American Arbitration Association or its successor organization, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. 23.19 - SECURITY AGREEMENT Intentionally deleted. 23.20 - INVALIDITY OF PARTICULAR PROVISIONS If any term or provision of this Lease or the application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 23.21 - EXECUTION OF LEASE BY LANDLORD The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and the document shall be effective and binding only upon the execution and delivery hereof by both the Landlord and Tenant. 23.22 - RELATIONSHIP OF THE PARTIES Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent nor any other provision herein contained, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than landlord and tenant. 23.23 - BROKERS Landlord represents and warrants to Tenant that it has not employed any realtors or brokers in connection with the negotiation of this Lease. Tenant represents that Tenant has retained as its broker Russell J. Friend of Blatteis Realty ("Tenant's Broker"), and Tenant specifically acknowledges and agrees that any fee payable to Tenant's Broker is the sole and exclusive responsibility of Tenant and Landlord shall have no liability therefor. Landlord and Tenant shall each indemnify, defend and hold harmless the other from any cost, expense or claim for brokerage or other commission arising from or out of any breach of the foregoing representation and warranty. 31 36 23.24 - REPRESENTATIONS Landlord warrants to Tenant that the Shopping Center is in good condition and repair, free of material defects, and that the Shopping Center has been constructed in accordance with applicable laws and requirements. 23.25 - ABATEMENT In the event Tenant is prevented from using the Premises or any portion thereof, for five (5) consecutive business days or ten (10) days in any twelve (12) month period (the "Eligibility Period") as a result of the failure of Landlord to maintain and repair the Shopping Center and the Premises in accordance with its obligations as set forth in this Lease, and such failure interferes with Tenant's operations and use of the Premises, or as a result of any failure to provide services or access to the Premises, or because of the presence of Hazardous Materials in or on the Shopping Center or the land on which the Shopping Center is located resulting from the acts or omissions of any party other than Tenant which pose a health risk to occupants of the Premises, then Tenant's Rent shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using the Premises or a portion thereof, in the proportion that the square footage of the portion of the Premises that Tenant is prevented from using bears to the Tenant Area of the entire Premises. However, in the event that Tenant is prevented from conducting its business in any portion of the Premises under such circumstances for period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not reasonably sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the square footage of such reoccupied portion of the Premises bears to the Tenant Area of the Premises, shall be payable by Tenant from the date such business operations commence. 23.26 - SPECIAL USE PERMIT Exceptions may be otherwise set forth in Section 5.02(a) of this Lease, Landlord represents that as of the date hereof, no "special" use permit from local governmental authorities is required for Tenant's operation for the permitted use in Section 8.01 within the Premises in accordance with this Lease. The foregoing representation shall not extend to any building or similar permits required for Tenant's Work or a certificate of use and occupancy for the Premises or licenses to conduct business and the like. 23.27 - TENANT IMPROVEMENT REBATE Notwithstanding anything contained herein to the contrary, provided Tenant is not in default under this Lease beyond the expiration of any applicable notice and cure period, Tenant shall be entitled to an allowance in the amount of [***] per square foot of the Premises ("Tenant Improvement Rebate") (e.g., if the Premises are 4,167 square feet in size, then Tenant shall be entitled to a Tenant Improvement Rebate from Landlord in the amount of [***]. The Tenant Improvement Rebate shall be paid to Tenant by Landlord in the form of an abatement (the "Abatement") of any and all charges, fees and reimbursements that otherwise would be due and owing from Tenant to Landlord (including, without limitation, Fixed Monthly Minimum Rent, Percentage Rent, Common Area Charges, insurance, and contributions to the Marketing Fund), except Tenant shall be obligated to pay Tenant's Allocable Share of all Real Property Taxes despite the Abatement. The Abatement shall commence on the Term Commencement Date and shall continue until the amount of the Abatement equals the amount of the Tenant Improvement Rebate. If this Lease is terminated prior to the expiration of the term, Tenant shall pay to Landlord, as Additional Rent, any amount of the Tenant Improvement Rebate received by Tenant (whether in the form of the Abatement or otherwise) in excess of the earned portion of the Tenant Improvement Rebate, which "earned portion" shall be determined by dividing the Tenant Improvement Rebate by the total number of months that would make up the term if not for the prior termination of this Lease (e.g., 120 months if the term is not extended pursuant to Section 2.03 above) and multiplying the result by the number of months (including whole and partial months) that occurred commencing on the Term Commencement Date and ending on the date that this Lease was terminated. For example, if the term is comprised of 120 months and if Tenant operated the Premises after the Term Commencement Date for 70 whole and partial months, then Tenant shall pay to Landlord any amount received by Tenant in excess of 7/12 (i.e., based on 70/120, or the "earned portion") of the Tenant Improvement Rebate. Such amount shall be deemed due as of the date the Lease is terminated and shall be payable within five (5) days following such date. Such amount shall not be subject to credit, offset or mitigation as otherwise provided in Section 15.02(c) of the Lease. IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date first above written. PYRAMID CROSSGATES COMPANY By: /s/ [ILLEGIBLE] ------------------------ Partner/Authorized Agent SILICON ENTERTAINMENT, INC. By: /s/ [ILLEGIBLE] ------------------------ Title: V.P. *** Confidential treatment requested. 32 37 (Acknowledgment of LANDLORD) State of New York ss: County of Onondaga On the 12th day of August in the year 1999, before me the undersigned, a notary public in and for said state, personally appeared [ILLEGIBLE], personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual or the person upon behalf of which the individual acted, executed the instrument. /s/ JENNIFER B. HUSE -------------------- (Notary Public) JENNIFER B. HUSE Notary Public, State of New York No. 01HU5086563 Qualified in Onondaga County Commission Expires October 20 1999 (Acknowledgement of TENANT) State of California ss: County of Santa Clara On the 5th day of August in the year 1999, before me the undersigned, a notary public in and for said state, personally appeared Chris Morse, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acted, executed the instrument. /s/ LAURIE H. SHERMER --------------------- (Notary Public) LAURIE H. SHERMER Commission # 1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 33 38 TABLE OF EXHIBITS ----------------- EXHIBIT A..............................................................Site Plan EXHIBIT A-1.............................................................Premises EXHIBIT B.........................................Description of Landlord's Work EXHIBIT C...........................................Description of Tenant's Work EXHIBIT D.................................................Outline Specifications EXHIBIT E..................................................Intentionally deleted EXHIBIT F.........................................................Tenant's Signs
34 39 EXHIBIT A [MAP] Note: This is a schematic plan and is intended to show only the proposed layout of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 40 EXHIBIT A-1 [MAP] Note: This diagram is an approximate lease plan of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 41 EXHIBIT A-2 [MAP] Note: This diagram is an approximate lease plan of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 42 EXHIBIT B LANDLORD'S WORK The Premises have already been constructed and Tenants accepts the Premises in its "as is" condition. All other work required to prepare the Premises for Tenant's use and occupancy shall be performed by Tenant at its sole cost and expense. 1 43 EXHIBIT C TENANT'S WORK Tenant accepts the Premises in the "as is" condition on the date that possession of the Premises is made available by Landlord, and shall, at its sole cost and expense, and in accordance with the Outline Specifications attached hereto and made a part hereof as Exhibit D, furnish all labor, material, fixtures and equipment necessary to complete, in a good, substantial and approved manner, all work required to bring the Premises to a finished condition ready for the conduct of Tenant's business therein. 1 44 EXHIBIT C Crossgates Mall, Albany, New York CONDITIONS OF SPACE: 1. HVAC is a 7.5 Ton unit, in good working condition. 2. Floor to deck height is 17 feet. 3. Existing ceiling is 12'. 4. Electrical service available is 800 amps. 5. Conduit is 2 inch. 6. Tenant's location is 40 feet from electrical room. 7. Floors are 95% wood and 5% VCT. 8. Walls are sheetrock. 9. See attached plan and DCP for further detail. Exhibit C Page 2 45 [FLOOR PLAN] DIMENSION CONTROL PLAN 46 "EXHIBIT A" [FLOOR PLAN] 47 [FLOOR PLAN] 48 EXHIBIT D OUTLINE SPECIFICATIONS A. DESIGN AND CONSTRUCTION Tenant will retain the services of architect(s) and engineer(s) licensed in the state in which the Shopping Center is located for the design of Tenant's Work. Tenant will retain contractors for the completion of Tenant's Work. Tenant and its contractors will at all times cooperate fully with Landlord's employees and contractors, and with other tenants and their contractors. Tenant's architect and engineer will design all Tenant's Work in full compliance with all federal, state and local codes, ordinances, rules and zoning regulations applicable to the Shopping Center and to Tenant's Premises. Tenant's architect and engineer will incorporate by reference or by duplication the Tenant Design Handbook into the final contract documents. Landlord will complete Landlord's Work as set forth in Exhibit B of this Lease under a blanket building permit. Tenant will complete Tenant's Work as set forth in Exhibit C of this Lease under an individual building permit. Tenant will be responsible for all building permit costs and/or any other municipal permit(s) and/or fees required for Tenant's Work. All building permit questions, as they relate to Tenant's Work (Exhibit C) should be directed to the Landlord. B. DIMENSION CONTROL PLAN Landlord will furnish Tenant with two (2) prints of a Dimension Control Plan, setting forth dimensions and design information necessary to complete the design of Tenant's Work. The Dimension Control Plan will be made available following the execution of this Lease. C. TENANT'S DESIGN All final submissions will bear the seal and signature of an architect (and engineer if applicable) licensed to practice in the state in which the Shopping Center is located. Tenant's design will employ the best available technology to provide for maximum energy conservation within the Premises. All HVAC, plumbing and electrical work will be in compliance with ASHRAE Standard 90-80, or the most recent edition thereof. Within two (2) weeks from the later of (a) receipt by Tenant of a Dimension Control Plan from Landlord, or (b) the date of execution of this Lease, Tenant shall submit by overnight delivery service "Preliminary Design Drawings," for Landlord's review, showing the intended design concept and character of proposed finishes. Tenant's submission shall consist of one (1) copy set and one (1) blueline set of prints. Preliminary Design Drawings will contain basic dimensions of the Premises and shall include, but not necessarily be limited to, the following: 1. Preliminary floor plan with fixturing layout; 2. Preliminary reflected ceiling plan; 3. Storefront elevation showing intended materials and signage, complete with sample of all finish materials; 4. Section through storefront and bulkhead; and 5. Material and color finish sample board of interior and storefront finishes; Landlord will return to Tenant one (1) set of prints marked with Landlord's comments relative to Tenant's preliminary submission within fifteen (15) days after Landlord's receipt of such submission. Tenant agrees to incorporate Landlord's comments into Tenant's final submission. Within thirty (30) days after the issuer of (a) receipt by Tenant of the Dimension Control Plans from Landlord, or (b) the date of execution of this Lease, Tenant will submit to Landlord two (2) sets of reproductible prints and six (6) sets of blueline prints of Tenant's "Design Drawings" showing final design, character, and finishes. All design shall conform to the design criteria set forth herein. Tenant's Design Drawings shall include, without limitation, the following for review: 1. Architectural: Floor plan, fixturing layout, room finish schedule, door schedule, partition types, ceiling plan, interior wall and storefront elevations describing signage elevations and shop drawings, sections, and details as appropriate. 2. Mechanical: All equipment, locations, distributions and return systems, duffuser locations, load calculations, controls, and details as appropriate. 3. Electrical: Floor and ceiling plans showing type and location of power and lighting, equipment, controls, projected loads, panel schedules, riser diagram, and details as appropriate. 4. Plumbing: Location and type of water meter, fixtures, supply and waste piping schematics and details as appropriate. 5. Specifications on materials and methods of construction for the above items. 6. Signage Shop Drawings indicating finishes, type, and mounting location. Food merchants will submit "menu board" specifications and/or photographs. 7. Manufacturer's Cuts of fixtures and equipment with finishes. 1 49 8. Certificate of Completion and Affidavit (Appendix 2). 9. Tenant Electrical Load Summary (Appendix 1A). 10. Tenant Design Checklist (Appendix 1). Landlord will return to Tenant one (1) set of copies of Tenant's Design Drawings marked with reviewer comments and required modifications, if Tenant's Design Drawings are returned to Tenant with comments but not bearing the approval of Landlord, Tenant's Design Drawings shall be revised by Tenant, incorporating Landlord's comments, and resubmitted to Landlord for review within ten (10) days of receipt. Plans will not be returned until Receipt of Appendices 1 and 1A. If the final submission of Tenant's architectural drawings are stamped "Final Approved for Construction as Noted," it is Tenant's or Tenant's representative's responsibility to distribute copies of the final drawings, stamped as such, to the contractors at the job site. Landlord's design review is solely for the purpose of assisting the Tenant and coordinating the store design of the various tenants in the Shopping Center. If in the design review process Landlord does not denote items that are not in compliance with the provisions of the Lease, including these Outline Specifications, the same will not relieve Tenant. Tenant's contractor, Tenant's architect and engineer of their obligations to construct in compliance with these Outline Specifications, and any applicable federal, state and local codes, ordinances, rules and regulations. Any modifications to Tenant's Premises during the term of the Lease must conform to all provisions of the Lease including this Exhibit or, at Landlord's option, Landlord's then-current design criteria, including design review and payment of the fee therefor. Tenant's contractor will construct Tenant's space in accordance with Tenant's final drawings as approved by Landlord and will furnish a signed Certificate of Completion as provided below, Receipt of Appendix 2 (attached) will be required prior to the release of Tenant's security deposit. D. SUBMISSION OF AS-BUILT DRAWINGS AND CERTIFICATE OF COMPLETION (Appendix 1) As a condition of Landlord's approval for Tenant to initially open for business in the Shopping Center, and upon completion of the Premises, Tenant will submit to Landlord for Landlord's permanent project construction files: (1) a set of reproducible "As-Built" drawings which contain all of the information required in Tenant's Design Drawings, updated to accurately reflect the as-built conditions of Tenant's HVAC, electrical and plumbing systems; and (2) a Certificate of Completion (Appendix 2) signed by Tenant, Tenant's architect and contractor, certifying that the Premises have been constructed and completed in accordance with the plans, drawings and specifications previously submitted to and reviewed by Landlord. Tenant must also submit a completed a Stipulation of Cost with appropriate backup documentation as a condition of Landlord's approval. Landlord will be entitled to rely on this Certificate as evidence of Tenant's completion of construction of the Premises pursuant to the provisions of this Lease. E. OUTLINE SPECIFICATIONS The following Outline Specifications will apply to the performance of all work carried out with regard to the Premises: 1. Floor System a. Upper-level Floor System (if applicable) The upper-level floor system will consist of a structural framing system and a concrete stab. Depressions in the slab for floor covering will not be permitted. Electrical floor boxes or plumbing lines must be installed by core drilling through the concrete slab to the lower-level tenant's ceiling space. All such work will be coordinated directly with Landlord. No piping, conduit or other related items may be placed in the concrete slab or on the steel decking. The floor system will be designed for a maximum allowable live load of 100 pounds per square foot. b. Level Floor System The lower level floor system will consist of a concrete floor slab. All work which Tenant desires to be placed below the slab will be installed prior to the slab construction, or Tenant may cut and replace said slab at Tenant's expense only upon approval from Landlord. c. Waterproofing (if applicable) All tenants will ensure the water tightness of their restroom floor system. Waterproofing membranes will extend no less than 4" vertically at all demising walls. Additionally, all food merchants, pet stores and salons will provide a waterproof membrane over their entire floor area with water-tight connections at all floor penetrations. All tenants will ensure water tightness of all floor slab penetrations. Tenant will be responsible for any damage which occurs as a result of, or which is caused directly or indirectly by the failure of Tenant or its contractors to adequately construct, install, or adequately seal all floor penetrations. Food use tenants must install a single waterproof membrane as specified by specific mall. 2. Walls, Partitions and Doors 2 50 a. Demising Partitions All demising partitions will be finished with a minimum of 5/8" fire code gypsum wallboard (unless otherwise required by code), from the floor to the deck, with all joints taped. Exposed walls will be finished with three layers of spackling, sanded and left in paint-ready condition. 1) Insulation in Demising Partitions All demising partitions constructed by the following types of merchants will be insulated with vapor barriers (installed to the warm side of the wall) and sound attenuation blanketing from the floor to the underside of the deck. 1. Food establishments; 2. Game rooms, arcades, video, record and tape stores; 3. Pet stores; 4. Salons; 5. Any other use which produces unusual noise or odor, or heats or cools the Premises 10 degrees (Fahrenheit) +/- beyond the normal range within the Shopping Center or is deemed by Landlord to potentially impact other mall tenants adversely. b. Exterior/Interior Partitions All interior partitions of the Premises will be constructed of metal studs, with gypsum wallboard or other non-combustible finish on all sides. Any combustible materials applied to partitions must receive a U.L. labeled fire-retardant coating, or be placed over a non-combustible substrate material. All exterior walls will be insulated with fiberglass insulation from the floor to the underside of the deck. Insulation will have an integral vapor barrier with an "R" value of 19 or greater if required by any federal, state or local code, ordinance, rule or regulation. The insulation will be covered by one (1) layer of 5/8" type 'X' gypsum wallboard from the floor to the underside of the deck. c. Storefront Bulkhead Tenant's storefront bulkhead, if any, will be constructed and finished subject to Landlord's review of signage and overall design. The mall side of Landlord's bulkhead will be finished by Landlord. Tenant's side will be finished with a minimum of 5/8" fire code gypsum wall board running the full height to the structure above (1 hour rated). All materials applied on the mall side of the storefront will be non-combustible as per code and local building regulations. Storefront bulkheads will have an insulation "R" value of at least 11 (except at Walden Galleria, Independence Mall, Carousel Center, Galleria at Crystal Run, Silver City Galleria and Crossgates Mall, where the insulation is not required at this time). d. Plumbing Chases Plumbing chases, whether in Tenant's Premises or beyond, will be constructed with access panels in full compliance with all applicable codes and will be insulated to prevent freezing of water and waste piping. e. Doors Service doors which open into a corridor or Tenant's exterior service area will be framed and installed in locations approved by Landlord. These doors must open in the direction of exit travel, and must be recessed so as not to restrict use of any service corridor as an emergency exit corridor. Tenant will cut and patch the wall provided by Landlord as necessary to properly access the door(s). Door frames will be made of hollow metal, 14-gauge steel, fully welded, with a reinforced head. Doors will be 3'-5" by 7'-0", 16-gauge steel, reinforced, hollow metal. Hardware will include a locking device which is always openable from the interior, a door bumper, corner guards and a hydraulic door closer. Service doors opening into a service corridor will be 1-1/2 hour rated. Tenant will properly identify the Premises with an engraved sign attached to the exterior of its service door. f. Exits Fire exits will be clearly marked and maintained in accordance with governing codes and ordinances. Tenant will not install any hardware or other device(s) that would prohibit the use of an emergency fire exit. g. Finishes Paint finishes will be a minimum of two (2) even coats with no skips, runs or sags. Before applying any wall covering(s), the underlying surfaces will be prime coated. 3. Storefront a. Scope The total separation between the Premises and mall, herein referred to as "Storefront," including any show windows, platforms, glass and glazing, lobbies or entries, doors, grilles, bracing and supports, depressions, and any walls between the Premises and the 3 51 mall will be furnished and installed by Tenant in accordance with Design Drawings bearing Landlord's approval. b. Design Review Tenant's Storefront design will be subject to Landlord's approval and will be in harmony with the overall quality and character of the mall. Landlord will review each Storefront design carefully to ensure the suitability of the design to the merchandise sold within the store and to the store's location within the mall. Landlord also reserves the right to modify Tenant's design and material election for the Storefront. c. Storefront Design Guidelines It is the intent of these guidelines to encourage the design of Storefronts which reinforce the concept of the mall as a streetscape. The streetscape is comprised of tenants' Storefronts which have varying shapes, sizes and materials and which also vary in the degree to which they protect beyond or are recessed from the bulkhead line. Creativity in the streetscape theme and the use of new and innovative materials is highly encouraged by Landlord; our Design Department is available and willing to assist tenants in creating a noteworthy and exciting design. Landlord's review of Tenant's Design Drawings is for design purposes only. Tenants architect and/or engineer accepts all responsibility for any non-compliance with federal, state or local codes, ordinances, rules or regulations applicable to Tenant's Premises. d. Storefront "Pop-Out" Criteria The following sets forth the required criteria for allowable Storefront projections: PLEASE NOTE: Refer to the Dimension Control Plan for the "Condition" which pertains to the "pop-out" criteria listed below. Tenant may occupy an enclosed projected area beyond the bulkhead line containing up to sixty percent (60%) of the area bounded by the maximum Storefront protection line, the bulkhead line, and the "no build zone" (as defined below), while respecting other setback lines as conditions apply (see Dimension Control Plan). A "no build zone" of either 1'.5" or 1'.0" is required between tenants' Storefronts. See Tenant Design Handbook for details. Overhead projections (minimum 8'.0" A.F.F.) may be constructed anywhere within the area bounded by the maximum Storefront projection line, the "no build zone" and other setback lines as conditions apply (subject to Landlord's approval) (see Dimension Control Plan). The Storefront will or may be built to a height no higher than the bottom of Landlord's bulkhead and shall not project outside the maximum Storefront projection line as shown on the Dimension Control Plan. At all mall Storefront feature columns, any partition of Tenant's storefront which must attach to Landlord's feature column must be full height glass. This glass must interact at the center line of the feature column and run parallel to Landlord's mall bulkhead for a minimum of 12 inches from the face of the feature column before changing direction. At all Storefront(s), illuminated signs mounted to the outside of the Storefront will not extend below 8'.0" A.F.F. Tenant must appropriately finish the top portion of its projected Storefront with a finish of the same quality and material as that used on the vertical surfaces of Tenant's projected Storefront. Particular Storefront conditions require reference to Tenant's Dimension Control Plan for the location(s) of any column(s) for the purpose of respecting the 12'.6" radius setback of Tenant's "pop-out". In no case will there be a limit on the amount of storefront which may be recessed behind the bulkhead line. e. Characteristics and Materials No artificial images such as applied roofs, dormers, thatch, veneer brick, veneer field stone, pegboard, cork products, carpet, painted gypsum wallboard, vinyl, plastic or metal laminate, nor zolatone will be permitted in the construction of Tenant's Storefront. Backpainted glass, ceramic tile (used in any area of the mall other than in the Food Court) will be permitted only at the sole discretion and with the consent of Landlord. Landlord reserves the right to modify any Storefront design and Tenant's material selection. "The use of combustible materials, fire retardant wood, permitted only by code. It is recommended that Tenant's Storefront design utilize full height tempered glass from floor to bottom of bulkhead as a basic design element. f. Security 4 52 Storefront security can be provided by utilizing rolling, sliding, or folding closures of glass, painted steel, anodized aluminum, or other materials approved by Landlord. All security closures must be fully concealed when open. Overhead door soffits will be constructed and finished in such a way as to conceal all internal areas of the Storefront construction. The opening will be finished on the inside faces of gate/door pocket 12" above the soffit line and 12" inside of the side wall pockets. Side wall gate/door pockets will be constructed with flush, overlay pocket doors to conceal the door and pocket. All such doors will have concealed hardware. g. Construction Materials All Storefront construction and construction materials are subject to federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center. h. Safety All Storefront design and construction shall comply with all federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center regarding transparent glass doors and fixed adjacent transparent glass sidelights to avoid injury from accidental human impact. All markings on glass expanses will be subject to Landlord's review. i. Tempered Glass All glass or mirror used in Tenant's Storefront construction in any type of vertical plane will be minimum 3/8" tempered safety glass. All overhead glass or mirror used in a horizontal or sloped application must be heat-strengthened laminated glass installed in accordance with governing codes. j. Storefront Base All Storefront construction, excluding doors, must have a tile base. Applicable mall tile may be purchased by Tenant from Landlord and installed by Tenant or by Landlord for Tenant if installed prior to the opening of the Shopping Center. However, Tenant is strongly recommended to utilize a material that compliments the overall storefront design. k. Maximum Projection No element of the Storefront, except signage, will project across Tenant's maximum Storefront projection line. No element of Tenant's Storefront, including signage, will project across Tenant's lease line. l. Hinged Doors Doors in the Storefront, if hinged, will swing toward the mall and be locked in an open position whenever the store is occupied. Such doors will be recessed in the Storefront so as not to swing past Tenant's maximum Storefront projection line. m. Non-Swing Doors Non-swing doors such as sliding glass or folding doors or rolling grilles are acceptable if they are locked an open position whenever the store is occupied. n. Floor Track Any floor track will be flush with the finished floor. o. Floor Level Tenant will adjust the level of the slab in Tenant's Premises by flush patching or another method to ensure that the level of the finished floor in the Premises corresponds with that of the mall. p. Display Windows All display windows must be adequately illuminated and vented. Direct visual exposure of conventional incandescent lamps will not be permitted. Fluorescent lights will not be permitted in display window areas. q. Structural Support All Storefront work requiring structural support, including sliding door tracts and housing boxes for grilles, will be supported at the head sections by a welded structural steel framework installed by Tenant. Connection to Landlord's roof structure or overhead floor structure for purposes other than horizontal bracing will not be permitted. All overhead rolling grille tube columns will be specified and installed by Tenant with base plates. r. Open Storefronts Where Tenant's Storefront is not enclosed, Tenant's merchandise or fixtures may not be extended farther than Tenant's maximum Storefront projection line. 5 53 4. Floor Covering a. Materials Carpeting will not be permitted within eight feet (8'0") of the Storefront enclosure line. Areas of the store subject to high traffic will be surfaced with ceramic, marble, or stone pavers or prefinished durable wood flooring. Vinyl composition tile is not allowed in Tenant's sales area under any circumstances. All flame spread specifications for all flooring material must be provided prior to Tenant's construction for review by the local building department. b. Cutting, Patching and Core Drilling Tenant will cut and patch for any underslab work which is performed after Landlord's original pouring of the slab. Excavated material must be removed and the subgrade must be thoroughly compacted before restoring the floor slab. Upper-level tenants will not cut the concrete slab. Penetrations for all mechanical, electrical, or plumbing work will be core drilled. c. Flush with Mall Tenant's floor finish will be flush with the mall floor finish, and Tenant will provide necessary finish trim where Tenant's floor finish meets the mall floor finish. d. Mall, Tenant floor Finish Transition Prior to the opening of the Shopping Center, the mall floor finish will be installed by Landlord to Tenant's lease line at Landlord's cost. Tenant will be responsible for the cost to extend the mall floor finish from Tenant's lease line to the center line of Tenant's Storefront enclosure. At Landlord's option, this work may be completed by Landlord; all such work shall be done at Tenant's expense. After the opening of the Shopping Center, the Tenant is responsible for furnishing and installing any and all mall floor finish necessary to the center line of Tenant's storefront enclosure. 5. Ceilings a. Non-Combustible System All ceilings, related framing, blocking and accessories will be non-combustible. No combustible materials may be used above finished ceiling surfaces. b. Suspension System All ceiling suspension systems will be metal. Support for ceiling hangers will be from the structural members. Support will not be permitted from (but not limited to) the following: metal roof deck, mall duct work, sprinkler pipes, or conduits. Tenant is encouraged to include creative ceiling systems in its sales areas. The ceiling must be suspended drywall, concealed spiral acoustical tile, 2" x 2" accoustical T-Bar ceiling with 3/8" revealed edge, or lath and plaster construction. Acoustical ceiling is to be of regular tile type only. Acoustical ceiling with 2' x 4' modules (including tiles to simulate 2' x 2' look) will NOT be permitted in sales areas. c. Food Court Ceilings in wet areas must be constructed with greenboard and finished with an enamel paint or other paint which resists moisture penetration. d. Insulation All upper-level ceilings for Crossgates and Poughkeepsie will have an insulation of "R" value of at least 19. Upper-level tenants for Walden Galleria, Carousel Center and Galleria at Crystal Run do not need to insulate their ceilings. All ceiling in one-level centers will have an insulation "R" value of at least 19 and not less than a three-quarter (3/4) hour fire rating. Ceilings in lower-level stores will have a fire rating of not less than one (1) hour. e. Design Where ceilings are omitted for aesthetic or other purposes, design will incorporate all federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center. 6. Sign Criteria a. Design Tenant's sign design will be coordinated with Tenant's Storefront design and will not be installed until the design is approved by Landlord. Landlord will have the right to remove or require the removal of any signs which either do not meet the Sign Criteria or which are 6 54 not expressly approved by Landlord. The cost of such removal will be at Tenant's expense. Shop drawings of all proposed signage shall be submitted by Tenant to Landlord for approval. The submittal shall include an elevation of the Storefront with signage completely dimensioned and drawn to scale. A material sample board with proposed sign materials is also required. Fabrication and installation of signage will comply with all applicable local codes, ordinances, rules, regulations, and national electrical codes applicable to the Shopping Center. All signage materials will be U.L. rated. All signage shall be incorporated into Tenant's design as an integral part of the Storefront. To add individuality, creativity and variety, Tenant is strongly encouraged to incorporate into its design scheme the following recommendations: 1) Signage etched in Storefront glazing or mirror; 2) Back-painted glass with signage etched & back lit; 3) Neon graphics; 4) Illuminated halo effect letters; 5) Metal letters such as cast bronze, polished brass, polished chrome and stainless steel; and 6) Fiber optics. b. Store Identity Tenant's sign will be limited to the identification of Tenant's tradename and/or logo. c. Characteristics Tenant's sign and logo will comply with the following design requirements: 1) Dimensional, individual, internally illuminated metal letters and/or logo may not be taller than eighteen inches (18"), unless in the opinion of Landlord, a larger size would be preferable. Maximum allowable projection from the Storefront will be six inches (6"). 2) Dimensional metal back-lit ("halo-effect") letters or logo with a height of six inches (6") to eighteen inches (18"). Each letter must be at least one inch (1") but no more than five inches (5") in thickness and must be projecting from the Tenant bulkhead surface with one inch (1") maximum spacers. 3) Exposed neon tubes forming letters and/or logos will be permitted at the discretion of Landlord on an individual basis. Dimmer switches will be attached to the sign transformers on all exposed neon tubes. No exposed neon crossovers, raceways, ballast boxes, or transformer boxes will be permitted. 4) Non-dimensional letters and/or logos applied or painted directly on the inside face of the glass Storefront area will be permitted as supplemental signs only. 5) Supergraphic or relief treatments of large amounts of Storefront area will be permitted only at the discretion of Landlord on an individual basis. 6) Signage will not exceed five percent (5%) of the area of Tenant's Storefront or twelve (12) square feet (whichever is greater). 7) Signage will not exceed two-thirds (2/3) of the width of Tenant's demised Premises. d. Prohibited Signs The following types of signs or signage will be prohibited: 1) Boxed or cabinet type signs; 2) Vacuum-formed plastic luminous letters and/or logos; 3) Blade signs; 4) Paper signs of any type; 5) Artificial wood and wood grain plastic laminate; 6) Animated components, flashing lights, or noise making signs of any type; 7) Signs utilizing plastic laminate; 8) Exposed neon; and 9) Dimensional graphic signage. e. Illumination All signage will be adequately illuminated by Tenant, utilizing a method which is approved by Landlord. f. Exterior Signage Except for Tenant's approved mall Storefront sign, no exterior signage by Tenant will be allowed. 7 55 g. Menu Boards Menu boards and price lists are subject to Landlord's review and approval. All such signage will be compatible with the remainder of the Premises and with the overall quality and design of the mall, and will be of a size, color and illumination level to be readily visible. "Photo signage" will be reviewed by Landlord. No "supplier" signs or advertising will be permitted. 7. Furnishings and Trade Fixtures All furnishings and trade fixtures will be new and of first quality, including installation. 8. Heating, Ventilating and Air Conditioning Delivery schedules require HVAC units to be ordered prior to Landlord's receipt of specific Tenant's specific store design data. Should Tenant require other and/or additional HVAC units due to Tenant's design or other specific use, such information should be immediately relayed to Landlord in writing separate from the plans submission process (upon completion of Tenant's architects and/or engineer's calculations). Landlord will make arrangements for such additional or upgraded equipment required if so desired by Tenant at Tenant's expense. Prior to the opening of the Shopping Center, any and all additional, upgraded or other equipment requested by Tenant is at the control of Landlord and at Tenant's expense. Other design criteria relating to Tenant's work includes: a. Ductwork Ductwork will be sized, fabricated and installed in accordance with ASHRAE 90-80 or later edition thereof and SMACNA standards. Ductwork will be installed with fiberglass insulation and vapor barrier. Ductwork which passes through fire rated walls will be equipped with U.L. approved fire dampers as required by code, and with adequate access to such dampers. All return air will be run in insulated ducts. Any flex duct used from main trunk lines to diffusers shall be limited to six (6) feet in length, Tenant must provide condensate drains for all split system equipment used by Tenant. Ductboard is NOT allowed. Ceiling plenums will not be permitted. b. Exhaust Upper-level tenants will furnish and install complete exhaust systems where required. Lower-level and upper-level tenants may be required to connect their exhaust system to a master system provided by Landlord. All tenants are to ensure that systems are independent of each other for toilet rooms, equipment requiring venting including refrigeration or hot presses, cooking, heat and/or other processes permitted by Landlord which produce air contaminants. Additionally, all tenants are to ensure that the discharge through the roof to the atmosphere properly vents odors and/or fumes away from the building, building openings and fresh air intakes. Tenant restroom exhaust duct systems will have a maximum external static pressure drop of .25 w.g. All roof penetrations must be performed by Landlords designated contractor at Tenant's expense. See Exhibit C, Item 14, "Rock Work" for required special protection. c. Outside Air Landlord will provide a common outside air duct accessible to all lower-level tenants and applicable upper-level tenants not having direct roof access. All hood exhausts must be installed with tempered make up air, including ductwork directly through the roof. Additionally, all food tenants' hood exhaust systems will have a minimum of ninety-five percent (95%) of its capacity of make up air introduced into the food preparation area directly from the outside. d. Supplementary Heating Tenant will provide electric unit heaters or wall heaters where required at exterior well exposures to maintain minimum comfortable winter temperature levels. Tenant's design will provide for a constant ambient minimum temperature of 45 degrees (Fahrenheit) above Tenant's ceiling through the use of ceiling transfer grills, additional electric resistance units, or other methods approved by Landlord. e. Temporary Construction Heat During Tenant's construction period, Tenant will provide any necessary temporary heat required for protection and completion of Tenant's Work. f. Water Cooled or Heated Equipment No water cooled or heated equipment will be permitted unless water is recirculated and may be used only when specific permission is granted by Landlord. g. "As-Built" HVAC Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's HVAC system. 8 56 9. Plumbing a. Quality Tenant, in designing the plumbing system, will use the best and most recent technology available for conservation of water and energy. Fixtures will be of good standard manufacture at least equal in quality to American Standard. Flush valves will not be permitted. All faucets will have water saving aerators. Tenant will supply and install or purchase from the applicable municipality, if required, a water meter of sufficient size to serve the Premises. b. Hot Water Heaters Water heaters will be automatic electric, 480 or 277 volt, 3 phase, with all necessary safety controls and drains. Water heaters located overhead will be supported independently of Landlord's structural framing system. Appropriate structural detailing will be included with Tenant's submission to Landlord for approval by Landlord and Landlord's engineer. Tenants whose only water usage is for small toilet room(s) may utilize "instant hot" hot water heaters or conventional heaters up to a maximum six (6) gallon capacity. c. Hair Interceptors Individual hair interceptors will be installed on all sinks, basins, and special sanitary units which may in any way receive human or animal hair. All hair interceptors must be made accessible and must be regularly maintained. d. Grease Interceptors Individual grease interceptors, adequately sized, and in compliance with state, local and other government health departments having jurisdiction over the Shopping Center will be installed and maintained on all grease producing and other kitchen equipment, and will bear the seal of the Plumbing Drainage Institute (PDI). All grease interceptors will be the type that will plug solid if not maintained. e. Decor No fountains or decorative devices will be used unless they are a recirculating type device. f. Sanitary Sewer Vents Tenant will connect sanitary sewer vent pipes to Landlord's common vent system, or vent through the roof, as applicable. Any roof penetrations must be made by Landlord's designated roofing contractor at Tenant's expense. g. Trash Compactors All tenants serving food to the public will install individual trash compactors within the Premises to precompact all trash into sealed, leak-proof containers. h. "As-Built" Plumbing Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's entire plumbing system. 10. Electrical a. Quality All electrical materials will be new, and bear the U.L. label. Selection of fixtures and lighting levels within the Premises will be in strict accordance with the provisions outlined in the latest editions of ASHRAE 80-80, and the I.E.S. Lighting Handbook, and will be in conformance with the applicable energy conservation codes. b. Codes All work will meet the requirements of the latest National Electric Code, and all applicable local, state and federal codes, applicable regulations of the local telephone and power companies, and ASHRAE 90-80 or the latest edition thereof. c. Certificates Tenant will be responsible for making all necessary applications for certificates regarding Tenant's Work. Upon completion of all electrical work, Tenant will furnish to Landlord a copy of the certificate of approval, issued by the local authority having jurisdiction over such installation. d. Voltage All fluorescent lighting and all heating and cooling equipment must be operated on 480 or 277 volts from Tenant's high-voltage panel. All Tenant transformers must be supported independently of Landlord's structure. 9 57 e. Night Lighting Tenant must provide a separate night lighting circuit on a non-controlled panel (one (1) light fixture per 2,000 square feet), and a lock-on breaker for this circuit, or as designated by local authorities. f. Door Bell Tenant will install an electrical, push-button operated door bell immediately adjacent to Tenant's service door, mounted at 6"-9" AF, F, in the door jamb. Installations in exterior wall surfaces will NOT be permitted. g. Controls HVAC and non-consistant electrical loads will be monitored by Landlord's Building Management System. Constant loads, such as night lights, emergency lights, exit lights, exit signs, alarm systems, employee time clocks, computer cash register systems, electric rolling grills and refrigeration and/or life safety equipment systems will be on non-controlled electrical panels. In locations where lighting is not controlled by Landlord's Building Management System, Tenant will install a seven-day time clock system with reserve spring capacity to control all non-constant loads. h. Wiring No exposed wiring of any sort (extension cords, etc.) will be permitted subsequent to the period of Tenant's initial build-out. i. Ceiling Lighting In Tenant's sales areas, 2' x 4' fluorescent ceiling lighting fixtures are prohibited. Exposed tube fluorescent lights are not permitted. Fluorescent lighting must have parabolic reflective lenses satisfactory to Landlord. j. "As-Built" Electrical Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's electrical system. k. Checkmeter Upon Tenant's request, Landlord will furnish Tenant with the specifications for a utility-quality checkmeter acceptable to Landlord's and with Landlord's specifications for installation thereof. 11. General Lighting The general lighting of the mall has been designed to allow each tenant's Storefront and sales area to be a prominent focal point. The following required lighting criteria has been established: a. All lighting in 'pop-out' Storefronts will be incandescent. Storefront lighting must meet all requirements as set forth by Landlord and its consultants; b. All accent lighting for the Storefront 'pop-out' areas must meet the criteria stated in the Tenant Design Handbook and is subject to Landlord's review; c. All fluorescent lighting will be low brightness type. Acceptable lamp colors are warm white and deluxe warm white. Acrylic lenses or non-shielded fluorescent tubes will NOT be permitted in Tenant's sales area. All fluorescent lighting will be 277 volt, deep call louver, or parabolic reflective lenses; d. Fluorescent lighting will NOT be permitted within eight (8) feet of the Storefront closure line; e. Installation of Tenant's lighting in mall Common Areas is NOT permitted; and f. Tenant will comply with all applicable energy conservation and construction codes. 12. Fire Protection a. Other Fire Protection Tenant will install and maintain above the ceiling any and all fire protection devices and equipment, smoke barriers, etc. as required by code(s) in the jurisdiction where the Shopping Center is located. Tenant will install and maintain automatic exhaust hood extinguisher systems and any special equipment or retardant required by the nature of Tenant's design or business, as determined by Landlord or applicable codes. b. Damage Any damages caused by Tenant to Landlord's sprinkler system will be repaired by Landlord at Tenant's expense. c. Hindrance of Sprinkler System 10 58 Tenant's merchandising, fixturing, storage, and other practices will not be conducted in such a manner as to hinder the effectiveness of the sprinkler system. d. Fire Extinguishers Tenant will install and maintain Type ABC fire extinguishers as approved by the local fire department and Landlord's fire and casualty insurer. e. Modifications All modifications, additions, repairs or relocations to the sprinkler system required for Tenant's use, prior to the Grand Opening, will be performed by Landlord's sprinkler contractor, at Tenant's expense. f. Smoke Detectors Tenant will install smoke detectors which automatically shut down the HVAC unit(s) if activated. Smoke detectors will be ceiling mounted in both sales and stock/storage areas with one (1) smoke detector for every 2,000 square feet of each area, and/or in the return or supply air duct as required by governing authorities and/or Landlord's fire and casualty Insurer. Depending on the local code jurisdiction, the strictest of the three above-referenced requirements will apply. 13. Sanitary Tenant will be responsible for its own toilet requirements per all applicable codes. Common Area Toilets will not be used in Tenant's calculations. a. Temporary Sanitary Tenant will be responsible for all temporary sanitary facilities required during the construction of Tenant's space. 14. Food Court Tenant Criteria a. All wall surfaces visible by the public in Tenant's food preparation areas will be faced with glazed ceramic tile. All other wall surfaces will also be finished with FRP, marble panel or stainless steel. b. Tenant will furnish and install a minimum of R-11 insulation with a vapor barrier from the floor to the underside of the structure above at all demising walls and in all ceiling areas. At exterior walls, the value of insulation will be a minimum of R-19. c. Tenant will furnish and install ceramic or quarry tile flooring throughout Tenant's floor area. d. Tenant will have the option of using the following countertop finishes: 1) Plastic slab (Corian, Avonite Formica 2000X, or its equivalent); 2) Stainless steel; 3) Wood butcher block; 4) Ceramic tile; 5) Marble, or other smooth finish stone. e. Locations for any additional rooftop equipment required by Tenant's design will be subject to approval by Landlord; any such additional equipment required will be at Tenant's expense. f. In addition to all of the other submittal requirements, Tenant will submit with its preliminary submittal all proposed finished for all equipment, signage, etc., which will be visible to the public. 15. General Conditions a. Occupancy Date Landlord will notify Tenant of the date on which the Premises will be available for Tenant's Work ("Occupancy Date"). Except as otherwise set forth in the lease and to the extent legally permissible, Tenant agrees that time is of the essence and agrees to commence installation of Tenant's Work no later than five (5) days following the Occupancy Date. b. Occupancy Period The period beginning on the Occupancy Date and terminalizing on the Term Commencement Date of this Lease will be known as the "Occupancy Period." c. Establishment of Schedules 11 59 Tenant, its agents, contractors and employees will comply with schedules which Landlord will establish from time to time, governing submittals by Tenant of design information for Landlord's approval, construction operations, occupancy by Tenant, opening for business, and other occurrences, for the purpose of coordinating the efforts of Tenant or Tenant's contractors, and Landlord. All parties will cooperate with Landlord in expediting work, and will provide work schedules, status reports, and updates upon Landlord's request until Tenant opens for business. d. Failure to meet Schedule Any cost incurred by Landlord as a result of Tenant's failure to meet the schedule requirements herein described will be Tenant's responsibility; such costs will be payable by Tenant to Landlord upon Landlord's demand. Any modification to Landlord's Work or Tenant's Work necessitated by Tenant's failure to undertake or complete Tenant's Work as required under this Lease will become the responsibility of Tenant. Upon three (3) days written notice thereof, Landlord may request that Tenant's general contractor cease work, and Landlord may complete, at Tenant's expense, any work deemed by Landlord to jeopardize Tenant's required opening date. Upon three (3) days written notice thereof, Landlord may remove Tenant's general contractor due to non-compliance with rules and regulations listed below or published on site. e. Construction Rules and Regulations of the Mall after Grand Opening 1) Tenant will erect and maintain a temporary barrier throughout the construction period. Said barrier is subject to the following requirements - it shall: a) Not extend beyond three feet (3') into the walking corridors. At all times, a ten foot (10') minimum clearance must be maintained in the mall Common Areas; b) Be constructed of metal studs and 5/8" or 1/2" fire rated gypsum wallboard; c) Be taped and finished; d) Be painted (paint number to be specified by Landlord) and have a finished vinyl or rubber base; e) Be twelve feet (12') high, sealed to contain dust, and insulated minimize sound transmission; f) Have a factory-made door with lockset which will be kept closed. The door will swing into the store and be equipped with a door closer. A working copy of the key will be marked accordingly and left in the mall office; g) Be maintained on a daily basis as necessary (i.e., paint, sheetrock, repair, etc.); h) Any such temporary Storefront barrier may not be dismantled until the permanent Storefront is completed; i) Any such temporary Storefront barrier may not be fastened to the finished floor, demise piers or any other permanent finishes or fixtures in the mall; j) Not contain advertising of contractors or associated trades. 2) No jackhammering, or use of other equipment producing a high noise or dust level during shopping hours will be permitted. 3) All construction materials will be delivered via service entrances. For stores without service entrances, all materials will be delivered either before or after standard mall operating hours. 4) Doors are not to be wedged open. 5) Contractor and employee vehicles will be parked in areas as directed by Landlord. 6) Tenant will dispose of all waste materials (except concrete, masonry or structural steel) in dumpsters or other approved containers provided by Tenant which are located in areas designated by Landlord. Absolutely no waste material is to be discarded in adjoining spaces, other vacant spaces, mall areas or Landlord's compactor. 7) No building systems will be shut down without the express prior permission of Landlord. 8) All work will be performed in a neat and orderly fashion. 9) Tenant will notify the mall office personnel of the following prior to starting work: a) The name, address and temporary residence location of contractors working in the space; and b) The starting date and anticipated completion date of all work. 12 60 10) If Exhibit C established that Tenant accepts the Premises "As is," then any demolition which may be required will be performed by Tenant at Tenant's expense. f. Compliance with Construction Rules and Regulations As a condition of Landlord's approval of Tenant or Tenant's contractor taking occupancy of the Premises, Tenant or Tenant's contractor will be required to deposit with Landlord the sum of $2,000.00 to be held by Landlord as security for the compliance by Tenant and Tenant's contractor with the Construction Rules and Regulations set forth herein and the other construction requirements as set forth in Exhibit C and D. Tenant and Tenant's contractor will reimburse Landlord for the cost of any damage or disruption caused by the failure of Tenant or Tenant's contractor to comply with the Construction Rules and Regulations. Any such cost(s) will be first recovered by Landlord from the security deposit made hereunder. Upon the recovery of cost(s), Tenant will restore the security deposit to the original sum of $2,000.00. Landlord will return the security deposit or the amount remaining thereof upon satisfaction of the following conditions: (i) the satisfactory completion of Tenant's Work as required under the Lease, including Landlord's punchlist; (ii) delivery of a Certificate of Occupancy to Landlord; (iii) within sixty (60) days following Landlord's acceptance of Tenant's properly completed Certificate of Completion, the submission of "As-Built" drawings as may be required hereunder; (iv) the receipt of copies of lien releases issued to Tenant from each subcontractor and the general contractor. Request for the return of the security deposit must be made to Landlord in writing. g. Compliance with Laws Tenant and Tenant's contractor will, at its/their expense, comply with all applicable statutes, ordinances, rules, orders, laws, regulations, codes and recommendations of all governmental agencies and their authorized agents which have jurisdiction over Tenant's Work; and, with respect to the prevention of fire and exposure to liability risks, to the Board of Fire Underwriters, Rating Board, and Landlord and Tenant's insurance companies. Tenant and/or Tenant's contractor will apply for, pay all fees for, and obtain all necessary permits, licenses and certificates. A copy of same will be delivered to Landlord and will be posted in a prominent place within the Premises before Tenant begins work. Tenant will furnish Landlord with a copy of a Certificate of Occupancy prior to opening for business. h. Non-interference Tenant will perform its work so as not to interfere with the completion of Landlord's Work or the work of other tenants. i. Quality of Materials; Warranty All materials furnished and incorporated in Tenant's Work will be new, unused, and of the quality and characteristics specified herein. If the quality and characteristics of certain materials are not specifically set forth herein, materials used will be those customarily used in first-class work of similar nature and character. Tenant will guarantee, and will require all parties furnishing and incorporating materials in Tenant's Work to guarantee said work to be free from any and all defects in workmanship and material for a period of five (5) years from the date of completion thereof. Tenant will be responsible for the costs of correction of such defects, which costs will include any and all expenses and damages resulting from said defects. Tenant's agreements with its contractors will contain language so providing and further providing that all guarantees and warranties will inure to the benefit of both Landlord and Tenant, as their respective interests appear, and that such guarantees and warranties can be directly enforced by either. j. Easements Tenant will install and maintain proper access panels as may be required for the regular maintenance of Tenant's and Landlord's equipment. Where applicable, tenants will recognize the rights of Landlord and of tenants located above or below to run pipes, ducts, conduits, or related items servicing the mall or other areas through Tenant's Premises. Tenant will cooperate with Landlord and other tenants; hours and times when work will be performed will be agreed upon by the parties involved. Any dispute arising hereunder will be resolved by Landlord. k. Insurance 1) Tenant will secure, pay for and maintain, or cause its contractor(s) to secure, pay for and maintain, during Tenant's construction and fixturing work within the Premises, all of the insurance policies required herein in the amounts as set forth below. Tenant will not permit its contractor(s) to commence any work until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. 2) Tenant's Contractors' and Subcontractors, Required Minimum Coverages and Limits of Liability. 13 61 a) Comprehensive General Liability, including personal injury and property damage, completed operations, explosions, collapse, and underground operations, if any, broad form property damage, contractor's protective liability, in the minimum amount of [***] Combined Single Limit; b) Auto Liability, Bodily injury and Property Damage (including non-owned and hired vehicles) in the minimum amount of [***] Combined Single Limit; and c) Statutory Workers' Compensation, Employer's Liability and disability Benefits. Umbrella Coverage in the minimum amount of [***]. Such insurance will insure the contractor and/or subcontractor against any and all claims for personal injury, including death resulting therefrom and damage to the property of others caused by accident and arising from the contractors' and/or subcontractors' operations and whether such operations are performed by the contractor(s), subcontractor(s), or by anyone directly or indirectly employed by them. 3) Protective Liability Insurance Tenant will provide Owner's Protective Liability Insurance that will insure Landlord and Tenant against any and all liability to third parties for damages because of personal injury liability (or death resulting therefrom) and property damage liability of others or a combination thereof which may arise from work in connection with the Premises, and any other liability for damages which Tenant's contractor or subcontractors are required to insure against under any provisions herein. Said insurance will be provided in the minimum amount of [***] Combined Single Limit. 4) Tenant's Builder's Risk Insurance - Completed Value Builder's Risk Material Damage Insurance Tenant will provide an "All Physical Loss" Builder's Risk insurance policy on all Tenant's Work to be performed in the Premises as it relates to the building within which the Premises is located. The policy will include Tenant, its contractor and subcontractors and Landlord as named insureds, as their interests appear. The amount of insurance to be provided will be [***] of the full replacement cost. 5) All such insurances policies required above will name Landlord as an additional insured, except Workers' Compensation Insurance, which will contain an endorsement waiving all rights of subrogation against Landlord. Certificates of insurance will provide that no reduction in the amounts or limits of Equity or cancellation of such insurance coverage will be undertaken without thirty (30) days prior written notice to Landlord. All insurance policies required above will be written by companies authorized under the laws of the state in which the Shopping Center is located and such policies must be satisfactory to Landlord. l. Indemnity Tenant will fully protect, defend, indemnity and hold harmless Landlord and Landlord's Managing Agent(s) and their employees, partners, officers, directors, agents, heirs, executors, administrators, successors, and assigns against any and all claims, actions, damages, liabilities, costs and expenses, including any and all attorneys' fees, arising from, because of, or out of the performance or non-performances of Tenant's Work or the use or occupancy of the Premises for Tenant's Work. m. Hazardous Materials Tenant will not install, nor cause or allow to be installed, nor use any hazardous materials in Tenant's Work without the express prior written consent of Landlord. Tenant will guarantee and require all parties furnishing and incorporating materials in Tenant's Work is guarantee that hazardous materials have not been furnished or incorporated in Tenant's Work. Tenant will be reasonable for any and all cost(s) of correction which will include all expenses and damages, whether director or indirect, resulting from the installation or use of hazardous materials. Tenant's agreements with its contractor(s) and subcontractor(s), if any, will contain language so providing and further, warranting that hazardous materials were neither installed nor, used in the Premises; such warranties shall insure to the benefit of both Landlord and Tenant, and can therefore be directly enforced by either. *** Confidential treatment requested. 14 62 APPENDIX 1A TENANT ELECTRICAL LOAD SUMMARY (Please complete the following form and include as part of the Final Drawing Submittal to the Landlord.) Tenant: ____________________________ Space No.: ____________________________ Mall: ____________________________ GLA: ____________________________ Landlord provides as standard 10 watts per square foot. Food Court Tenants are provided with 15 watts per square foot. The information provided below is necessary in order to properly size the Mall's electrical distribution capacity. Upgrades over the Landlord's supplied wattage will be billed to the Tenant. Winter: Summer: 1. Connected Cooling Load: Compressor(s): ________ Watts Inside Fan: ________ Watts Outside Fan(s): ________ Watts Power Exhaust: ________ Watts 2. Connected Heating Load: Compressor(s): ________ Watts (Heat Pump) Inside Fan: ________ Watts Outside Fan(s): ________ Watts (Heat Pump) Heat Coil(s): ________ Watts 3. Connected Constant Lighting Load: (not to be included in occupied lighting load below) ________ Watts 4. Connected Constant Equipment Load: (not to be included in occupied equipment load below) ________ Watts 5. Connected Occupied Lighting Load: (not to be included in constant lighting load above) ________ Watts 6. Connected Occupied Equipment Load: (not to be included in constant equipment load above) ________ Watts 7. Total Connected Load: (the greater of item 1 or 2 plus items 3 through 6) ________ Watts Completed By: Electrical Engineer's Name:_____________________ Date:____________________ Firm Name:______________________________________ Address:________________________________________ Stamp:___________________ Phone:__________________________________________
1 63 APPENDIX 2 CERTIFICATE OF COMPLETION AND AFFIDAVIT OF CONTRACTOR'S COMPLIANCE WITH APPROVED PLANS (Complete and submit to Landlord upon completion of Tenant's Work construction) RE: Construction of STORE ----------------------- MALL ---------------------------------------- This is to state that I have made an inspection of the site on completion, and I hereby certify that the Premises has been completed in accordance with the Landlord approved final plans and specifications except as noted below. Dated: , 19 Tenant: -------------- -- ---------------------------------- By: ---------------------------------- Title: ---------------------------------- Dated: , 19 Contractor: -------------- -- ---------------------------------- Name: ---------------------------------- Address: ---------------------------------- Signature: ---------------------------------- Title: ---------------------------------- - ---------------------------------------------------------------------------- List all changes, if any, to previously approved plans and specifications required during construction: - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- As-Built Drawings Enclosed (if applicable): -------------- -------------- Certificate of Occupancy Attached (where required): -------------- -------------- Underwriter's Certificate Attached (where required): -------------- - ------------- 2 64 [VIEW OF EXTERIOR ENTRANCE] EX-10.21 23 RETAIL LEASE AGREEMENT BETWEEN PEABODY PLACE 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.21 ---- RETAIL LEASE AGREEMENT THIS LEASE is entered into this 24 day of May, 1999, in consideration of the covenants and undertakings of each of the parties hereto by and between Peabody Place Centre, L.P., a Tennessee limited partnership, hereinafter referred to as "Landlord", and Silicon Entertainment, Inc., a California corporation, hereinafter referred to as "Tenant"; WITNESSETH: Landlord owns, operates or controls certain real property located in the City of Memphis County of Shelby and State of Tennessee located at Peabody Place Centre; and WHEREAS, Tenant desires to lease from Landlord certain premises within the Shopping Center, NOW, THEREFORE, Landlord and Tenant agree as follows: PART 1 PREMISES In consideration of the rent and other agreements contained in this Lease, Landlord leases to Tenant and Tenant rents from Landlord the premises (hereinafter the "Premises") described as follows: A retail store space numbers 214, 216, and 218 containing approximately 6,000 square feet within the Peabody Place Centre (hereinafter the "Shopping Center"), municipally described as Peabody Place Retail/Entertainment Development, in Memphis, Tennessee. The Premises are designated on Exhibit A hereto for the purpose of setting forth the configuration and approximate location of the Premises within the Shopping Center Site (the "Shopping Center Site" being defined to include all property shown on Exhibit A hereto). The Premises shall be improved or otherwise prepared for occupancy by Tenant in accordance with Exhibit C which sets out any work improvements to be implemented by Landlord and the cost, if any, to Tenant. In the absence of any specific requirements set forth on Exhibit C, Tenant shall be deemed to have accepted the Premises "as is", except for any items specified on a punch list delivered to Landlord within thirty (30) days after possession of the Premises is delivered to Tenant. Notwithstanding the foregoing, Tenant shall not be deemed to have waived its right to require Landlord to correct any latent defects as long as Tenant gives notice thereof to Landlord on the earlier of thirty (30) days after discovery of the defect or thirty (30) days after the date Tenant should have been alerted to the existence thereof had Tenant acted reasonably, provided such notice must be provided in any event within one (1) year after delivery of possession of the Premises, Landlord covenants and agrees to (i) deliver the Premises in compliance with legal, code and zoning requirements exclusive of any such requirements relating to Tenant's Work including, but not limited to, building or occupancy permits, (ii) deliver the utility systems to the Premises as specified in Exhibit C in good working order, and (iii) deliver the rough shell building in good condition and repair, free of any asbestos. Tenant shall use commercially reasonable efforts to submit plans and specifications for Tenant's Work to Landlord for its approval, which shall not be unreasonably withheld, on or before [***]. Landlord shall approve such plans and specifications or provide specific objections thereto within [***] days after their receipt. Landlord acknowledges that Tenant's prototype design plan for its store incorporates the open storefront element into the design of the Premises provided that Tenant constructs such portion (and all portions) of Tenant's Work in compliance with applicable law, Exhibit C of this Lease, and pursuant to plans and specifications approved in advance by Landlord. *** Confidential treatment requested. 2 PART 2 TERM Subject to the terms and conditions contained herein, this Lease shall be effective on the date of complete execution hereof by Landlord and Tenant, but the term of this Lease and the payment of Minimum Rental and Additional Charges (as defined in Exhibit B) shall begin on the commencement date (the "Commencement Date") which shall be the earlier of (i) the date on which Tenant opens for business, or (ii) one hundred twenty (120) days after Landlord tenders delivery of the Premises to Tenant, in the event that Landlord is implementing improvements pursuant to the provisions of exhibit C, tender of delivery shall have occurred on the date Landlord notifies Tenant that Landlord has either (i) substantially completed any improvements to be implemented by Landlord pursuant to Exhibit C subject to minor punchlist terms, or (ii) determined that Landlord's work pursuant to Exhibit C has progressed sufficiently such that Tenant may commence and complete Tenants work while portions of Landlord's work are still being completed. Notwithstanding anything to the contrary contained herein, Tenant shall not be deemed to be in default hereunder for failure to open for business on or before the Commencement Date, so long as Tenant opens for business not later than one hundred thirty five (135) days after Landlord delivers possession of the Premises to Tenant, subject to Force Majeure and delays caused by Landlord. Additionally, Landlord agrees that it shall deliver possession of the Premises to Tenant at least one hundred twenty (120) days prior to the grand opening of the Shopping Center. Landlord shall use its reasonable commercial efforts to deliver the Premises with Landlord's Work substantially complete to Tenant on or before June 15, 2000 (the "Target Delivery Date"), subject to delays caused by events of Force Majeure (as hereinafter defined), in the event that Landlord is unable to deliver possession of the Premises with Landlord's Work substantially complete to Tenant on or before the Target Deliver Date, Landlord shall deliver the Premises to Tenant after substantial completion of Landlord's Work, and Tenant shall complete Tenant's Work within one hundred twenty (120) days after the date of delivery of the Premises subject to Force Majeure and delays caused by Landlord and open for business in the Premises in accordance with the provisions of the foregoing paragraph, provided, however. Tenant shall not be obligated to pay Minimum Rental, Percentage Rental or Additional Charges until (i) March 1, 2001 (provided that Landlord delivers possession of the Premises on or before November 1, 2000) or (ii) such later date that is one hundred twenty (120) days after Landlord delivers possession of the Premises to Tenant with Landlord's Work substantially complete. Landlord agrees that in the event Landlord does not deliver possession of the Premises to Tenant on or before November 1, 2000, within ten (10) days after Tenant's written request, Landlord shall confirm to Tenant in writing that its leased for space in the Shopping Center with Muvico (or a comparable tenant) and Jillian's (or a comparable tenant) are in full force and effect. In the event that Landlord is unable to confirm that such leases are in full affect or fails to respond to Tenant's request within ten (10) days, Tenant shall have a right to terminate this Lease on thirty (30) days written notice to Landlord, which notice shall be given within ten (10) days after (i) the expiration of the aforesaid ten-day period if Landlord fails to respond or (ii) Tenant's receipt of notice from Landlord stating that such leases are not in full force and effect. In such event, Landlord shall reimburse Tenant for all of its out-of-pocket expenses incurred in connection with this lease, including, but not limited to, architectural and design fees and attorneys fees in an amount not to exceed [***]. Notwithstanding the foregoing, in the event that Landlord reinstates both of the respective leases or executes leases with comparable tenant(s) during the thirty-day period, Tenant's termination shall be rendered null and void and of no further force or effect. Notwithstanding anything to the contrary contained in this Lease, if Landlord has not delivered the Premises to Tenant with all of Landlord's Work substantially completed as required hereunder on or before June 1, 2001 (subject to Force Majeure), then Tenant may terminate this Lease by written notice to Landlord delivered by June 15, 2001, and Landlord shall reimburse Tenant for all of its out-of-pocket expenses incurred in connection with this Lease including, but not limited to, architectural and design fees and attorneys fees in an amount not to exceed [***]. Notwithstanding the foregoing, Tenant's obligation to commence payment of Minimum Rental, Percentage Rental and Addition Charges shall be tolled by the number of days of delay in Tenant's opening for business resulting from delays caused by Landlord. If the Commencement Date occurs on the first day of a month, the term shall expire *** Confidential treatment requested. 3 without notice on the last day of the calender month ten (10) years hence, and if the Commencement Date occurs on a day other than the first day of a month, the term shall expire without notice on the last day of the calender month in which the Commencement Date occurs ten (10) years hence. Landlord and Tenant agree that, upon the demand of the other party, each shall execute an amendment to this Lease, in recordable form, setting forth the Commencement Date and the termination date of the Lease term. Any access by Tenant to the Premises prior to the Commencement Date shall be upon all of the terms, covenants and conditions of this Lease, provided, however, Tenant shall have no obligations with respect to the payment of Minimum Rental, Percentage Rental and Additional Charges. Tenant shall pay all utility charges related to the Premises which accrue from and after Landlord's tender of possession. PART 3 OPENING COTENANCY Notwithstanding anything contained herein to the contrary, until such time as Muvico Theater (or a comparable tenant) is open and operating for business and sixty percent (60%) of the other tenants of the Shopping Center are open and operating for business (the "Initial Cotenancy"), Tenant may pay in lieu of the Minimum Rental and Additional Charges reserved hereunder (but in no event more than the monthly installment of Minimum Rental and Additional Charges otherwise payable hereunder), an amount equal to [***] of Sales and Business Transacted from the Premises, such amount to be due and payable within thirty (30) days after the month in which such sales occurred, together with submission of evidence of the amount of Sales and Business Transacted. Commencing on the first day of the month following the month in which the Initial Cotenancy has been reached, Tenant will commence payment of Minimum Rental and Additional Charges as reserved hereunder. Notwithstanding anything to the contrary contained herein, the Commencement Date of the Lease term shall occur on the date on which the Initial Cotenancy is met. In the event that the Initial Cotenancy has not been satisfied for a period equal to eight (8) months after the date on which Tenant is obligated to open for business in the Premises, Tenant shall have a one-time right to terminate this Lease on written notice from Tenant to Landlord given by the date that is thirty (30) days after the date that is twelve (12) months after the date of delivery of possession. In such event, Landlord shall reimburse Tenant for its actual out-of-pocket costs incurred in connection with this Lease, including but not limited to the costs of constructing leasehold improvements, in an amount not to exceed [***], less the amount of the Construction Allowance paid by Landlord to Tenant in accordance with the terms of Exhibit C attached hereto and made a part hereof. PART 4 ONGOING COTENANCY If at any time after the date that is twelve (12) months after the Commencement Date, (i) the multiplex movie theater facility located in the Shopping Center (and currently leased by Muvico) closes for business (the requirement that such theater facility be open for business referred to herein as the "Theater Requirement") or (ii) less than sixty percent (60%) of the total leasable floor area of the Shopping Center is occupied by tenants or licensees and open for business (the requirement that such sixty percent (60%) of the total leasable floor area of the Shopping center be occupied and open for business referred to herein as the "Cotenancy Requirement"), then Tenant shall have the right to cease operating its business in the Premises ("Go Dark") until such time as both the Theater Requirement and the Cotenancy Requirement are satisfied, and during such Go Dark period, Tenant shall not be obligated to pay any Percentage Rental (i.e., Tenant will continue to pay only the Minimum Rental along with Additional Charges as required to be paid under the Lease). In the event that Tenant shall be entitled to Go Dark pursuant hereto but shall elect to remain open for business in the Premises, Tenant shall have the right to so remain open and for so long as the Theater Requirement and/or the Cotenancy Requirement remains unsatisfied, Tenant shall be obligated to pay the lesser of Minimum Rental and Percentage Rental (without reference to the Percentage Rental Breakpoint) (such lesser amount referred to herein as the "Abated Rent"), along with Additional Charges as required to be paid under this Lease. *** Confidential treatment requested. 4 If either the Theater Requirement or the Cotenancy Requirement remains unsatisfied for a period of nine (9) months or longer, then Tenant shall have the right, so long as either the Theater Requirement or the Cotenancy Requirement remains unsatisfied, to terminate this Lease and, if Tenant so elects to terminate this Lease, Landlord shall reimburse Tenant for all reasonable, third-party costs and expenses (but not to exceed [***], less the amount of the Construction Allowance paid to Tenant by Landlord pursuant to the provisions of Exhibit C attached hereto and made a part hereof) actually incurred by Tenant in connection with the negotiation of this Lease and the termination of this Lease, the preparation of Tenant's design plans and specifications, and other design and construction costs, including, without limitation, the cost of leasehold improvements in connection with the preparation of the Premises for Tenant's business; provided, however, notwithstanding the foregoing, with respect to the Theater Requirement, if Landlord provides Tenant with credible and reliable evidence on or before the expiration of the foregoing nine (9) month period that Landlord will have the theater facility open and operating within an additional nine (9) months after the expiration of the foregoing nine (9) month period (the "Extended Theater Period") (i.e., evidence (including without limitation, a lease executed by a theater tenant that commits such tenant to open by such date) that the theater facility will be open within eighteen (18) months after the Theater Requirement failed to be satisfied), then Tenant shall not be permitted to terminate this Lease as a result of Landlord's failure to satisfy the Theater Requirement unless such Theater Requirement remains unsatisfied at the expiration of the Extended Theater Period. PART 5 RENT Tenant covenants and agrees that without demand, notice or set off, except as otherwise expressly provided herein, Tenant shall pay to Landlord minimum annual rental (hereinafter the "Minimum Rental") and percentage rental ("Percentage Rental") in the amounts as follows: Minimum Rental in the amount of [***] per square foot or [***] per annum, payable in equal monthly installments of [***] per month in advance on or before the first day of each month for Years [***]. Minimum Rent in the amount of [***] per square foot or [***] per annum, payable in equal monthly installments of [***] per month is due in advance on or before the first day of each month for Years [***]. Either party shall have the right to request a remeasurement of the Premises on written notice to the other party given within thirty (30) days after the Commencement Date and naming the architect or engineer it will have do the remeasurement. Upon fifteen (15) days prior written notice, the other party shall identify its architect or engineer, and the architects or engineers identified by both parties shall jointly measure the leasable square footage contained in the Premises. If the leasable square footage as so remeasured is less than that set forth in Part 1 hereof, then the leasable square footage as stated herein shall be revised and Minimum Rental shall be reduced accordingly, by an amount not to exceed [***] of the stated square footage and the Percentage Rental Breakpoint (as hereinafter defined) shall be proportionately adjusted. If the leasable square footage as so remeasured is greater than that set forth in Part 1 hereof, then the leasable square footage as stated herein shall be revised and the Minimum Rental shall be increased accordingly, by an amount not to exceed [***] of the stated square footage and the Percentage Rental Breakpoint shall be proportionately adjusted. Leasable square footage shall be measured from the exterior faces of all outside walls and from the center of all party walls. Notwithstanding anything to the contrary contained herein, in no event shall the leasable square footage of the Premises be less than [***] of the square footage as stated in Part 1 hereof. Tenant shall further pay to Landlord Percentage Rental of [***] of annual Sales and Business Transacted (as defined in the General Lease Provisions) in excess of [***] (the "Percentage Rental Breakpoint") per Lease Year (as herein defined) for Years [***], and [***] of annual Sales and Business Transacted in excess of [***] per Lease Year for Years [***]. *** Confidential treatment requested. 5 All rental payments and payments of Additional Charges (as defined in Exhibit B) hereunder shall be sent to: Peabody Place Centre, L.P. Attn: Accounts Receivable Department P. O. Box 3661 Memphis, Tennessee 38173-3661 or to such other addresses as Landlord may direct from time to time. PART 6 ADDITIONAL CHARGES In addition to Minimum Rental and Percentage Rental, Tenant agrees, commencing on the Commencement Date, to pay to Landlord, at the times hereinafter set forth, without deduction, setoff or abatement, except as otherwise expressly provided herein, the following Additional Charges, as additional rent, the nonpayment of which shall be subject to all provisions of this Lease and of law as to default in the payment of rent or money: (i) Common Area Charges (See General Lease Provisions). (ii) Real Estate Taxes and Assessments (See General Lease Provisions). (iii) Marketing Fund. Tenant shall pay to Landlord the sum of [***] in advance on the first day of each and every calendar month, or the amount voted on by a majority of the tenants in the Shopping Center, whichever is greater, toward the expense of advertising and for promotional activities. Landlord shall, annually, make a contribution to the Marketing Fund in an amount equal to the amount contributed by the tenants in the Shopping Center. (iv) Insurance (See General Lease Provisions). (v) First Year Promotional Assessment (INTENTIONALLY DELETED). (vi) Food Court Furniture, Fixtures, Improvements & Equipment Charge. (INTENTIONALLY DELETED). PART 7 USE AND OPERATION The premises shall be opened for business, kept open for business and used by Tenant and any permitted assignee, sublessee or other occupant of the Premises continuously only for the installation and operation of automobile racing car ride simulators (including motion based simulators) for guests with each ride separately priced and no general admission price to the facility (other than group sales and leagues), and for the sale of merchandise related to motor sports (including NASCAR videos, picture, CD-Roms, DVD's and other media and other such audio/visual items featuring NASCAR and other auto racing) and/or related to NASCAR with the logo of NASCAR or NASCAR Silicon Motor Speedway or such other trade name as Tenant may operate under from time to time. In no event shall the Premises be used for any of the uses set forth in Exhibit F "Exclusive Use Restrictions" attached hereto and made a part hereof. Tenant shall conduct its business in the Premises under the name of NASCAR Silicon Motor Speedway which name shall not be charged without the Landlord's prior written consent, which consent shall not be unreasonably withheld. The Tenant shall have the right to change its trade name (i) in connection with an assignment or subletting to a third party permitted under the Lease and (ii) in all other cases, with Landlord's approval, not to be unreasonably withheld. Furthermore, in the event Tenant loses its right to use the "NASCAR" name (either because Tenant is unable to renew its license agreement with NASCAR or because the NASCAR license agreement is terminated), then Tenant shall have the right to operate the Premises under the same trade name as all or substantially all of the other stores previously operated by Tenant under the trade name *** Confidential treatment requested. 6 "NASCAR Silicon Motor Speedway". Similarly, subject to Landlord's approval which shall not be unreasonably withheld, Tenant shall also be permitted to change its name as part of a national name change of substantially all of its locations. PART 8 NOTICES All notices required or provided for under this Lease shall be given in the manner as prescribed by the notice requirements of the General Lease Provisions, addressed to the following addresses: To Landlord: To Tenant: Peabody Place Centre, L.P. Silicon Entertainment, Inc. c/o Belz Enterprises 210 Hacienda Avenue 100 Peabody Place, Suite 1400 Campbell, CA 95008 Memphis, Tennessee 38103 ATTENTION: Ronald A. Belz With a copy to: Rick S. Kirkbride, Esq. Paul, Hastings, Janofsky & Walker, LLP 555 South Flower Street Los Angeles, CA 90071-2371 or to such other addresses as Landlord or Tenant may direct in writing from time to time. PART 9 REAL ESTATE AGENT This Lease was negotiated by BELZ REALTY COMPANY, L.L.C., represented by Stan Myers acting as agent for Landlord and Blatteis Realty Co., represented by Russell Friend acting as agent for Tenant. BELZ REALTY COMPANY, L.L.C., agrees to pay said agents a commission in accordance with the agreements between BELZ REALTY COMPANY, L.L.C. and agents. PART 10 OPTION TO RENEW It is agreed and understood that the Tenant, if not in default beyond any applicable cure period and this Lease has not been terminated in accordance with the provisions of this Lease, shall have the right to extend this Agreement for 2 additional period(s) of five (5) years each at the [***]. If Tenant shall elect to extend, Tenant shall give to Landlord not less than six (6) months' written notice (certified mail) prior to the expiration of the original term of this Lease Agreement. If within thirty (30) days, the Landlord and Tenant have not agreed upon at the Fair Market Rental rate during the respective term, then Tenant and Landlord shall each appoint a knowledgeable real estate broker or appraiser familiar with commercial property of the type in the Memphis metropolitan area. The two appointees shall designate a third real estate broker or appraiser and the majority decision of the three shall be binding upon Tenant and Landlord, but under no circumstances shall the rent during any extended term be less than rent paid during the preceding term. The cost of arbitration shall be borne equally by the Landlord and Tenant. Notwithstanding the foregoing, in order to avoid any forfeiture or inadvertent lapse of any of Tenant's right to extend the Lease term, if Tenant shall fail to give Landlord any written notice to extend prior to that date which is six (6) months prior to the expiration of the original term of this Lease Agreement (or the expiration of the first extended term, as applicable) and shall not have given Landlord prior notice of its intent not to exercise its option to extend the term of the Lease pursuant hereto, then and as often as the same shall occur, Tenant's right to extend the Term shall nevertheless continue until the expiration date of the original term of this Lease Agreement (or the expiration of the first extended term as applicable) or earlier termination of this Lease, as shall its tenancy hereunder, under the same terms and conditions as theretofore in effect *** Confidential treatment requested. 7 and notwithstanding that the Lease term or most recent extended term shall have expired, except that after the expiration of the term, the Lease shall become a month-to-month tenancy until such time as the next option to extend the term is exercised or this Lease is otherwise terminated pursuant to its terms. If Tenant fails to give Landlord notice of its exercise of the next-succeeding option to extend the term prior to the applicable six (6) month deadline, Landlord shall be entitled (but not obligated) to provide Tenant with a written notice of Landlord's election to terminate such option to extend the terms and all subsequent options to extend the term, which notice shall be effective to terminate this Lease upon either (i) the expiration of the term of this Lease, or (ii) if the term has already expired, that date which is sixty (60) days following the date of Tenant's receipt of such termination notice from Landlord, unless Tenant, within fifteen (15) days of receipt of such termination notice, provides Landlord with written notice of Tenant's election to exercise its next available option to extend the terms of this Lease. PART 11 EXCLUSIVE Provided that Tenant is not in default hereunder beyond any applicable notice and cure period and has not ceased operating for business in the Premises in accordance with Part 7 hereof (subject, however, to Tenant's right to go dark pursuant to Part 4 hereof) for a period in excess of thirty (30) days, Tenant shall have the exclusive right to occupy and operate a business within the Shopping Center (including, without limitation, the Common Areas of the Shopping Centers for the installation and operation of automobile racing car ride simulators (including motion-based simulators) and, so long as Tenant retains the right to use the NASCAR name and uses at least 500 square feet of its sales floor area for the sale of the merchandise hereinafter described, for the sale of NASCAR-branded merchandise and other merchandise related to NASCAR (including, without limitation, NASCAR videos, pictures, CD-Roms, DVD's and other media and other such audio/visual items featuring NASCAR racing and for the sale of NASCAR Silicon Motor Speedway-branded merchandise and Silicon Motor Speedway-branded merchandise ("Tenant's Exclusive Use"). Notwithstanding the foregoing, other tenants in the Shopping Center may sell NASCAR-branded merchandise and other merchandise related to NASCAR, other than apparel, so long as such use is incidental to such tenants primary use of their respective premises. For purposes hereof, an "incidental" use shall mean that not more than one hundred (100) square feet within such tenant's sales area shall be devoted to the sale of such merchandise comprising the "incidental" use. Landlord represents and warrants to Tenant that, except for one space tenant to be operated as Jillian's (or successors or assigns) and one space tenant to be operated as a movie theater under the name Muvico (or successors or assigns), no current tenant, licensee or other occupant of (whether or not currently operating with) the Shopping Center (or other party to which Landlord or any predecessor entity is bound or which has rights affecting the Shopping Center) is a party to a lease, license or other document (and Landlord is not now negotiating any lease, license or other right to use any space within the Shopping Center) the effect of which would violate or permit the use of any space within the Shopping Center which, if so used, would violate Tenant's Exclusive Use. Landlord covenants and agrees that, throughout the Term of this Lease (as may be extended pursuant hereto), (1) Landlord shall not permit (including, to the extant Landlord has the discretion to deny permission under their respective leases, Jillian's and Muvico referenced above), or enter into a lease, license or other document which permits, or approve any change of use by any tenant, licensee or other occupant under any lease, license or other agreement existing as of the date of this Lease or otherwise in a manner that would permit, any other tenant, license or occupant of the Shopping Center to use such tenant's, licensee's or occupant's premises in the Shopping Center in any manner that would violate Tenant's Exclusive Use in whole or in part, (2) any lease, license or other document hereafter entered into with any tenant or occupants for space within the Shopping Center shall expressly recognize and prohibit the tenant or occupant thereunder from violating Tenant's Exclusive Use. Landlord acknowledges and agrees that the grant of Tenant's Exclusive Use is a material inducement for Tenant's execution of this Lease and but for the grant to Tenant's Exclusive Use, Tenant would not have executed this Lease. (a) If Landlord has taken affirmative action to permit, or knowingly permitted, the occurrence of a violation of Tenant's Exclusive Use and such violation of Tenant's Exclusive Use is not extinguished within thirty (30) days following Landlord's receipt of a written notice from Tenant indicating that landlord is in breach of this part 11 ("Exclusive Use Notification"), or if Landlord fails to comply with the requirements of (b) hereinbelow, 8 then Landlord shall be in breach of this Lease and Tenant shall have the right to terminate this Lease and pursue its rights and remedies in law and in equity, as a result of such breach (including, without limitation, the reimbursement by Landlord of the unauthorized costs of Tenant's improvements to the Premises, less the amount of the Construction Allowance paid by Landlord to Tenant pursuant to Exhibit C. (b) If Landlord has not taken affirmative action to permit and Landlord has not knowingly permitted, the occurrence of a violation of Tenant's Exclusive Lien, then Landlord will provide Tenant with written certification within five (5) days following Landlord's receipt of an Exclusive Violation Notification from Tenant that Landlord will use all reasonable efforts to eliminate the violation of Tenant's Exclusive Use. Thereafter, (i) so long as Landlord is actively proceeding to eliminate the violation of Tenant's Exclusive Use by all legal remedies available to Landlord, or (ii) if the Landlord's claim for legal remedies is denied by the court after Landlord has exhausted all of its appeals, Landlord will not be in breach of this Part 11; however, commencing on the fifth (5th) day following Landlord's receipt of the Exclusive Violation Notification and continuing until the violation of Tenant's Exclusive Use no longer exists, Tenant shall not be obligated to pay to Landlord Minimum Rental but instead pay to Landlord, in lieu of Minimum Rental an amount equal to [***] of the annual Sales and Business Transacted monthly in arrears; provided, however, if Tenant's Sales and Business Transacted during the one hundred eighty (180) day period immediately following Landlord's receipt of an Exclusive Violation Notification from Tenant decrease by [***] (as compared to the corresponding 180-day period in the first preceding year that the violation of Tenant's Exclusive Use did not occur, or if there is no such corresponding 180-day period, then the 180-day period immediately preceding Landlord's receipt of an Exclusive Violation Notification from Tenant) in the same category in which Tenant's Exclusive Use is being violated (i.e., simulator rides versus merchandise), then Tenant shall have the right, but not the obligation, for a period of forty-five (45) days following the expiration of such 180-day period to terminate this Lease on written notice to Landlord; in the event of such termination by Tenant pursuant to this sentence. landlord shall reimburse Tenant for unamortized costs of its improvements to the Premises in an amount not to exceed [***], less the amount of the Construction Allowance paid by Landlord to Tenant pursuant to Exhibit C. In the event Tenant fails to exercise such termination right, or Sales and Business Transacted have not decreased as above-described, Tenant shall resume payment of Minimum Rental and Percentage Rental as reserved hereunder on the first day of the month following the expiration of the aforesaid forty-five (45) day period or the expiration of the 180-day period in the event Sales and Business Transacted had not so decreased. PART 12 PEABODY PLACE DEVELOPMENTAL GUIDELINES Tenant agrees to comply with all applicable federal, state and local governmental requirements including, but not limited to, those attached hereto in Exhibit E and agrees to furnish to Landlord, within a reasonable time after Landlord's written request, all documentation within its reasonable control to evidence such compliance, except for any documents or information deemed confidential by Tenant. Notwithstanding anything to the contrary contained herein, Landlord represents and warrants that the funds provided to fund the Construction Allowance described in Exhibit C attached hereto and made a part hereof shall not be funds provided by the UDAG, CDBG or MUD programs as described in Section 5 of Exhibit E attached hereto and made a part hereof. PART 13 TITLE TO SHOPPING CENTER Peabody Place Centre, L.P. will be the owner of the ground leasehold interest in the Premises and will function as the Landlord pursuant to this Lease. The undersigned Hotel Peabody, L.P. (formerly known as Hotel Peabody, Ltd.) joins herein as the current owner of the ground leasehold interest in the Premises pursuant to the terms of the lease agreement dated as of December 31, 1997 by and between Memphis Center City Revenue Finance Corporation and Hotel Peabody, L.P. recorded in the Shelby County Register's Office as Instrument HB 6476 (the "Ground Lease") and guarantees the obligations of the Landlord under the Lease. At such time as construction commences on the Shopping Center, Hotel Peabody, L.P. will transfer all of its right, title and interest in and to the Shopping Center pursuant to the Ground Lease to Peabody Place Centre, L.P. Hotel Peabody, L.P. will *** Confidential treatment requested. 9 thereupon be released from all covenants, conditions and obligations pursuant to the Lease and any documents executed in connection therewith and Peabody Place Centre, L.P. will assume all obligations of the Landlord hereunder, including those which had accrued but not been satisfied prior to the time of such transfer. PART 14 TENANT'S TERMINATION RIGHT Notwithstanding anything to the contrary contained herein and so long as Tenant is not in material default hereunder beyond any applicable notice and cure period and has not ceased operating for business within the Premises (except pursuant to the provisions of Part 4 hereof). In the event Tenant does not achieve Sales and Business Transacted of at least Two Hundred and Fifty and No/100 Dollars ($250.00) per square foot contained in the Premises on average during the fourth and fifth lease years of the term hereof calculated on an annualized basis (e.g., if the Sales and Business Transacted for the fourth and fifth lease years, when added together and divided by two, do not exceed $250.00 per square foot), then Tenant, for a period of thirty (30) days following the end of the fifth year, shall have the option, upon one hundred eighty (180) days prior written notice to Landlord, of terminating this Lease ("Termination Option"). In the event that Tenant fails to exercise its Termination Option within the required time period, then such Termination Option shall, upon the expiration of the applicable period, become null and void and be of no further force or effect. In the event Tenant exercises the foregoing Termination Option within the required time period, this Lease shall terminate upon expiration of the one hundred eighty-day notice period, subject, however, to the payment by Tenant to Landlord of all sums having accrued to Landlord. In the event that Tenant exercises the Termination Option provided for herein, Tenant shall pay to Landlord the unamortized portion of the Tenant Allowance actually paid to Tenant pursuant to Exhibit C and the unamortized portion of any brokerage commissions paid by Landlord pursuant to the provisions of Part 9 hereof. PART 15 REASONABLE CONSENT Landlord and Tenant hereby acknowledge and agree that, except as otherwise expressly provided herein, in any instance provided in this Lease for Landlord or Tenant to give its consent, such consent shall not be unreasonably withheld. PART 16 ENTIRE AGREEMENT This Lease includes the Lease Agreement, Exhibit A (drawing or description of the Property showing the general location of the Premises), Exhibit B (General Lease Provisions), Exhibit C (which delineates the construction requirements of the parties, if any), Exhibit D (sign criteria), Exhibit E (developmental guidelines) and Exhibit F (exclusive use restrictions). The foregoing constitute all of the agreements and conditions made between the parties hereto, and no representations or statements claimed to have been made and not herein contained shall vary or modify this Lease in any way. 10 IN TESTIMONY WHEREOF the above named Landlord and the above named Tenant have executed this and three (3) other original instruments of identical year and date, on the day and year set forth on page 1 of this Lease. LANDLORD: Peabody Place Centre, L.P. BY: PEABODY PLACE, INC., General Partner By: /s/ MORRIS I. THOMAS ----------------------------------------- Morris I. Thomas, Vice President By: /s/ JACK A. BELZ ----------------------------------------- Jack A. Belz, President HOTEL PEABODY, L.P. By: Perim Corp., General Partner By: /s/ JIMMIE D. WILLIAMS ----------------------------------------- Jimmie D. Williams, Senior Vice President TENANT: Silicon Entertainment, Inc. By: /s/ [ILLEGIBLE] ----------------------------------------- Its: Vice President ---------------------------------------- EXHIBITS: A. Site Plan and/or Floor Plan B. General Lease Provisions C. Construction Exhibit (if applicable) D. Sign Criteria E. Developmental Guidelines F. Exclusive Use Restrictions Lease Agreement between Peabody Place Centre, L.P. and Silicon Entertainment, Inc. for Peabody Place Retail/Entertainment Development at space numbers 214, 216, and 218. 11 STATE OF TENNESSEE COUNTY OF SHELBY Before me, a Notary Public of the State and County aforesaid, personally appeared JACK A. BELZ AND MORRIS I. THOMAS, PRESIDENT AND VICE PRESIDENT, respectively, of PEABODY PLACE, INC., a Tennessee corporation, said corporation is the general partner of PEABODY PLACE CENTRE, L.P., a Tennessee limited partnership, with whom I am personally acquainted, and who, upon oath acknowledged that they are the PRESIDENT AND VICE PRESIDENT, respectively of PEABODY PLACE, INC., General Partner, of PEABODY PLACE CENTRE, L.P., and that they as such PRESIDENT AND VICE PRESIDENT, respectively, executed the foregoing instrument for the purpose therein contained by signing the name of such partnership, as one of the general partners by themselves as PRESIDENT AND VICE PRESIDENT, respectively of such corporation. WITNESS my hand and Notarial seal, at office in Memphis, Tennessee, this, the 19th day of May, 1999. /s/ SANDRA PERRY [SEAL] - ----------------------------- Notary Public My Commission Expires: ------- STATE OF CALIFORNIA COUNTY OF SANTA CLARA Before me, a Notary Public of the State and County aforesaid, personally appeared Chris Morse with whom I am personally acquainted, (or proved to me on the basis of satisfactory evidence) and who, upon oath, acknowledge himself to be the Vice President of SILICON ENTERTAINMENT, INC., the within named bargainor, a California corporation, and that he executed the foregoing instrument for the purposes therein contained by signing the name of such corporation by himself as such Vice President. Witness my hand, at office, this 24 day of May, 1999. /s/ LAURIE M. SHERMER - --------------------- Notary Public My Commission Expires 9/19/2001 [SEAL] STATE OF TENNESSEE COUNTY OF SHELBY Before me, a Notary Public of the State and County aforesaid, personally appeared JIMMIE D. WILLIAMS, SENIOR VICE PRESIDENT of PERIM CORP, a Tennessee corporation, said corporation is one of the general partners of HOTEL PEABODY, L.P., a Tennessee limited partnership, with whom I am personally acquainted, and who, upon oath acknowledged that he is the SENIOR VICE PRESIDENT of PERIM CORP., General Partner, of HOTEL PEABODY, L.P., and that he as such SENIOR VICE PRESIDENT, executed the foregoing instrument for the purpose therein contained by signing the name of such partnership by such corporation, as one of the general partners by himself as SENIOR VICE PRESIDENT of such corporation. WITNESS my hand and Notarial seal, at office in Memphis, Tennessee, this, the 19th day of May, 1999. /s/ SANDRA PERRY [SEAL] - ----------------------------- Notary Public My Commission Expires: ------- 12 TABLE OF CONTENTS TO EXHIBIT B TO RETAIL LEASE AGREEMENT
PAGE ARTICLE 1 - RENT AND OTHER PAYMENT................................................. 1 Section 1 - Minimum Rental............................................. 1 Section 2 - Percentage Rental.......................................... 1 Section 3 - Additional Charges......................................... 2 (i) Common Area Maintenance Charge............................. 2 (ii) Real Estate Taxes and Assessments.......................... 2 (iii) Other Taxes................................................ 3 (iv) Marketing Fund............................................. 3 (v) Insurance.................................................. 3 (vi) Tenant's Proportionate Share............................... 3 (vii) Payment.................................................... 3 Section 4 - Security Deposit........................................... 4 ARTICLE 2 - USE AND OPERATION...................................................... 4 Section 1 - Permitted Use.............................................. 4 Section 2 - Permits.................................................... 4 Section 3 - Hours of Operation......................................... 4 Section 4 - Covenant of Continuous Operation........................... 4 Section 5 - Parking, Etc............................................... 5 Section 6 - Lawful and Moral Use....................................... 5 Section 7 - Additional Tenant Covenants................................ 5 ARTICLE 3 - COMMON AREAS MAINTENANCE............................................... 5 ARTICLE 4 - ASSIGNMENT AND SUBLETTING.............................................. 6 ARTICLE 5 - ALTERATIONS, INSTALLATIONS AND REMOVAL OF IMPROVEMENTS BY TENANT............................... 6 ARTICLE 6 - INSURANCE AND RELATED MATTERS.......................................... 7 Section 1 - Loss or Damage to Tenant's Property........................ 7 Section 2 - Tenant's Required Insurance................................ 7 Section 3 - Landlord's Insurance....................................... 7 Section 4 - Waiver of Recovery......................................... 8 Section 5 - Hold Harmless and Indemnification.......................... 8 Section 6 - Invalidation of Insurance/Increased Premiums............... 8 ARTICLE 7 - LANDLORDS' LIEN........................................................ 8 ARTICLE 8 - MECHANICS' LIEN........................................................ 8 ARTICLE 9 - REPAIRS................................................................ 8 ARTICLE 10 - DAMAGE OR DESTRUCTION BY FIRE.......................................... 9 ARTICLE 11 - RIGHT OF ENTRY, ETC.................................................... 9 ARTICLE 12 - UTILITIES.............................................................. 9 ARTICLE 13 - DEFAULT................................................................ 10 ARTICLE 14 - INSOLVENCY OF TENANT................................................... 11 ARTICLE 15 - DELIVERY AT END OF LEASE............................................... 11 ARTICLE 16 - NO WAIVER OF BREACH, EXTENSION, PARTIAL PAYMENT, NO ACCORD AND SATISFACTION...................................... 11 ARTICLE 17 - SUBORDINATION: ATTORNMENT: ESTOPPEL: LANDLORDS COVENANT AS TO TITLE.................................. 12 ARTICLE 18 - GRAPHICS............................................................... 12 ARTICLE 19 - CONDEMNATION........................................................... 13 ARTICLE 20 - ENVIRONMENTAL MATTERS.................................................. 13 ARTICLE 21 - FIRE PROTECTION........................................................ 13 ARTICLE 22 - COVENANTS RUN TO HEIRS................................................. 13 ARTICLE 23 - SHORT FORM LEASE....................................................... 13 ARTICLE 24 - NOTICES................................................................ 14 ARTICLE 25 - RULES AND REGULATIONS.................................................. 14 ARTICLE 26 - REAL ESTATE AGENT...................................................... 15 ARTICLE 27 - PERSONAL LIABILITY..................................................... 15 ARTICLE 28 - NO PARTNERSHIP......................................................... 15 ARTICLE 29 - CORPORATE TENANTS...................................................... 15 ARTICLE 30 - ENTIRE AGREEMENT....................................................... 15
13 EXHIBIT B TO RETAIL LEASE AGREEMENT GENERAL LEASE PROVISIONS ARTICLE 1 RENT AND OTHER PAYMENTS SECTION 1. MINIMUM RENTAL Tenant shall, without demand or notice, pay to Landlord minimum annual rental ("Minimum Rental") in the amount as is set forth in the Lease Agreement which amounts shall be paid in equal monthly installments (or in the manner prescribed by Part 3 of the Lease to which this is an Exhibit without deduction, abatement or setoff in advance on or before the first day of each month throughout the term of this Lease. Minimum Rental for any partial calendar month shall be prorated at a daily rate based upon the number of days in the respective calendar year. Tenant shall not prepay any Minimum Rental more than one (1) month in advance of its due date. SECTION 2. PERCENTAGE RENTAL Tenant further covenants and agrees that, commencing on the date that Tenant's Sales and Business Transacted (as hereinafter defined) reach or exceed the Percentage Rental breakpoint as is set forth in the Lease Agreement, then thereafter, after the end of each month of such Lease Year (as hereinafter defined). Tenant shall pay additional percentage rental ("Percentage Rental") based upon the total of all Sales and Business Transacted by Tenant, its sub-tenants and licensees, in or from the Premises during the remainder of each such Lease Year. The dollar breakpoint above which such Percentage Rental shall be paid as well as the percentage to be utilized in the computation of such Percentage Rental are more particularly set forth in the Lease Agreement to which these General Lease Provisions are attached. Tenant shall be under no obligation to make any payments of annual Percentage Rental in any Lease Year until such time as Tenant has achieved the minimum amount of Sales and Business Transacted or is set forth in Part 3 of the Lease Agreement to which this is an Exhibit (except to the extent Tenant is not open for business a complete Lease Year, as hereinafter provided). Upon achieving such minimum amount of Sales and Business Transacted in any Lease Year. Tenant shall thereupon make monthly payments of annual Percentage Rental payable on or before the fifteenth (15th) day following the close of each full calendar month during the term, based upon the Sales and Business Transacted for such period. Monthly payments of annual Percentage Rental shall be calculated by multiplying the amount of Sales and Business Transacted for the month in question by the percentage specified in Part 3 of the Lease Agreement to which this is an Exhibit, and the first such payment shall include any prorated Percentage Rental for the period from the date Tenant's Sales and Business Transacted reached the Percentage Rental Breakpoint set forth in Part 3 to the first day of the next full calendar month in the term. The term Lease Year is based herein shall mean and refer to the twelve calendar month period commencing on the first day of the term hereof, if the term commences on the first day of a month, or commencing on the first day of the following month, if the term commences within a month, and successive twelve calendar month periods thereafter. The first Lease Year shall be enlarged to include Sales and Business Transacted for the first partial month of the term hereof, if applicable. Sales and Business Transacted and the Percentage Rental Breakpoint shall be proportionately reduced or enlarged based on the number of months within a Lease year that Tenant is open and operating. For the purposes of this Lease, "Sales and Business Transacted" shall be defined to mean and include the aggregate dollar amount of all business done 1. from the Premises, including all sales of merchandise, food and beverages, and charges for all services performed in, upon or resulting from the Premises, including, but not limited to, direct store sales, sales through newspaper, mail order, telephone and other media of communications, whether by Tenant or Tenant's licensees or other occupying the Premises, including all sales for cash, check, credit, credit cards, charge accounts, exchange or otherwise, regardless of collection. Additionally, Sales and Business Transacted shall include all income received by Tenant attributable to display fees, slotting allowances, promotional considerations, rebates or any other payments received by Tenant as consideration to Tenant for its stocking, promoting, or advertising any product. In computing the Sales and Business Transacted, there shall be deducted from or excluded from the computation, only the following: 1(a). On or prior to the fifteenth (15th) day of each month throughout the term, Tenant shall furnish Landlord monthly statements of Sales and Business Transacted during the prior month. On or before the thirtieth (30th) day after the end of each Lease Year, Tenant shall furnish to Landlord an annual statement of the Sales and Business Transacted during the preceding Lease Year which shall be prepared and calculated in accordance with generally accepted accounting principles and certified by Tenant as correct. Any Percentage Rental not previously paid which may be due to Landlord shall be paid simultaneously with furnishing of such annual statement. Tenant covenants that for the purposes of ascertaining the amount of Percentage Rental due and payable, Tenant will keep full and complete records and looks of account, showing the daily cash receipts, the daily bank deposits, and the 1 14 early Sales and Business Transacted in, from or upon the Premises. In order to enable Landlord to verify the Percentage Rental due at hereunder, Tenant will, upon written request, make available records and books of account at the Premises or at an accountant's office in Memphis, Tennessee, or at Tenant's corporate headquarters. Tenant shall permit Landlord or its representatives, 1(b). to inspect the records and books of account relating to Sales and Business Transacted in front or upon the Premises, for the purpose of examination and verification of the aforementioned "Lease Year" reports, provided such inspections shall be made within the twenty four (24) months after delivery of the report. 1(c). In the event that upon inspection of such records and books of account, it is determined that the report for such year resulted in an underpayment of Percentage Rental in excess of 1(d). anything hereinbefore contained notwithstanding, Landlord shall have the right to inspect the records and transfer of account for all prior Lease Years subsequent to the date of the last inspection. Tenant shall immediately pay Landlord any amounts which may be due for any prior year which may be shown upon or as a result of any such inspection and Tenant also shall reimburse Landlord for the cost of all such inspections in which an underpayment is found. 1(e). Noncompliance with the sales reporting requirements of this Article or the nonpayment of Percentage Rental due hereunder 1(f). shall be deemed to be a material default which shall enable Landlord to exercise all remedies available to Landlord under this Lease, or at law or equity, including termination of this Lease. Upon request of Landlord, Tenant shall furnish to Landlord copies of any sales tax returns made to any lawful taxing authority covering payment of any sales taxes paid by Tenant in connection with Sales and Business Transacted. In addition to the other remedies Landlord is entitled to under due provisions of this Lease or otherwise by law, if Tenant shall fail to deliver to Landlord any statement or report required pursuant to the provisions set out hereinbefore in this Article 1, 1(g). Tenant, in recognition of the difficulty or impossibility of determining Landlord's damages, shall pay Landlord, upon demand, as liquidated damages and not as a penalty and in addition to the rent and other charges payable under this Lease, a charge of [***] for each day beyond the last date on which the statement or report called for hereinbefore was due to be delivered to Landlord, which separate charge of [***] per day shall continue to be due and payable for each day which occurs until said statement or report is delivered to Landlord. Regardless of the foregoing, nothing herein contained shall be deemed to limit any other remedy available to Landlord or in any way prevent Landlord from declaring Tenant in default under this Lease for failure to have delivered any such statement or report to Landlord within the time limit required by the provisions of this Article 1. SECTION 3. ADDITIONAL CHARGES In addition to Minimum Rental and Percentage Rental, Tenant agrees that it shall, from and after the Commencement Date, pay to Landlord, at the times hereinafter set forth, without deduction, or abatement, the following Additional Charges, as additional rent, the nonpayment of which shall be subject to all provisions of this Lease and of law as to default in the payment of rent or money: (l) Common Area Maintenance Charge. In addition to the rentals set forth in Part 3 of the Lease, and with the same rights and results respecting collection, violation or default, Tenant agrees to pay to Landlord, as additional rent, monthly in advance on the first day of each month during the term of this Lease, commencing on the Commencement Date and continuing throughout the term hereof, a charge (hereafter referred to as the "Common Area Maintenance Charge") representing Tenant's Proportionate Share (as defined in Section vi hereafter) of the Common Area Maintenance and Operation Costs. The term "Common Area Maintenance and Operation Costs" includes the total cost and expense incurred in operating, maintaining, equipping, policing, inspecting, protecting and repairing the Common Areas of the Shopping Center, including, without limitation, the cost or expenses of, or incurred in connection with or reasonably attributable to, lighting, gardening and paving, line painting and traffic direction; fire protection (including sprinkling and the installation of an ADT or monitor type system); sprinkler monitoring fees; fees for required licenses); personal property leases; surcharges levied upon or assessed against parking spaces or areas; payments toward mass transit or car pooling facilities or otherwise as required by federal, state or local governmental ambient air and environmental standards; heating, ventilating and air conditioning of the enclosed units and other enclosed portions of the Common Areas; operating of loud speakers and other equipment supplying music in the Common Areas; the operation and maintenance of vertical transportation equipment and facilities; the illuminating, maintaining and operating signs advertising the Shopping Center or the tenants therein; sanitary control, gas, water and sewage charges; electrical charges; removal of ice, snow, trash, rubbish, debris, garbage and other refuse; depreciation on equipment and machinery used in such maintenance, permitted to provide and supervise such services, to clean, to direct parking, maintain security and police the Common Areas (including wages, unemployment, and any social security taxes, workers compensation insurance, health benefits and other fringe benefits); such replacement of paving, curbs, walkways, landscaping, drainage, lighting and other common facilities as may from time to time be necessary of all the Common Areas of the Shopping Center, expenditures required under any governmental law or regulation that was not applicable to the Shopping Center at the time it was originally constructed; the cost of reasonable enforcement of the Common Area Rules and Regulations; plus the administrative costs attributable to the Common Areas for on-site personnel and, in addition thereto, an overhead cost equal to [***] of the total of the aforesaid costs incurred by Landlord in connection with the operation of the Common Areas. Said Costs shall not include depreciation of the original cost of constructing the Common Areas. Common Area Maintenance and Operation Costs shall be reduced by the amount of any contributions thereto made by any Anchor Tenant(s) (as hereinafter defined). 1(h). Landlord may cause any or all of said services and/or supplies to be provided by an independent contractor or contractors. Should Landlord acquire or make available additional land not now a part of the Shopping Center Site and make the same available for parking or other common area purposes, then the Common Area Maintenance and Operation Costs shall also include all of the aforementioned expenses incurred and/or paid by Landlord in connection with said additional land. (ll) REAL ESTATE TAXES AND ASSESSMENTS. Tenant shall pay to Landlord Tenant's Proportionate Share (as hereinafter defined) of the Real Property Taxes and Assessments (general and special, ordinary and extraordinary, foreseen and unforeseen) levied against the land, buildings and improvements comprising the Shopping Center or the property of which the Premises are a part or the property included in Landlord's real property tax and assessment bills for the Shopping Center ("Real Property Taxes and Assessments"). 1(i). *** Confidential treatment requested. 2 15 "Real Property Taxes and Assessments" shall include all 1(j) costs and fees including consultant's fees and other similar fees incurred by Landlord in contesting or defending taxes and assessments or negotiating with public authorities. A copy of Landlord's tax bill shall be conclusive evidence of the amount of Real Property Taxes and Assessments assessed or levied. (iii) OTHER TAXES. Should any governmental authority having jurisdiction impose a tax and/or assessment of any kind or nature upon, against, or with respect to the rentals or other payments payable to Landlord or on the gross receipts of Landlord or with respect to Landlord's ownership of the land, holdings and improvements comprising the Shopping Center, then such shall be deemed to be a Real Property Tax and Assessment and Tenant shall be obligated to pay said tax. Tenant shall pay said tax directly to the taxing authority or, if Landlord is obligated to pay taxing authority, Tenant shall pay to Landlord Tenant's Proportionate Share thereof - 1(k). (iv) MARKETING FUND. Tenant shall pay to Landlord the sum which is set forth in the Lease Agreement to which this is an Exhibit as its contribution to the Marketing Fund. Such payment shall be deemed to be additional rental and shall be paid in advance on the first day of each and every calendar month during the term and, at Landlord's request, shall be paid separately from any other payments due under this Lease. Such amount, or such greater amount voted on by a majority of tenants in the Shopping Center, shall be paid to Landlord to be utilized toward the expense of advertising and for promotional activities. Funds so paid by Tenant shall be expanded for said activities by or under the direction of Landlord, or by such person, firm or corporation in whom or to which Landlord may delegate such authority. The mall manager and other mall personnel employed by Landlord may be designated by Landlord to be the promotional director or to otherwise perform such services. In the event any employees of the Landlord perform promotion work, Landlord shall deduct from the Marketing Fund the reasonable cost and expense thereof. The amounts payable under this subparagraph shall be adjusted on January 1 of each calender year of the term from and after January 1 of the year following the Commencement Date and annually thereafter during the term of this lease and any extension or renewal thereof by a percentage equal to [***]. All items (19X2-KR=100), published by the Bureau of Labor Statistics of the United States Department of Labor ("CPI") on the date closest to the date hereinbefore designated for such adjustment over the base CPI figure published for the month in which the Commencement Date occurs. If, from time to time during the term of this Lease and any extension or renewal thereof, the United States Department of Labor, Bureau of Labor Statistics ceases to maintain said CPI, such other index or standards as will most nearly accomplish the aim and purpose of said CPI as reasonably determined by Landlord shall be used in determining the amount of any such adjustment. In the event Landlord is required to contribute to the Marketing Fund, such contribution may be satisfied in whole or in part by contribution of 1(l) a Promotional Director, Promotional or Advertising Coordinator or Shopping Center or Mall Manager. (v) INSURANCE. Tenant shall pay to Landlord Tenant's Proportionate Share of Landlord's annual premiums for insurance carried by Landlord in accordance with the requirements of Article 6 of those General Lease Provisions and elsewhere herein for "all risk" insurance coverage if carried by Landlord; commercial general liability insurance, rent loss insurance, boiler and machinery insurance and all other insurance and the loss deductibles maintained by Landlord for the Shopping Center from time to time - 1(m). (vi) TENANT'S PROPORTIONATE SHARE. "Tenant's Proportionate Share" shall be defined as being a fraction, the numerator of which is the number of leasable square feet in the Premises and the denominator of which is the aggregate number of leasable square feet in the Shopping Center, but excluding from such aggregate area the area leased by any Anchor Tenant (but only to the extent that any such Anchor Tenant pays less than its portion of the total costs). For purposes hereof, Anchor Tenants shall mean and refer to tenants leasing in excess of 15,000 square feet and restaurant tenants. (vii) PAYMENT. The foregoing amounts, unless the amount and time for payment are fixed, may be separately invoiced by Landlord and in such event shall be paid by Tenant within fifteen (15) days after the date of such invoice. Said amounts may be estimated by Landlord in which event Landlord shall notify Tenant from time to time of Landlord's estimate. Tenant shall pay said estimate (as said estimates may be revised) in advance on the first day of each and every calendar month with Tenant's Minimum Rental without further notice. When Landlord has calculated the exact amount actually payable by Tenant for each item, Landlord shall notify Tenant. Any deficiency in payment by Tenant for any item shall be paid by Tenant to Landlord promptly upon receipt of the notice in respect to such item. Any overpayment by Tenant shall be credited against the next ensuing installments of Landlord's estimate of that item. In the event of dispute regarding payment, the burden of proof of payment of any monthly installments of Minimum Rental, Percentage Rental, or Additional Charges hereunder shall be upon Tenant. All Minimum Rental, Percentage Rental, Additional Charges and other amounts required to be paid shall be paid to Landlord at the notice address as is set forth in the Lease Agreement or at such other place or places as Landlord may from time to time designate in writing. If Tenant shall fail to pay any amounts required to be under the terms of this Lease within seven (7) days after the same is due, Tenant shall be obligated to pay a late payment charge equal to the greater of [***] or [***] of any payment not paid when due to reimburse Landlord for its additional administrative costs. *** Confidential treatment requested. 3 16 In addition, any Minimum Rental, Percentage Rental or Additional Charges which is not paid within seven (7) days after the same is due shall bear interest at a rate equal to the lesser of (i) 1(n). per annum or (ii) the [***], from the first day due until paid. Any assessments pursuant to this Section which shall become due shall be payable, unless otherwise provided herein, with the next installment of Minimum Rental. Any payment by Tenant or acceptance by Landlord of a lesser amount than shall be due from Tenant to Landlord shall be treated as a payment on account. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full shall be given no effect, and Landlord may accept such check without prejudice in any other rights or remedies which Landlord my have against Tenant. Section 4. Security Deposit ARTICLE 2 USE AND OPERATION Section 1. Permitted Use The Premises shall be opened for business, kept open for business and used by Tenant and any assignee, sublessee or other occupant of the Premises continuously only for the operation of a retail store engaged in the sale of merchandise and/or performance of services more particularly described in the Lease Agreement in which this is an Exhibit and Tenant agrees that it will not use or permit or alter the Premises or any part thereof to be used for any business or purpose other than that specifically defined and permitted by the Lease Agreement of this paragraph or for the sale of merchandise or the performance of services other than the merchandise and/or services specifically described in the Lease Agreement. The covenant to use the Premises as set forth above is a material inducement for Landlord to enter into this Lease and Landlord, in Landlord's sole discretion, may withhold consent to any proposed change of use of the Premises. Section 2. Permits Tenant, at Tenant's sole cost and expense, shall obtain all building, use and occupancy permits and licenses required by applicable governmental authorities for connection, repair or alteration of the Premises, use of the Premises and for the conduct of Tenant's business excepting building permits which Landlord is required to obtain in connection with improvements required of Landlord hereunder, if any. - 1(o). Section 3. Hours of Operation The Premises shall be open for business to the public Monday through 1(p). not later than 1(g). a.m. and shall remain open for the conduct of business to the public until 2. On Sunday's the Premises shall be open minimally from 3. On legal holidays the Premises shall be open during such hours as the Landlord shall establish. Landlord shall designate and may amend from time to time the closing hours of the Shopping Center. Landlord reserves the right to permit other Tenants to observe different hours of business operations. -4. Section 4. Covenant of Continuous Observation Tenant agrees to keep on the Premises an adequate staff of employees and a full and complete stock of merchandise and shall continuously operate its business during the hours set forth above. 5. Each failure of Tenant to keep the Premises open for business as herein required 5(a). shall be deemed a breach of this Lease 5(b). In addition to any other rights and remedies Landlord may have for such default, Tenant agrees to pay Landlord in addition to the Minimum Rental and Additional Charges set forth in this Lease) for each day or partial day that Tenant does not operate from the Premises in accordance with the provisions of this Lease liquidated damages equal to 5(c). of the monthly Minimum Rental payable by Tenant pursuant to this Lease, divided by thirty (30). Further, in the event Tenant ceases operating a going business within the Premises as required by these General Lease Provisions, in addition to the 5(d). increase in Minimum Rental, such liquidated damages shall be increased monthly by one twelfth (1/12) of the average annual Percentage Rental paid by Tenant during the two (2) year period preceding such cessation of operations. Tenant acknowledges that Landlord's actual damages would be difficult to calculate and that the liquidated damages set forth above represent a fair and reasonable appreciation of Landlord's actual damages. - 6. *** Confidential treatment requested. 4 17 SECTION 5. PARKING, ETC. 7. SECTION 6. LAWFUL AND MURAL USE The Premises shall, during the term of this Lease be used only and exclusively for lawful and moral purposes, and no part of the Premises or improvements thereon shall be used in any manner whatsoever for any purposes in violation of the ordinances and laws of any governmental authority having jurisdiction over the Premises, and Tenant will have and hold the Landlord harmless from any such violations. -- 8. Tenant, at Tenant's expense shall comply with all laws, rules, orders, ordinances, directions, regulations and requirements of federal, state, county and municipal authorities, now in force or which may hereafter be in force, which shall impose any duty upon Landlord or Tenant with respect to the use, occupation or alteration of the Premises. SECTION 7. ADDITIONAL TENANT COVENANTS Tenant, at Tenant's expense, shall keep the plate glass within the Premises clean and clear of any debris and litter, keep any garbage, trash, rubbish or refuse in all-proof containers within the interior of the Premises until removed, have such garbage, trash, rubbish and refuse removed on a regular basis; keep all mechanical apparatus free of vibration and noise which may be transmitted beyond the Premises 9.; keep any vestibules or entries to the Premises and the sidewalks, driveways, parking areas, rear service areas and loading areas and other areas adjacent to the Premises free of all trash, refuse or other articles; not permit any accumulations of garbage, trash, refuse, or rubbish within or outside of the Premises; remove its shopping carts and other personal property from the Common Areas; not cause or permit objectionable odors to eminate from the Premises; and not distribute handbills, printed material or advertising outside the Premises or within the Common Areas or solicit business in the parking or other Common Areas. Further, in no event shall Tenant display or sell merchandise outside of the Premises or in any portion of the Common Areas other than in connection with Landlord sponsored promotional sales affecting the overall Shopping Center, nor shall Tenant install, minimum or permit any individual or entity to install, maintain or otherwise operate vending machines, pay phones or any other type of personal property or equipment within or upon the Common Areas, sidewalks or any area outside of the Premises. - -- 10. ARTICLE 3 COMMON AREAS MAINTENANCE Landlord shall make available from time to time within the Shopping Center such Common Areas as Landlord shall deem appropriate. The term "Common Areas" shall mean all areas, improvements and equipment in the Shopping Center not devoted to or for one occupant's exclusive use and shall include without limitation, any and all open and enclosed pedestrian malls, courts and lanes, customer and employee parking areas (including any back parking structures); all lights and lighting standards, traffic and directional signs and traffic stripping and marking, driveways, roadways and ramps, corridors, aisles and hallways, balconies, interior and exterior stairs, retaining walls, exterior boundary walls and fences, delivery passenger, entrances on the streets and highways, water, sanitary sewers, storm sewers, and other utility lines, systems, conduits and facilities to the perimeter walls of any building (even though intended for the use of only one or a limited number of occupants), and any of the foregoing which serve the Common Areas and facilities, planting, landscaped areas and facilities, lighting facilities, decorative fountains, truck serviceways, loading dock areas and facilities, sidewalks, courts, ramps, canopies, comfort and first-aid stations, restrooms and lounges, janitorial facilities, parcel pick-up stations, drinking fountains, transportation equipment (including elevators, escalators and moving sidewalks), community rooms and auditoriums, curbs and drains, the facilities apparent to each and all of the foregoing, and other facilities and service areas for common use within the Shopping Center, and including such improvements and facilities as may be constructed or added to the Shopping Center, as may be expended or adjusted by Landlord from time to time, which improvements and facilities are not devoted in or for one occupant's exclusive use, all whether or not existing or hereafter constructed. Tenant and its customers shall have the right in common with others to the nonexclusive use of the Common Areas as such are configured, maintained and provided by Landlord from time to time. The Shopping Center may be constructed in stages and construction of later stages may necessitate the rearrangement and alterations of some or all of the Common Areas. Landlord shall operate and maintain the Common Areas at the expense of Tenant and the occupants of the Shopping Center in a manner deemed by Landlord, in its sole discretion as reasonable and appropriate and may close the Common Areas or portions thereof for repairs and for other reasonable business purposes. Landlord reserves the right in its sole discretion to modify, alter, remove, reduce, redesign or change the size, location, elevation, nature and/or purpose of all or any part of the Common Areas, to make installations or construct buildings, structures, booths and/or kioshes therein, and to use the Common Area for exhibits, sales or promotions. -- 11. 5 18 Tenant understands and agrees that Landlord may, at any time or from time to time during the term of this Lease, perform substantial renovation work in and to the building or the mechanical systems serving the building (which work may include, but need not be limited to, the repair or replacement of the buildings exterior facade, exterior window glass, elevators, electrical systems, air conditioning and ventilating systems, plumbing system, common hallways, or lobby), any of which work may require access to the same from within the Premises. Tenant agrees that: (a) Landlord shall have access to the Premises at all reasonable times, upon reasonable notice, for the purpose of performing such work; and (b) Landlord shall incur no liability to Tenant, nor shall Tenant be entitled to any abatement of Minimum Rental or any other charges on account of any noise, vibration, or other disturbance to Tenant's business at the Premises (provided that Tenant is not denied access to said Premises) which shall arise out of said access by Landlord or by the performance by Landlord of the aforesaid renovations at the building. Landlord shall use reasonable efforts (which shall not include any obligation to employ labor at overtime rates) to avoid disruption of Tenant's business during any such entry upon the Premises by Landlord. ARTICLE 4 ASSIGNMENT AND SUBLETTING This Lease shall not be assigned, mortgaged, pledged, encumbered or in any other manner transferred by Tenant, voluntarily or involuntarily, by operation of law or otherwise nor shall the Premises of any part thereof be sublet, licensed, granted to a concessionaire or used or occupied by anyone other than Tenant without first obtaining the written consent of Landlord, -- 12. 12(a) If at any time during the term of this Lease Tenant shall request Landlord's consent to assign this Lease, or to sublet all or substantially all of the Premises, Tenant shall include with such request the name and business experience of the proposed transferor, assignee or sublessee, complete and current financial statements of said transferee, assignee or sublessee, and the ??? and other terms of the proposed assignment, transfer or subletting. 12(b) In the event that Landlord consents to said subletting or assignment, any amounts received by or payable to Tenant (other than the reasonable value paid to Tenant in repayment for trade fixtures and inventory and other personal property of Tenant) above the amounts payable by Tenant to Landlord hereunder, shall be deemed "real estate profit" and shall be paid to Landlord. -- 12(c). If Landlord permits any such assignment, change or subletting. Tenant agrees to pay Landlord's reasonable legal fees 12(d). in connection therewith. If Tenant shall at any time during the term of this Lease subject all or any part of the Premises or assign this Lease, Tenant shall nevertheless remain fully liable under all of the terms, covenants, and conditions of this Lease. If this Lease is assigned, or if the Premises or any part thereof are subleased or occupied by anybody other than Tenant, Landlord may collect from the assignee, sublessee or occupant any rent or other charges payable to Tenant under the Lease and apply the amount collected to the rent and other charges herein reserved, but such collection by Landlord shall not be deemed an acceptance of the assignee, sublessee or occupant as a Tenant nor a release of Tenant from the performance by Tenant under this Lease. Notwithstanding Landlord's consent to any assignment, subletting, occupation or use by another person, any subsequent assignment, subletting, occupation or use by another person shall require Landlord's prior written consent. ARTICLE 5 ALTERATIONS, INSTALLATIONS AND REMOVAL OF IMPROVEMENTS BY TENANT Tenant shall have the right 13. during the continuance of this Lease to make such interior alterations, changes and improvements to the Premises as may be proper and necessary for the conduct of Tenant's business and for the full beneficial use of the Premises, 14. provided Tenant shall (i) pay all costs and expenses thereof, (ii) make such alterations, changes and improvements in a good and workmanlike manner, (iii) obtain all required permits, and (iv) do all its work in conformity with all legal requirements. Tenant shall hold Landlord harmless from any penalty, damage or injury of whatever kind arising out of failure of Tenant's work to so conform. 15. 6 19 Landlord's approval of the plans, specifications and working drawings for any of Tenant's alterations shall mandate no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental authorities or agencies. If Landlord shall send a notice to Tenant no later than thirty (30) days after the later of (i) the expiration or earlier termination date of the term or (ii) the date on which Tenant completely vacated the Premises. Tenant shall remove any alterations, changes and improvements made to the Premises by Tenant with or without the consent of Landlord which Landlord requires be removed and shall repair and restore the Premises in its condition prior to the making of such alterations, changes and/or improvements. Any alterations, changes, and improvements which Landlord does not require to be removed shall remain the property of Landlord, without compensation by Landlord to Tenant therefor. 16. All signs, furnishings, trade fixtures and other equipment installed in the Premises by Tenant shall remain the property of Tenant and shall be removed by Tenant upon the termination of this Lease. Tenant shall repair any damage caused by the removal of such property and shall restore the Premises as provided in this Lease. Notwithstanding the foregoing, all light fixtures, the complete storefront including gates, all carpeting, linoleum or other floor covering, nailed, cemented or otherwise adhesively attached to the Premises, sinks and vanities and the complete electrical (including emergency generators, if any), plumbing, air conditioning and heating systems, including ducts, diffusers, grills, controls systems, shall be and remain in the Premises at all times for the benefit of Landlord unless Landlord shall direct Tenant to remove any of the foregoing within the period set forth in the preceding paragraph. Tenant shall pay before delinquencies all taxes assessed against Tenant's fixtures, trade fixtures, equipment and leasehold improvements placed in or about Premises. ARTICLE 6 INSURANCE AND RELATED MATTERS Section 1. Loss or Damage to Tenant's Property Tenant acknowledges that Landlord does not insure Tenant's personal property, fixtures, improvements or equipment. Accordingly, in order to contractually allocate risk of loss relative to all such property Tenant agrees that it shall store its property in and shall occupy the Premises and use all other portions of the property of which the Premises are a part, at its own risk. 17. Landlord and Landlord's agents and employees shall not be liable for, and Tenant waives all claims against them for, loss or damage to Tenant's business or damage to personnel or property sustained by Tenant or any person claiming by, through or under Tenant resulting from any accident or occurrence in or upon the Premises of the building of which they are a part, or any part thereof. The provisions of this section shall also apply to the period prior to the commencement of the lease term where any permission is given by Landlord to Tenant for Tenant to perform any of its work and install any of its fixtures or otherwise prior to commencement of the lease term. Section 2. Tenant's Required Insurance Tenant shall, during the term, at its sole expense obtain and keep in force, (i) commercial general liability insurance coverage, personal injury, bodily injury, broad form property damage, operations hazard, owner's protective coverage, contractual liability and products and completed operations liability in limits not less than [***] inclusive (the aggregate limits of such insurance to apply specifically to the Premises and not in multiple locations) with Landlord and, if required, by Landlord mortgages of Landlord, each named as an additional insured, as their respective interests may appear, and (ii) "All Risk" Physical Damage insurance for Tenant's property (personal property, fixtures and household improvements in excess of building standard) in or on the Premises for the full insurable value thereof, including an endorsement providing for "loss of income" coverage. Tenant shall furnish evidence satisfactory to Landlord of the existence of and maintenance of such insurance prior to or contemporaneous with the commencement of the term and thereafter on the date on which such policy is required to be renewed. Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days prior to the cancellation of such insurance. Tenant shall also obtain worker's compensation insurance covering all persons employed, directly or indirectly, in connection with any finish work performed by Tenant or any repair or alteration authorized by this Lease or consented to by Landlord, as required by the law of the state where the Premises are located. Landlord reserves the right to require that Tenant increase the limits if such insurance required pursuant to the paragraphs above provided such request is commercially reasonable in such amounts as Landlord determines prudent within generally accepted business practices for comparable businesses. All policies required to be maintained by Tenant pursuant to this Article shall be issued in a form acceptable to Landlord, by insurance companies having and maintaining at least an A-X rating in the most currently available "Best Rating Guide", and qualified to bo business in the state in which the Premises are located. In no event shall such policy or policies provide for a deductible amount for any type of coverage in excess of [***]. Section 3. Landlord's Insurance Landlord shall, during the term, obtain and keep in force commercial general liability insurance coverage and "All Risk" Property Damage insurance covering the building of which the Premises are a part (including exterior walls, downspouts, gutter and roof, and (at Landlord's option) excluding all improvements and fixtures required to be insured by the Tenant pursuant to Article 6, Section 2 (ii), in such amounts and with such deductible amounts as Landlord determines prudent in Landlord's sole discretion. Landlord may insure such other risks as Landlord may from time to time determine and with any such deductible as Landlord may from time to time determine. Landlord's insurance cost for maintaining the insurance coverage referred to in this Article shall be subject to reimbursement by Tenant to the extent provided elsewhere in this Lease. *** Confidential treatment requested. 7 20 SECTION 4. WAIVER OF RECOVERY Anything in this Lease to the contrary notwithstanding, Landlord and Tenant each hereby waive any and all rights of recovery, claim, action or cause of action, against the other, the agents, officers or employees, for any loss or damage that may occur to the Premises, or any improvements thereto, or the Shopping Center, or any personal property of such party therein, by reason of fire, the elements, or any other cause which is insured against or is required to be insured against pursuant to the terms of this Lease under the terms of the "All Risk" Property Damage Insurance coverage referred to in subparagraphs (1) and (3) above, regardless of cause or origin, including negligence of the other party hereto, its agents, officers or employees. Landlord's and Tenant's insurance policies shall each contain a waiver of alteration. SECTION 5. HOLD HARMLESS AND INDEMNIFICATION Irrespective of the adequacy of said insurance, Tenant shall indemnify and save Landlord free and harmless from all liability for injury or damage to any person(s), firm(s), corporation(s) or property occurring on or about the Premises, or arising out of any accident or any other occurrence on the Premises or due directly or indirectly to the use of the Premises or any part thereof by Tenant, its agents, subtenants or employees (including all costs, expenses, court reporter fees, expert fees and attorney fees incurred by Landlord in defense of any such claims), -- 17(a). SECTION 6. INVALIDATION OF INSURANCE/INCREASED PREMIUMS Tenant shall not do anything or engage in any activity, or permit any condition to exist on or about the Premises which will cause the cancellation of or invalidate any insurance which Landlord may now or hereinafter have on the Shopping Center or the Premises. Further, Tenant shall not permit any condition or activity which may result in increased premiums payable by Landlord. -- 18. ARTICLE 7 LANDLORDS' LIEN ARTICLE 8 MECHANICS' LIEN Tenant shall have no authority, express or implied, to create or place any lien or incumbrances of any kind or nature whatsoever upon, or in any instance to bind, the interest of Landlord in the Premises or to charge the rentals payable hereunder for any claim in favor of any person or entity dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this instrument. It is understood and agreed that if Tenant shall make repairs or improvements to the Premises, Tenant shall, in making such repairs or improvements, act solely for its own benefit and not as an agent or Landlord, and that Landlord's interest in the Premises, the building of which the Premises are a part, and the Shopping Center or the overall development of which the Premises are a part, shall not be subject to any mechanic's, furnisher's or materialmen's liens. Tenants covenants and agrees that it will pay or cause to be paid all sums due and payable by it in account of any labor performed or materials furnished in connection with any work performed on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Premises or the improvements thereon. Tenant will save and hold Landlord harmless from any and all loss, cost or expense, including attorney's fees, based on or arising out of asserted claims or liens against the leasehold estate or against the rights, title and interest of Landlord in the Premises or under the terms of this Lease. Tenant shall discharge by payment or satisfactory bond pursuant to statutory procedures any lien arising out of work performed or materials furnished on the Premises by, through and under Tenant within thirty (30) days after the filing of same. ARTICLE 9 REPAIRS Except as otherwise provided in this Lease, within a reasonable time after Landlord receives written notice from Tenant of the necessity thereof, Landlord will repair the roof, structural portions and exterior of the Premises (exclusive of doors, plate glass, mechanical systems or storefronts which shall be maintained and repaired by Tenant), provided, however, that Tenant, not Landlord, shall at Tenant's sole cost and expense make all repairs and replacements necessitated by reason of (a) the neglect, fault or default of Tenant, or Tenant's agents, employees, contractors, invitees, or customers, and (b) the structural and exterior work done or installed by Tenant. Further, and notwithstanding anytime in this Lease to the contrary, Tenant shall make all repairs and replacements to the property which Landlord is required to maintain which are required as the result of repairs, alterations, other improvements or installations made by Tenant or any occupant of the Premises or the agent of any of them. All maintenance repairs and replacements to the Premises and specifically the obligation of Landlord under this Lease shall be made by Tenant. Tenant, at Tenant's expense, shall make all repairs and replacements to keep and maintain the interior of the Premises in good condition and repair, including, but not limited to, the heating, electrical, air conditioning (whether within or 8 21 without the Premises), sprinkler and other mechanical installations serving the Premises, the plumbing and sewer systems serving the Premises, the exterior and interior portions of all doors including door checks and hardware, and all windows, frames and glass and Tenant shall promptly replace all broken and cracked glass. 19. Any replacement Tenant is required to make under this Lease shall be of equal or better quality, type and style as the best being replaced. Tenant shall be responsible for all painting and decorating. Tenant will maintain and keep in good condition and repair the storefront and all structural and exterior work done or installed by Tenant. Tenant shall not permit any waste, damage or injury to the Premises and shall, at its sole cost and expense, abate any nuisance upon, or emanating from, the Premises, keep the Premises neat, clean and in an orderly and sanitary condition free of offensive odors, vermin, rodents, bugs, insects and other pests. Tenant shall keep in full force and effect, and provide Landlord with a copy of a maintenance contract with a reputable heating and air conditioning contractor providing for at least semiannual inspection and maintenance of the heating and air conditioning systems serving the Premises. Upon request Tenant shall provide or require its contractor to provide copies of all maintenance and service records to Landlord. Tenant shall obtain approval from Landlord of its heating and air conditioning contractor and, additionally, shall obtain approval of any other contractor which may require access to the roof for the purpose of implementation of any repairs or improvements. Tenant shall in no event perform or do any work on or affecting the roof of the Premises without Landlord's prior written consent. And if consented to, shall only use contractors approved by Landlord. Landlord shall enforce any warranties in effect for the benefit of Landlord, provided, however, that such shall not alleviate Tenant's repair responsibility hereunder. ARTICLE 10 DAMAGE OR DESTRUCTION BY FIRE In the event the Premises shall be damaged or destroyed either (i) by an insured casualty within Landlord's standard all-risk insurance policies to such extent that Landlord cannot make necessary repairs or rebuilt within 140 days from the date 19(a). of such damage or destruction, 19(b). (ii) by any uninsured casualty, 19(c). or (iii) or by an illegal casualty with respect to which Landlord's mortgagee requires that the insurance proceeds be applied to the indebtedness (19d)., then at Landlord's option, the Lease Agreement may be terminated 20. in which event Tenant shall be allowed an abatement of Minimum Rental and Additional Charges from the date of such damage or destruction. 20(a). 20(b). Landlord 20(c). make necessary repairs or rebuild within 10 days from the date of such damage or destruction, subject to the provisions of any deed of trust or mortgage encumbering the Premises and requiring the application of insurance proceeds to the indebtedness, then this Lease Agreement shall not terminate, the Premises shall be repaired or rebuilt by Landlord at its own expense, the Minimum Rental and Additional Charges shall abate proportionately until the repairs or rebuilding are completed and possession thereof given to Tenant, and the term of this Lease Agreement shall be extended for a period equal to such period of rent abatement but not otherwise affected. Should the Premises be damaged or destroyed, nor occupied by the use of the Premises by Tenant, its agents, employees and not arising during any period when Tenant has vacated the Premises 20(d), and Landlord 20(e)., then, in that event, 20(f). may terminate this Lease Agreement by notice in writing 20(g)., however, if Landlord agrees to restore or repair the Premises to tenantable condition, then, in that event, Landlord agrees to allow Tenant a proportionate abatement of Minimum Rental and Additional Charges in an amount which bears the same proportion to the Minimum Rental as the number of square feet of damaged or destroyed floor area of the Premises occurs to be total number of square feet of floor area on the Premises, which reduction shall contain until such renovation or repair shall be completed, (h). Tenant shall in all events restore or repair its additions, improvements, and betterments to the Premises and, also, any other damage or destruction the repair or restoration of which is not provided for hereinabove. Tenant shall, in case of damage or destruction, give notice in writing to Landlord 20(i). Should fifty percent (50%) or more of the total floor area of the Shopping Center at any time be damaged or destroyed by fire or any other cause, or should Landlord's mortgages require that the insurance proceeds be applied to the indebtedness, Landlord may elect not to rebuilt 20(j). terminate this Lease Agreement by written notice to Tenant of Landlord's election to so terminate. ARTICLE 11 RIGHT OF ENTRY, ETC. Landlord reserves the right during the term of this Lease to enter the Premises at reasonable hours to show the same to others who may be interested in the property, and for the purposes of inspecting the Premises and to make such repairs as Landlord may deem necessary for their protection and preservation and may enter the Premises at any time in the event of an emergency provided that this right shall not be construed as expanding, Landlord's repair obligation beyond that as stated herein. ARTICLE 12 UTILITIES 21. Tenant is to obtain and pay for all utilities, including electricity, gas, other fuel, water, the ventilation and air conditioning system and shall pay all garbage removal fees, water fees, sprinkler monitoring fees, and other special fees on or for the Premises during the term of this Lease. The ventilation and air conditioning central plant/chilled water system may be provided by or through Landlord. In such case, Tenant shall be charged based on the costs associated with the operation and maintenance of the ventilation and air conditioning control plant/chilled water system including, but not limited to, equipment, maintenance and repair, electrical consumption, water consumption, water treatment and a replacement reserve charge plus an administrative assessment equal to [***] of the overall charge. If there is another meter source provided by or through Landlord, Tenant will pay Landlord for said utility usage for additional rent (other than Minimum Rental or Percentage Rental) and Landlord shall send *** Confidential treatment requested. 9 22 statements for such usage which shall include an administrative assessment equal to ten (10) percent of the amount of utilities and shall be based upon a pro rata square foot basis. Said amounts may be estimated by Landlord in which event Tenant shall pay said estimate, or may be revised from time to time, in advance on the first day of each and every month with Tenant's Minimum Rental without further notice. Landlord will have the right in its discretion to adjust utility costs among tenants on other than a pro rata basis based upon its determination of tenants' image. -- 21(a). ARTICLE 13 DEFAULT If Tenant shall at any time be in default in the payment of rent or other sums of money required to be paid by Tenant or in the performance of any of the covenants, terms, conditions, provisions, rules and regulations of this Lease and Tenant shall fail to remedy such default within five (5) days after the giving of written notice thereof by Landlord in the event the default is as to payment of rent or other sums of money or within ten (10) days after the giving of written notice thereof by Landlord if the default relates to matters other than the payment of rent and other sums of money (but Tenant shall not be deemed to be in default if Tenant commences to remedy said defaults other than the payment of rent and other sums of money within said ten-day period and proceeds therewith with due diligence). Landlord, in addition to all other remedies given to Landlord in law or in equity, may by written notice to Tenant terminate this Lease or without terminating this Lease and without notice to enter the Premises by summary proceedings or otherwise and in any event that disposesses Tenant. In the event Landlord elects to terminate the Lease, Tenant agrees, notwithstanding such termination, that it shall be and remain liable for all rent and other charges and sums due hereunder for the remainder of the term, which liability shall survive the termination of this Lease, the re-entry by Landlord and the commencement of any action to secure possession of the Premises. Landlord shall have the right to maintain successive actions against Tenant for recovery of all damages, including, without limitation, amounts equal to the rents and other charges and sums payable hereunder as and when said rents and other charges and sums are payable hereunder and Landlord shall not be required to wait to begin such actions or legal proceedings until the date this Lease would have expired. -22. In the event of such re-entry, Landlord may enter as agent for Tenant or in its own name, without being obligated to do so, and relet the whole or any portion of said Premises (with or without any improvements made by Tenant thereon or thereto), or the whole or any portion thereof with additional space, for any period equal to, greater or less than the remainder of the term of this Lease, for any sum (including any rental concessions and rent free occupancy) which it may deem reasonable, to any Tenant which it may deem suitable and satisfactory, and, for any use and purpose which it may deem appropriate. Landlord's damages shall include without limitation, attorneys' fees and collection costs incurred by reason of Tenant's default, commissions and the cost of repair or alteration of the Premises ("Costs of Reletting") and, in the event of any reletting, Landlord may apply the rent therefrom first to the payment of Landlord's expenses, including Costs of Reletting, and then to the payment of rent and all other sums due from Tenant hereunder, Tenant remaining liable for any deficiency. In computing damages or rental due under this Lease, the value of the Percentage Rental for any period subsequent to termination of this Lease or Tenant's right of possession shall be included and shall be an amount equal to the highest Percentage Rental which was payable by Tenant during the term of this Lease. Any obligation imposed by law upon Landlord to relet the Premises shall be subject to the reasonable requirements of Landlord to develop in a harmonious manner the real estate of which the Premises are a part and to establish the tenant mix which is suitable to Landlord; and the failure of Landlord to relet, or if relet, to collect the rent under such reletting, shall not release or affect Tenant's liability for damages hereunder. In any event, Landlord shall have the right to lease other vacant storerooms before leasing the Premises. In the event of default by Tenant of any of the terms, provisions, covenants, conditions, or rules and regulations of this Lease, Landlord shall have the right to invoke any remedy permitted to Landlord in law or in equity. All remedies available to Landlord in this Lease, in law or equity are declared to be cumulative and concurrent. No termination of this Lease nor any taking or recovering of possession of the Premises shall deprive Landlord of any of its rights, remedies or actions against Tenant including, without limitation, the right to receive all past due rents and damages equal to future rents and other charges accruing under this Lease, which rights shall survive the termination of this Lease or taking of possession of the Premises. If this Lease be terminated for any reason whatsoever or if Landlord should re-enter the Premises as a result of any breach of Tenant hereunder without terminating the Lease, Tenant covenants, any other covenant herein to the contrary notwithstanding (except where this Lease is terminated following eminent domain proceedings) that (i) the Premises shall then be in the condition required by all applicable provisions of this Lease; and (ii) Tenant shall perform any covenant contained in this Lease for the construction of the Premises or the making of any repair, improvement, alteration or betterment to the Premises or for restoring or rebuilding any part thereof. For the breach of either of the foregoing obligations Landlord shall be entitled to recover and Tenant shall pay, forthwith, without notice or other action by Landlord for the cost of performing such obligation(s). In the event Tenant violates any of the provisions, covenants, conditions or promises set forth in this Lease Agreement, and further in the event Landlord determines in its exercise of its sole discretion that such default is susceptible of a cure by Landlord, then in addition in any and all other remedies provided for in this Lease, or at law or in equity Landlord shall have the right (but shall not be obligated) to cure such default and implement such corrective measures as Landlord deems reasonably necessary to correct such default. In the event Landlord exercises the right of "self help" as set forth in the preceding sentence, then Tenant covenants and agrees that it shall within five (5) days after notice from Landlord pay to Landlord [***] of the cost incurred by Landlord in connection with implementation of such corrective measures, it being the intent to permit Landlord to recover a reasonable administrative fee in addition to the actual cost incurred. Further, in the event Tenant is not conducting a going business within the Premises or vacates or abandons the Premises (the cessation of operation of a business within the Premises for a period in excess of seven (7) days to be conclusive evidence of Tenant's intent to abandon or vacate the Premises) then Landlord shall have the right (but shall not be obligated) to enter the Premises after providing notice to Tenant for the purpose of inspection and implementation of such repairs, maintenance or other improvements to the Premises which may be required, in Landlord's opinion, to preserve the overall appearance of the Premises or to mitigate the adverse impact of the appearance of the Premises upon the Shopping Center. Landlord shall additionally have the *** Confidential treatment requested. 10 23 right to change the exterior locks on the Premises for security purposes but shall not be obligated to do so. In the event Landlord does change the exterior locks, then Tenant shall, upon request, be provided with a key to the Premises. In no event shall any of the foregoing actions by Landlord be considered an eviction, constructive or otherwise, of Tenant, it being the intent of the parties to permit Landlord a reasonable right of access to the Premises for the purposes set forth herein and to minimize any adverse impact resulting from an abandonment of the Premises or cessation of operation by Tenant. Entry by Landlord pursuant to this paragraph shall in no event be construed, interpreted or otherwise determined to be an eviction of Tenant or a termination of this Lease absent notification to the contrary by Landlord. Landlord and Tenant shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the partners hereto against the other on any matters not relating to personal injury or property damage but otherwise arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant. Tenant's use or occupancy of the Premises and any emergency statutory or any other statutory remedy. In the event an attorney is employed by either party in order to initiate litigation to secure compliance by the other party with the provisions of this Lease, the non-prevailing party, including filing fees and court costs. ARTICLE 14 INSOLVENCY OF TENANT In the event of the insolvency of Tenant, or the filing of a proceeding by or against Tenant or any partner of Tenant or guarantor of this Lease under the Bankruptcy Code, or in the event of a partial or general assignment for the benefit of a creditor or creditors by Tenant, or in the event Tenant should be successfully proceeded against in any general creditor's bill, or in the event Tenant makes any offer in or out of court for the compromise of Tenant's debts, or any substantial part thereof, by reduction in amount or in preference, or security, or by postponement of payment date or dates, or in the event any court proceedings are instituted by, for, or against Tenant in contemplation of any such offer, Landlord in addition to any rights available to it at law or equity shall have the right and privilege to immediately terminate this Lease. Landlord shall have the right to immediately re-enter into possession of the Premises for the purpose of leasing same. If Landlord shall not be permitted to terminate this Lease as hereinabove provided because of the provisions of Title 11 of the United States Code relating to Bankruptcy, as amended ("Bankruptcy Code"), then Tenant as a debtor-in-possession or any trustee for Tenant agrees promptly, within no more than fifteen (15) days upon request by Landlord to the Bankruptcy court, to assume or reject this Lease and Tenant on behalf of itself, and any trustee agrees not to seek or request any extension of adjournment of any application to assume or reject this Lease by Landlord with such Court. In such event, Tenant or any trustee for Tenant may only assume this Lease if (A) it cures or provides adequate assurance that the trustees will promptly cure any default hereunder. (B) compensates or provides adequate assurance that the trustees will promptly compensate Landlord for any actual pecuniary loss to Landlord resulting from Tenant's defaults, and (C) provides adequate assurance of performance during the fully stated term hereof of all of the terms, covenants, and provisions of this Lease to be performed by Tenant. In no events after assumption of this Lease shall any then-existing default remain uncured for a period in excess of the earlier of ten (10) days or the time period set forth herein. Adequate assurance of performance of this Lease, as set forth hereinabove, shall include, without limitation, adequate assurance (1) of the source of rent reserved hereunder, (2) that any Percentage Rental due hereunder will not decline from the levels anticipated, and (3) the assumption of this Lease will not breach any provision hereunder. In the event of a filing of a petition under the Bankruptcy Code, Landlord shall have no obligation to provide Tenant with any services or utilities as herein required, unless Tenant shall have paid and be current in all payments of Common Area Maintenance and Operating Costs, utilities or other charges therefor. ARTICLE 15 DELIVERY AT END OF LEASE 23. Tenant agrees that on the last day of the term it shall without notice or demand deliver the Premises, including all improvements and fixtures permanently attached, and replacements thereto (except those which Tenant may be directed to remove) to Landlord, or Landlord's agent or assignee, in good order and condition. Tenant shall have repaired all damage to the Premises, ordinary wear and tear excepted. If Tenant remains in possession of the Premises after the expiration of the tenancy created hereunder and without the execution of a new lease or other written agreement, Tenant shall be deemed to be occupying the Premises as a tenant from month to month and subject to all of the rents and provisions of this Lease in effect on the day before the expiration of the tenancy, except those relating to term and except that the Minimum Rental shall be increased to the amount which is 24. the amount payable during the last month of the Lease without prejudice to any claim for damages or otherwise which Landlord may have against Tenant for failure of Tenant to vacate the Premises at expiration of the term. For the purpose of this provision "fair rental value" shall be defined as being the amount which Landlord is then receiving for comparable space in the Shopping Center or comparable properties in the same city. ARTICLE 16 NO WAIVER OF BREACH; EXTENSION; PARTIAL PAYMENT; NO ACCORD AND SATISFACTION It is hereby covenanted and agreed that no waiver of a breach of any of the covenants of this Lease shall be construed to be a waiver of any succeeding breach of the same or any other covenants. It is further agreed that, should Landlord, at its option, either extend the time of payment or accept partial payment on one or more of the Minimum Rental installments or other monetary obligations hereunder, such shall not be construed as altering the terms of payment of any subsequent installments or obligations. 11 24 After the service of any notice or commencement of any suit, or final judgement herein, Landlord may receive and collect any rent due and such collection or receipt shall not operate as a waiver of nor affect such notice or judgement. No payment by Tenant or receipt by Landlord of a lessor amount shall be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction. Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided for in this Lease or available at law or in equity. ARTICLE 17 SUBORDINATION: ATTORNMENT: ESTOPPEL LANDLORD'S COVENANT AS TO TITLE Upon payment by Tenant of the rent and other charges herein provided, and upon the observance and performance Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereof without hindrance or interruption by Landlord or others legally claiming title thereto by, through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease. Tenant's leasehold estate shall always be subordinate to any mortgage loan, deed of trust, or underlying or ground lease, including, without limitation, any refinancing, replacement, renewal, modification, extension or consolidation thereof which is placed upon the Premises from time to time by the Landlord. This provision shall be self operative and no further instrument of subordination shall be required. -25. Any mortgage, trustee of a deed of trust or ground lessor of all or any part of the Shopping Center may elect to have this Lease have priority over its mortgage, deed of trust or underlying ground lease and upon any such mortgages, trust or lessor executing unilaterally on instrument subordinating its mortgage, deed of trust or lease to this Lease, or placing a clause of such subordination is its mortgage, deed of trust or lease, and filing the same for record among the public land records of the state or county in which the Shipping Center is located, this Lease shall thereupon have priority over said mortgage, deed of trust or lease. Tenant agrees that it will afford to and recognize the purchaser at any foreclosure sale or at any sale under a power of sale contained in any mortgage or deed of trust upon the Shopping Center and the grantee of any conveyance made in lieu of foreclosure or power of sale as Landlord under this Lease. Tenant agrees that no mortgagee, trustee of a deed of trust or purchaser at any foreclosure shall be reasonable for any defaults of any prior landlord, including Landlord. Tenant agrees, further, that in the event any proceedings are brought for the termination of any ground or underlying lease affecting the Premises, upon such termination, if the lessor thereunder elects or is obligated to recognize Tenant. Tenant shall afford to such lessor and recognize such lessor as Landlord under this Lease. Tenant covenants and agrees that within five (5) days after receipt of notice Tenant shall execute in recordable form and deliver upon demand of Landlord whatever instruments may be required to acknowledge and further evidence the subordinations, agreements to afford and priorities, referred to in this Section. Tenant shall additionally, within five (5) days after receipt of notice, execute an "Estoppel" certificate confirming that the Lease is in full force and effect, that there are no Landlord defaults (or delineating with specificity the nature of such Landlord's defaults, if any), the rental and other amounts required to be paid by Tenant, and such other information as is reasonably requested by a prospective purchaser or mortgagee. ARTICLE 18 GRAPHICS Tenant acknowledges that the Premises are a part of an integrated shopping center, and agrees that control of all signs by Landlord is essential to the maintenance of uniformity, propriety and the esthetic values in or pertaining to the Shopping Center. Accordingly, Tenant shall not place or suffer to be placed on the exterior of the Premises, upon the roof, on any exterior door or wall, or on the exterior or interior window, any sign, awning, canopy, marquee, advertising matter decoration, lettering or other thing of that kind without the written consent of the Landlord first had and obtained. 26 Landlord hereby reserves the exclusive right to the use for any purpose whatsoever of all exterior surfaces including but not limited to the roof and the exterior walls of the Premises. In the absence of express written consent of Landlord. Tenant shall not utilize temporary or portable signs or banners which, if installed in the absence of such consent, may be removed by Landlord without notice, in no event shall Landlord's approval of Tenant signage or Landlord's promulgation of sign standards or sign criteria be construed as a confirmation or warranty that such sign or the criteria on which the sign is based is in compliance with local code or ordinances. Tenant shall be solely responsible for verifying such compliance and obtaining any and all permits required from the governmental authority having jurisdiction. Except as otherwise herein provided, Tenant shall have the right, at its sole cost and expense, to erect and maintain within the interior of the Premises all signs and advertising matter customary or appropriate in the conduct of Tenant's business provided, however, that Tenant shall upon demand of Landlord immediately remove any sign, advertisement, decoration, lettering or notice which Tenant has placed or permitted to be placed in, upon or about the Premises and which Landlord reasonably deems objectionable or offensive, and if Tenant fails or refuses so to do Landlord may remove the same at Tenant's cost and expense and may enter the Premises for the purpose of removal of said nonconforming signs. 12 25 ARTICLE 19 CONDEMNATION The parties hereby agree that should the Premises, or such portion thereof as 28. will make the Premises unusable for the purposes herein leased, be taken or condemned for public or quasi-public use, then this Lease shall terminate from the date when possession of the part so taken shall be required. If the Lease continues after a partial taking, the Minimum Rental 28(a). and Additional Charges shall abate proportionately 28(b). All compensation awarded for such taking of the Premises (or any part thereof), or the fee and the leasehold shall belong to and be the property of Landlord, provided, however, that Landlord shall not be entitled to any portion of any award made to Tenant for the value of Tenant's trade fixtures. Tenant shall not be entitled to any damages for the unexpired portion of the term of this Lease, or injury to its leasehold interest. -- 28(c). ARTICLE 20 ENVIRONMENTAL MATTERS 29. Tenant shall not cause or permit any Hazardous Substance to be used, stored, generated, or disposed of on or in the Premises or the Shopping Center by Tenant, Tenant's agents, employees, contractors, or invitees without first obtaining Landlord's written consent. If Hazardous Substances are used, stored, generated, or disposed of on or in the Premises or the Shopping Center except as permitted above, or if the Premises or the Shopping Center become contaminated in any manner for which Tenant is legally liable, Tenant shall indemnify and hold harmless Landlord from any and all claims, damages, fines, judgments, penalties, costs, liabilities, or losses (including, without limitation, a decrease in value of the Premises or the Shopping Center, damages caused by loss or restriction of rentable or usable space, or any damages caused by adverse impact on marketing of the space, and any and all sums paid for settlement of claims, attorneys' fees, consultant's fees, and expert's fees) arising during or after the Lease term and arising as a result of that contamination by Tenant. This indemnification includes without limitation any and all costs incurred because of any investigation of the site or any cleanup, removal, or restoration mandated by a federal, state or local agency or political subdivision. Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on the Premises or the Shopping Center and that results in contamination, Tenant shall promptly, at its sole expense, take any and all necessary actions to return the Premises or the Shopping Center to the condition existing prior to the presence of any such Hazardous Substance on the Premises or the Shopping Center. Tenant shall first obtain Landlord's approval for any such remedial action. As used herein, "Hazardous Substance" means any substance that is toxic, ignitable, reactive, or corrosive or that is regulated by any local government, the state in which the Shopping Center is located, or the United States Government. "Hazardous Substance" includes any and all material or substances that are defined as "hazardous waste," "extremely hazardous waste," or a "hazardous substance" pursuant to state, federal, or local governmental law. "Hazardous Substance" includes, but is not restricted to asbestos, polychlorobiphenyls ("PCBs"), and petroleum. The provisions of this Article 20 shall survive any assignment, transfer, amendment or termination of this Lease Agreement. -- 30. ARTICLE 21 FIRE PROTECTION Tenant has examined the Premises and fire protection/sprinkler system in the Premises, if any. Tenant acknowledges that Landlord shall have no responsibility for implementation of any modifications whatsoever for the fire protection/sprinkler system in the Premises which Tenant has examined and with which Tenant is satisfied. In the event that the Fire Marshal, Building Department or other municipal authority requires any modifications in the existing fire protection/sprinkler system, implementation of such modifications and all costs thereof shall be the responsibility of Tenant. Further, in the event such modifications are requested or required as a restriction of Tenant's use or method of storage materials within the Premises, Tenant shall either implement the required modifications to the fire protection/sprinkler system or ventilation and/or Tenant shall modify its method of storage or use of the Premises so as to comply with the permitted uses under the existing fire protection/sprinkler system or ventilation configuration. ARTICLE 22 COVENANTS RUN TO HEIRS It is hereby covenanted and agreed between the parties hereto that all covenants, conditions, agreements and undertakings in this Lease contained shall extend to and be binding on, and inure to the benefit of (except as limited by the terms hereof), the respective heirs, administrators, executors, successors and permitted assigns of the respective parties hereto the same as if they were in every case named and expressed also that the terms Landlord and Tenant shall be construed in the singular or plural number according as they respectively represent one or more than one person. In the event of a sale of the property in which the Premises are located, Tenant agrees that Landlord shall thereupon be released from any obligations or liabilities occurring under this Lease from and after the effective date of such conveyance. ARTICLE 23 SHORT FORM LEASE The parties have entered into a Short Form of this Lease Agreement which may, at Landlord's option, be recorded. In no event shall this Lease Agreement be recorded. 13 26 ARTICLE 24 NOTICES All notices required or provided for under this Lease shall be given in writing either by (i) CERTIFIED MAIL, return receipt requested; (ii) hand delivery by a reputable courier service requiring receipt on delivery, or (iii) delivery by a national or regional overnight courier service. All notices shall be addressed to Landlord or Tenant at the addresses set forth in the Lease Agreement to which this is an Exhibit, or to such other addresses as Landlord or Tenant may direct in writing from time to time. Notices shall be effective upon the earlier of actual receipt or forty eight (48) hours after deposit in the U.S. Mail or permitted courier. Notices of any default by Landlord shall be given by Tenant to any mortgagee of whom Tenant has been notified in writing, and said mortgagee shall have the right to cure said default.--31(a). ARTICLE 25 RULES AND REGULATIONS Tenant and Tenant's agents, employees, invitees and visitors shall comply fully with all requirements of the rules and regulations of the Shopping Center which may be made by Landlord. Such rules and regulations applicable to the Premises and the Shopping Center may be changed, amended, or supplemented by Landlord at any time. If said rules shall be printed on a separate schedule such schedule shall be attached in this Lease and made a part hereof as fully and completely as though printed herein in detail. Tenant's failure to keep and observe said rules and regulations shall constitute a breach of the terms of this Lease in the manner as if the same were contained herein as covenants. Tenant agrees as follows: (i) All garbage and refuse shall be kept in approved type containers and shall be placed at a location adjoining the Premises or other location designated by Landlord, for collection at regular intervals (not less than weekly). Tenant shall pay the 32 cost of removal of garbage and refuse.--32(a). (ii) Tenant agrees that if the Premises are used for other than traditional retail use, or if the Fire Marshall requires, Tenant, at its cost, shall provide the required additional automatic sprinkler heads and/or other required modifications necessary to comply with the insurance and fire department regulations; in all events Tenant shall provide for its usage the necessary quantity of approved type and class fire extinguishers within the Premises.--32(b). (iii) No radio, television, satellite, microwave dish or tower or other similar aerials or appurtenances (inside or outside) shall be installed without first obtaining in each instance the Landlord's consent in writing, and if such consent is given, no such device shall be used in a manner as to be heard or seen outside of the Premises. Tenant shall be responsible for any damage to Landlord's roof occasioned by such installation. Any aerial or other such device if installed without such written consent shall be subject to removal without notice at any time.--33. (iv) Tenant shall keep the Premises at a temperature sufficiently high to prevent freezing of water in pipes and/or fixtures or equipment. (v) Tenant shall during the lease term or any extension hereof, at Tenant's cost, be responsible for pest extermination (including, but not limited to, rodents and insects) at such intervals as is necessary to keep the Premises free and clear of infestation. (vi) Tenant shall not place, suffer or permit displays, sales or storage on the outside of the Premises or upon any of the Common Areas nor shall Tenant install or maintain any vending machines or other property upon the Common Areas. (vii) Tenant agrees at all times to comply with any governmental energy conservation regulations and at all times to maintain temperatures in the Premises consistent with the temperature as specified and set forth in any governmental regulation. (viii) All loading and unloading of goods shall be done only at such times, in the hours, and through the entrances designated for such purposes by Landlord. (ix) The delivery or shipping of merchandise, supplies and fixtures to and from the Premises shall be subject to such rules and regulations as in the judgment of Landlord are necessary for the proper operation of the Premises or Shipping Center. (x) No loud speakers, televisions, phonographs, radios or other devices shall be used in a manner so as to be heard or seen outside of the Premises without the prior written consent of Landlord.--34. (xi) Tenant and Tenant's employees shall park their cars only in those parking areas designated for that purpose by Landlord. Tenant shall furnish Landlord with State automobile license numbers assigned to Tenant's car or cars, and cars of Tenant's employees, within five (5) days after taking possession of the Premises and shall thereafter notify Landlord of any changes within five (5) days after such changes occur.--35. In the event that Tenant or its employees fail to park their cars in designated parking areas as aforesaid, then Landlord at its option shall charge Tenant Ten Dollars ($10.00) per day per car parked in any areas other than those designated, as and for liquidated damages. 14 27 (xii) The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be thrown therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by Tenant who shall or whose employees, agents or invitees shall, have caused it. (xiii) Tenant shall not make noises, cause disturbances, or create odors which may be offensive to other tenants of the Shopping Center or their officers, employees, agents, servants, customers or invitees. - 36. (xiv) Tenant shall not conduct or permit to be conducted in the Premises any auction, fire, bankruptcy or other distress sale without the prior written consent of Landlord. (xv) No smoking shall be permitted in the Properties or in any other part of the buildings in the Shopping Center. ARTICLE 26 REAL ESTATE AGENT Landlord and Tenant each represent and warrant to the other that no agents were involved in the negotiation of this Lease except that it is disclosed in the Lease Agreement to which this is an Exhibit. Each party agrees to indemnify the other against claims for commission by individuals, entities or agents claiming entitlement to compensation by virtue of its representation of the indemnifying party. ARTICLE 27 PERSONAL LIABILITY The liability of Landlord (and any partner, stockholder or officer of Landlord) to Tenant for any default by Landlord is limited to the interest of Landlord in the property of which the Premises are a part and Landlord (and any partner, stockholder or officer of Landlord) shall not be personally liable for any deficiency nor shall Landlord (or any partner, stockholder or officer of Landlord) ever be liable under the terms of this Lease for consequential or special damages. This paragraph shall not be deemed to limit or deny any remedies which Tenant may have in the event or default by Landlord hereunder which do not involve the personal liability of Landlord. ARTICLE 28 NO PARTNERSHIP Nothing contained herein shall be construed to create a partnership between Landlord and Tenant and under no circumstances shall Landlord be liable for the debts or obligations of Tenant. ARTICLE 29 CORPORATE TENANTS In the event Tenant is a corporation, the persons executing this Lease on behalf of Tenant hereby covenant and warrant that: Tenant is a duly constituted corporation qualified to do business in the State in which the Premises is located; all Tenant's franchise and corporate taxes have been paid in date; all future forms, reports, fees and other documents necessary for Tenant to comply with applicable laws will be filed by Tenant when due and such persons are duly authorized by the board of directors of such corporation to execute and deliver this Lease on behalf of the corporation. ARTICLE 30 ENTIRE AGREEMENT This Lease includes the Lease Agreement and Rider, if any, attached hereto and forming a part hereof Exhibit A (drawing of the Shopping Center showing the general location of the Premises), this Exhibit B (General Lease Provisions) and Exhibit C (which delineates the construction requirements of the parties if any). The foregoing constitute all of the agreements and conditions made between the parties hereto, and no representations or statements claimed to have been made and not herein contained shall vary or modify this contract in any way. Landlord: PEABODY PLACE CENTRE, L.P. Tenant: SILICON ENTERTAINMENT, INC. BY: Peabody Place, Inc., General Partner By: /s/ MORRIS J. THOMAS By: /s/ [ILLEGIBLE] -------------------------------- --------------------------------- Morris J. Thomas, Vice President By: /s/ JACK A. BELZ HOTEL PEABODY, L.P. -------------------------------- By: Perim Corp., General Partner Jack A. Belz, President By: /s/ JIMMIE D. WILLIAMS -------------------------------- Jimmie D. Williams, Senior Vice President 15 28 RIDER TO EXHIBIT D GENERAL LEASE PROVISIONS BETWEEN SILICON ENTERTAINMENT, INC., AS TENANT AND PEABODY PLACE CENTRE, L.P., AS LANDLORD 1. ... "in or" ... )(a). "(a) transfers of merchandise between stores owned by Tenant only for the convenient operation of Tenant's business and not for the purpose of avoiding inclusion of such transactions in Sales and Business Transacted; (b) returns to manufacturer; (c) sales of fixtures, machinery, games and equipment after use in the conduct of Tenant's business in the Premises and not in the ordinary course of business; (d) discounted, or complimentary use of games or entertainment attractions by, or discounted or complimentary merchandise given or sold to, guests or invitees of Tenant in an amount not to exceed three percent (3%) of Sales and Business Transacted and discounted or complimentary use of games or entertainment attractions by or discounted or complimentary merchandise given or sold to employees; (e) special promotional use of games or other entertainment attractions; (f) revenue received from the sale of "debit cards", "game cards" or "smart cards", or tokens except to the extent that such cards or tokens are redeemed for use of games or other entertainment devices within the Premises; (g) sales of gift certificates (unless redeemed at the Premises); (h) the selling price of all merchandise returned by customers and accepted for full credit or the amount of discounts and allowances made thereon; (i) goods returned to sources or a warehouse owned by affiliated with Tenant; (j) sums and credits received in the settlement of claims for loss or damage to merchandise to the extent previously reported as Sales and Business Transacted; (k) the price allowed on all merchandise traded in by customers for credit to the extent the credit given is in excess of the value of the merchandise traded in, or the amount of credit for discounts and allowances made in lieu of acceptance thereof; (l) alteration workroom charges and delivery charges, if the amount of any such charge received by Tenant is not greater than Tenant's cost of providing the services and separately stated; (m) amount received from sales of "distressed", damaged, unreasonable, or absolute merchandise sold in bulk to buyers other than regular retail customers; (n) any penalty charged by Tenant for a returned check; (o) reimbursement of the amount paid for minor services charges, such as postage or delivery expenses; (p) cash refunds made to customers in the ordinary course of business; (q) receipts from any public telephones, stamp machines or public toilet locks installed with Landlord's approval in areas not open to the public; (r) the amount of any license fee, or any city, county, state or federal sales taxes, so-called luxury taxes, consumers' excise taxes, gross receipts taxes, use taxes, entertainment and so-called "drop taxes", and other similar taxes now or hereafter imposed upon the sale of merchandise or services (including the playing of 29 games), whether collected as a part of or separately from the selling price of merchandise or services and collected from customers and paid to such governmental entity; (s) sales of fixtures, equipment or property which are not Tenant's stock in trade; (t) fees paid by Tenant to credit card companies and/or banking institutions (to the extent previously reported as Sales and Business Transacted) in accordance with credit card purchases plans not a exceed [***] of the merchandise sales price and not to exceed a total of [***] of Tenant's Sales and Business Transacted in any single calendar year; (u) tips and gratuities passed through and/or paid directly to Tenant's employees; (v) telephone or other sales solicited or originated at the Premises but filled from a place other than the Premises; and (w) revenues received by third party caterers providing services at the Premises; and (x) revenue from vending machine sales at the Premises. All sales that are filled at or from the Premises will be considered as made and completed therein, even though bookkeeping and payment of the account may be transferred to another place of collection. Each sale upon installment or credit shall be treated as a sale for the full cash price at the time of sale. 1(b) ..."upon ten (10) days" notice and in such a manner as to avoid unreasonably interfering with Tenant's business in the Premises and in no event more often than two (2) times in any five (5) year period during the Lease term"... 1(c) "Tenant shall not be required to maintain the books and records for longer than a twenty-four (24) month period." 1(d) ..."[***]"... 1(e) "Willful"... 1(f) "which noncompliance continues uncured for ten (10) business days after notice thereof" 1(g) ..."and such failure continues for twenty (20) days after written notice"... 1(h) "Notwithstanding the foregoing, none of the following shall be included in the definition of Common Area Maintenance and Operation Costs: any ground lease rentals; costs incurred by Landlord for the repair of damage to the Shopping Center to the extent that Landlord is reimbursed by insurance proceeds; costs, including permit, license and inspection costs incurred with respect to the installation of tenant improvements made for tenants in the Shopping Center or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for Tenant or other occupants in the Shopping Center depreciation and amortization, except on materials, tools, supplies, and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation and amortization would otherwise have been included in the charge or such third party's services, all as determined in accordance with generally accepted accounting principles, consistently applied, and when depreciation or amortization is permitted or required, the item shall be amortized over its reasonably anticipated useful life; leasing commissions, attorney's fees and other costs and expenses incurred in connection with negotiations or disputes with prospective tenants of the Shopping Center or litigation to collect rent from tenants of the Shopping Center; costs incurred by Landlord for alterations which are considered capital improvements and replacements under generally accepted accounting principles, consistently applied; costs of a capital nature, including, without limitation, capital improvements, capital repairs, capital equipment and capital tools, all as determined in accordance with generally accepted accounting principles, consistently applied, except that the cost of parking lot resurfacing may be included in Common Area Maintenance and Operation Costs so long as the cost is amortized over the useful life of the improvement as reasonably determined by Landlord; expenses in connection with services or other benefits which are not offered to Tenant or for which Tenant is charged directly but which are not provided to another tenant or occupant of the Shopping Center; overhead and profit increments paid to *** Confidential treatment requested. 2 30 Landlord or to subsidiaries or affiliates of Landlord for services in the Shopping Center to the extent the same exceed the overhead and profit increments which would be paid to unaffiliated third parties on a competitive basis of the provision of such services and any management fee (whether paid to Landlord, its principals, any affiliate or subsidiary of Landlord or its principals, or any other party); interest, principal, points and fees on debt or amortization on any mortgage or any other debt instrument encumbering the Shopping Center, any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord or in the parking garage of the Shopping Center; all items and services for which Tenant or any other persons in commercial concessions operated by Landlord or in the parking garage of the Shopping Center; all items and services for which Tenant or any other tenant in the Shopping Center reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement, electric power costs for which any tenant directly contracts with the local public service company; tax penalties incurred as a result of Landlord's negligence or inability or unwillingness to make payments when due; costs incurred by Landlord due to the violation by Landlord or any other tenant of the terms and conditions of any lease of space in the Shopping Center; rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature, except equipment not affixed to the Shopping Center which is used in providing janitorial or similar services; any metro rail assessment (or equivalent); and any site characterization, investigation or remediation costs relating to any Hazardous Substances (as hereinafter defined). During the first full calendar year of the Lease Term, Tenant shall pay its actual Proportionate Share of the Common Area Maintenance Charge, estimated at [***] per square foot per year, provided, however, in no event shall Tenant's Common Area Maintenance Charge during the first full calendar year of the Lease term exceed [***]. Commencing with the second calendar year during the Lease Term, Tenant's Proportionate Share of the Common Area Maintenance Charge (excluding the costs of waste removal, security and utilities) shall not increase by more than [***] over the prior year's share, calculated cumulatively. Landlord and Tenant acknowledge and agree that during the first full calendar year of any renewal term that may be exercised by Tenant, Tenant shall pay its actual Proportionate Share of the Common Area Maintenance Charge and that, thereafter, during the respective renewal term, the Common Area Maintenance Charge (excluding the costs of waste removal, security and utilities) shall not increase more than [***] over the amount of the Common Area Maintenance Charge for the prior calendar year as prorated for any partial calendar year, calculated cumulatively. Provided that Tenant is not in default of any material covenant under this Lease beyond the applicable cure period. Tenant shall have a right to reasonably review supporting data for Landlord's bill for the Common Area Maintenance and Operation Costs and all other Additional Charges. In order to exercise its rights hereunder, Tenant shall, within twelve (12) months after any such statement is sent, deliver a written notice to Landlord requesting to review Landlord's records. Tenant shall pay to Landlord all amounts shown as being due to Landlord pursuant to Landlord's bill within thirty (30) days after receipt of such statement. The right of Tenant to audit any such bill may be exercised not more than twice in any [***] year period during the Lease term. Tenant acknowledges that Landlord maintains its Common Area Maintenance and Operation Costs and other records at its office in Memphis, Tennessee, and that any review pursuant to the provisions hereof shall occur at such location only during the months of May through October of any calendar year. Any review to be conducted pursuant hereto shall be conducted at Tenant's expense by Tenant or Tenant's certified public accountant compensated on a fixed fee basis only. Tenant acknowledges and agrees that any records reviewed pursuant to this paragraph constitute confidential information of Landlord and shall not be disclosed to anyone other than the accountants performing the review and the principals of Tenant who receive the results of the review. Any errors disclosed by the review of records under this paragraph shall be promptly corrected, provided however, that in the event Landlord disputes the results of Tenant's audit, Landlord shall have the right to designate a third party independent firm of certified public accountants compensated on a fixed fee basis only acceptable to Tenant to undertake another review of the records. The costs of such review shall be shared equally between Landlord and Tenant. In the event that the results of the review (taking into account, if applicable, the results of any additional review made by for a preceding period. Landlord shall, as Tenant's option, reimburse the amount of such overpayment to Tenant or credit such amount against Tenant's subsequent obligations to pay the Common Area Maintenance and Operation Costs or respective other Additional Charge. In the event that such results show that Tenant has underpaid its obligations for a preceding period, Tenant shall immediately pay the amount of underpayment to Landlord." *** Confidential treatment requested. 3 31 1(i). "Notwithstanding anything to the contrary contained herein, during the first full calendar year of the Lease term, Tenant's Proportionate Share of the Real Estate Taxes and Assessments shall not exceed $0.77 per square foot per year contained in the Premises." 1(j). ..."reasonable out-of-pocket"... 1(k). "notwithstanding anything to the contrary contained herein, Tenant shall not be responsible for any income tax assessed to Landlord." 1(l). ..."the services of"... 1(m). "notwithstanding anything to the contrary contained herein, Tenant's Proportionate Share of insurance costs during the first full calendar year of the Lease term shall not exceed $0.25 per square foot contained in the Premises." 1(n). ..."[***]"... 1(o). "Landlord acknowledges that it is the intent of this Lease that Tenant shall not be obligated to pay and Landlord shall pay any mitigation, discretionary, impact fees or hook-up or connection fees (except that portion of hook-up and connection fees that represents a reimbursement to the city or county, as appropriate, for the cost of sending its employees to connect the utilities for the Premises, which portion will be paid by Tenant)." 1(p). ..."Saturday"... 1(q). ..."11:00"... 2. ..."10:00 p.m."... 3. ..."11:00 a.m. to 9:00 p.m."... 4. "Landlord and Tenant acknowledge and agree that the aforesaid stated hours are minimum operating hours and that Tenant shall be permitted to operate for hours in excess of those stated, so long as any other tenant in the Shopping Center (including the movie theater) is open during such hours. Tenant shall be allowed from time to time to conduct group sales at which time all or a portion of the Premises will be temporarily closed to the public with the group sales activity occurring in the closed portion of the Premises. Conditioned on Tenant obtaining at Tenant's expense any required licenses or permits relating to the sale of alcoholic beverages, alcoholic beverages and other food may be served during group sales activities. Tenant shall be permitted to engage third party caterers to serve food at such group sales activities and agrees to use commercially reasonable efforts to use food service providers located within the Shopping Center to the extent such food service providers are reasonably competitive in price and the type of food served is comparable to that ordinarily served by Tenant during its group sales activities." 5. ..."except when unable to operate as a result of Force Majeure, in addition, Tenant shall have the right to close for business for non-corrective remodeling for up to thirty (30) days, no more often than once every three (3) years, for inventory up to three (3) nonconsecutive days per year, for any reason that would expose Tenant's employees, agent or invitees to an unreasonably high risk of physical injury or property damage, for the purpose of complying with applicable law, ordinance, order or other act of any judicial governmental or quasi-governmental authority, and for extenuating circumstances that do not constitute Force Majeure events up to one (1) day per month. Tenant failure to open shall not constitute a breach of the Lease without notice and in opportunity to cure." 5(a). ..."which failure shall continue for ten (10) days after written notice thereof"... 5(b). "Subject to the provisions of Part 4 of the Lease Agreement"... 5(c). ..."[***]"... 5(d). ..."[***]"... 6. "It is agreed however, that the foregoing provisions shall be subject to the hours of operation prescribed by any governmental regulations or labor union contracts which may govern the operation or business of Landlord or Tenant." *** Confidential treatment requested. 4 32 7. "Landlord has arranged to provide parking for the Shopping Center consisting of spaces for up to 1,000 cars in the parking garage located across Third Street and connected to the Shopping Center by pedestrian bridge and owned by the City of Memphis. Under a parking validation program, customers of the Shopping Center making a minimum purchase of [***] will be permitted to park for [***] per hour for a maximum of [***] hours. Parking validation stickers or stamps (or another comparable validation indicator) will be available for purchase by Tenant at its option in order that it dispense them to its customers or will be available to customers themselves at a central location in the Shopping Center. Landlord agrees that the parking validation program shall be non-discriminatorily made available to all tenants in the Shopping Center on the same terms and the same price, except for the movie theater tenant which may have a different agreement. In addition, Landlord will provide free employee parking for Tenant's employees, at a surface parking lot off-site. 8. "Landlord represents and warrants that as of the date of delivery of possession of the Premises, Landlord shall have good and marketable title to the Premises subject to (a) covenants, conditions, restrictions, casements, and rights of record, (b) the effect of any zoning laws of the city, county and state where the Project is located and (c) general and special Taxes not delinquent. Landlord covenants that Tenant will not be unreasonably interfered with as a result of any of the covenants, conditions, restrictions, easements and rights or record, provided Tenant is in compliance with the provisions of this Lease. Landlord represents and warrants that to the best of Landlord's knowledge, the Premises are in compliance with all applicable zoning ordinances and all mitigation plans applicable to the Premises have been satisfied. Notwithstanding anything to the contrary contained in this Lease, Landlord hereby represents and warrants to Tenant that Landlord has obtained a conditional use permit (or its equivalent) and all other zoning and other discretionary permits and approvals (i.e., all consents and approvals, other than a building permit ("the Building Permit"), conditioned only upon the submission of plans and specifications which comply with applicable building codes and the payment of statutory building permit fees necessary to permit the construction of the Premises and all improvements to be constructed therein or as a part thereof by Landlord and Tenant as contemplated in this Lease (collectively the "Discretionary Approvals") and the use of the Premises by Tenant as permitted under this Lease." 9. ...", except to the extent the foregoing are generated from the normal operations associated with the automobile racing car ride simulators in compliance with the use set forth in Part 5 of the Lease Agreement (including, for example, the noise made by the track announcer)"... 10. "Landlord hereby consents to Tenant's use of hydraulic oil in connection with the operation of the automobile race car driving simulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled, stored, and disposed of in accordance with applicable laws. Tenant shall be permitted to install, maintain and operate one or more vending machines and pay telephones within the Premises." 11. "Notwithstanding the foregoing, Landlord shall not materially impair or allow any other party to materially impair public access to the Premises or the visibility of the Premises and/or Tenant's signage from the Common Areas of the Shopping Center (e.g., Landlord shall not and Landlord shall not permit any other tenant to construct signage that would unreasonably impair the visibility of Tenant's signage, or place or permit the placement of any kiosk, structure or other physical item within twenty-five feet (25') of the storefront of the Premises). Furthermore, in the event that Landlord uses or permits any other party to use any portion of Common Areas for a special event, Landlord will take all necessary steps to ensure that such use does not prohibit or materially impair access to the Premises by patrons of the Shopping Center. Landlord agrees that Tenant's name shall be present on the directional signage for the Shopping Center, and further, that pending the approval of the applicable governmental authorities, Tenant shall have signage as reasonably approved by Landlord on the pedestrian bridge to the Shopping Center facing Second Street. Landlord and Tenant shall work together in good faith to devise mutually acceptable signage for the storefront and the pedestrian bridge, which sign specifications shall be approved pursuant to the terms of Exhibit C attached hereto and made a part hereof. Notwithstanding anything to the contrary contained herein, Landlord agrees that, pursuant to plans and specifications submitted to and approved by Landlord, Tenant shall be permitted to install a portion of a stock car into the storefront facade, and may locate a stock car in the Common Areas, subject to Landlord's approval as to location and means of installation" 12. "which consent shall not be unreasonably withheld or delayed"... *** Confidential treatment requested. 5 33 12(a). "Without Landlord's consent (but with notice to Landlord), Tenant shall have the right to assign its rights under this Lease or to sublet all of the Premises to (a) any person or entity which is a parent, subsidiary, general partner, limited partner, member (or constituent owner of such general or limited partner) of Tenant or (b) any corporation or other entity into which or with which Tenant merges or consolidates. Additionally, without Landlord's consent (but with notice to Landlord), Tenant shall have the right to sell, assign or otherwise transfer all or a portion of any share of stock, partnership interests, limited liability company membership interests, or other ownership interests in Tenant resulting in a change in the effective control of Tenant (i) in connection with any public offering of stock in Tenant or (ii) by, between or among any partners, members, owners, limited partners or other persons or entities having an ownership interest in Tenant. Without Landlord's consent, Tenant shall have the right to assign its rights under this Lease or to sublet or license all or a portion of the Premises to any person or entity acquiring at least all or substantially all of the assets of Tenant operating under the same trade name of Tenant as of the date of such transfer, provided that in any such event, (i) if the transferee has a net worth equal to the lesser of the [***] as of the execution of the Lease or [***]. Tenant shall be relieved of all obligation or liability which arises under the Lease after the date of such assignment, or (ii) if the transferee does not have a net worth equal to lesser of the [***] as of the execution of the Lease or [***], Tenant shall remain liable for all obligation or liability which arises under the Lease after the date of such assignment. Any assignment under this paragraph shall require thirty (30) days prior written notice together with the following information: (i) the name, (ii) the financial and operating experience history, and (iii) any other information reasonably appropriate, concerning the proposed transferee and its officers, directors, owners and employees." 12(b). "In the event of Tenant's request for consent to assign or sublease, Landlord shall notify Tenant in writing of its granting or, denial of consent within fifteen (15) days of receipt of Tenant's request and the receipt of the foregoing information accompanied by specific reasons for its decision in the event Landlord denies consent. Failure of Landlord to notify Tenant within such time frame shall be deemed Landlord's approval of such request. Notwithstanding anything to the contrary contained herein, in the event of a subletting or assignment to which Landlord consents and the transferee has a net worth equal to at least [***], Tenant shall be relieved of all obligation or liability which arises under the Lease after the date of such assignment." 12(c). "Notwithstanding anything to the contrary contained in this Lease (including, without limitation, the immediately foregoing sentence), in the event that any rent in excess of that owing by Tenant to Landlord under this Lease is payable by an assignee or sublessee of Tenant, from such excess rent, Tenant shall be entitled to recover all costs and expenses incurred by Tenant in effecting such assignment or sublease, including, without limitation, brokerage commissions and fees, legal and other professional costs, tenant improvement allowances paid by Tenant to such assignee or sublessee and other costs of constructing or installing tenant improvements for such assignee or sublessee as well as the unamortized costs of constructing Tenant's leasehold improvements to the extent such costs were not paid by Landlord." 12(d). ..."in an amount not to exceed [***]"... 13. ...", but not the obligation,"... 14. ..."and close up to thirty (30) days therefor no more often than once every three (3) years"... 15. "After giving Landlord notice of its intention to do so, Tenant may, from to time after completion of all work in accordance with Exhibit C. make such permanent and nonstructural alterations, replacements, additions, changes and/or improvements (collectively referred to in this Lease as "Alterations"; provided, however, the term "Alterations" shall not include strictly cosmetic changes such as changing the carpeting or painting within the Premises) to Tenant's Work previously completed in accordance with Exhibit C or prior Alterations as Tenant may find necessary or convenient for its purposes, provided that: (i) any such Alterations which are structural or on the exterior or affect the storefront of the Premises may not be made without Landlord's prior written consent; (ii) the value of the Premises is not thereby diminished; and (iii) no Alterations costing in excess of [***] for any one work of improvement, or in excess of [***] in the aggregate for multiple works of improvement during any period of twelve (12) consecutive months during the Lease Term, may be made without obtaining the prior approval of Landlord, which Landlord may withhold in its reasonable discretion." *** Confidential treatment requested. 6 34 16. "Notwithstanding anything to the contrary contained in this Lease"... 17. "Except for such loss or damage as results from Landlord's negligence or intentional misconduct, or that of its employees or agents,"... 17(a). ... "except for such injury or damage as results from Landlord's negligence or intentional misconduct, or that of its employees or agents. Landlord shall indemnify and hold harmless Tenant from all liability for injury or damage to any person(s) or property occurring on or about the Common Areas of the Building, or arising out of any accident in the Common Areas of the Building (including all costs, expenses and reasonable attorney's fees incurred by Tenant in defense of any such claims), unless such injury or damage results from the negligence or intentional misconduct of Tenant, its employees, agents, subtenants or assignees." 18. "Landlord represents and warrants that Tenant's Permitted Use as set forth in Part 5 of the Lease will not in any way violate the terms of this Section 6 and nothing in this Section 6 shall in any way limit such Permitted Use or require Tenant to compensate Landlord for increased insurance rates under this Section 6 as a result of Tenant's use of the Premises for the Permitted Use." 19. "Notwithstanding anything to the contrary contained herein, Landlord shall make any such repairs necessitated by the negligence or willful misconduct of Landlord, its employees or agents." 19(a). ... "of Landlord's getting all approvals and permits"... 19(b). ... "and Landlord elects not to repair and does not repair"... 19(c). ... "the cost of which repair would exceed [***] and Landlord elects not to repair and does not repair,"... 19(d). ... "the cost of which repair would exceed [***] and Landlord elects not to repair and does not repair"... 20. ... "by notice to Tenant given within sixty (60) days after the occurrence,"... 20(a). "Notwithstanding anything to the contrary contained herein, in the event Landlord has not terminated the Lease pursuant to the foregoing provisions, but has not completed its restoration or rebuilding of the Premises by the date that is two hundred seventy (270) days from the date of the occurrence, Tenant may terminate this Lease on written notice to Landlord given by the date that is three hundred ten (310) days from the date of the occurrence." 20(b). "If this Lease is not terminated pursuant to the provisions of the foregoing paragraph,"... 20(c). ... "shall"... 20(d). "(subject to Tenant's right to go dark pursuant to the provisions of Part 4 hereof)"... 20(e). ... "has not commenced within sixty (60) days after the date of the damage or destruction to restore or repair the Premises and proceeded to complete such repairs or restoration of the Premises within one hundred eighty (180) days after obtaining a building permit,"... 20(f). ... "Tenant"... 20(g). ... "within sixty (60) days after failure to meet the foregoing requirement"... 20(h). "Notwithstanding the foregoing, in the event Tenant in its reasonable judgment determines that the Premises are not suitable for Tenant to operate within the Premises, Minimum Rental, Percentage Rental and Additional Charges shall be fully abated until such restoration or repair shall be completed." 20(i). ... "as soon as reasonably possible"... 20(j). ... "and if Landlord elects not to rebuild and Landlord does not rebuild, then Landlord may"... 21. "Subject to the provisions of Article 2, Section 2 hereof,"... *** Confidential treatment requested. 7 35 21(a). "Notwithstanding anything to the contrary contained herein, Landlord agrees that in no event shall Tenant be obligated to pay more for utilities than it would be obligated to pay directly to the utility company providing the service." 22. "Landlord shall use reasonable efforts to mitigate its damages and to relet the Premises to another tenant." 23. "Subject to the provisions of Article 5 hereof," ... 24. ... "[***] of" ... 25. "Within ninety (90) days after the closing of any mortgage financing on the Shopping Center, Landlord shall obtain from its lender and deliver to Tenant a recordable, nondisturbance agreement in form and substance reasonably acceptable to Tenant and have the same recorded in the Office of the Shelby County Register. Landlord represents and warrants that the terms of the Ground Lease state that any termination of the Ground Lease shall be subject to the terms of any subleases made by the lessee thereunder so long as the respective sublessee is in compliance with its lease and attorns to the Memphis Center City Revenue Finance Corporation, as lessor. Landlord acknowledges that Tenant is deemed to be a sublessee under the Ground Lease." 26. "Notwithstanding the foregoing, Landlord acknowledges and agrees that Tenant has submitted, and Landlord has approved Tenant's preliminary design plans for the storefront and signage for the Premises (which designs are attached hereto as Exhibit E), and documents detailing Tenant's concept. If Tenant desires to make any changes to the storefront and/or the exterior signage preliminary design plans attached hereto as Exhibit E, such changes shall be submitted to Landlord for approval by Landlord, which approval shall be in Landlord's reasonable discretion if such changes are generally consistent with the previously approved preliminary design plans of Tenant, and in Landlord's sole discretion if such changes are not generally consistent with the previously approved preliminary design plans of Tenant." 27. "Landlord acknowledges that Tenant is a licensee under a license agreement with NASCAR, and therefore, agrees that all use of the NASCAR trade name (including both signage and advertising) shall remain subject to the review and approval of the licensor to the extent required under said license agreement." 28. ... ", in Tenant's reasonable judgment," ... 28(a). ... ", Percentage Rental" ... 28(b). ... "equitably based on the effect on Tenant's business operations"... 28(c). "Tenant shall have the right to seek a separate award for the loss of business and damage to or loss of trade fixtures." 29. "Subject to the provisions of Article 2, Section 7 hereof," ... 30. Landlord warrants and represents that, to the best of Landlord's knowledge, any use, storage, treatment, or transportation of Hazardous Substances that has occurred in or on the Premises prior to the date hereof has been in compliance with all applicable federal, state and local laws, regulations or ordinances. Landlord additionally warrants and represents that, to the best of Landlord's knowledge, no release, leak, discharge, spill, disposal or emission of Hazardous Substances has occurred in, on or under the Premises, and the Premises are free of Hazardous Substances as of the date hereof. Landlord agrees to indemnify and hold harmless Tenant from any and all claims, damages, fines, judgments, penalties, costs, liabilities or losses (including, without limitation, any and all sums paid for settlement of claims, attorney's fees, consultant and expert fees) arising during or after the Lease term from or in connection with the presence or suspected presence of Hazardous Substances in or on the Premises, unless the Hazardous Substances are present as a result of the negligence, willful misconduct, or other acts of Tenant, Tenant's agents, employees, contractors or invitees. Without limitation of the foregoing, this indemnification shall include any and all costs incurred due to any investigation of the site or any cleanup, removal or restoration mandated by a federal, state or local agency or political subdivision, unless the Hazardous Substances are present as a result of the negligence, willful misconduct, or other acts of Tenant, Tenant's agents, 8 *** Confidential treatment requested 36 employees, contractors or invitees. This indemnification shall specifically include any and all costs due to Hazardous Substances that flow, diffuse, migrate, or percolate into, onto or under the Premises after the Lease term commences. 31. ... "if the transferee expressly assumes all of Landlord's liabilities and obligations under this Lease." 31(a). ... "within a period of thirty (30) days after the expiration of Landlord's applicable notice and cure period." 32. ... "reasonable"... 32(a). ... "pursuant to a system whereby Tenant's actual use of a shared dumpster is measured"... 32(b). "Landlord shall notify Tenant prior to Tenant's commencement of Tenant's Work of any such installations and/or other safeguards that (to Landlord's actual knowledge regarding applicable fire, safety and building codes and regulations; to Landlord's best knowledge regarding safeguards that Landlord's insurance underwriters require) Tenant will be required to perform or construct in order to comply with this clause (ii)." 33. "Tenant shall have the right to install and maintain on the roof of the Shopping Center one (1) satellite dish for Tenant's communications and data transmission network, subject to the terms and provisions of the Satellite Dish License Agreement between Landlord and Tenant of even date herewith." 34. "Landlord represents and warrants that Tenant's Permitted Use as set forth in the Lease does not violate this clause (x) does not limit Tenant's right to carry on the Permitted use in the Premises." 35. "Tenant shall not be deemed to be in default under this provision unless Tenant fails to provide the same within five (5) business days after receiving a written request therefor from Landlord." 36. "Landlord represents and warrants that Tenant's Permitted Use as set forth in the Lease does not violate this clause (xiii) does not limit Tenants right to carry on the Permitted use in the Premises." LANDLORD: TENANT: PEABODY PLACE CENTRE, L.P. SILICON ENTERTAINMENT, INC. By: Peabody Place, Inc., General Partner BY: /s/ MORRIS I. THOMAS BY: /s/ ILLEGIBLE ----------------------------------------- ----------------------- Morris I. Thomas, Vice President BY: /s/ JACK A. BELZ ----------------------------------------- Jack A. Belz, President HOTEL PEABODY, L.P. By: Perim Corp., General Partner BY: /s/ JIMMIE D. WILLIAMS ----------------------------------------- Jimmie D. Williams, Senior Vice President 9 37 EXHIBIT "C" - WORK TO BE DONE PEABODY PLACE CENTRE, L.P. - LANDLORD SILICON ENTERTAINMENT, INC. - TENANT The Tenant leases Premises in an "AS IS" condition and agrees to make all improvements at its expense, including compliance with any ADA and handicap requirements except that Landlord shall make those improvements as shown on the attached Exhibit C Plans and Specifications. The Tenant Allowance shall be disbursed in draws no more frequently than once per month. Each draw shall be funded within [***] days after Landlord's receipt of a draw request in an amount equal to [***] of the total draw request which shall be submitted together with invoices for the amount actually expended up to that point and partial lien waivers from the applicable contractors and suppliers. The balance of the Tenant Allowance (the remaining [***] shall be funded provided that Tenant is not in default herein beyond any applicable cure period, within [***] days after the later of (i) Tenant opening for business in the Premises; (ii) Tenant completing its improvements, and (iii) Tenant providing to Landlord lien waivers from its general contractors, major subcontractors and suppliers involved in the implementing of Tenant's leasehold improvements. In the event the actual cost of Tenant's leasehold improvements is less than Tenant Allowance, Landlord shall credit the difference between the Tenant Allowance and the actual cost of the leasehold improvements, as amortized over the full term of the Lease against the first payment of Minimum Rental due pursuant to the terms of this Lease. In no event shall Landlord's cost exceed $390,000.00. In the event that Landlord fails to fund the Tenant Allowance in accordance with the aforesaid provisions and such failure continues for thirty (30) days after written notice thereof, Tenant shall be permitted to offset such amount against Minimum Rental and Additional Charges due hereunder; provided that in the event Landlord in good faith disputes that the Tenant Allowance is then due or in good faith asserts that Tenant is in default hereunder, Tenant shall not be permitted to so offset the amount of the Tenant Allowance in question. LANDLORD: PEABODY PLACE CENTRE, L.P. BY: PEABODY PLACE, INC. (General Partner) By: /s/ MORRIS I. THOMAS ---------------------------------- Morris I. Thomas, Vice President By: /s/ JACK A. BELZ ---------------------------------- Jack A. Belz, President HOTEL PEABODY, L.P. By: Perim Corp., General Partner By: /s/ JIMMIE D. WILLIAMS ---------------------------------- Jimmie D. Williams; Senior Vice President TENANT: SILICON ENTERTAINMENT, INC. By: /s/ [ILLEGIBLE] --------------------------------- Its: Vice President --------------------------------- *** Confidential treatment requested. 38 EXHIBIT "C" WORK TO BE DONE PEABODY PLACE RETAIL/ENTERTAINMENT ELEMENT NASCAR SILICON MOTOR SPEEDWAY LANDLORD'S WORK A. Structure 1. Frame, etc.: The structural frame, columns, beams, floor and roof slabs shall be constructed with incombustible framing, and the floor and roof slabs shall be designed to carry live loads of 75 pounds per square foot. Roofs will be insulated roof deck construction. Exterior walls above grade will be concrete block, Precast panels, and/or suitable members, with ties for anchorage of exterior veneers such as brick, EIFS, stone and other suitable materials. If any load are applied to the roof or structural areas of the building which, in the opinion of Landlord shall be considered excessive, any costs for handling these structural changes shall be done by Tenant. 2. Space heights: The minimum clear height measured between the floor slab and the underside of steel joints shall generally be as follows: Sales Area 14' and Stock Areas 14'. Landlord reserves the right to install mechanical, electrical, and plumbing systems in Tenant spaces as needed. B. Store Fronts The Landlord will provide a rough opening for storefront (provided by Tenant) in accordance with the criteria and the general plan of the Shopping Center as determined by the Landlord and prepared by the Landlord's designated representative. C. Demising Frames Landlord will provide metal studs, two feet on center from finished floor to the underside of the roof deck, or an unfinished concrete block wall, as determined by the Landlord. D. Interior Finish Floor: All floors will be concrete with smooth cement finish. E. Rear Service Doors/Hardware The Landlord will provide a rear service door in a location acceptable to Tenant as a means of egress in accordance with the general plan of the Shopping Center as determined by the Landlord and prepared by the Landlord's architect and/or if required by any building code. F. Utilities and Plumbing The Landlord will provide stubbed utility services essentially as outlined below as indicated on the general plan of the Project as prepared by the Landlord's architect and/or engineer. Refer to item G for electrical and telephone service. a. Domestic water line (1") will be provided above the ceiling with a single valve for tenant connection. b. The cost of metering of the water service if required by the Landlord will be the responsibility of the Tenant. c. Sanitary sewer line for main level (slab or grade) Tenants will be provided below finish floor in a "leave out" located by the Landlord. Sanitary sewer lines for second level Tenants will be located in the ceiling area of the space below. Coring of the slab will be the responsibility of the Tenant after receiving written approval from both the Landlord and engineer regarding location of the coring. The Tenant is also responsible for coordinating with the tenant below the coring and correction to the sanitary sewer line. d. Gas service (if applicable) will be separately metered. For restaurants, an additional gas connection point will be located within the premises. G. Electrical The Landlord will provide the main electrical service for the Project to a central room. An empty conduit of sufficient size shall be provided to a designated point of entry in the Leased Premises as indicated on the general plan of the Project prepared by the Landlord's architect. An empty 1 inch 39 conduit to the Leased Premises shall be provided for telephone service. Power and data surge protection is the responsibility of the Tenant. H. Sprinklers (if applicable) The Landlord will provide sprinklers on a fourteen foot by fourteen foot grid pattern (modification by Tenant). I. Utility Meters Tenant is responsible for applying and paying for all utility meters. J. Heating And Air Conditioning The Landlord will furnish closed loop condenser water supply and return piping maintained at a temperature between 60 degrees and 90 degrees F. These services shall be sufficient to allow the Tenant's water source heat pump to provide cooling at a level mutually acceptable to Landlord and Tenant not to exceed one (1) ton for every 200 square feet of leasable area. The Landlord will provide outside air at the rate of 0.3 CFM/FT to the space in accordance with the 1988 International SOCA Code for retail space. TENANT'S WORK Landlord's Work is limited to the work herein above described and excludes work described as Tenant's Work. All work not specifically listed above as Landlord's Work is Tenant's Work. Tenant's Work shall include all other necessary improvements to operate Tenant's business at Tenant's expense. The plans and specifications and the detail and design shall be subject to the written approval of Landlord's architect. A. CONSTRUCTION 1. Landlord will provide Tenant, when preliminary plans have been prepared by Landlord's architect, with scale drawings, showing the general features of the leased premises. 2. In developing the working drawing, Landlord reserves the right to make such necessary reasonable changes and adjustments which are the result of detailed technical development of the preliminary studies so long as Landlord notifies Tenant in a reasonable manner and does not materially alter the design of the Tenant's premises. 3. Tenant shall have the right to substitute more expensive items than normally provided by Landlord hereunder, in which event Tenant shall complete such items at Tenant's cost, and Landlord shall give Tenant an allowance based upon the cost of the item Landlord would have been required to complete. All such work performed by Tenant shall be subject to the approval of Landlord's architect. 4. Tenant shall submit detailed plans and specifications (all in triplicate) to Landlord for Landlord's review. Landlord may require changes to plans and specifications prior to approving same. Tenant shall make such changes, if any, as Landlord requires. Tenant shall not receive possession of the leased premises nor begin construction without first receiving Landlord's written approval of final plans and specifications. 5. Tenant shall bear the cost of all structural supports necessary for Tenant Storefront work. Tenant shall not use building structure or demising walls to support Tenant construction, including automatic grills without the written approval of Landlord. 6. All Tenant construction work must be coordinated with Landlord's Program Manager before and during construction. 40 EXHIBIT E SPECIAL CONDITIONS COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS SECTION 1. GOVERNMENTAL COMPLIANCE. The Tenant agrees to comply with all applicable federal, state and local governmental requirements, including, but not limited to, those listed in these Special Conditions, and agrees to furnish to the Landlord documentation of said compliance from time to time upon request. The provisions of these Special Conditions are intended to be applicable only to the extent required by federal, state or local law, and to the extent not so required shall not be subject to enforcement. SECTION 2. CONTRACTORS BOUND. To the extent required by law, the Tenant will cause these Special Conditions to be inserted in all contracts and subcontracts for construction or installation of tenant improvements for the Premises ("Tenant Build-Out"); provided that the provision regarding Sections 3 and 4 (except with regard to handicapped persons) shall not apply to contracts and subcontracts for commercial supplies of raw materials when said contract or subcontract is less than Ten Thousand Dollars ($10,000.00). Any failure to insert any of these Special Conditions shall in no way modify the applicability of the statutes or regulations described in these Special Conditions to any contractor. SECTION 3. PROJECT AREA EMPLOYMENT AND CONTRACTING. With respect to Tenant Build-Out, Tenant agrees, to the greatest extent feasible, to provide opportunities for training and employment of lower-income persons residing with the Project Area (herein defined as the City of Memphis) and to award contracts for work to eligible business concerns which are located in, or owned in substantial part by persons residing in, the Project Area. SECTION 4. NON-DISCRIMINATION IN EMPLOYMENT. During the performance of the Tenant Build-Out, the Tenant will require its contractors to comply with the following: (a) The contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. The contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to, the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training; including apprenticeship. The contractor will post in conspicuous places, available to employees and applicants for employment, the attached notice setting forth the provisions of this non-discrimination clause. (b) The contractor will, in all solicitations or advertisements for employees placed by or on behalf of the contractor, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin. (c) The contractor will send to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding, a notice advising the labor union or workers' representative of the contractor's commitment under Section 202 of the Executive Order No. 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (d) The contractor will comply with all provisions of Executive Order No. 11246 of September 24, 1965, and the rules, regulations and relevant orders of the Secretary of State. (e) The contractor will furnish all information and reports required by Executive Order No. 11246 of September 24, 1985, and by the rules, regulations and orders of the Secretary of Labor, or pursuant thereto, and will permit access to its books, records, and accounts by the Tenant, the City of Memphis, U.S. Department of Housing and Urban Development (HUD), and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations and orders. 41 (f) In the event of the contractor's noncompliance with the non-discrimination clauses of the contract or with any of such rules, regulations, or orders, the contract may be canceled, terminated or suspended in whole or in part, and the contractor may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order No. 11246 of September 24, 1965, and such other sanctions may be imposed and remedies invoked as provided in Executive Order 11246 of September 24, 1965, or by rule, regulation, or order of the Secretary of Labor, or as otherwise provided by law. (g) The contractor will include the provisions of paragraphs (a) through (f) in every subcontract or purchase order unless exempted by rules, regulations, or orders of the Secretary of Labor issued pursuant to Section 204 of Executive Order No. 11246 of September 24, 1965 (Section 204 of the Order), so that such provisions will be binding upon each subcontractor or vendor. The contractor will take such action with respect to any subcontract or purchase order as may directed by the Secretary of Labor as a means of enforcing such provision, including sanctions for noncompliance; provided, however, that in the event the contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction, the contractor may request the United States to enter into such litigation to protect the interest of the United States. SECTION 5. USE OF UDAG AND CDBG FUNDS. If any funds provided by the City of Memphis to the Landlord pursuant to the Urban Development Action Grant ("UDAG") or Community Development Block Grant ("CDBG") programs of the U.S. Department of Housing and Urban Development ("HUD") are made available, as part of any construction allowance or otherwise, for any of the Tenant's leasehold improvements, such funds shall only be used for non construction items as specifically approved by the Landlord. To assure compliance with this provision, the Landlord shall have the right to review and approve all contracts for such leasehold improvements prior to their execution. SECTION 6. NON-DISCRIMINATION CONCERNING UDAG AND CDBG FUNDS. The Tenant will comply with Section 109 of the Housing and Community Development Act of 1974, as amended, (the "Act") to insure that no person shall on the ground of race, color, national origin, sex, age (under the Age Discrimination Act of 1975) or handicap (otherwise qualified handicapped persons under Section 504 of the Rehabilitation Act of 1973) be excluded from participating in, be denied the benefits of, or be subject to discrimination under any program or activity funded in whole or in part with UDAG or CDBG funds. SECTION 7. GOVERNMENT ACCESS TO RECORDS. The Landlord, the City of Memphis, HUD, the Comptroller General of the United States, or any of their duly authorized representatives shall have access to any books, documents, papers and records of the Tenant and its contractors which are related directly to the receipt or disbursement of UDAG or CDBG funds for the purpose of making audit, examination, excerpts, and transcriptions. SECTION 8. PROHIBITION AGAINST USING INELIGIBLE CONTRACTORS. The Tenant agrees that no UDAG or CDBG funds shall be used directly or indirectly to employ, award contracts to, or otherwise engage in the services of, or fund any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status of such contractor or subcontractor under the provisions of 24 CFR Part 24. SECTION 9. AGE DISCRIMINATION REQUIREMENTS. The Tenant agrees to comply with the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.) which prohibits discrimination on the basis of age and applies to participation in any program or activity funded in whole or in part with UDAG or CDBG funds. SECTION 10. REHABILITATION ACT REQUIREMENTS. The Tenant agrees to comply with Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations found in 24 CFR Part 8. These regulations concern discrimination against an otherwise qualified handicapped person who seeks to participate in or receive benefits from an activity funded in whole or in part with UDAG or CDBG funds. 2 42 SECTION 11. POLLUTION PROHIBITIONS. The Tenant agrees to comply with any and all local, state and federal statutes and regulations protecting the environment from pollutants generated by the Tenant's activities. SECTION 12. CONFLICT OF INTEREST. Except for approved eligible administrative or personnel costs, no person who is an employee, agent, consultant, officer, elected official, or appointed official of the City of Memphis or of any designated public agencies or sub-recipients (neighborhood-based non-profit organization, local development corporation, or Section 301(d) Small Business Investment Company) receiving UDAG or CDBG monies, who exercises or has exercised any functions or responsibilities with respect to the Peabody Place project who is in a position to participate in a decision making process or gain inside information with regard to the Peabody Place project, may obtain a personal or financial interest or benefit from the activity, or have any interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, at any time during or after such person's tenure. (However, upon the written request of the City, HUD may grant an exception to the conflict of interest provisions stated above on a case-by-case basis when it determines, consistent with the requirements of 24 CFR 570.611 (48 Federal Registor 186, pages 43571-72, 9-23-83), that such an exception would serve to further the purposes of the Act, and the effective and efficient administration of the City's program or project.) SECTION 13. REPORTING REQUIREMENTS. Upon written request from the Landlord, the Tenant shall provide the Landlord all information within its control regarding this Lease and the performance thereof that is necessary for the Landlord to satisfy its reporting requirements to the City of Memphis regarding the Peabody Place project. This information shall include the total capitalizable cost of all tenant improvements, the number of permanent employment positions at the Premises, and the number of such positions filled by minority persons and persons who meet the HUD definition of low and moderate income (80% of area median income, adjusted for family size). In addition, the Tenant understands that the Landlord has entered into an agreement with the City of Memphis that requires the Landlord to (i) use its best efforts to assure that at least fifty-one percent (51%) of the initial permanent employment opportunities (computed on a full-time equivalent basis) for the Element E portion of the Peabody Place project will be held by, or will be available to, persons who, at the time of their employment, qualify as low or moderate income, and (ii) development and implement procedures acceptable to the City of Memphis whereby its tenants participate in the effort to employ low to moderate income persons. The Tenant agrees to fully cooperate with the Landlord, consistent with commercially reasonable business practices, in the Landlord's efforts to achieve this employment objective. 3 43 EXHIBIT "F" EXCLUSIVE USE RESTRICTIONS 1. No movie theater shall be operated in the Shopping Center except for that operated pursuant to the Lease dated April 17, 1997 by and between Peabody Place Centre, L.P. and Muvico Entertainment, LLC. 2. Jilliana's of Memphis, TN, Inc. "No other leased space within the Shopping Center shall: (i) have more than two (2) billiard tables; (ii) be a sports bar (which for purposes hereof shall be defined as being a bar or restaurant having more than five (5) televisions exhibiting sports events); (iii) have any bowling facilities; or (iv) have a dance floor in excess of twenty percent (20%) of the floor area of such space (or a maximum 5000 square foot dance floor). Notwithstanding anything to the contrary contained herein, the foregoing restrictions shall not apply to another tenant's space whose ordinary use involves the presence of not more than two (2) video games." 44 MEMORANDUM OF LEASE THIS LEASE, made and entered into as of the ___ day of ____________, 1999 by and between PEABODY PLACE CENTRE, L.P., a Tennessee limited partnership, hereinafter referred to as "Landlord", and SILICON ENTERTAINMENT, INC., a ______ corporation, hereinafter referred to as "Tenant". WITNESSETH: For and in consideration of One Dollar ($1.00) and other valuable consideration paid and to be paid by the Tenant to the Landlord, the Landlord does demise and let unto Tenant and the Tenant does lease and take from the Landlord, upon the terms and conditions and subject to the limitations more particularly set forth in a certain agreement between the Landlord and Tenant, bearing even date herewith, to which Agreement reference is hereby made for all of the terms and provisions thereof, which terms and provisions are made a part hereof as fully and particularly as if set out verbatim herein, the premises situated in the City of Memphis, County of Shelby, State of Tennessee, consisting of land, together with improvements placed and/or to be placed thereon, and more particularly described as follows: A retail space containing approximately 6,000 square feet located within the Peabody Place Retail Entertainment Center and further municipally described as Memphis, Shelby County, Tennessee. TO HAVE AND TO HOLD the above demised premises unto the Tenant for the period of ten (10) years, commencing on the first day of _____ and ending on the last day of the previous month ten years thereafter. Provided that Tenant is not in default under the Lease beyond any applicable notice and cure period and has not ceased operating for business in the Premises in accordance with Part 7 of the Lease, subject, however, to Tenant's right to go dark pursuant to Part 4 of the Lease, for a period in excess of thirty (30) days. Tenant shall have the exclusive right to occupy and operate a business within the Shopping Center (including, without limitation, the Common Areas of the Shopping Center) for the installation and operation of automobile racing car ride simulators (including motion-based simulators) and, so long as Tenant retains the right to use the NASCAR name and uses at least 500 square feet of its sales floor area for the sale of the merchandise hereinafter described, for the sale of NASCAR-branded merchandise and other merchandise related to NASCAR (including, without limitation, NASCAR videos, pictures, CD-Roms, DVD's and other media and other such audio/visual items featuring NASCAR racing) and for the sale of NASCAR Silicon Motor Speedway-branded merchandise and Silicon Motor Speedway-branded merchandise ("Tenant's Exclusive Use"). Notwithstanding the foregoing, other tenants in the Shopping Center may sell NASCAR-branded merchandise and other merchandise related to NASCAR, other than apparel, so long as such use is incidental to such tenants' primary use of their respective premises. For purposes hereof, an "incidental" use shall mean that not more than one hundred (100) square feet within such tenant's sales area shall be devoted to the sale of such merchandise comprising the "incidental" use. It is agreed and understood that if the Tenant shall make certain improvements to the demised premises, Tenant shall, in making such improvements, act solely for its own benefit and not as an agent of Landlord and that Landlord's interest in the demised premises the building of which the demised premises are a part, and the overall development of which the demised premises are a part, shall not be subject to any mechanical, furnishers or materialmen's liens. Landlord does not consent to any contract for labor or materials within the context of Section 66-11-108 et seq., Tennessee Code Annotated out of which any such liens might arise. No contract for labor or material will be contracted for by Tenant except with the express stipulation that any lien arising therefrom shall not attach to Landlord's fee interest, but only is Tenant's leasehold interest in the demised premises, building, or in the overall development of which the demised premises is a part. Tenant shall defend and save harmless Landlord from any and all loss, cost or expense, including attorneys' fees, based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of Landlord in the demised premises or under the terms of the Lease. Tenant shall discharge by payment or furnish to Landlord a satisfactory bond pursuant to statutory procedures any lien arising out of work performed or materials furnished on the demised premises by, through or under Tenant within thirty (30) days after the filing of same. 45 IN WITNESS WHEREOF, the parties through their duly authorized officers, have executed this instrument, this the day and year first above written. LANDLORD: PEABODY PLACE CENTRE, L.P. TENANT: SILICON ENTERTAINMENT, INC. BY: PEABODY PLACE, INC. (General Partner) By: /s/ MORRIS I. THOMAS By: /s/ [ILLEGIBLE] ---------------------------------- ------------------------ Morris I. Thomas, Vice President By: /s/ JACK A. BELZ Its: Vice President ---------------------------------- ------------------------ Jack A. Belz, President HOTEL PEABODY, L.P. By: Perim Corp., General Partner By: /s/ JIMMIE D. WILLIAMS ----------------------------------------- Jimmie D. Williams, Senior Vice President 2 46 STATE OF TENNESSEE COUNTY OF SHELBY Before me, a Notary Public of the State and County aforesaid, personally appeared JACK A. BELZ AND MORRIS I. THOMAS, PRESIDENT AND VICE PRESIDENT, respectively, of PEABODY PLACE, INC., a Tennessee corporation, said corporation is the general partner of PEABODY PLACE CENTRE, L.P., a Tennessee limited partnership, with whom I am personally acquainted, and who, upon oath acknowledged that they are the PRESIDENT AND VICE PRESIDENT, respectively of PEABODY PLACE, INC., General Partner, of PEABODY PLACE CENTRE, L.P., and that they as such PRESIDENT AND VICE PRESIDENT, respectively, executed the foregoing instrument for the purpose therein contained by signing the name of such partnership, as one of the general partners by themselves as PRESIDENT AND VICE PRESIDENT, respectively of such corporation. WITNESS my hand and Notarial seal, at office in Memphis, Tennessee, this, the 19th day of May, 1999. /s/ SANDRA PERRY [SEAL] ----------------------------- Notary Public My Commission Expires: ------- STATE OF TENNESSEE COUNTY OF SHELBY Before me, a Notary Public of the State and County aforesaid, personally appeared JIMMIE D. WILLIAMS, SENIOR VICE PRESIDENT of PERIM CORP., a Tennessee corporation, said corporation is one of the general partners of HOTEL PEABODY L.P., a Tennessee limited partnership, with whom I am personally acquainted, and who, upon oath acknowledged that he is the SENIOR VICE PRESIDENT of PERIM CORP., General Partner, of HOTEL PEABODY, L.P., and that he as such SENIOR VICE PRESIDENT, executed the foregoing instrument for the purpose therein contained by signing the name of such partnership by such corporation, as one of the general partners by himself as SENIOR VICE PRESIDENT of such corporation. WITNESS my hand and Notarial seal, at office in Memphis, Tennessee, this, the 19th day of May, 1999. /s/ SANDRA PERRY [SEAL] ----------------------------- Notary Public My Commission Expires: ------- STATE OF CALIFORNIA COUNTY OF SANTA CLARA Before me, a Notary Public of the State and County aforesaid, personally appeared CHRIS MORSE with whom I am personally acquainted, (or proved to me on the basis of satisfactory evidence) and who, upon oath, acknowledge himself to be the VICE PRESIDENT of SILICON ENTERTAINMENT, INC., the within named bargainor, a CALIFORNIA corporation, and that he executed the foregoing instrument for the purposes therein contained by signing the name of such corporation by himself as such VICE PRESIDENT. Witness my hand at office, this 24 day of May, 1999. /s/ LAURIE M. SHERMER --------------------- Notary Public My Commission Expires 9/19/2001 [SEAL] --------- 3 47 SATELLITE/MICROWAVE EQUIPMENT LICENSE AGREEMENT This Satellite/Microwave Equipment License Agreement ("License Agreement" or "Agreement") is made by and between PEABODY PLACE CENTRE, L.P., as Licensor and SILICON ENTERTAINMENT, INC., as Licensee on this ___ day of May, 1999. Recitals: Licensor is the Landlord and Licensee is the Tenant under a lease (the "Lease") for premises ("Premises") located at Peabody Place Centre, Memphis, Tennessee. Licensee desires to establish a private satellite/microwave network for communication among its headquarters, branch offices and store facilities, including the Premises, and/or for private music programming within the Premises, and Licensor is agreeable thereto as herein provided. NOW, THEREFORE in consideration of the above and other valuable consideration, the sufficiency which is hereby acknowledged, the parties hereto agree as follows: Licensor hereby grants to Licensee a license (hereinafter "License") for the following only: to install, operate, maintain, repair, and remove (hereinafter collectively "Licensed Work") the Equipment (as hereinafter defined) on the terms and conditions hereinafter set forth. 1. All terms not defined herein shall have the meaning ascribed to them in the Lease. This License shall be coterminous with the Lease. 2. Law shall mean all laws, statutes, ordinances, rules, regulations, codes, decrees, orders and other such requirements of all federal, state, county, municipal and local governments and governmental agencies having jurisdiction over the Shopping Center. Insurance Requirements shall mean all requirements of any insurance policy covering or applicable to all or any part of the Shopping Center and all orders, regulations and other requirements of a local or national insurance board and any state or local insurance body having jurisdiction of all or any part of the Shopping Center. 3. Except as may be expressly provided otherwise herein, the exercise of all rights and the fulfillment of all obligations of Licensee hereunder shall be at Licensee's sole cost and expense. 4. Licensee shall submit to Licensor's Asset Management Department for Licensor's prior written approval plans and specifications ("Plans and Specifications") in scope and detail reasonably satisfactory to Licensor, depicting all equipment (hereinafter "Equipment") including antenna, supports, mountings, connection to building electrical and other systems, conduit, and cables and wiring which may be installed on the exterior of the building (hereinafter "Building") of which the Premises are a part, and the size, weight, materials, and location of Equipment which Licensee desires to install. The antenna and all supports, mountings and connections therefor and all installations on the roof are hereinafter collectively referred to as the "Antenna". The Antenna mount shall be of a non-penetrating type. The Antenna shall not be visible from any location in the parking areas of the Shopping Center without Landlord's prior written consent, Licensee shall obtain, upon Licensor's request, the written opinion, a copy of which shall be delivered to Licensor together with Licensee's plans and specifications, of a structural engineer of Tenant's choice reasonably acceptable to Landlord certifying that no adverse effect will result to the roof or the Building structure, from the Equipment, the Antenna or the Licensed Work. The Equipment, the Antenna and/or the Licensed Work shall not cause any interference in Licensor's reasonable judgment, with the operation of the Shopping Center, or with the Building systems. Any roof penetration shall only be done by Licensor's approved roof contractor and shall not violate the Building roof warranty in any way. 5. The Equipment, the Antenna, the Licensed Work and any other matter pertaining to the Equipment and/or Antenna shall comply at all times during the term of this License with Law and Insurance Requirements. Irrespective of the adequacy of said insurance, Licensee shall indemnify and save Licensor harmless from all liability for injury or damage to any person(s), firm(s), corporation(s) or properly occurring on or about the Premises or any part thereof by Licensee, its agents, subtenants, or assignees (including all costs, expenses, court reporter fees, expert fees, and attorney fees incurred by Licensor in defense of any such claims), except for injury or damage resulting from Licensor's negligence or willful misconduct or that of its employees, agents or contractors. Licensee shall obtain at its expense and furnish to Licensor copies of all permits and approvals required for such compliance prior to the initial installation of the Equipment and immediately upon obtaining any renewals thereof. Licensor assumes no responsibility for the Equipment. Antenna and/or Licensed Work. Licensee is solely responsible for the Licensed Work, Equipment and Antenna. 6. Approval by Licensor of Licensee's Plans and Specifications shall not constitute a representation of or assumption of responsibility by Licensor for compliance with Law and/or Insurance Requirements or for the accuracy or sufficiency of such Plans and Specifications. Licensor makes no representation that the Equipment will be able to receive or transmit communication signals without interference or disturbances, whether or not by reason of the installation or use similar equipment by others on the roof, and Licensee agrees that Licensor shall not be liable therefor except for that resulting from Licensor's willful misconduct or that of its employees or agents or contractors. Licensee recognizes that others may have rights to use similar equipment on the roof of the 48 Building. Licensor agrees that it will use reasonable efforts to have such others cooperate with Licensee in the event of interference or disturbance. 7. The Equipment shall be used only by Licensee for transmitting and receiving sales, inventory and other internal operational data of Licensee, and for music for internal sound systems. Licensee shall not use or permit the use of the Equipment by any other party or for any other purpose. 8. Licensee will not perform in whole or in part any Licensed Work without Licensor's prior written consent, not to be unreasonably withheld, which consent may be given by Licensor's Mall Manager. Licensee shall, at least ten (10) working days prior to the commencement of any Licensed Work, notify Licensor in writing of the names and identities of the persons who are authorized by Licensee to perform such Licensed Work. All such Licensed Work shall be performed during Mall office hours and shall be subject to such reasonable rules and regulations as are established by Licensor's property management from time to time. 9. Promptly upon Licensor's request, at Licensor's discretion, Licensee shall relocate the Equipment and/or Antenna to another location on the roof as designated by Licensor, or, if no relocation space is available, then Licensee shall remove the Equipment and/or Antenna. In the event Licensee fails to so relocate or remove said Equipment and/or Antenna, Licensor may do so (but shall not be obligated to do so) at Licensee's expense and thereupon Licensee shall reimburse Licensor one hundred ten percent (110%) of the reasonable out-of-pocket costs so incurred. It is expressly agreed that such removal or relocation shall not be deemed a constructive eviction or a breach of any covenant, express or implied, of Landlord under the Lease, or grounds for any abatement of rent or additional rent under the Lease. 10. The Equipment and Antenna are and shall remain the property of Licensee, and the provisions of Article 6.1, of the Lease, shall apply to the Equipment and Antenna with the same force and effect as though fully set forth herein with Licensor and Licensee being substituted for Landlord and Tenant. All provisions of the Lease relating to mechanics or materialmen's liens shall apply to this Agreement as though fully set forth herein. 11. Licensee shall be liable for any and all damages, loss, cost or expense, resulting from the installation, maintenance and operation of the Equipment and/or Antenna, except for damage, loss, cost or expense resulting from Licensor's negligence or willful misconduct or that of its employees, agents or contractors. Licensor, its employees and agents, shall not leave any obligation with respect to the Equipment and/or Antenna, nor shall Licensor, its employees or agents, be responsible for any damage that may be caused to Licensee or the Equipment and/or Antenna by any third party. Licensee shall bear the expense of repairing any damage to the roof of the building or to the Building resulting from the Equipment, Antenna and/or the Licensed Work, except for damage, loss, cost or expense resulting from Licensor's negligence or willful misconduct or that of its employees, agents, or contractors. 12. Licensee shall work in good faith to take such reasonable steps as are necessary to eliminate such interference upon notification by Licensor of any interference, whether physical, electronic, or electromagnetic, by or coming from the Equipment with the use of any other occupants' radio, television, microwave, electromagnetic, or electronic transmission or receiving equipment at the Building. If the interference has not been eliminated pursuant to the foregoing sentence and in the event such interference cannot be eliminated within thirty (30) days after Licensor's notification thereof to Licensee, Licensee agrees to remove the Equipment and Antenna from the Premises and this Licensee shall terminate without further obligation on either party except as may be specifically enumerated herein. 13. Default. The failure of Licensee to perform or fulfill any obligation on its part under this License shall be a default. In the event of a default by Licensee, Licensor shall have the right, at its election, to terminate the License upon five (5) days' written notice to Licensee. All of Licensor's remedies hereunder shall be cumulative and shall be in addition to all rights and remedies Licensor may have at law and in equity. Licensee shall pay reasonable attorney's fees, court costs and filing fees incurred by Licensor in enforcing this License. 14. Licensor shall be responsible for declarations of payment of any applicable taxes or assessments against the Premises. Licensee shall be responsible for the declaration and payment of any applicable taxes against Licensee's personal property, including but not limited to any sales or use taxes assessed against Licensee's Equipment and/or Antenna. 15. It is agreed that Licensor shall not be liable to Licensee for damages caused by acts of God, or other acts beyond the control of Licensor ("Force Majeure"), although Licensor shall exercise due diligence to restore services and facilities regardless of the nature of such cause. Licensee agrees not to seek from Licensor consequential damages that may arise as a result from the interruption to service due to such events of Force Majeure. 16. This License Agreement may not be assigned by Licensee without the prior written consent of Licensor. In the event this License Agreement is assigned by Licensee upon the terms and conditions set forth, Licensee shall remain fully liable for any default occurring on the part of any assignee of Licensee, unless Licensee is released from liability pursuant to the terms of the Lease. 17. Any notice required or permitted hereunder shall be sent via certified mail, return receipt requested or by a nationally recognized overnight courier service and addressed in the following manner. Licensor or Licensee may from time to time designate any other address for this purpose by written notice to the other party. -2- 49 Licensor Licensee Peabody Place Centre, L.P. Silicon Entertainment, Inc. c/o Belz Enterprises 210 Hacienda Avenue 100 Peabody Place, Suite 1400 Campbell, CA 95008 Memphis, Tennessee 38103 ATTENTION: Ronald A. Belz With a Copy to: Rick S. Kirkbride, Esq. Paul, Hostings, Janofsky & Walker, LLP 555 South Flower Street Los Angeles, CA 90071-2371 18. Upon the termination and/or expiration of this License Agreement, Licensee will remove all of its personal property, including without limitation its Equipment and Antenna from the Premises and restore the Premises in its condition as of the execution due of this License Agreement, ordinary wear and tear excepted. 19. This Agreement may be amended only in writing signed on behalf of both parties. 20. This Agreement constitutes the entire agreement and understanding between the parties and no representatives, inducements, promises, agreements or otherwise between the parties not embodied herein shall be of any force or effect. 21. This Agreement shall be interpreted under the laws of the State of Tennessee. Any section brought in relation to this Agreement shall be brought in a court in Memphis, Shelby County, Tennessee and the parties agree that such a court has personal jurisdiction over the parties and that such a court is the proper venue for any such action. 22. Should any portion of this Agreement be deemed by a court to be invalid, the remainder of the Agreement shall be valid and in full force and effect. 23. This Agreement may be executed in one or more counterparts by each of the parties hereto, each of which shall be deemed an original and all of which together shall constitute one agreement. 24. In the event either party incurs attorneys' fees, court costs or other reasonable expenses in order to enforce the provisions of this Agreement, the losing party shall reimburse the prevailing party for such attorneys' fees court costs or other reasonable expenses. IN WITNESS WHEREOF: the parties have hereunto set their hands and seals on the date first above written. LICENSOR LICENSEE: PEABODY PLACE CENTRE, L.P. SILICON ENTERTAINMENT, INC. By: Peabody Place, Inc., General Partner By: /s/ MORRIS I. THOMAS By: /s/ [ILLEGIBLE] ------------------------------------ ------------------------ Morris I. Thomas, Vice President By: /s/ JACK A. BELZ ------------------------------------ Jack A. Belz, President HOTEL PEABODY, L.P. By: Perim Corp., General Partner By: /s/ JIMMIE D. WILLIAMS ------------------------------------ Jimmie D. Williams, Senior Vice President -3- EX-10.22 24 STANDARD SHOPPING CENTER LEASE, CAROUSEL CENTER 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT. THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION EXHIBIT 10.22 STANDARD SHOPPING CENTER LEASE NAME OF SHOPPING CENTER: CAROUSEL CENTER LOCATION OF SHOPPING CENTER: 320 HIAWATHA BOULEVARD SYRACUSE, NEW YORK LANDLORD: CAROUSEL CENTER COMPANY, L.P. TENANT: SILICON ENTERTAINMENT, INC. D/B/A: NASCAR SILICON MOTOR SPEEDWAY 2 TABLE OF CONTENTS ARTICLE I ................................................................. 2 Premises ............................................................... 2 1.01 - Premises ................................................... 2 1.02 - Shopping Center ............................................ 2 1.03 - Use of Premises and Trade Name ............................. 2 ARTICLE 2 ......................................................... 3 Term of Lease ..................................................... 3 2.01 - Commencement of Term ....................................... 3 2.02 - Term of Lease .............................................. 3 2.03 - Expiration of Term ......................................... 3 2.04 - Surrender of Premises ...................................... 3 ARTICLE 3 ......................................................... 4 Rent .............................................................. 4 3.01 - Minimum Rent ............................................... 4 3.02 - Percentage Rent ............................................ 4 3.03 - Gross Receipts Defined ..................................... 5 3.04 - Tenant's Books and Records ................................. 6 3.05 - Reports by Tenant .......................................... 6 3.06 - Non-Waiver ................................................. 6 3.07 - Right to Examine and Audit Books and Records ............... 6 3.08 - Delinquent Payments ........................................ 7 3.09 - Additional Rent ............................................ 7 3.10 - Definition of Lease Year and Partial Lease Year ............ 7 3.11 - Place for Payments ......................................... 7 ARTICLE 4 ................................................................. 7 Taxes .................................................................. 7 4.01 - Real Property Taxes ........................................ 7 4.02 - Tenant's Taxes ............................................. 8 ARTICLE 5 ................................................................. 8 Construction and Financing ............................................. 8 5.01 - Landlord's Work ............................................ 8 5.02 - Tenant's Work .............................................. 8 5.03 - Payment .................................................... 9 5.04 - Financing .................................................. 9 ARTICLE 6 ................................................................. 9 Conduct of Business by Tenant .......................................... 9 6.01 - Use of Premises and Trade Name ............................. 9 6.02 - Tenant's Operating Covenant ................................ 9 6.03 - Competition ................................................ 10 6.04 - Other Business Practices ................................... 10 6.05 - Marketing Fund ............................................. 12 ARTICLE 7 ................................................................. 12 Common Areas and Operating Costs ....................................... 12 7.01 - Definition ................................................. 12 7.02 - Development of Common Areas ................................ 12 7.03 - Use of Common Areas ........................................ 12 7.04 - Common Area Costs .......................................... 13 7.05 - Adjustment to Payment ...................................... 13 7.06 - Payment of Extraordinary Common Area Costs ................. 13 ARTICLE 8 ................................................................. 13 Energy, Utility and Sprinkler Costs .................................... 13 8.01 - Energy and Utility Charges ................................. 13 8.02 - Intentionally deleted ...................................... 15 8.03 - Intentionally deleted ...................................... 15 8.04 - Miscellaneous Utility Provisions ........................... 15 8.05 - Periodic Adjustment ........................................ 15 ARTICLE 9 ................................................................. 15 Fixtures, Alterations, Signs ........................................... 15 9.01 - Installation By Tenant ..................................... 15 9.02 - Removal and Restoration by Tenant .......................... 15 9.03 - Signs, Awnings and Canopies ................................ 16 9.04 - Condition of the Premises .................................. 16 ARTICLE 10 ................................................................ 16 Repairs and Maintenance ................................................ 16 10.01 - Landlord's Obligation to Repair ........................... 16 10.02 - Tenant's Obligation to Repair ............................. 16 10.03 - Article Not Applicable to Fire or Condemnation ............ 17 ARTICLE 11 ................................................................ 17 Indemnity .............................................................. 17 11.01 - Indemnity ................................................. 17 ARTICLE 12 ................................................................ 17 Insurance .............................................................. 17 12.01 - Liability Insurance ....................................... 17 12.02 - Special Causes of Loss and Difference in Conditions Insurance ................................................. 15 12.03 - Insurance on Common Areas ................................. l5 12.04 - Increase in Fire Insurance Premium ........................ 18 12.05 - Tenant to Share Insurance Costs ........................... 18 12.06 - Waiver of Subrogation ..................................... 18 12.07 - Policies .................................................. 18 ARTICLE 13 ................................................................ 19
i 3 Damage by Fire, Etc. ................................................... 19 13.01 - Restoration of Premises ................................... 19 13.02 - Restoration During Last Three Years ....................... 19 13.03 - Tenant's Obligation Upon Restoration ...................... 19 ARTICLE 14 ................................................................ 19 Eminent Domain ......................................................... 19 14.01 - Eminent Domain ............................................ 19 14.02 - Landlord Entitled to Award ................................ 20 ARTICLE 15 ................................................................ 20 Bankruptcy and Default Provisions ...................................... 20 15.01 - Events of Default and Conditional Limitation .............. 20 15.02 - Landlord's Remedies ....................................... 21 ARTICLE 16 ................................................................ 22 Mechanics' Liens ....................................................... 22 16.01 - Mechanics' Liens .......................................... 22 ARTICLE 17 ................................................................ 22 Assignments, Subleases and Other Transfers of Tenant's Interest ........ 22 17.01 - Limitations on Tenant's Rights ............................ 22 17.02 - Effect of Landlord's Consent .............................. 24 ARTICLE 18 ................................................................ 24 Compliance with Government Orders ...................................... 24 18.01 - Tenant to Comply .......................................... 24 18.02 - Failure to Comply ......................................... 24 18.03 - Hazardous Material ........................................ 25 18.04 - Americans With Disabilities Act ........................... 25 ARTICLE 19 ................................................................ 25 Subordination, Mortgagee's Rights and Assignment of Rents .............. 25 19.01 - Subordination ............................................. 25 19.02 - Mortgagee's Rights ........................................ 25 19.03 - Assignment of Rents ....................................... 26 ARTICLE 20 ................................................................ 26 Entry to Premises ...................................................... 26 20.01 - Entry to Premises by Landlord ............................. 26 ARTICLE 21 ................................................................ 26 Notices and Certificates ............................................... 26 21.01 - Notices ................................................... 26 21.02 - Estoppel Certificate of Landlord .......................... 27 21.03 - Estoppel Certificate of Tenant ............................ 27 ARTICLE 22 ................................................................ 27 Covenant of Quiet Enjoyment ............................................ 27 22.01 - Covenant of Quiet Enjoyment ............................... 27 ARTICLE 23 ................................................................ 28 Miscellaneous Provisions ............................................... 28 23.01 - Holdover .................................................. 28 23.02 - Limitation on Landlord's Personal Liability ............... 28 23.03 - Definition of Tenant's Allocable Share .................... 28 23.04 - Force Majeure ............................................. 28 23.05 - Relocation of Tenant ...................................... 29 23.06 - Changes and Additions ..................................... 29 23.07 - Attornment by Tenant ...................................... 29 23.08 - Index ..................................................... 29 23.09 - Survival of Tenant's Obligations .......................... 29 23.10 - Effect of Landlord's Notice to Terminate .................. 29 23.11 - Effect of Captions ........................................ 30 23.12 - Tenant Authorized to Do Business .......................... 30 23.13 - Execution in Counterparts ................................. 30 23.14 - Law Governing, Effect and Gender .......................... 30 23.15 - Memorandum or Notice of Lease ............................. 30 23.16 - Complete Agreement ........................................ 30 23.17 - Guaranty of Lease ......................................... 30 23.18 - Arbitration ............................................... 30 23.19 - Security Agreement ........................................ 30 23.20 - Invalidity of Particular Provisions ....................... 30 23.21 - Execution of Lease by Landlord ............................ 31 23.22 - Relationship of the Parties ............................... 31 23.23 - Brokers ................................................... 31 23.24 - Representations ........................................... 31 23.25 - Abatement ................................................. 31 23.26 - Special Use Permit ........................................ 31 23.27 - Allowance or Abatement of Rent ............................ 31
ii 4 INDEX OF DEFINED TERMS
DEFINED TERM SECTION Additional Rent .................................................... 3.09 Anchor Store ....................................................... 23.03(c) Common Areas ....................................................... 7.01 Common Area Costs .................................................. 7.04(b) Energy Charges ..................................................... 8.01(b) Fixed Annual Minimum Rent .......................................... 3.01(a) Fixed Monthly Minimum Rent ......................................... 3.01(a) Gross Receipts ..................................................... 3.03 Hazardous Material ................................................. 18.03 Landlord ........................................................... 23.02(b) Lease Year ......................................................... 3.10 Major Store ........................................................ 23.03(c) Partial Lease Year ................................................. 3.10 Percentage Rent .................................................... 3.02(a) Premises ........................................................... 1.01 Real Property Taxes ................................................ 4.01 Square Feet ........................................................ 23.03(c) Tenant's Allocable Share ........................................... 23.03 Term Commencement Date ............................................. 2.01
iii 5 SHOPPING CENTER LEASE AGREEMENT made this 18 day of AUGUST, 1999, by and between the following parties: Landlord: CAROUSEL CENTER COMPANY, L.P. a limited partnership organized and existing under the laws of the State of New York with its mailing address for notices and a principal office at: THE CLINTON EXCHANGE FOUR CLINTON SQUARE SYRACUSE, NEW YORK 13202-1078 Attention: MANAGEMENT DIVISION hereinafter referred to as "Landlord," and Tenant: SILICON ENTERTAINMENT, INC. d/b/a NASCAR SILICON MOTOR SPEEDWAY a corporation organized and existing under the laws of the State of California with its mailing address for notices and principal office or residence at: 210 Hacienda Avenue - ------------------- (Street Address) Campbell California 95008 - ---------------------------------------------------------- (City or Town) (County) (State) (ZIP) Attention: President hereinafter referred to as "Tenant." Tenant's Federal Tax Identification or Social Security Number: 77-0389433. 1 6 ARTICLE I PREMISES 1.01 - PREMISES (a) Landlord hereby demises and leases to Tenant and Tenant hereby rents from Landlord those certain premises (Premises") hereinafter described and located in Carousel Center ("Shopping Center"), which is located in the City of Syracuse, County of Onondaga, and State of Now York. The Premises consist of approximately 4,597 square feet. The Premises are shown cross-hatched on the plan attached hereto and made a part hereof as Exhibit A-1. The Premises shall not be deemed to include either the land lying thereunder or the exterior walls or roof of the building in which said Premises are located or any area beyond the midpoint of any interior wall. Landlord reserves the use of said land, walls and roof of the building, together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements leading through the non-sales area of the Premises in locations which will not materially interfere with Tenant's use of the Promises. Any such installation, maintenance, use, repair or replacement, if approved by Tenant, shall be performed by Landlord In such a manner as to avoid unreasonably interfering with Tenant's business operations in the Premises. (b) Within sixty (60) days after Landlord's delivery of possession to Tenant pursuant to the terms of this Lease, Tenant may, at its sole cost and expense, have the size of the Premises verified by an independent architect of Tenant's choice. For purposes of this verification, the square footage of the Premises shall be measured from the midpoints of any interior walls shared in common with another tenant, and from the outside face of any exterior walls of the buildings. In the event that such verification reveals a discrepancy between the measured size of the Premises and the size of the Premises set forth in Section 1.01 (a) of this Lease, and Landlord and Tenant are unable to agree upon the square footage for purposes of this Lease, an independent architect acceptable to Landlord and Tenant (the cost of which shall be divided equally between Landlord and Tenant) shall measure the Premises in the manner set forth above. In the event that Tenant's architect, Landlord or its architect, and the independent architect are unable to agree upon the square footage of the Premises for purposes of this Lease, the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof. In the event the square footage of the Premises as determined in accordance with the methodology set forth in this Section 1.01 (b) varies from the square footage set forth in Section 1.01(a) above, Landlord and Tenant agree to execute a lease modification agreement (effective retroactive to the Term Commencement Date) adjusting the square footage of the Premises, and appropriately adjusting the Rent, and those items of Additional Rent to the extent that such Additional Rent was originally calculated on a pro rata square foot basis. Any necessary payments or reimbursements shall be paid within thirty (30) days after the full execution of the lease modification agreement. 1.02 - SHOPPING CENTER The Shopping Center includes: (i) the parcel(s) of land and improvements hereinafter referred to as "Landlord's Tract" generally depicted on Exhibit A attached hereto and made a part hereof, whether owned in fee or ground leased by Landlord and (ii) the parcel(s) of land and improvements, if any, generally depicted on Exhibit A as "REA Parcel" made available for use by any reciprocal construction operating and easement agreement ("REA"). Landlord reserves the right to add to or sever the ownership of or title to any portion of the Shopping Center or to add to or reduce the size of any REA Parcel at any time. Landlord represents and warrants that it has the right and authority to lease the Promises. It is agreed that the depiction of the Shopping Center on Exhibit A does not constitute a representation, covenant or warranty of any kind by Landlord. Subject to Section 7.03 of this Lease, Landlord. in its sole and absolute discretion, reserves the right to expand or remodel the Shopping Center and to change the configuration, size and dimensions of the Shopping Center, the number, location and dimensions of buildings, parking areas, driveways, entrances, exits and landscaped areas, the number of floors in any of the buildings, the dimensions, identity, and type of stores or tenancies, and, as provided in Section 7.02, the "Common Areas" (defined in Section 7.01). 1.03 - USE OF PREMISES AND TRADE NAME Throughout the Term, Tenant shall operate the Premises solely under the trade name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" or, with Landlord's approval, not to be unreasonably withheld, any other legally permitted trade name ("Trade Name"); provided that if the trade name of all or substantially all other stores operating under the trade name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" are changed to another legally permissible trade name, Tenant, upon prior written notice to Landlord, shall be permitted to change its Trade Name to such other trade name as has been adopted for all or substantially all such other stores. Tenant shall use the entire Premises solely for the purpose(s) of: (a) as a primary use, conducting an interactive entertainment center featuring among other things the installation and operation of motion-based racing simulators and (b) ancillary thereto, other related retail and entertainment uses; such uses may include but shall not be limited to the sale of motor sports and auto racing merchandise, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR or motor sports (including, without limitation, NASCAR videos, pictures, CD-Roms, DVDs, and other similar media or audio/visual materials); the sale of hot and cold beverage and snack foods, and for no other purpose whatsoever. Tenant shall use its reasonable efforts not to place any food vending machines or other food sales area at the store front of the Premises. Anything contained in this Lease to the contrary notwithstanding, throughout the Term Tenant shall limit the display of merchandise and food or beverage items to no more than [***] of the square footage of the Premises. Landlord hereby represents and warrants to Tenant that Tenant's use of the Premises as contemplated in this paragraph does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other Tenant of the Shopping Center, and Landlord shall indemnify, defend, protect, and hold harmless Tenant from any loss, liability, cost, expense, judgment, action or claim of any such party arising from the inaccuracy of such representation and warranty. Anything contained in this Lease to the contrary notwithstanding, Landlord's consent shall not be unreasonably withheld for any change or addition to Tenant's permitted use requested in writing by Tenant. Tenant hereby agrees that the criteria which Landlord may use in determining whether or not to grant such consent shall include, but not be limited to, (i) the impact such change or addition may have on the tenant mix of the Shopping Center, (ii) whether such change or addition violates any use restriction applicable to the Shopping Center, or (iii) the compatibility such change or addition may have with a first-class super-regional shopping center. *** Confidential treatment requested. 2 7 Notwithstanding anything to the contrary in this Section 1.03 of this Lease, Tenant shall be entitled to use the Premises from time to time for conducting the uses set forth in this Section 1.03 for the exclusive use of groups of private parties ("Private Events"). Tenant may while such Private Events are in progress, temporarily restrict access by the general public to Tenant's simulator rides, provided that the Tenant shall otherwise remain open to the general public for the sale of merchandise and the sale of simulator ride tickets for redemption by the public after any Private Event is concluded. Gross Receipts in connection with Private Events shall be included in Gross Receipts for purposes of calculating Percentage Rent. In connection with Private Events, Tenant may serve, or hire another party to serve, food and beverages (including alcoholic beverages) for on-premises consumption only, provided that Tenant obtains or causes to be obtained, if necessary, all governmental licenses, approvals and permits required in connection therewith and in the case of offering of any alcoholic beverages for consumption within the Premises, Dram Shop or liquor liability insurance coverage. For the preparation and serving of food and alcoholic beverages at Private Events, Tenant shall engage, and cause third parties to use, restaurants and food establishments located within the Shopping Center ("Center Caterer"), provided that up to ten percent (10%) of the total number of Private Events held during a Lease Year may be catered by non-Center Caterers and provided, further, that Tenant shall not be required to use or cause to be used Center Caterers for Private Events within the Shopping Center unless at the time of the related Private Event there are at least three restaurants or other food and beverage vendors in the Shopping Center offering catering services from the Shopping Center at prices equal to or less than the then menu prices of such restaurant or vendor and two of three of such Center Caterers are full service sit down restaurants and one of the three is either a full service restaurant or a limited service restaurant, food court operator or other food and beverage operator (such as by way of example and not limitation Johnny Rockets, Pizzeria Uno, Kahunaville. Ruby Tuesday, Mozzarella's American Cafe or Sbarros). In the event that Tenant shall be in default of the immediately preceding sentence and a Private Event is conducted in whole or in part by other than a Center Caterer, then, as liquidated damages and not as a penalty, the retail value of food and beverage provided by such third party shall be included in the amount of Gross Receipts used to compute Percentage Rent payable under this Lease on merchandise sold from the Premises. Any Private Events which are held at times when the requirements set forth in the provisos above concerning Center Caterers are not met shall be excluded from the total number of Private Events held during any Lease Year for purposes of calculating the ten percent (10%) permissible number of Private Events catered by non-Center Caterers as described above. ARTICLE 2 TERM OF LEASE 2.01 - COMMENCEMENT OF TERM (a) Landlord shall deliver possession of the Premises to Tenant with all of Landlord's work, if any, substantially complete by September 1, 1999 and the term of this Lease shall commence, subject to Section 23.04 below and other delays caused solely by Landlord, on the earlier of: (1) December 1, 1999, or (2) the date Tenant opens to the public for the conduct of its business in the Premises (hereinafter called "Term Commencement Date"). In the event Landlord does not deliver possession of the Premises to Tenant on or before March 1, 2000, then Tenant shall have the right to terminate this Lease upon written notice to Landlord, which notice shall be given by March 2000. If Tenant does so notify Landlord, then Landlord will reimburse Tenant for its reasonable out-of-pocket costs actually incurred by Tenant as of the date of termination including architectural, design and legal fees which shall not, in the aggregate, exceed [***] and both Landlord and Tenant shall thereafter be relieved of any further obligation and liability hereunder. If Tenant does not so notify Landlord, then this right of termination shall be deemed waived. (b) Tenant acknowledges the importance both to Landlord and the other tenants of the Shopping Center of Tenant opening for business to the public on the Term Commencement Date. In the event Tenant fails to open for business at the Premises not later than forty-five (45) days after the Term Commencement Date or, if the Term Commencement Date has been rescheduled by Landlord, not later than forty-five (45) days after the rescheduled Term Commencement Date, Tenant covenants and agrees to pay to Landlord, upon receipt of notice from Landlord of the amount due under this Section 2.01(b), as liquidated damages suffered by Landlord due to Tenant's failure to open, a sum (in addition to any rent due hereunder) equal to [***] the per diem Fixed Monthly Minimum Rent (using a thirty (30) day month) provided in Section 3.01(a) for each and every business day that Tenant has failed to open for business. 2.02 - TERM OF LEASE Subject to Section 2.03 below, the term of this Lease shall expire on the tenth (10th) anniversary of the Term Commencement Date, unless earlier terminated pursuant to the provisions herein (the last day of the term, whether due to expiration or prior termination of this Lease may be referred to herein as the "Termination Date"). 2.03 - EXPIRATION OF TERM If the term of this Lease would expire during the period October 1 through the last day of December, the parties agree that the term of this Lease shall instead expire on the immediately succeeding January 31. 2.04 - SURRENDER OF PREMISES On the Termination Date of this Lease, Tenant agrees, without necessity of any notices from Landlord (statutory or otherwise), to surrender the Premises in accordance with Article 9, and broom clean and in good order, repair and condition, reasonable wear and tear and damage by fire or casualty excepted. *** Confidential treatment requested. 3 8 ARTICLE 3 RENT 3.01 - MINIMUM RENT (a) Except as set forth in Section 23.25 below, Tenant agrees to pay Landlord, without diminution, deduction or set-off whatsoever and without prior notice or demand, and as fixed annual minimum rent ("Fixed Annual Minimum Rent"), the sums set forth in Section 3.01(a) (i) and (ii) below payable in equal consecutive monthly installments ("Fixed Monthly Minimum Rent") each in advance upon the first day of each calendar month during the term hereof. (i) From the Term Commencement Date through the end of the [***] full month of the Lease term, Fixed Annual Minimum Rent shall be [***] per square foot of the Premises, which equals (subject to Section 1.01(b) of this Lease) [***], payable in equal monthly installments of [***] each; and (ii) From the first day of the [***] full month of the Lease term through the end of the Lease term, Fixed Annual Minimum Rent shall be [***] per square foot of the Premises, which equals (subject to Section 1.01(b) of this Lease) [***]. payable in monthly installments of [***] each. (b) If the term shall commence upon a day other than the first day of a calendar month or if the term shall terminate upon a day other than the last day of a calendar month, then Tenant shall pay, upon the Term Commencement Date, and on the first day of the last calendar month, a pro rata portion of the Fixed Monthly Minimum Rent for the first and last fractional calendar months of the term. 3.02 - PERCENTAGE RENT (a) In addition to Fixed Annual Minimum Rent, Tenant shall, in the manner, upon the conditions and at the times hereinafter set forth, pay to Landlord percentage rent ("Percentage Rent") equal to [***] of "Gross Receipts" (defined in Section 3.03) in excess of [***] ("Annual Minimum Gross Receipts") per "Lease Year" (defined in Section 3.10). Percentage Rent shall be payable as hereinafter provided without any diminution, deduction or set-off whatsoever, except as provided in Section 3.02(b), and without prior notice or demand. (b) Percentage Rent, if any, shall be paid by Tenant to Landlord, in quarter-annual installments computed on all Gross Receipts during each three (3) month period of the term hereof (i.e., periods from January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31 (each a "Quarter-Annual Period" and collectively the "Quarter-Annual Periods")) in excess of [***] of Annual Minimum Gross Receipts then in effect. Any Percentage Rent becoming due shall be payable on or before the applicable January 15, April 15, July 15 and October 15 next following the applicable quarter end of each Lease Year. In the event that the total of the quarterly installments of Percentage Rent for any Lease Year does not equal the annual Percentage Rent computed in accordance with the formula set forth in Subsection 3.02(a), then, on or before January 15 following each such Lease Year, Tenant shall pay to Landlord any deficiency, or Landlord shall refund any overpayment to Tenant within fifteen (15) days after receipt of Tenant's Annual Statement of Gross Receipts. (c) Notwithstanding anything contained in this Section 3.02 to the contrary, the Percentage Rent for any Lease Year having less than twelve (12) full months shall be based upon the Gross Receipts for the twelve (12) month period immediately following the Commencement Date (as to the first Lease Year) and for the twelve (12) month period immediately preceding the expiration or earlier termination of the Lease (as to the final Lease Year). The Percentage Rent due for such period shall be established by multiplying the Percentage Rent which would have been due for such twelve (12) month period had the Gross Receipts for such period been multiplied by the applicable percentage in this Lease, by a fraction, the numerator of which is the number of days in such partial Lease Year and the denominator of which is 365. (d) Provided that Tenant is not in default under this Lease beyond any applicable cure period and has been open and continuously operating its store in the entire Premises from the Term Commencement Date through the last day of the fifth (5th) Lease Year of the Initial Term (except for periods Tenant is not able to be so open and operating as a result of force majeure, casualty, eminent domain, or remodeling (provided Tenant is not closed as a result of remodeling for more than five (5) days in the aggregate in any Lease Year)), then in the event that Gross Receipts for the fourth (4th) and fifth (5th) Lease Year of the Initial Term, when averaged, are less than [***], Tenant may, at its option, elect to terminate this Lease by giving Landlord written notice thereof, which notice shall be given not later than thirty (30) days after the last day of the said fifth (5th) Lease Year. Time is of the essence with respect to the giving of such notice. If Tenant timely gives Landlord such a notice of termination of this Lease and the conditions for such termination as provided above in this Section 3.02(d) have been satisfied, then this Lease shall automatically terminate without any further action or notice by either party hereto, on the date that is thirty (30) days after the date Landlord receives such notice of termination; and from and after such date of termination, Tenant shall have no further right, title or interest in or to the Premises. If Tenant does not notify Landlord of its election to terminate this Lease in accordance with this Section 3.02(d) or if the conditions for such termination as provided above in this Section 3.02(d) have not been satisfied, then this Lease shall continue in full force and effect in accordance with and subject to its terms, and Tenant shall have no further right to terminate this Lease pursuant to this Section 3.02(d). If Tenant is not open and operating in the entire Premises continuously throughout the said fifth (5th) Lease Year, as a result of force majeure, casualty, eminent domain, remodeling or for any other reason, then for purposes of determining whether Tenant has the right to terminate this Lease under this Section 3.02(d), Tenant's Gross Receipts for any such period of time shall be deemed *** Confidential treatment requested. 4 9 to be the Gross Receipts for the corresponding period of time in the first (1st) Lease Year prior to the fifth (5th) Lease Year for which Tenant was open and operating in the entire Premises during such corresponding period of time. 3.03 - GROSS RECEIPTS DEFINED (a) The term "Gross Receipts" as used in this Lease is defined to mean receipts from sales of products or services by Tenant exclusively at, in, on, or from the Premises (including any sales made via personal computer, "Home Shopping" television sales, catalog, direct mail telephone or electronic sales at, in, on, or from the Premises) whether such sales be evidenced by check, contract rights, credit, charge account, exchange or otherwise, and shall include, but not be limited to, the amounts received from the sale or rental of goods, wares and merchandise, and from fees and charges for the use by customers of Tenant"s simulators and racing entertainment center, and for services performed on or off the Promises to the extent relating to sales made from the Premises, together with the amount of all orders taken or received at the Premises, whether such orders are filled from the Premises or elsewhere, and whether such sales are made by means of merchandise or other vending devices in the Premises. Each charge or sale upon installment or credit shall be treated as a sale for the full price in the month during which such charge or sale shall be made, irrespective of the time when Tenant shall receive payment (whether full or partial) therefor. (b) Notwithstanding anything herein to the contrary the following shall not be included in Gross Receipts: (1) Sales of merchandise returned and claimed to be defective or unsatisfactory, provided such sales have been included in Gross Receipts and deducted from Gross Receipts shall be the sales price of merchandise returned by customers for exchange, provided that the sales price of merchandise delivered to the customer in exchange is included in Gross Receipts. (2) The amount of any sales tax, so-called luxury taxes, excise taxes, gross receipt taxes, entertainment taxes, so-called "drop taxes" and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of merchandise or services and collected from customers or included in the retail selling price use, imposed by any federal, state, municipal or governmental authority directly on sales and collected from customers; provided, however, no franchise or capital stock tax and no income or similar tax based upon income or profits as such shall be deducted from Gross Receipts in any event whatsoever. (3) The sales price of merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon. (4) The sums and credits received in settlement of claims for loss or damage to merchandise or other property located at the Premises. (5) The consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant"s business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee. (6) Receipts from public telephones and vending machines used exclusively by Tenant"s employees. (7) Bankcard discounts (e.g., Visa, MasterCard, etc.), interest, carrying charges, or other finance charges in respect of sales made on credit, as well as any penalty charged by Tenant for a returned check. (8) Sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail. (9) The amount of any discounted sales to employees of Tenant, not to exceed [***] of Gross Receipts in any Lease Year; provided, however, that discounted or complimentary use of Tenant"s games and entertainment attractions (including, without limitation, the driving simulators) by Tenant"s employees during such employees" normal working hours shall not be included in Gross Receipts. (10) The amount of any discount in sales made to senior citizens. (11) Revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers. (12) Tenant's accounts receivable, not to exceed [***] of Gross Receipts in any Lease Year, which have been determined to be uncollectible for federal income tax purposes during the applicable Lease Year, provided however, that if such accounts are actually collected in a later Lease Year, the amount shall be included in Gross Receipts for such later Lease Year. (13) Amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant wherever located, provided such merchandise is not used to fill a sale made in, at, or from the Premises. (14) The amount of any discounts given for promotional coupons that are redeemed from time *** Confidential treatment requested. 5 10 to time. (15) Gift certificates until such time as the certificates are redeemed. (16) Amounts received in connection with remote site promotional activities. (17) Promotional fees earned by Tenant with respect to goods or services offered for sale. (18) Rents, subrents or other consideration received in connection with an assignment sublease, license, concession or other transfer of any portion of the store (however, Gross Receipts of any such transferee shall be included), including license fees otherwise payable by Tenant in connection with a third party license agreement. (19) To the extent they are not made at a profit to Tenant sales passed through to caterers or other parties providing services in connection with private parties for Tenants customers at the Premises. (c) In the event any portion of the Promises shall be operated by one or more of Tenant's departments or divisions, or if Tenant shall, in accordance with all of the terms, covenants, and conditions of this Lease, assign this Lease or enter into any sublease, license, concession or other use or occupancy agreement with respect to all or any part of the Premises, then there shall be included in the Gross Receipts for the purpose of determining the Percentage Rent payable under this Lease all of the Gross Receipts generated by such departments or divisions, subtenants, assignees, licensees, concessionaires and all such other persons, individuals and for entities (collectively referred to as "Affiliates") generating such Gross Receipts, it being the intention of the parties hereto that all Gross Receipts generated at or from the Premises shall be included in Gross Receipts for the purpose of determining Percentage Rent as defined herein. Tenant agrees that any assignment sublease, license or concession, use or occupancy agreement entered into by Tenant with any Affiliates shall contain provisions setting forth the procedure for determining, recording and reporting Gross Receipts by Affiliates which are subject to the review and approval of Landlord as being in conformance with this Section 3.03(c). Such provisions shall contractually obligate Affiliates to the same procedures set forth in this Lease for determining, recording and reporting Gross Receipts. 3.04 - TENANT'S BOOKS AND RECORDS Tenant agrees to prepare and keep on the Premises or at its principal office for a period of not less than three (3) years following the end of each Lease Year, accurate books of account and records of daily Gross Receipts, including without limitation all federal, state and local tax returns, and copies of relevant contracts, checks, vouchers, inventory records, dated cash register tapes, sales slips and such other documentation as would enable Landlord to make a full and complete audit of Gross Receipts ("Books and Records"), as more particularly set forth In Section 3.07 below. Tenant agrees that all Gross Receipts shall be registered at the time each sale or transaction is made In cash registers or other devices or other electronic or technology based systems containing locked-in cumulation capacity, such systems to be consistent with Tenant's normal business practices. 3.05 - REPORTS BY TENANT Within twenty (20) days after the end of each Quarter-Annual Period as set forth in Section 3.02 above, or a portion thereof, during the term of this Lease, Tenant shall furnish to Landlord a written statement setting forth the amount of Gross Receipts and an itemization of any deductions or exclusions taken from Gross Receipts for such previous Quarter-Annual Period. Tenant also agrees that it will furnish to Landlord within sixty (60) days after the end of each Lease Year or Partial Lease Year, an annual statement, showing in all reasonable detail the amount of Gross Receipts and an itemization of any deductions or exclusions relating to such Lease Year or Partial Lease Year and the amount of Percentage Rent due Landlord ("Actual Percentage Rent"). Each Quarter-Annual and Annual statement required by this Section 3.05 shall be certified by Tenant or one of Tenant's executive officers and shall be subject to further certification as provided in Section 3.07. In the event Tenant fails to furnish Landlord with a Quarter-Annual or Annual statement within the required time period and within ten (10) days after notice from Landlord, and in the manner set forth in this Section 3.05, then the Gross Receipts for such Quarter-Annual Period or year, as the case may be, shall, at Landlord's option, be deemed to be equal to Tenant's highest previously reported quarterly or annual Gross Receipts, and if such failure continues for ten (10) days following notice from Landlord, Tenant shall pay to Landlord, as liquidated damages. the sum of [***] per month until such statement is received. In addition, if Tenant is delinquent in furnishing Landlord with the annual statement of Gross Receipts and such failure continues for ten (10) days following notice from Landlord, the immediately following audit the Landlord conducts pursuant to Section 3.07 below shall be at Tenant's expense. 3.06 - NON-WAIVER The acceptance by Landlord of payments of Percentage Rent and statements of Gross Receipts shall be without prejudice to Landlord's right to examine Tenant's Books and Records in order to verify the amounts thereof. 3.07 - RIGHT TO EXAMINE AND AUDIT BOOKS AND RECORDS At its option, Landlord may, during regular business hours and upon ten (10) days' prior written notice to Tenant, examine the Books and Records or cause a complete audit to be made of the Books and Records (including the books and records of any subtenant, operator, concessionaire or licensee or of any other store operated by Tenant within the [***] radius as more specifically set forth in Section 6.03 of this Lease) for the period covered by any statement required to be furnished by Tenant as set forth above; provided, however, any such audit or examination shall be conducted in such a manner as to minimize any interference with Tenant's business operations. In the event such examination discloses that Tenant has intentionally or fraudulently understated Gross Receipts by [***] or more, Tenant agrees to pay to Landlord the reasonable cost of such examination *** Confidential treatment requested. 6 11 and audit, plus a [***] administrative fee. In the event that such examination or audit discloses that Tenant has understated Gross Receipts by [***] or more, then, in addition to the foregoing, at Landlord's option, the term of this Lease shall expire ten (10) days after Tenant's receipt of a termination notice from Landlord. Any additional Percentage Rent found to be due and owing to Landlord as a result of any examination or audit shall immediately be due and payable and interest shall accrue on the unpaid portion thereof at a per annum rate ("Default Rate") equal to the lesser of (i) the maximum interest rate permitted by law, or (ii) the prime rate of interest from time to time charged by Citibank, N.A. (or its successors) to its most credit worthy corporate borrowers, plus [***]. 3.08 - DELINQUENT PAYMENTS If during the term of this Lease Tenant fails to pay the full amount of the Fixed Monthly Minimum Rent Percentage Rent or "Additional Rent" (defined in Section 3.09) within five (5) days when the same was due and payable, then interest at the Default Rate. shall accrue on the unpaid amount from and after the date on which any such sum shall be due and payable, and such Interest, together with a Late Charge of [***] for each past due payment to cover the extra expense involved in handling such delinquency, shall be paid to Landlord at the time of payment of the delinquent sum. Landlord shall have the right to apply any payments made by Tenant first to any deficiency in the payment of the interest and administrative charges provided for hereunder. Any payment to be made by Tenant under this Lease shall be deemed to have been paid upon the date that it is received by Landlord. The provision for a Late Charge and interest herein shall not be deemed to grant Tenant any grace period or extension of time or prevent Landlord from exercising its other rights under this Lease. Tenant shall pay to Landlord an administrative fee of [***] for each and every check submitted by Tenant which is dishonored. If Landlord receives from Tenant two or more checks which have been dishonored, all checks from Tenant thereafter shall, at Landlord's option, be either certified or cashier's checks. 3.09 - ADDITIONAL RENT All rents, charges, costs, expenses, reimbursements, fees, interest, and other payments to be made by Tenant to Landlord under this Lease, other than Fixed Annual Minimum Rent and Percentage Rent, shall be deemed to be "Additional Rent." 3.10 - DEFINITION OF LEASE YEAR AND PARTIAL LEASE YEAR The term "Lease Year" is defined to mean a period of twelve (12) consecutive calendar months commencing on the first day of January. Any portion of the term which is less than a Lease Year shall be deemed a "Partial Lease Year" and computations requiring proration shall be made on a per diem basis using a 365 day year. In order to achieve uniformity in the operation of the Shopping Center, Landlord reserves the right to designate and change the beginning and ending day of the Lease Year, notice of which shall be given to Tenant in writing: provided, however, no such change shall in any way increase Tenant's obligations or reduce Tenant's rights hereunder. 3.11 - PLACE FOR PAYMENTS Tenant shall deliver to Landlord all payments of Fixed Monthly Minimum Rent, Percentage Rent and Additional Rent at the office of Landlord shown at the beginning of this Lease or such other place as may be designated by Landlord in writing. Nothing contained in this Section 3.11 shall relieve Tenant of the obligation to pay by the dates due, any and all such payments payable by Tenant under this Lease. ARTICLE 4 TAXES 4.01 - REAL PROPERTY TAXES (a) Landlord will pay in the first instance all real property taxes (which shall include property tax assessments, water and sewer rent rates and charges, parking and environmental surcharges, and any other governmental charges, general and special, ordinary and extraordinary) which may be levied or assessed by any lawful authority against land or improvements located in the Shopping Center (collectively "Real Property Taxes"). The amounts required to be paid by Landlord or any tenant or occupant of the Shopping Center pursuant to any Payment in Lieu of Tax Agreement entered into with a taxing authority having jurisdiction over the Shopping Center shall be considered for the purposes of this Lease to be included within the definition of Real Property Taxes. (b) During the term of this Lease, Tenant shall pay to Landlord as Additional Rent, Tenant's Allocable Share of all Real Property Taxes. Real Property Taxes shall include a charge equal to eighteen percent (18%) of the Real Property Taxes relating to the Common Areas. Tenant's Allocable Share shall be computed under Section 23.03(b) as of the first day of each respective Lease Year. If the Premises are separately assessed, then Tenant agrees to pay to Landlord, as Additional Rent, the amount of the Real Property Taxes separately assessed against the Premises including the land lying thereunder plus Tenant's Allocable Share of the Real Property Taxes assessed against the Common Areas of the Shopping Center. (c) Tenant agrees that following the Term Commencement Date, Tenant shall pay to Landlord, as Additional Rent and within thirty (30) days after receipt of a bill therefor, the amount of Tenant's Allocable Share of all Real Property Taxes, computed as of the Term Commencement Date for the then current tax fiscal year(s). Such amount shall be calculated on the basis of the number of days (from the Term Commencement Date) remaining in each such current tax fiscal year. Thereafter, Tenant shall pay to Landlord, as Additional Rent, all sums due pursuant to Section 4.01(b) in monthly installments, in advance and without notice, on or before the first day of each month during the term of this Lease, in an amount estimated by Landlord, such that Landlord will have received the full *** Confidential treatment requested. 7 12 amount of Tenant's Allocable Share of Real Property Taxes in time for payment to applicable taxing authority when due. In the event Landlord is required to escrow Real Property Taxes, Landlord may, but shall not be obligated to, use the amount required to be escrowed as a basis for its estimate of the monthly installments due from Tenant hereunder. Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's Allocable Share of Real Property Taxes based upon the tax bills or assessment bills for each tax fiscal year. If the total amount paid by Tenant under this Section 4.01(c) for any tax fiscal year during the term of this Lease is less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the deficiency within thirty (30) days after demand therefor by Landlord. If the total amount paid by Tenant hereunder for any year exceeds the amount due from Tenant for such year, Tenant shall be entitled to offset the excess against payments next thereafter becoming due from Tenant under this Section 4.01(c). For the tax fiscal years in which this Lease commences and terminates, the provisions of this paragraph shall apply and, to the extent necessary, Tenant's liability for its Allocable Share of any Real Property Taxes for such year shall be subject to a pro rats adjustment based on the appropriate number of days of said tax fiscal years. A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of Real Property Taxes to which such bill relates. (d) Intentionally deleted. (e) Landlord may seek a reduction in the assessed valuation (for Real Property Tax purposes) of the Shopping Center or any portion thereof by administrative or legal proceeding. Tenant shall pay to Landlord Tenant's Allocable Share of Landlords costs for said proceedings, including counsel fees, appraisal fees and other similar expenses, within thirty (30) days after Tenant's receipt of a statement from Landlord therefor. Tenant's Allocable Share of such costs shall be computed under Section 23.03(b) hereof. Landlord shall reimburse Tenant for Tenant's Allocable Share of any refund of Real Property Taxes (after deducting any unpaid portion of Tenant's Allocable Share of Landlord's costs for such proceedings) resulting from any proceeding for which Tenant has paid Tenant's Allocable Share of Real Property Taxes. (f) Should any alteration or improvement performed by or for Tenant during the term of this Lease cause an increase in assessment, Tenant shall pay to Landlord the full cost of all Real Property Taxes resulting from such increase in assessment. Any amount paid separately hereunder by Tenant to Landlord shall be in addition to any amounts paid by Tenant pursuant to Section 4.01(b). (g) Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge or assessment upon or against the rents payable by Tenant to Landlord, or upon or against the Common Areas, whether by way of substitution for or in addition to any existing Real Property Tax or otherwise, Tenant shall be responsible for and shall pay Tenant's Allocable Share of such tax in the manner provided in Section 4.01(c). Notwithstanding anything to the contrary in this Section 4.01(g), Tenant shall not be responsible for payment of any income taxes attributable to Landlord. (h) Tenant's 1999 Real Property taxes will be calculated at $10.84 per square foot of the Premises, which is based upon Landlord's actual 1999 PILOT payment. Notwithstanding anything to the contrary in this Lease: increases in Tenant's contributions for Real Property Taxes shall be limited to the actual increases in Real Property Taxes as imposed by the taxing authorities. 4.02 - TENANT'S TAXES Tenant shall, at all times, be responsible for and pay, before delinquency, all municipal, county, state or federal taxes charged against Tenants income, sales, fixtures, furnishings, equipment, stock-in-trade or other personal property of any kind owned, installed or used in or on the Premises, and any tax now or hereafter charged against Tenant on any other basis. ARTICLE 5 CONSTRUCTION AND FINANCING 5.01 - LANDLORD'S WORK Prior to the Term Commencement Date, Landlord shall perform all items of "Landlord's Work." if any, described in Exhibit B attached hereto and made a part hereof, in accordance with the Outline Specifications set forth in Exhibit D attached hereto and made a part hereof. Tenant agrees to accept the Promises in its "as is" condition on the date possession of the Premises is made available to Tenant without any express or implied warranty concerning the condition of the Premises by Landlord or its agents, and agrees, at its sole cost and expense, to complete all improvements necessary to prepare the Premises for the conduct of Tenant's business in the Premises In accordance with the Outline Specifications set forth in Exhibit D. Tenant represents, warrants and covenants that it shall build out the Premises in full conformance with plans approved by Landlord or Tenant shall be deemed In default of this Lease. In the event of such default, Landlord shall have the right to terminate this Lease, in addition to all other rights and remedies available to Landlord under applicable law or under this Lease. Any non-standard item of Landlord's Work requested by Tenant or necessitated by Tenants location, space plans or business operation shall be performed by Landlord at Tenant's additional cost, plus [***] for profit and [***] for administration. Landlord hereby warrants to Tenant that to Landlord's best knowledge the Premises do not contain any asbestos-containing materials or other reportable amounts of hazardous or toxic materials. 5.02 - TENANT'S WORK (a) Prior to the Term Commencement Date, Tenant, shall at its sole cost and expense perform "Tenant's Work" described in Exhibit C attached hereto and made a part hereof, in accordance with the Outline Specifications set forth in Exhibit D. Any item of Tenant's Work which Tenant requests Landlord to perform on the Tenant's behalf and which Landlord agrees to undertake shall be provided to Tenant at Tenants additional cost, plus [***] for profit and [***] for administration. Tenant acknowledges its ability to perform Tenant's Work, and no delay in its performance shall cause or be deemed to cause any delay or postponement in the Term Commencement Date. Tenant shall be responsible for obtaining, at its sole cost and expense, any necessary ***Confidential treatment requested. 8 13 permits, approvals or related consents which relate to Tenant's particular use of the Premises or to Tenant's Work or any other work performed by Tenant pursuant to this Lease, including any building permits required for the construction of Tenant's Work. With respect to any permits, approvals or related consents which relate to the Shopping Center in general and not to Tenant's particular use of the Premises or to Tenant's Work or any other work performed by Tenant pursuant to this Lease, Landlord and not Tenant shall be obligated therefor. Landlord knows of no such mitigation, impact, or discretionary fees related to the development of the Shopping Center in general which were deferred by Landlord and would result in unexpected costs to Tenant. Tenant agrees that its design plans and its operations shall take into account the [***] which may affect adjacent tenants or the Common Areas. Accordingly, Tenant agrees that its design plans shall incorporate such reasonable steps and procedures as are known to Tenant or Tenant's contractors to eliminate or substantially reduce any [***] that may be felt or heard outside of the Premises. These steps shall include: i) [***] walls, floor, and ceiling construction; ii) [***]; iii) [***] of all openings, cut-outs, and dissimilar surfaces. For purposes of operational standards, Tenant [***] wall, floor and ceiling construction such that noise emitted from the Premises will not exceed 65dbA when measured from outside the Promises. Tenant shall submit its Design Drawings to Landlord in compliance with Exhibit "D". Upon Landlord's approval of Tenant's Design Drawings (as Tenant may agree to modify such plans and specifications in response to Landlord's comments thereto in accordance with the following sentence), then Landlord will be deemed to have approved the measures taken by Tenant to minimize vibration and, thereafter, Tenant shall not be in default under the Lease as a result of vibration associated with the permitted use of the Premises. In the event that Landlord and Tenant are unable to agree as to the "reasonableness" of the steps and procedures requested by Landlord to [***], the dispute shall be submitted to arbitration pursuant to Section 23.18 hereof for a determination as to whether such steps are "reasonable". (b) Tenant agrees to obtain and maintain, or to cause Tenant's contractors to obtain and maintain, at Tenant's or Tenant's contractor's expense, for so long as Tenant's Work continues, public liability insurance, builder's risk property insurance covering Tenant's Work, and Workers' Compensation insurance protecting from and against any and all liability for death of or injury to persons or damage to property caused in or about the Premises, or by reason of the construction of Tenant's Work. Tenant shall furnish to Landlord certificates evidencing said coverage prior to the commencement of Tenant's Work (see Exhibit D for further insurance requirements). 5.03 - PAYMENT Any payment to be made by Tenant to Landlord for items of Landlord's Work to be completed by Landlord as provided in Section 5.01, or for any items of Tenant's Work which Tenant requests Landlord to perform and which Landlord agrees to undertake as provided in Section 5.02, shall be paid for by Tenant, as Additional Rent, within [***] days after receipt of a bill therefor. 5.04 - FINANCING (a) Intentionally deleted. (b) Intentionally deleted. (c) If Landlord can obtain approval of this Lease from a mortgagee for the purposes of financing or refinancing only upon the basis of reasonable modifications of terms and provisions of this Lease, then Tenant shall not unreasonably withhold its consent thereto provided that such lease modifications do not relate to those provisions pertaining to size or location of the Premises, length of the term, or amount of Fixed Annual Minimum Rent, Percentage Rent, Additional Rent, the Abatement or the Permitted Use and do not increase Tenant's obligations or decrease Tenant's rights. (d) Within fifteen (15) days of request by Landlord in connection with any financing or sale of the Shopping Center, which request shall not be made more than once per Lease Year, Tenant or any Guarantor shall provide to Landlord a statement of Tenant's Gross Sales for the preceding period since the Term Commencement Date. ARTICLE 6 CONDUCT OF BUSINESS BY TENANT 6.01 - USE OF PREMISES AND TRADE NAME Throughout the term, Tenant shall use the entire Premises solely for the purpose as set forth in Section 1.03 and shall operate its store in the Premises under the trade name set forth in Section 1.03. Tenant shall not use or permit, or suffer the use of the Premises, or any part thereof, for any other business or purpose or under any other trade name. 6.02 - TENANT'S OPERATING COVENANT Subject to Section 23.04 below, Tenant shall occupy the Premises on and after the Term Commencement Date and shall continuously operate its store in the entire Premises during the full term of this Lease. Tenant shall operate the Premises in a manner consistent with the majority of the other stores operated by Tenant as of the date *** Confidential treatment requested. 9 14 hereof under the same trade name and having the same or similar use as the use as provided for In this Lease, and with due diligence and efficiency. Tenant shall carry at all times in the Premises a stock of merchandise of a size, character and quality as is in keeping with a first class regional shopping center. Tenant shall use for office, storage, or other non-selling purposes only such space as is reasonably required for the proper operation of Tenant's retail business in the Premises. Tenant shall conduct its business in the Premises during regular published Shopping Center hours of business (as of the date of this Lease, those hours are Monday through Saturday, 10:00 am until 9:30 pm and Sunday 11:30 am until 6:00 pm), which hours are subject to change at Landlord's direction from time to time. Tenant acknowledges and agrees that the Shopping Center's success is dependent upon the continued operation of Tenant's business, and that the maintenance of the character and quality of the Shopping Center is enhanced by the continued occupancy of the Premises and the regular conduct of Tenant's business as required herein. In the event Tenant ceases operation prior to the termination date set forth in Section 2.02, Landlord shall have the right to obtain a court order for specific performance of the operating covenant as set forth In this Section 6.02. If during any period Tenant shall fail to operate the Premises provided herein, then after the second (2nd) such failure in any Lease Year, Tenant shall pay as liquidated damages, as a reasonable estimate of damages suffered by Landlord due to the loss of Percentage Rent, the damage to the character and quality of the Shopping Center and other non-quantifiable adverse effects caused by Tenant's failure to continually operate, a sum equal to [***] of the Fixed Annual Minimum Rent for the portion of the term during which such failure continues. The payment of such sums shall not relieve Tenant of any of its obligations under this Lease. Tenant shall have the right to enter the Premises at any time during the term of the Lease. Notwithstanding anything to the contrary in this Section 6.02, Tenant shall be permitted to be open for business until the later of (i) 2:00 a.m. or (ii) as late as any other tenant located on the commons level of the Shopping Center is permitted to be open without incurring any extra hours charge as set forth in Section 7.06 below. Anything contained in this Lease to the contrary notwithstanding, Tenant shall not be obligated to continuously operate from the Premise during periods which (i) Tenant is carrying on remodeling activities, provided prior Notice of such activities has been delivered to Landlord, (ii) Tenant is closed for the taking of inventory (not to exceed four (4) days per Lease Year), or (iii) Tenant's use and occupancy of the Premises is prohibited by any law, ordinance, order or other act of any judicial, governmental or quasi-governmental authority. Notwithstanding anything to the contrary in this Section 6.02, to the extent that Landlord is obligated to do so according to leases between Landlord and any theater in the Shopping Center, Landlord will illuminate and secure the Common Areas and exterior parking areas which are immediately adjacent to the Premises and the exterior entrance to the Shopping Center which is nearest to the Premises. Landlord represents and warrants that it currently has a lease with Hoyt's Cinemas Corporation which commenced on October 15, 1990 and has an initial term of twenty-five (25) years and a full-term operating covenant. In the event Landlord is not obligated by the terms of its lease with any theater in the Shopping Center to illuminate and secure said Common Areas and exterior parking areas after then-current published Shopping Center hours of business, and Tenant requires such illumination and security, then Tenant shall be obligated to pay, as Additional Rent and within thirty (30) days after receipt of a bill therefor, its proportional share of the costs associated with such after-hours illumination and security. Tenant's proportional share of such costs shall be the product of multiplying the amount of said costs by a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is the total number of square feet of premises occupied by any other tenant or occupant of the Shopping Center which is also open and operating its business in the Shopping Center during such additional hours as Tenant requires after-hours illumination and security. 6.03 - COMPETITION During the term of this Lease, Tenant shall not directly or indirectly, without the prior written consent of Landlord, operate, manage, franchise, license or have any interest in any other business located within a radius of five (5) miles from the outside boundary of the Shopping Center, which business is engaged in the same or substantially the same use as the use provided for in this Lease; nor, if Tenant is a corporation, shall any then current officer or director, or any then current shareholder owning more than ten percent (IO%) of the issued and outstanding stock of Tenant, nor any entity that: (a) 50% or more of which is owned by Tenant, or (b) owns 50% or more of Tenant, or (c) 50% or more of which is owned by an entity that owns 50% or more of Tenant; or of any then current officer, director or ten percent (10%) shareholder of Tenant), have any such interest without the prior written consent of Landlord; nor, if Tenant is a partnership, shall any then current partner or any member of the immediate family of any then current partner have any such interest without prior written consent of Landlord. If, during the first five years of the term, Tenant or any such officer, director, shareholder, affiliate, partner or family member does operate, manage, franchise, license or have any interest in any such business without the prior written consent of Landlord, Landlord shall have the right, at its option, as its sole and exclusive remedy, to obtain a court order for specific performance of the operating covenant as set forth in Section 6.02 of this Lease and, as liquidated damages and not as a penalty, to require that gross receipts (defined as in Section 3.03 of this Lease, except that where reference is made to the Premises, it shall in this case refer instead to the location of such other business of Tenant or any such officer, director, shareholder, affiliate, partner or family member as more specifically described herein) resulting from such business shall be included in the amount of gross receipts used to compute Percentage Rent hereunder. After the first [***] years of the term, if Tenant or any such officer, director, shareholder, affiliate, partner or family member does operate, manage or have any interest in any such business without the prior written consent of Landlord, Landlord shall have the right, at its option, in addition to all other rights and remedies to which Landlord may avail itself pursuant to this Lease, to require, as liquidated damages and not as a penalty, that [***] of gross receipts resulting from such business shall be paid to Landlord. The prohibitions in this Section 6.03 shall extend to and expire on the termination date set forth in Section 2.02 hereof notwithstanding any earlier termination resulting from Tenant's default hereunder. 6.04 - OTHER BUSINESS PRACTICES (a) Tenant shall keep the Premises and all show windows and signs and any loading area and other areas allocated for the sole use of Tenant in good, neat and clean condition. Tenant shall keep the Premises and any service area contiguous to or part of the Premises free of debris, rubbish, garbage, posts, rodents and vermin caused by Tenant, and, upon two (2) days' written notice by Landlord to Tenant of Tenant's failure to do so, Landlord may remove such debris, snow and ice, rubbish, garbage, pests, rodents and vermin and charge Tenant the reasonable out-of-pocket costs incurred by Landlord for such removal, plus [***] for administration. (b) Tenant shall keep its display windows stocked and electrically lighted during such periods of time as may from time to time be required by Landlord of substantially all other retail businesses in the Shopping Center. *** Confidential treatment requested. 10 15 (c) Tenant shall load and unload its merchandise, equipment and supplies and remove its rubbish only by way of the loading area and service doors designated by Landlord for Tenant's use; provided, however, that Landlord will not unreasonably withhold its consent to Tenant's use of the service doors or loading dock available for common usage by tenants in the Shopping Center and which is closest to the Premises. (d) Tenant shall not knowingly and willfully commit nor permit any act or practice which may tend to injure the building occupied by Tenant, nor permit its equipment to be a nuisance to other tenants, nor keep goods, foods, rubbish, inventory, or merchandise on or obstruct the mall area or sidewalks or other areas outside the Premises, nor conduct or permit any fire, bankruptcy, auction or going-out-of-business sale, nor erect or retain any sign, light, lettering, inscription, symbol or mark which is not approved by Landlord, nor install any antenna, fixture, or improvement outside of the Premises, nor sell or display merchandise outside the Promises. Notwithstanding the foregoing, Tenant shall be permitted to place professionally generated signs, advertisements and decorations within the Promises consistent with Tenant's other operations. Anything contained in this Lease to the contrary notwithstanding, Tenant shall be permitted to install a video wall or mounted video screen or panel within the Premises which may be visible to customers from outside the Premises. Notwithstanding anything contained in this Section 6.04 to the contrary, subject to compliance with Legal Requirements and Landlord's prior written reasonable approval of plans and specifications, and further provided that the satellite dish and/or other electronic transmitter (in either case a "satellite dish") and the screen or covering, if any, hereinafter described shall be for the exclusive use of Tenant, shall not penetrate the roof unless otherwise agreed in writing by Landlord, and shall not be visible from any part of the Common Area or public roadways adjoining the Shopping Center and shall not interfere in any material respect with access to the Building roof by any others, Tenant shall have the right to install one (1) three foot (3') or smaller satellite dish on the Building roof at the location designated by Landlord. Tenant shall, if necessary and at its sole cost and expense, construct a screen or other covering structure around the satellite dish to prevent visibility from the Common Areas or public roadways adjoining the Shopping Center. The cost of installation and maintenance of the satellite dish and screen or other covering structure (including temporary removal thereof, if required, in connection with any repairs or other work to the Building deemed necessary or desirable by Landlord) shall be borne solely by Tenant. The reasonable cost of any repairs to the roof which are necessitated by the installation and/or repair of the satellite dish and screen or covering, if constructed, shall be borne solely by Tenant and paid to Landlord upon demand as Additional Rent hereunder. Upon expiration or earlier termination of this Lease, Tenant shall, at its sole cost and expense, remove any satellite dish and screen or covering, if constructed, and Tenant shall repair any damage to the roof occasioned by such removal. Tenant further agrees to defend, indemnify and hold harmless Landlord from and against all claims, losses, costs and expenses (including without limitation reasonable attorneys' fees) suffered or incurred by Landlord arising out of the existence of Tenants satellite dish and screen or covering, if constructed. In addition, Tenants liability endurance policies shall include special endorsements protecting Landlord and all other parties required to be additional insureds pursuant to Section 12.06 against any liabilities that may arise out of the existence or installation and removal of Tenant's satellite dish and any screen or covering. In connection with all work related to the Installation, repair, maintenance and removal of the satellite dish and screen or other covering structure, Tenant shall request from Landlord a list of three (3) competitively priced contractors acceptable to Landlord, which Landlord shall provide to Tenant within fifteen (15) business days following written request. All such work shall be performed by one of Landlord's designated contractors and shall be conducted with notice to Landlord as provided in Section 10.02(e) of this Lease. (e) In all of Tenants printed material distributed primarily within Syracuse, New York and that refers to the location of the Premises (by newspaper, radio, television or otherwise), Tenant shall include in any reference to Tenant's place of business the name (and where appropriate the symbol) of the Shopping Center. (f) Tenant agrees to store in the Premises only such merchandise as is to be offered for sale at retail from the Premises within a reasonable time after receipt; to store all trash and refuse in adequate containers within the Premises and to maintain such containers in a healthy, safe, neat, odor free and clean condition and in a location so as not to be visible to members of the public shopping in the Shopping Center, and to attend to the daily disposal thereof in the manner designated by Landlord; and to conform to all rules and regulations which Landlord may make in the management and use of the Shopping Center requiring such conformance by Tenant and Tenants employees. If the Premises are used for the sale of food, Tenant shall store all trash, refuse and garbage in a garbage storeroom or compartment which Tenant shall install and keep in good repair at its sole expense. Landlord may require that the Premises be periodically treated against pests, rodents or vermin, and in such event, Tenant will, at its sole cost and expense, enter into a contract with a professional pest control service for the performance of such work, which contract and service shall be selected by Tenant but subject to Landlord's prior approval. (g) Landlord may establish a central station trash compactor and/or recycling service (including, but not limited to, compactor and container cost, hauling, landfill charges, taxes or any other special charges relating to such trash compactor and/or recycling service) or contract for the removal of trash at the Shopping Center. If Landlord establishes a central station trash compactor and/or recycling service, Tenant agrees to pay as Additional Rent the sum of [***] per month for the cost of Tenant's share of such service. It is agreed that this charge may be increased periodically from the date of this Lease as Landlord's expenses increase (in which event, the cost of Tenant's share of such service shall increase only by the percentage by which Landlord's expenses actually increase) or as the volume of Tenant's trash increases. If at any time Landlord elects to contract for trash removal and/or recycling, Tenant agrees to use said contractor for its trash removal and/or recycling and pay when due all charges at the rate established therefor from time to time. Tenant may, however, contract with an entity other than that designated by Landlord in the event that Landlord's designated contractors rates are not reasonable and competitive with alternative services available to Tenant. If Tenant fails so to pay for trash removal and/or recycling, Landlord shall have the same remedies (even if such payment is due to such contractor and not to Landlord) as Landlord has for nonpayment of rent hereunder. Tenant shall comply with all applicable Governmental Orders as defined in (Section 18.01) in conjunction with the sorting or recycling of trash or refuse. (h) Tenant shall comply with all further reasonable rules and regulations for the use and occupancy of the Shopping Center as Landlord from time to time promulgates for the best interests of the Shopping Center, provided that if Tenant disputes the reasonableness of any further rule or regulation, Tenant shall notify Landlord within thirty (30) days after Tenant is provided with a copy thereof, and the dispute shall be submitted to arbitration pursuant to Section 23.18. In the event of a conflict between the Lease and such rules or regulations, then the term of the Lease shall govern. *** Confidential treatment requested. 11 16 6.05 - MARKETING FUND (a) Tenant shall make a contribution, in the manner set forth in Section 6.05, to a Marketing Fund to be administered by Landlord. The Marketing Fund will be used for advertising, customer services, promotion, public relations, market research and administrative expenses which, in the sole opinion of Landlord, will sustain and improve the market penetration and promotional needs of the Shopping Center. Landlord acknowledges and agrees that Tenant is a party to a license agreement and that Tenant's advertising, use and display of the Trade Name and the logo and trademarks associated therewith may be subject to the licensor's consent as set forth in the license agreement; therefore, Landlord agrees not to use Tenant's Trade Name in any advertising or promotional medium without Tenant's consent; provided, however, notwithstanding the foregoing, Landlord shall be permitted to (i) use Tenants Trade Name in any directory or other listing which contains the names of substantially all of the tenants or occupants of the Shopping Center and (ii) utilize photographs, slides, videos, or other similar images of the Shopping Center that may include or depict the Premises or Trade Name. (b) From and after the Term Commencement Date, Tenant shall pay to Landlord, as an annual contribution to the Marketing Fund, the sum of [***] per square foot of the Premises, which sum shall be paid in advance in consecutive equal monthly installments on the first day of each month during the term. For any Partial Lease Year during the term of this Lease, or for any partial month, the amount of Tenant's contribution to the Marketing Fund shall be adjusted on a pro-rata basis to reflect such Partial Lease Year or partial month. (c) Upon the first day of January next following the date of this Lease and upon the first day of January of each Lease Year thereafter, Tenant's annual contribution to the Marketing Fund shall increase by [***] upon the first day of each January thereafter during the term of this Lease ARTICLE 7 COMMON AREAS AND OPERATING COSTS 7.01 - DEFINITION The term "Common Areas" shall mean the interior and exterior areas and facilities within the Shopping Center which are: (i) not leased to a tenant, or (ii) by nature not leasable to a tenant for the purpose of the sale of merchandise or the rendition of services to the general public. Common Areas shall include but shall not be limited to all parking areas and facilities, roadways, driveways, entrances and exits, truck serviceways and tunnels, utilities, water filtration and treatment facilities, retention ponds or basins located within or outside the Shopping Center, retaining and exterior walls, sidewalks, open and enclosed mails, outside courts, landscaped and planted areas, escalators, stairways, elevators, service corridors, service areas, loading docks, hallways, public restrooms, community rooms or areas, roofs, equipment, signs and any special services provided by Landlord for the common or joint use and benefit of all tenants in the Shopping Center, their employees, customers and invitees. 7.02 - DEVELOPMENT OF COMMON AREAS Landlord shall make available from time to time such Common Areas, which may in part consist of areas made available by means of REA or other agreements, for the common benefit to the tenants and occupants of the Shopping Center as Landlord shall deem appropriate. Subject to the provisions of any REA Agreement, Landlord shall operate, manage, equip, heat, cool, ventilate, insure, repair and maintain such Common Areas for their intended purposes in such a manner as Landlord shall, in its sole discretion, determine. Landlord shall at all times have the right to determine, change or after the nature, extent, size or location of the Common Areas and Landlord shall not be subject to liability therefor, nor shall Tenant be entitled to any compensation or diminution or abatement of rent on account of any such determination or change, nor shall any such action be deemed an actual or a constructive eviction of Tenant. 7.03 - USE OF COMMON AREAS Tenant and its officers, employees, agents, customers and invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas as designated from time to time by Landlord, subject to such regulations as Landlord may from time to time impose on a non-discriminatory basis, including the designation of the days and hours of operation and use and designation of specific areas in which motor vehicles owned or used by Tenant, its officers, employees, and agents must be parked. Tenant shall, upon request, furnish to Landlord the license numbers and descriptions of the motor vehicles operated by Tenant and its officers, agents and employees. If Landlord designates such parking areas, and if any motor vehicle of Tenant, or an officer, employee or agent of Tenant is parked in any other portion of the Shopping Center, Tenant shall pay to Landlord, upon demand, the sum of [***] for each such motor vehicle for each day, or part thereof, such motor vehicle is so parked, and Tenant hereby authorizes Landlord to tow or cause any such car to be towed to the then designated parking area, and Tenant hereby agrees to reimburse Landlord for the cost thereof upon demand. Tenant agrees to abide by such regulations and to use its best efforts to cause its officers, employees, agents, customers and invitees to conform thereto. Landlord may at any time (i) close temporarily the Common Areas or any portion thereof, (ii) make repairs or changes to prevent the acquisition of public rights therein, (iii) discourage noncustomer parking, and (iv) do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Landlord shall have the sole and exclusive right to use the Common Areas for advertising purposes, promotions, exhibits, shows, displays, kiosks and such other similar uses. Notwithstanding the foregoing, Landlord shall not modify the Common Areas in any manner that would have a material adverse effect on pedestrian and vehicular traffic or that would materially limit the number of parking spaces reasonably required for the business and retail activities conducted or that otherwise would adversely affect access to the Premises or the building in which the Premises are located. Notwithstanding the foregoing, Landlord will not materially adversely interfere with (i) visibility of Tenant's storefront signage from the *** Confidential treatment requested. 12 17 enclosed mail immediately adjacent to the Premises, or (ii) access to the Premises from the enclosed mall immediately adjacent to the Premises. Notwithstanding anything to the contrary in this Section 7.03, Landlord recognizes that Tenant's prototype incorporates an open storefront design and Tenant shall be permitted to incorporate this element into the design of the Premises, provided such design does not violate any applicable laws or compromise the structural integrity of the Shopping Center. With Landlord's approval, not to be unreasonably withheld, Tenant shall have the right to use, at no additional cost to Tenant, a portion of the Common Area in front of the Premises for the purpose of displaying a NASCAR racing vehicle. 7.04 - COMMON AREA COSTS (a) Commencing on the Term Commencement Date, Tenant shall pay to Landlord, as Additional Rent, monthly in advance on the first day of each month, a sum equal to [***] of the Common Area Charge. The "Common Area Charge" shall be an annual charge of [***] per square foot of the Premises for the Common Area Costs defined in Section 7.04(b), subject to adjustment as provided in Section 7.05. (b) "Common Area Costs" shall mean the total costs and expenses incurred in operating, managing and maintaining the Shopping Center and the Common Areas, including but without limitation, such maintenance, repair, replacement and remodeling as shall be required in Landlord's sole and absolute judgment to preserve the utility thereof in the same condition and status as existed at the time of completion of the original construction. Common Area Costs shall also include Tenant's share of insurance costs. 7.05 - ADJUSTMENT TO PAYMENT Upon January 1, 2001 and upon the first day of January of each Lease Year thereafter, the amount of Tenant's Common Area Charge then in effect shall increase by [***]. Tenant acknowledges and agrees that Tenant shall have no right to audit Landlord's books and records concerning Common Area Costs. Notwithstanding anything to the contrary in this Section 7.05, the first such increase in Common Area Charges will be prorated on a per-diem basis. 7.06 - PAYMENT OF EXTRAORDINARY COMMON AREA COSTS If Tenant opens the Premises for business or remains open for business in the Premises at a time when Tenant is not required under the terms of this Lease to be open and when less than fifty percent (50%) of the total leased area of the buildings in the Shopping Center is open for business, then for each such day on which Tenant is open for business in the Premises, Tenant, as Additional Rent, shall pay to Landlord, in addition to and together with Tenant's payment of the Common Area Charge due Landlord as provided by Section 7.04, a sum equal to [***] of the monthly amount of Tenant's Common Area Charge. ARTICLE 8 ENERGY, UTILITY AND SPRINKLER COSTS 8.01 - ENERGY AND UTILITY CHARGES (a) Immediately after delivery of possession of the Premises to Tenant, Tenant shall make application to the appropriate local authority, municipality or other governmental agency to obtain direct service for Tenant's electric, natural gas, and other energy requirements. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing and installing any required meters, conduits, wiring and other facilities and equipment all of which shall be part of Tenant's Work. However Tenant shall not be obligated to pay any fees to the utility company for the initial connection of energy services to the Premises which relate to the Shopping Center in general and not to the Premises, and Landlord and not Tenant shall be obligated for any other fees payable to the utility company which relate to the Shopping Center in general with respect to the initial connection of energy services to the Premises. From and after the date Tenant first enters into possession of the Premises (or if the date Tenant obtains such energy service is sooner. then from and after the date such service begins). Tenant covenants and agrees to pay the authority, municipality or agency the cost of all energy provided to Tenant (including but not limited to all energy provided to the Premises, to Tenant's signs and to the HVAC units serving the Premises) when due and payable. As of the date of this Lease, Landlord has no knowledge that the energy provider will not provide direct service, and Tenant acknowledges that provision of such service is within the control of the energy provider and not Landlord. (b) Tenant shall pay the cost of all water and sewer used in or at the Premises. Landlord and Tenant acknowledge that water and sewer services for the Premises are as of the date of this Lease, provided by the local municipality to the Premises through Landlord. Accordingly, Tenant shall, at its cost and as part of Tenant's Work, install a water meter acceptable to Landlord and the local municipality; and Tenant shall pay Landlord for all water and sewer usage in and at the Premises based on the usage recorded by such meter and based on the rates charged to Landlord for water and sewer usage by the local municipality. Such payment calculation is subject to change if, as and when the billing methodology of said municipality for water differs from that set forth in this paragraph. The above payment structure shall continue in effect until such time as the Premises are directly supplied, metered and billed for water and sewer services by the local municipality. Immediately after delivery of possession of the Premises to Tenant, Tenant shall make application to the appropriate local authority. municipality or other governmental agency to obtain direct service for water and sewer services to the Premises. Tenant shall be solely responsible for the cost of obtaining such services and the cost of providing and installing any required meters and other facilities and equipment, all of which shall be part of Tenant's Work. From and after the date direct water and/or sewer service is available to the Premises, Tenant covenants and agrees to pay the authority, municipality or agency the cost of same provided to Tenant when due and payable. (c) (i) If as a result of Tenant's inability to obtain direct supply or Tenant's election not to obtain direct supply and metering for Tenant's natural gas, electric and other energy requirements as provided in subsection *** Confidential treatment requested. 13 18 (a) hereof, and if Landlord supplies service for Tenant's electric, natural gas, or other energy requirements, from and after the date which is the later of either the date when Tenant first enters into possession of the Premises or the date when Landlord commences supplying energy to the Premises, Tenant shall pay to Landlord monthly in advance on the first day of each month its "Energy Charges." as hereinafter defined. (ii) As used in this Lease "Energy Charges" shall be the product of multiplying the Energy Charge Calculation (herein defined) for all energy used or consumed in the Premises including without limitation, electricity, oil and gas times the unit prices for such energy determined in accordance with the then current utility rate schedules applicable to Landlord, plus a charge of [***] of such amount. Following the date that Tenant opens for business in the Premises, Landlord shall calculate Tenant's energy requirements on the basis of Tenant's construction plans, equipment and lighting lists, and the as-built condition of the Premises, assuming (1) a usage of not less than one hour before through one hour after the daily hours of operation of the Shopping Center and (2) a loading factor based upon the total connected load of all electrical fixtures and equipment in the Premises ("Energy Charge Calculation). If Tenant requires additional hours of usage of energy within the Premises, Tenant shall make such request in writing to Landlord and Tenant's Energy Charges shall be adjusted accordingly. Prior to the completion of such Energy Charge Calculation and the submission to Tenant of a statement setting forth such calculation, Tenant shall pay Energy Charges as estimated by Landlord based upon the energy requirements of a typical store layout comparable to Tenant's proposed use and size of the Premises. Following completion of the Energy Charge Calculation, Tenant's energy billings and payment of Energy Charges shall be adjusted accordingly. Any delay in Landlord furnishing such Energy Charge Calculation to Tenant shall not in any way affect Tenant's obligation herein. (iii) Notwithstanding the provisions of subparagraph (c) (ii) of this Section 8.01 relating to use of the Energy Charge Calculation to calculate Energy Charges to the contrary, Tenant shall have the option to verify the amount of electrical energy used or consumed within the Premises by the installation of a checkmeter as hereinafter set forth. Such option may be exercised by Tenant upon not less than thirty (30) days' prior written notice to Landlord given prior to either (i) 60 days after Landlord commences supplying energy to the Premises (provided, however, that in no event shall the checkmeter period begin until after Tenants Work is fully completed and operational and Tenant is open for business to the public). or (ii) the first day of any Lease Year during the term of this Lease. Following such notice, Tenant shall install in the Premises. in accordance with the Outline Specifications set forth in Exhibit D and at Tenant's sole cost and expense, a utility-quality checkmeter for the purpose of verification of the electrical consumption within the Premises (the "checkmeter"). The checkmeter will be monitored monthly by Landlord and Tenant for a period of thirteen (13) consecutive full months (the "checkmeter period") beginning on the first day of the first full month following initial installation thereof and approval by Landlord. The first month's reading of the checkmeter will be used solely for determining a usage base reading over which subsequent readings will be measured. Landlord and Tenant shall on or about the first day of each month concurrently observe and record the checkmeter readings on forms provided by Landlord. The checkmeter shall be reset (for demand only) in the presence of both Landlord and Tenant representatives following the recording of monthly readings. During the checkmeter period Tenant shall pay Energy Charges for the Premises based on the Energy Charge Calculation. Following completion of the checkmetering period, Landlord shall calculate the average monthly utility usage within the Premises utilizing the checkmeter readings taken during the checkmeter period. The average monthly charge for consumption (KWH) shall be calculated by dividing the total KWH by the number of days comprising the checkmeter period; the resulting quotient will then be multiplied by 30.42. The average monthly demand charge (KW), if applicable, shall be calculated by dividing the total KW readings by the number of months comprising the checkmeter period. If Tenant has made the election to utilize a checkmeter, for purposes of calculating Energy Charges for electricity under subparagraph (b) of this Section 8.01, the product of the resulting average monthly KWH usage readings and KW demand readings times the unit prices for such energy determined in accordance with then current utility rate schedules charged to Landlord shall be used in lieu of the Energy Charge Calculation. Tenant's energy billings based on the checkmeter readings and payment of Energy Charges retroactive to the commencement of the checkmeter period shall be adjusted accordingly. Any delay in Landlord furnishing a checkmeter reconciliation to Tenant shall in no way affect Tenant's obligation herein. The average monthly KWH usage charges and KW demand charges once determined pursuant to the checkmeter procedure shall be the basis for calculation of Energy Charges for the balance of the term of this Lease. The checkmeter procedure shall be used solely to verify energy use within the Premises in accordance with the terms of this Lease and shall not be utilized for billing purposes. The use of the checkmeter procedure set forth in this subparagraph (c) shall be the sole and exclusive remedy between Landlord and Tenant to resolve any dispute concerning the amount of electrical usage within the Premises. The results of the checkmetering procedures set forth herein shall be conclusive and determinative of all disputes, claims and controversies with respect to energy usage or demand within the Premises pursuant to this Lease. Following the checkmeter period, Tenant shall disconnect and remove the checkmeter from the Premises. The monitoring of energy service by means of a checkmeter shall not take place more than once during the term of this Lease unless Tenant has varied its equipment, service, use or load demand or has remodeled the Premises. In any such event either Landlord or Tenant may request the other party to reinstitute the checkmeter procedures but in no event more than once in any thirty-six (36) month period following the completion of any checkmeter period. (iv) At any time during the term hereof, Landlord may cease providing energy to the Premises without thereby affecting this Lease in any manner or otherwise incurring any liability to Tenant. In such event, Tenant shall have no further obligation to pay to Landlord the charge for Energy Charges as provided in this Section 8.01. Landlord will notify Tenant at least thirty (30) days prior to such termination in order that Tenant may make application to the appropriate utility companies serving the Shopping Center. In the event Tenant fails to pay energy or utility charges when the same become due and payable, Landlord reserves the right, in addition to all other rights and remedies to which Landlord may avail itself pursuant to this Lease, to discontinue the furnishing of energy to the Premises. Landlord shall not be liable for any damages resulting from or arising out of any such discontinuance, and the same shall not constitute a termination of this Lease or an actual or constructive eviction of Tenant. (v) The charges defined in Section 8.01(c). if any, may be adjusted by Landlord periodically based upon changes in the number of hours during which the Premises remains open, connected load, recalculations, rate changes imposed by utility companies, rate changes imposed by fuel companies (including but not limited to fuel adjustment rates), any changes, alterations or improvements done to the Premises, or any taxes or surcharges imposed upon energy costs or usage. *** Confidential treatment requested. 14 19 Notwithstanding anything to the contrary in this Section 8.01, in the event Landlord's energy provider is not competitively priced, Tenant shall have the right to secure energy service from an alternative energy provider (where available). Tenant understands and agrees that in the event it elects to use such alternative energy provider, it shall do so at Tenant's sole cost and expense and such energy service must be provided to the Premises from such alternative energy provider's facilities and shall not come through Landlord's switchgear. 8.02 - INTENTIONALLY DELETED. 8.03 - INTENTIONALLY DELETED. 8.04 - MISCELLANEOUS UTILITY PROVISIONS (a) Tenant shall not install within the Premises any equipment, fixtures or appliances which exceed the capacity of the utility facilities within or serving the Premises. If any such equipment, fixtures or appliances installed by Tenant requires additional utility facilities, the same shall be installed by Tenant at Tenant's sole cost and expense. (b) Tenant shall operate the heating, ventilating and cooling systems serving the Premises such that the temperature in the Premises will be substantially the same as that in the Common Areas, and Tenant shall set Tenant's thermostat at substantially the same temperature as exists in the Common Areas. Tenant shall operate ventilation equipment such that the relative air pressure in the Premises will be substantially the same as or less than that in the Common Areas. (c) Intentionally deleted. (d) Tenant agrees that Landlord shall not be responsible for any interruption of business or damage to the Premises resulting from interruption of utility service caused by any utility company or governmental regulatory agency. 8.05 - PERIODIC ADJUSTMENT Intentionally deleted. ARTICLE 9 FIXTURES, ALTERATIONS, SIGNS 9.01 - INSTALLATION BY TENANT After the completion of Tenant's Work, Tenant shall not make or cause to be made any alterations, additions or improvements or install or cause to be installed any trade fixtures, exterior sign, floor covering, interior or exterior lighting, plumbing fixtures, shades or awnings, or make any changes to its store-front or interior decor without first obtaining Landlord's written approval and consent in each instance, which shall not be unreasonably withheld. Notwithstanding the foregoing, Tenant shall be permitted to make interior, non-structural alterations, changes and modifications not exceeding [***] per Lease Year without Landlord's prior consent, provided Tenant notifies Landlord in writing prior to the commencement of such alterations, changes, or modifications. Tenant shall present to Landlord plans and specifications of such work at the time approval is sought. All permitted alterations, additions or improvements shall be done in a good and workmanlike manner in compliance with all applicable laws and ordinances and shall not unreasonably interfere with the conduct of Tenant's normal business. Notwithstanding anything to the contrary in this Section 9.01, Tenant shall be permitted to close for a period not to exceed five (5) days during any Lease Year, for the sole purpose of completing such alterations, changes, or modifications. Where Landlord's approval is required per this Section 9.01, any alteration, addition or improvement done to the Premises by Tenant without Landlord's approval shall be returned to its original condition within thirty (30) days after receipt of written notice from Landlord and at Tenant's expense upon request by Landlord at any time. All fixtures installed by Tenant shall be new or completely reconditioned; provided, however, Tenant makes no representation or warranty that such fixtures will be free from defects in material, workmanship, or design; provided, further, that Tenant shall use its commercially reasonable efforts to ensure that such fixtures are installed in the Premises in a safe manner so as not to be hazardous to persons who may come on to the Premises. Tenant shall (i) be responsible for all costs, including attorneys' fees, and (ii) Tenant shall indemnify and hold harmless Landlord from all liability, incurred by Landlord as a result of any failure in material, workmanship or design of such fixtures. 9.02 - REMOVAL AND RESTORATION BY TENANT All alterations, additions, improvements or installations made by Tenant, or made by Landlord on Tenant's behalf and at Tenants expense, shall remain the property of Tenant for the term of the Lease. Such alterations, additions, improvements, trade fixtures and equipment shall not be removed from the Premises prior to the end of the term hereof without the prior consent in writing from Landlord, except in the case of routine maintenance, refurbishment or replacement of defective or broken items. Upon expiration of the term of the Lease or upon Tenant's vacating the Premises upon eviction or surrender of the Premises prior to expiration of the term, any permanent leasehold improvements and fixtures or equipment permanently attached to the real estate shall become the property of Landlord (unless, as a condition of its consent to install same, Landlord shall have required the subsequent removal thereof by Tenant), if not removed by Tenant. With respect to any improvements and fixtures which Tenant does not remove, Tenant shall be obligated to repair any damage resulting from such removal, and *** Confidential treatment requested. 15 20 Tenant's possession of the Premises shall not be deemed terminated until such repairs have been completed. Tenant shall surrender all keys for the Premises to Landlord and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Within five (5) days following the expiration or earlier termination of this Lease, Tenant shall remove furnishings, equipment, trade fixtures and personal property and, if Tenant fails to so remove such property, then Landlord shall have the option of retaining or removing such property at Tenant's expense. Tenant shall repair or cause to be repaired any damage to the Premises caused by such removal. 9.03 - SIGNS, AWNINGS AND CANOPIES Tenant will not place, maintain or suffer to be placed or maintained on or in an exterior door, wall or window of the Premises any sign, awning or canopy, decoration. lettering or advertising matter or other thing of any kind without first obtaining Landlord's written approval, which approval shall not be unreasonably withheld. Notwithstanding the foregoing. Landlord's consent shall not be required for any professionally prepared signs or banners, or for the installation of an awning or canopy at the store front of the Premises, provided such awning or canopy complies with all applicable building codes and further provided that such awning or canopy does not utilize any supports which cannot be integrated into the store front of the Premises. Tenant further agrees to maintain such sign, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times. In the event that Landlord at any time during the term of this Lease elects to erect signage within the interior of the Shopping Center which in a general fashion depicts any so-called entertainment wing of the Shopping Center, then Tenant may, at its option, be included in such signage at Landlord's cost and expense. Notwithstanding anything to the contrary in this Lease, Tenant shall be permitted to erect interior bulkhead and directional signage as depicted on Exhibit F attached hereto and made a part hereof. 9.04 - CONDITION OF THE PREMISES Throughout the Term. Tenant shall maintain the Premises in a manner consistent with a first class shopping center. ARTICLE 10 REPAIRS AND MAINTENANCE 10.01 - LANDLORD'S OBLIGATION TO REPAIR Landlord agrees to repair and maintain, at Landlord's sole cost and expense, the outside walls, structure and foundation of the building containing the Premises in good order and serviceable condition. Landlord agrees to commence any such repair within a reasonable time (not to exceed thirty (30) days, unless by the nature of such repair, it cannot reasonably be commenced within said thirty (30) day period) after written notice from Tenant that the same is necessary. There is excepted from this covenant the following, which shall be Tenant's responsibility: (a) Repair of damage caused by the act or omission of Tenant, its employees, agents, and contractors; (b) Repair of any loading areas not used in common with others; and (c) Repairs which are the responsibility of Tenant in accordance with Section 10.02. 10.02 - TENANT'S OBLIGATION TO REPAIR (a) Tenant agrees, at its sole cost and expense, to repair and maintain the Premises in good order and condition, including but not limited to the non-structural portions of the Premises, including store front, loading areas, show windows, doors, windows, plate and window glass, ceilings, floor coverings, Tenant's HVAC systems, and the plumbing, sprinkler, electric and sewage systems, facilities, appliances, lighting fixtures and other systems and improvements located within the Premises. In addition, Tenant shall be responsible, at its sole expense, for the repair and maintenance of its rooftop HVAC unit(s) (if any) and any other equipment or improvement located outside the Premises which is constructed or installed by Tenant or at Tenant's request and is used exclusively by or for Tenant. Tenant shall obtain Landlord's prior consent before making any repair or performing any maintenance which may adversely affect any aspect of the Shopping Center's operation. (b) During the entire term, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with an independent HVAC contractor approved by Landlord covering at least the routine items of maintenance for Tenant's HVAC systems as are recommended by the manufacturer of such systems, provided that the cost thereof at all times shall be reasonable and competitive. Tenant agrees to provide Landlord with a copy of such HVAC; service contract within thirty (30) days following the Term Commencement Date. Further, Tenant agrees during the entire term of this Lease to use the sprinkler service company designated by Landlord for any repairs or maintenance required for Tenant's sprinkler system, provided that the cost thereof at all times shall be reasonable and competitive. (c) If repairs are required to be made by Tenant pursuant to the terms of the Lease, Landlord may demand (but shall not be required to do so) that Tenant make the same forthwith, and if Tenant refuses or neglects to commence to such repairs and complete the same with reasonable dispatch after such demand, and if Tenant's failure to commence such repairs continues for fifteen (15) days after receipt of notice from Landlord, Landlord may make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to its stock or business by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will, on demand, pay as Additional Rent to Landlord, reasonable out-of-pocket costs incurred by Landlord therefor, and a [***] administration fee, and if Tenant defaults in such payment, Landlord shall have the remedies provided in Article 15 hereof. Likewise, if repairs are required under the terms hereof to be made by Landlord and it fails or refuses after twenty (20) days' notice and demand by Tenant to commence such repairs and thereafter diligently prosecute same to completion, then Tenant shall have the right to make such required repairs. Landlord shall reimburse Tenant for the cost of such repairs within twenty (20) days after receipt by Landlord of evidence of payment therefor by Tenant, additionally, Tenant shall have the right to offset such costs *** Confidential treatment requested. 16 21 against the payment of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent if Landlord shall fail to reimburse Tenant for the cost of such repairs within thirty (30) days after receipt by Landlord of evidence of payment therefor by Tenant. (d) If Tenant's use of the Premises requires a grease trap, Tenant agrees to maintain, at Tenant's sole cost, a maintenance contract with, an independent service contractor approved by Landlord to inspect, clean and repair such grease trap at such intervals as may be required by Tenant's use but in no event less frequently than once a month. (e) Tenant shall not, and shall not permit any of its employees, invitees, contractors or agents to, enter or otherwise be on the roof of the Building without prior written notice to Landlord. Tenant shall give Landlord not less than five (5) days' prior written notice of the date any such person will be on the roof of the Building. 10.03 - Article Not Applicable to Fire or Condemnation The provisions of this Article shall not apply to the repair of damage caused by fire, casualty, which matter is covered under Article 13, nor shall these provisions apply to a taking under the power of Eminent Domain, which matter is covered under Article 14. ARTICLE 11 Indemnity 11.01 - Indemnity Tenant will indemnify and hold harmless Landlord, Landlord's managing agent and such other persons who are in privity of estate with Landlord, or to whom Landlord is legally responsible (collectively, "Landlord's Party"), from and against any and all claims, actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Premises, from or out of the occupancy or use by Tenant of the Premises or the Shopping Center or any part thereof, or occasioned wholly or in part by any negligent act or omission of Tenant, its agents, contractors, employees, lessees, invitees or concessionaires; provided, however, Tenant shall not be required to indemnify, defend, hold harmless, protect, release or otherwise exculpate Landlord or any member of Landlord's Party from and against any claims, actions, damages, liabilities or expenses to the extent the same results from Landlord's or any member of Landlord's Party's or their respective agents, employees, contractors, licensees, invitees or servants' negligence, willful misconduct, failure to comply with applicable laws or breach of this Lease. In case Landlord or any member of Landlord's Party shall be made a party to any action or proceeding commenced by or against Tenant, then Tenant agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Tenant shall pay to Landlord all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Landlord in enforcing the terms, conditions, covenants and agreements in this Lease. Landlord shall indemnify, hold harmless and defend Tenant, Tenant's managing agent, if any, and such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible (collectively, "Tenant's Party"), from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Shopping Center, or occasioned wholly or in part by any negligent act or omission of Landlord, its agents, contractors, employees, lessees, invitees or concessionaires; provided, however, Landlord shall not be required to indemnify, defend, hold harmless, protect, release or otherwise exculpate Tenant or any member of Tenant's Party from and against any claims, actions, damages, liabilities or expenses to the extent the same results from Tenant's or any member of Tenant's Party's or their respective agents, employees, contractors, licensees, invitees or servants' negligence, willful misconduct, failure to comply with applicable laws or breach of this Lease. In case Tenant, Tenant's managing agent or such other persons who are in privity of estate with Tenant, or to whom Tenant is legally responsible, shall be made a party to any action or proceeding commenced by or against Landlord, then Landlord agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by such parties in connection with such action or proceeding. Landlord shall pay to Tenant all costs, expenses and reasonable attorneys' fees that may be incurred or paid by Tenant in enforcing the terms, conditions, covenants and agreements in this Lease. ARTICLE 12 Insurance 12.01 - Liability Insurance Throughout the term of this Lease, Tenant, at its sole cost and expense, for the mutual benefit of Landlord and Tenant, shall maintain personal injury and property damage liability insurance against claims for personal injury, bodily injury, death or property damage occurring on, in or about the Premises, or arising from, in or about Tenant's use of the Common Areas, or resulting from or arising out of products sold from the Premises or Tenant's use of the Common Areas during the term of this Lease, of not less than [***] in respect of personal injury, bodily injury, death or property damage (combined single limit). Such policy shall expressly contain a contractual endorsement to provide coverage for Tenant's indemnification set forth in Section 11.01 of this Lease and shall contain the "Per Location Aggregate" endorsement. Such policy shall be endorsed (1) as primary and (2) to waive rights of subrogation against Landlord. Prior to the Term Commencement Date, Tenant shall provide Landlord with a certificate containing evidence of such coverage and of the coverage required in Sections 12.02(c) and (d) below, and Tenant shall thereafter provide Landlord with appropriate evidence of said *** Confidential treatment requested. 17 22 coverage upon each anniversary date of the policy. In the event that Tenant fails to provide the certificate as set forth herein or falls to provide such evidence of such coverage at least fifteen (15) days prior to the expiration date of each expiring policy, Landlord may obtain such insurance at Tenant's sole cost and expense and upon demand of Landlord, Tenant shall reimburse Landlord for the cost of procuring such insurance coverage together with [***] for administration costs. 12.02 - Special Causes of Loss and Difference In Conditions Insurance (a) At all times during the term of this Lease, Landlord shall keep all Permanent Improvements, as hereinafter defined, insured for the benefit of Landlord against loss or damage by risks now or hereafter embraced by "Special Causes of Loss" and "Difference in Conditions" coverages and against such other risks as Landlord from time to time reasonably may designate in amounts sufficient to prevent Landlord from becoming a coinsurer under the terms of the applicable policies. In any event, the amount applicable to "Special Causes of Loss" policies shall be not less than [***] of the "Then Full Replacement Cost" (being the cost of replacing the Permanent Improvements exclusive of the costs of excavations and footings below the lowest grade level). The Then Full Replacement Cost shall be determined from time to time (but not more frequently than once in any twelve (12) calendar months) by an appraiser, architect or other person or firm designated by Landlord. (b) The Permanent Improvements for purposes of this Section 12.02 shall be deemed to mean the building in which the Premises is situated, the appurtenances thereto and the equipment and other improvements constructed by Landlord and Tenant pursuant to Exhibits B and C. Such Permanent Improvements shall exclude, however, Tenant's merchandise, trade fixtures, furnishings, equipment, wall covering, carpeting, drapes, and all personal property (collectively "Tenant's Personal Property"). Tenants shall provide Landlord with a certificate setting forth the cost of Tenant's Work no less than [***] days prior to the Term Commencement Date. (c) At all times during the term of this Lease, Tenant shall keep all of Tenants Personal Property situated at or on the Premises, insured with "Special Causes of Loss" and "Difference in Conditions" and "Plate Glass" coverages for not less than the full replacement cost thereof, with the deductible on the "Plate Glass" and "Special Causes of Loss" policies not to exceed [***] and with a commercially reasonable deductible on the "Difference in Conditions" policy (provided, however, by way of illustration and not limitation, it shall be deemed commercially reasonable for the "Difference in Conditions" policy to have a deductible of [***] of the value of the insured property or a deductible of [***]. (d) Tenant shall maintain, and shall cause all parties performing work on or about the Premises or on behalf of Tenant to maintain, statutory Workers' Compensation coverage according to the laws of the state in which the Shopping Center is located and Employers Liability coverage in limits of not less than [***]. 12.03 - Insurance on Common Areas At all times during the term of this Lease, Landlord shall keep the Common Areas insured for personal injury, bodily injury and property damage liability. "Special Causes of Loss" and "Difference in Conditions" property coverage, Workers' Compensation, Employers Liability and any other casualty or risk insurance which Landlord or Landlord's insurance carrier deems necessary or appropriate. If and to the extent Landlord elects to self insure up to the first [***] of any claims for personal injury or bodily injury, or under Workers' Compensation, there shall be included within insurance costs the amount of any personal injury, bodily injury or Workers' Compensation claim(s) or judgment(s) paid by Landlord, limited, however, in each instance to the lesser of (i) [***], or (ii) [***]. 12.04 - Increase in Fire Insurance Premium Tenant covenants and agrees to promptly pay to Landlord as Additional Rent, upon demand, the amount of any increase in the rate of insurance on the Premises or on any other part of the Shopping Center that results by reason of Tenant's act(s) or Tenants permitting certain activities to take place. 12.05 - Tenant to Share Insurance Costs Tenant's obligation for the payment of Insurance Costs is included in Common Area costs, as set forth in Section 7.04 of this Lease. 12.06 - Waiver of Subrogation Each party releases and waives on behalf of itself and on behalf of the insurers of such party's property, any and all claims and any rights of subrogation of any such insurer against the other party, its employees and agents for loss (other than loss or damage resulting from the willful act of such other party, its employees and agents) sustained from any peril to property required to be insured against herein, whether or not such insurance is actually in force, or from any peril to property actually insured against, though not required to be under this Lease. The policies of the respective parties shall contain an express waiver of subrogation to this effect. 12.07 - Policies All insurance provided in this Article 12 shall be effected under valid and enforceable policies of at minimum a Best rating of A-, XII and issued by insurers of recognized responsibility which are licensed to do business in the state in which the Shopping Center is located. All of Tenant's policies of insurance as required in this Article 12 shall name Landlord, Tenant, Landlord's managing agent and any mortgagee having an interest in any or all part of the Shopping Center the name and address of which Tenant has received written notice, as additional insureds, as their respective interests may appear. Tenant agrees that such policies shall also be made payable, if required by Landlord, to a mortgagee or ground lessor, as the interest of such mortgagee or ground lessor may appear. The loss, if any, under any policies provided for hereunder may be adjusted with the insurance company by Landlord. *** Confidential treatment requested. 18 23 Each of Tenant's policies shall contain an agreement by the insurer that such policy shall not be terminated, canceled or reduced in coverage without at least thirty (30) days' prior written notice to Landlord and to any mortgagee or ground lessor to whom a loss thereunder is payable. The minimum limits of coverage for all of Tenant's policies of insurance required by this Article 12 shall be increased by Tenant if reasonably required by Landlord. ARTICLE 13 Damage by Fire, Etc. 13.01 - Restoration of Premises (a) The parties hereto mutually agree that if the Premises are partially or totally destroyed or damaged by fire or otherwise, then Landlord (subject to being able to obtain all necessary permits and approvals therefor) shall repair and restore the Premises as soon as is reasonably practicable to substantially the same condition in which the Premises existed before such damage; provided that if the insurance proceeds (other than the amount of any deductible, self insured retention or co-insurance requirement) collected or collectible and available to Landlord to pay the cost of such repairs and restorations by Landlord as a consequence of such destruction or damage are less than the cost of such repairs and restoration as estimated by Landlord's architect, Landlord shall not be obligated to commence or perform such repairs and restorations, and this Lease upon notice by Landlord to Tenant shall at gm option of Landlord terminate unless Tenant undertakes (in form and upon terms satisfactory to Landlord) to pay the difference between such estimated cost and such insurance proceeds. Within forty-five (45) days following the date of damage or destruction, Landlord shall notify Tenant of its Intentions with respect to the repairs or restoration of the Premises, and in the event Landlord elects to repair or restore the Promises, Landlord shah diligently pursue such repair or restoration to completion following commencement of the repairs or restoration. If, however, the Promises are completely destroyed or so damaged that Landlord cannot complete restoration or rebuilding in four (4) months to substantially the same condition in which the Premises were before such damage, then Landlord shall not be required to rebuild or restore, and this Lease shall be terminable by either party serving written notice upon the other. In any event, if repairs have not been commenced within sixty (60) days after the date on which Landlord receives the insurance proceeds, or if the repairs have been commenced within such time but Landlord is not diligently pursuing such repairs or restoration, then this Lease may be terminated by Tenant serving notice upon Landlord following the expiration of such sixty (60) days by giving Landlord not less than thirty (30) days' advanced written notice of such election. Except as otherwise provided in this Section 13.01 (a), provided Landlord is diligently pursuing such repairs or restoration, in no event may Tenant terminate this Lease after such repairs have been commenced by Landlord. (b) In the event the Premises are completely or partially destroyed or so damaged by fire or other hazard that the Premises cannot be reasonably used by Tenant or can only be partially used by Tenant and this Lease is not terminated as above provided, there shall be no abatement of rent for the first sixty (60) days following the date of damage or destruction, it being understood and agreed that the Tenant at its discretion, cost and expense shall procure insurance necessary to protect itself against any interruption of its business during such sixty (60) day period. In the event that Tenant is prevented from using the Premises in excess of sixty (60) days, then Fixed Annual Minimum Rent and Additional Rent shall be abated, and there shall be a proportionate reduction to the Annual Minimum Gross Receipts, from and after said sixtieth (60th) day until the date Tenant is able to reopen for business within the Premises. 13.02 - Restoration During Last Three Years Anything in Section 13.01 to the contrary notwithstanding, if, within three (3) years prior to the expiration of the initial term or at any time during any renewal term (if any) of this Lease the Premises shall be damaged or destroyed by fire or otherwise and the estimated cost of restoration exceeds Fifty Thousand and 00/100 Dollars ($50,000.00), then at the election of Landlord or Tenant and by notice to the other, the Lease shall terminate. 13.03 - Tenant's Obligation Upon Restoration In the event of damage or destruction to the Premises and unless this Lease is terminated by Landlord or Tenant as provided in this Article 13, Tenant shall, as soon as reasonably possible, repair, redecorate and refixture the Premises and restock the contents thereof in a manner and to at least a condition equal to that existing prior to its destruction or casualty, and reopen the entire Premises for business. All proceeds of insurance carried by Tenant on Tenant's Personal Property shall be held in trust for such purposes. ARTICLE 14 Eminent Domain 14.01 - Eminent Domain If the Premises, or such portion thereof as to render the balance wholly unsuitable for the purpose of Tenant, is taken by condemnation or the right of eminent domain, or by agreement between Landlord and those authorized to exercise such right (collectively the "Condemnation Proceedings"), either party upon written notice to the other shall be entitled to terminate this Lease provided that such notice is given not later than thirty (30) days after Tenant has been deprived possession of use by such taking. Should any part of the Premises be so taken and should this Lease not be terminated in accordance with the foregoing provisions, Landlord covenants and agrees promptly after such taking to expend so much as may be necessary of the net amount which may be awarded to and received by it in such Condemnation Proceedings in restoring the Premises to an architectural unit as nearly like its condition prior to such taking as shall in the reasonable judgment of Landlord be practicable, with an appropriate abatement to be made in Fixed Annual Minimum Rent and a corresponding reduction in Annual Minimum Gross Receipts. Should the net amount so awarded to and received by Landlord be insufficient to cover the cost of restoring the Premises as estimated by Landlord's architect, Landlord may at its election, supply the amount of such insufficiency and restore 19 24 the Premises, as above provided, or terminate this Lease. Where Tenant has not already exercised any right of termination accorded to it under this Section 14.01, Landlord shall notify Tenant of Landlord's election within ninety (90) days after the final determination of the amount of the award. 14.02 - Landlord Entitled to Award Out of any award for any such taking of the Premises or any part thereof, Landlord shall be entitled to receive and retain the amounts awarded for such Premises, except that Tenant shall be entitled to receive and retain only amounts which may be specially awarded to it in any such condemnation proceedings because of the taking of its trade fixtures and its leasehold improvements which have not become a part of the realty, and such business loss as Tenant shall specifically and separately establish, but not otherwise. It is understood in the event of on termination of this Lease as aforesaid, Tenant shall have no claim against the Landlord or the condemning authority for the value of any unexpired term of its Lease and no right or claim to any part of the award on account thereof. Tenant hereby waives each such claim or right and assigns any such claim or right to Landlord. Anything contained in this Lease to the contrary notwithstanding, Tenant shall have the right to bring any claim during any Condemnation Proceedings, provided such claim does not reduce the claim of Landlord in said Condemnation Proceedings. ARTICLE 15 Bankruptcy and Default Provisions 15.01 - Events of Default and Conditional Limitation (a) If at any time prior to or during the term any one or more of the following events occurs, each such event shall constitute an "event of default": (i) Tenant or Tenant's Guarantor, if any, makes an assignment for the benefit of its creditors; (ii) The leasehold estate hereby created in Tenant is taken on execution or by other process of law; (iii) Any petition is filed against Tenant or Tenant's Guarantor, if any, in any court, whether or not pursuant to any bankruptcy, reorganization, composition extension, arrangement or insolvency proceedings, and Tenant or Tenant's Guarantor is thereafter adjudicated bankrupt, or such petition is approved by the Court, or the Court assumes jurisdiction of the subject matter and such proceedings are not dismissed within ninety (90) days after the institution of the same; or any such petition is so filed by Tenant, or Tenant's Guarantor. (iv) In any proceedings, a receiver or trustee is appointed for Tenants property or the property of Tenant's Guarantor and such receivership or trusteeship is not vacated or set aside within ninety (90) days after the appointment of such receiver or trustee; (v) Tenant intentionally or fraudulently understates Gross Receipts by five percent (5%) or more: (vi) There is a transfer or an attempted transfer of this Lease or of Tenant's interest thereof in violation of the restrictions set forth in Article 17 of this Lease; (vii) Tenant ceases operation in or vacates or abandons the Premises or is otherwise in breach of Sections 6.01 or 6.02 of this Lease, and such breach is not cured within ten (10) days following written notice from Landlord, provided, however, that if such default cannot be cured within said time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; (viii) Tenant fails to comply with any local, state or federal law, rule or regulation governing the use, handling and disposal of Hazardous Materials or is otherwise in violation of the obligations contained in Section 18.03 of this Lease, and Tenant fails to commence a cure of such violation within thirty (30) days following written notice from Landlord (or such shorter time period if required by law); provided, however, that If such default cannot be cured within said time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within said time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; (ix) Tenant fails to comply with the obligations contained in Section 21.03 of this Lease, and such failure continues for fifteen (15) days following written notice from Landlord; (x) Tenant or Tenant's Guarantor, if any, fails to pay any installment of the Fixed Annual Minimum Rent, Percentage Rent, Additional Rent or any portion of any such payment, when the same becomes due and payable, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; (xi) Tenant or Tenant's Guarantor, if any, fails to pay any installment of the Fixed Annual Minimum Rent, Percentage Rent, Additional Rent or any portion of such payment, when same becomes due and payable, and such failure occurs on three (3) or more occasions in any Lease Year or Partial Lease Year; (xii) Tenant fails to comply with the obligations contained in Section 1.03 of this Lease, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant: provided, however, that if such default cannot be cured within such time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within such time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant shall promptly notify Landlord of Tenant's commencement of such cure; or 20 25 (xiii) Tenant or Tenants Guarantor, if any, fails to perform or observe any other material requirement of this Lease (not hereinbefore specifically referred to) on the part of Tenant to be performed or observed and such failure continues for thirty (30) days after receipt of written notice from Landlord to Tenant provided, however, that if such default cannot be cured within such time period, Tenant shall be deemed to have cured such default if Tenant commences cure of the default within such time period, and thereafter diligently and in good faith continues with and actually completes said cure. Tenant or Tenant's Guarantor, if any, shall promptly notify Landlord of Tenant's or Tenant's Guarantors (if any) commencement of such cure. (b) This Lease and the term are expressly subject to the conditional limitation that upon the happening of any one or more of the aforementioned events of default, Landlord, in addition to the other rights and remedies it may have, shall have the right, upon notice to Tenant to declare this Lease terminated and the term ended, in which event all of the right, title and interest of Tenant hereunder shall wholly cease and expire upon receipt by Tenant of a Notice of Termination. Tenant shall then quit and surrender the Premises to Landlord in the manner and under the conditions as provided for under this Lease, but Tenant shall remain liable as hereinafter provided. Notwithstanding anything to the contrary in this Section 15.01(b), the parties hereby agree that the following events shall be deemed "material" for the limited purposes of determining Landlord's right to terminate this Lease according to the terms of this Section 15.01 (b) following an event of default for which notice and any applicable opportunity to cure has expired: (i) failure to open and commence and continue operation of Tenant's business within the entire Promises according to Section 6.02 of this Lease; (ii) failure to make repairs to the Premises according to Section 10.02 of this Lease; (iii) failure to comply with Tenant's indemnification obligations according to Article II of this Lease; (iv) failure to comply with Tenant's insurance obligations pursuant to Article 12 of this Lease; (v) failure to comply with Tenant's obligations with regard to Restoration of the Premises according to Section 13.03 of this Lease; (VI) an assignment, sublet or other transfer not in compliance with the terms of Article 17 of this Lease; and (vii) failure to comply with Government Orders, Insurance Matters, Hazardous Material or the ADA, all according to the terms of Article 18 of this Lease. It is specifically understood and agreed that this provision shall not in any way modify any other termination right of Landlord which is otherwise specifically provided for in this Lease. 15.02 - Landlord's Remedies (a) If this Lease shall be terminated as provided in Section 15.01, Landlord or Landlord's agents or employees may immediately or at any time thereafter re-enter the Premises and remove therefrom Tenant, its agents, employees, licensees, and any sub-tenants and other persons, firms or corporations, and all or any of its or their property therefrom, either by summary dispossess proceedings or by any suitable action or proceedings at law or in equity, without being liable to indictment or prosecution of damages therefor, and repossess and enjoy the Premises, together with all alterations, additions and improvements thereto. Landlord, in the event of such re-entry and repossession, may store Tenant's Personal Property in a public warehouse or elsewhere at the cost of and for the account of Tenant. (b) In case of any such termination, re-entry or dispossession by summary proceedings or otherwise, the rents and all other charges required to be paid up to the time of such termination, re-entry or dispossession, shall be paid by Tenant, and Tenant also shall pay to Landlord all reasonable expenses which Landlord may then or thereafter incur for legal expenses, attorneys' fees, brokerage commissions and all other costs paid or incurred by Landlord as the result of such termination, re-entry or dispossession, and for restoring the Premises to good order and condition and for altering and otherwise preparing the same for reletting and for reletting thereof. Landlord may, at any time and from time to time, relet the Premises, whole or in part, for any rental then obtainable either in its own name or as agent of Tenant, for a term which, at Landlord's option, may be for the remainder of the then current term of this Lease or for any longer or shorter period. (c) If this Lease is terminated as aforesaid, Tenant nevertheless covenants and agrees notwithstanding any entry or re-entry by Landlord whether by summary proceedings, termination or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal to the several installments of Fixed Annual Minimum Rent, Percentage Rent and Additional Rent reserved as they would, under the terms of this Lease, become due if this Lease had not been terminated or if Landlord had not entered or re-entered as aforesaid, and whether the Premises is relet or remains vacant in whole or in part or for a period less than the remainder of the term, and for the whole thereof. In the event the Premises be relet by Landlord, Tenant shall be entitled to a credit (but not in excess of the Fixed Annual Minimum Rent, Percentage Rent and Additional Rent reserved under the to of this Lease) in the net amount of rent received by Landlord in reletting the Premises after deduction of the reasonable out-of-pocket expenses and costs incurred or paid as aforesaid in reletting the Premises and in collecting the rent in connection therewith. If Tenant fails to make such payments in accordance with the first sentence, of this subsection 15.02(c) for any two (2) consecutive months following the termination of this Lease, Landlord shall at any time thereafter, in lieu of collecting any monthly deficiencies, or any further monthly deficiencies, aforesaid. at Landlord's option, be entitled to recover from Tenant, in addition to any other relief, such a sum as at the time of such termination represents the amount of the then present value of the total Fixed Annual Minimum Rent, Percentage Rent, and Additional Rent which would have accrued to Landlord under this Lease for the remainder of the Lease term, as if the Lease had been fully complied with by Tenant. less any monthly deficiencies for such period previously paid to Landlord by Tenant, The present value ("Present Value Amount") shall be calculated by discounting all amounts due by a discount rate equal to the greater of (i) the [***] or (ii) [***]. Tenant shall be entitled to a credit against the Present Value Amount for Fixed Annual Minimum Rent, Percentage Rent and Additional Rent subsequently received by Landlord from a replacement tenant against amounts paid by Tenant to Landlord after deducting the allowance paid by Landlord to Tenant and all expenses and costs incurred or paid (including any allowances, construction costs and administrative costs) by Landlord in reletting the Premises and in collecting the rent in connection therewith, which right to a credit shall terminate on the date this Lease would have expired pursuant to Section 2.02. Suit or suits for the recovery of the deficiency or damages referred to in this Subsection 15.02(c) or for any installment or installments of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent hereunder, or for a sum equal to any such installment or installments, may be brought by Landlord all at once or from time to time at Landlord's election, and nothing in this Lease shall be deemed to require Landlord to await the date whereon this Lease or the term hereof would have naturally expired had there been no such default by Tenant or no such termination. (d) For the purpose of this Section 15.02, it shall be deemed that the Percentage Rent for any period after any such default and entry by Landlord would have been at the monthly rate thereafter equal to the average *** Confidential treatment requested. 21 26 Percentage Rent which Tenant was obligated to pay to Landlord under this Lease within the two (2) Lease Years (or lesser number of Lease Years since the Term Commencement Date) immediately preceding the date of such entry. (e) Tenant hereby expressly waives, so far as permitted by law, any and all right of redemption or reentry or repossession under present or future laws arising after Landlord's recovery of possession, including any amendments hereafter, or to restore the operation of this Lease. Landlord and Tenant, so far as permitted by law, waive and will waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, or any claim or injury or damage. The terms 'enter,' 're-enter,' 'entry' or 're-entry' as used in this Lease are not restricted to their technical legal meaning. In the event Landlord commences any proceedings for the recovery of possession of the Promises or to recover for nonpayment of Fixed Annual Minimum Rent, Percentage Rent or Additional Rent, Tenant shall not Interpose any noncompulsory counterclaim in any such proceeding. This may not, however, be construed as a waive of Tenant's rights to assert such claim in any separate action or actions initiated by Tenant. (f) No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach shall be deemed an accord and satisfaction thus Landlord may accept any check or payment without prejudice to Landlord's rights to recover the balance due, nor shall it constitute a waiver of any such breach or of such covenant, agreement, term and condition, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. (g) In the event of any breach or threatened breach by Tenant of any of the covenants, agreements, terms or conditions contained in this Lease, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity, by statute or otherwise. (h) Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereinafter existing at law or in equity, by statute or otherwise. ARTICLE 16 Mechanics' Liens 16.01 - Mechanics' Liens (a) If any mechanics' liens are filed against the Premises or any portion of the Shopping Center based upon any act of Tenant or anyone claiming through Tenant. Tenant shall hold Landlord harmless from all damages, claims and expenses arising therefrom, and Tenant, after notice from Landlord (or any person in privity of estate with Landlord), shall forthwith commence such action by bonding, deposit, payment or otherwise as will remove or satisfy such lien within thirty (30) days. In the event Tenant does not remove or satisfy said lien within said thirty (30) day period, Landlord shall have the right to do so by posting a bond or undertaking, and Tenant agrees to reimburse Landlord for all reasonable out-of-pocket expenses incurred by Landlord in connection therewith five (5) days after receipt by Tenant of Landlord's invoice therefor. These expenses shall include, but not be limited to, filing fees, legal fees and bond premiums. (b) Nothing in this Article 16 shall be deemed or construed as (i) Landlord's consent to any person, firm or corporation for the performance of any work or services or the supply of any materials to the Premises or any improvement thereon, or (ii) giving Tenant of any other person, firm or corporation any right to contract for or to perform. or supply any work, services or materials that would permit or give rise to a lien against the Premises or any part thereof. ARTICLE 17 Assignments, Subleases and Other Transfers of Tenant's Interest 17.01 - Limitations on Tenant's Rights (a) Neither this Lease nor the interest of Tenant in this Lease shall be sold, assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation of law or otherwise, nor shall the Premises or any part thereof be sublet or subject to any license or concession without the prior written consent of Landlord in each instance. The sale or transfer of stock constituting a controlling interest In Tenant or Tenant's Guarantor shall be considered for the purpose of this Lease to be an assignment, and likewise shall require Landlord's prior written consent, except where Tenant or Tenant's Guarantor is a corporation having its shares traded on the New York, American or Over-The-Counter stock exchange or market. Tenant shall make available to Landlord the stock record books of Tenant and Tenant's Guarantor and shall produce the same on request of Landlord. Similarly, if Tenant is a partnership, the interest of any partner shall not be transferred without Landlords prior written consent. For the purposes of this Lease, the entering into of any management agreement or any similar agreement which transfers control of the business operations of Tenant in the Premises shall be treated as an assignment of this Lease and shall require Landlord's prior written consent. Any attempted transfer, assignment, subletting, license or concession agreement, hypothecation or other transfer herein that is prohibited without Landlord's prior written consent shall be void and confer no rights upon any third party. Anything contained in this Section 17.01(a) to the contrary notwithstanding, Tenant shall have the right without Landlord's consent to assign this Lease or sublet the Premises, subject to the terms of this Lease, in conjunction with the sale of substantially all of the other assets and other store locations of Tenant to Tenant's parent, Tenant's subsidiary, or a subsidiary of Tenant's parent, provided that at least seventy-five percent (75%) of Tenant's other stores located in the United States are simultaneously transferred to such entity. Tenant shall remain primarily liable under this Lease following any assignment of the Lease or subletting of the Premises. Subject to paragraph (f) hereinbelow, Landlord shall not unreasonably withhold 22 27 its consent to any assignment or subleasing and shall respond to any request by Tenant for permission to sublease or assign with thirty (30) days after receipt of written request. If Landlord objects to such assignment or sublease. Landlord shall advise Tenant of the reasons for such objections. If Landlord fails to respond to such request within said thirty (30) days, and such failure continues for ten (10) days following Notice from Tenant, then such failure shall be deemed approval of such sublease or assignment. Notwithstanding the terms of the immediately preceding grammatical paragraph provided Tenant is not in default beyond any applicable cure period, named Tenant may, without the consent of Landlord, assign this Lease or sublet the entire Premises to any corporation which owns all of the issued and outstanding common stock of named Tenant or to a wholly owned subsidiary corporation of named Tenant, or to any corporation resulting from the consolidation or merger of named Tenant, in or with any other business organization or any person, firm or corporation acquiring all of the issued and outstanding capital stock of named Tenant or all or substantially all of the assets, store locations and no less than eighty percent (80%) of leases (including this Lease) of named Tenant to the same entity; however, no such assignment shall be deemed effective unless and until such assignee executes and delivers to Landlord, at no cost to Landlord, a written agreement in form and substance acceptable to Landlord whereby such assignee assumes for the benefit of Landlord the performance and observance of all of the terms, conditions and covenants contained in this Lease. The foregoing is subject to Tenant providing Landlord with thirty (30) days' written notice in advance, including statements of fact certified by an authorized officer of Tenant, certifying the facts upon which Tenant is claiming the right to assign this Lease pursuant to this grammatical paragraph. In addition, any private placement or public offering of ownership interest in Tenant shall not require Landlord's prior consent, provided that as a result of any private placement the day-to-day management of Tenant remains unchanged. Notwithstanding anything contained in this Section 17.01 to the contrary, a public offering of Tenant's voting stock on a nationally recognized public stock exchange shall not be deemed an assignment of this Lease, provided (i) Tenant shall have given Landlord ten (10) days' prior written notice of such intended public offering, and (ii) this Lease is not further assigned except as provided for in this Article 17. (b) No permitted assignment made shall be effective until there are delivered to Landlord (i) an agreement, in recordable form, executed by Tenant and the proposed assignee, wherein such assignee assumes due performance of the obligations of Tenant's part to be performed under this Lease to the end of the term hereof and (ii) a written consent to such assignment by the holder of any fee or leasehold mortgage affecting the Premises to which this Lease is then subject and such consent shall have been obtained and delivered to Landlord if so required by the terms of such mortgage or by a collateral document securing the same obligations as are secured by such mortgage. (c) Any assignment of this Lease or any sublease affecting the Premises or any other permitted transfer hereunder shall be subject and subordinate to the full terms and conditions of this Lease. Regardless of either the assumption by any assignee or sublessee of due performance or the Landlord's acceptance of rent or other charges from such assignee or sublessee, Tenant shall not be released by any assignment or sublease but shall continue to be fully responsible for the due performance of Tenant's obligations hereunder in the same manner and to the same extent as if no such assignment or sublease had been made. Notwithstanding anything to the contrary in this Section 17.01(c), for any assignment of this Lease for which Landlord's consent is required and such consent is granted, Tenant shall be released from any future obligations under this Lease provided that the proposed assignee maintains a net worth of at least Ten Million Dollars ($10,000.000) for the twenty-four (24) month period immediately preceding the assignment and for the twelve (12) months immediately following the assignment. (d) In the event Tenant assigns or subleases all or any portion of the Premises as set forth in this Article 17 and the amounts due to Tenant under such assignment or sublease exceed the amounts reserved to be paid to Landlord by Tenant under this Lease, then Tenant shall pay to Landlord one-half of the amount by which such assignment or sublease rent exceeds Rent as set forth in Section 3.01(a) above. In the event Tenant assigns or subleases only a portion of the Premises, the assignment or sublease rent shall be calculated on a per square foot basis and then compared to the then applicable per square foot Rent reserved in Section 3.01(a) above to determine whether or not such assignment or sublease rent exceeds Rent. (e) Any transfer made in violation of the provisions of subsections (a), (b) or (c) in this section 17.01 shall constitute an event of default under Section 15.01 herein and give rise to Landlord's right to re-enter the Premises in accordance with Section 15.02. (f) Notwithstanding anything in this Section 17.01 to the contrary, if Tenant desires to assign its interest under this Lease or to sublet all of the Premises to a Permitted Party (as hereinafter defined), Tenant shall deliver to Landlord written notice, requesting Landlord's consent to such transaction, which consent request shall include (i) a fully executed letter of intent containing the material terms of the proposed assignment or sublet transaction (including proposed rent (including additional rent), square foot area, term and use), (ii) current reasonable financial information with respect to the proposed assignee or sublessee, including without limitation its most recent financial report, (iii) a statement that the proposed assignment or sublease relates to the entire Premises for the remaining term of this Lease, and (iv) an express statement to the effect that the proposed assignee or sublessee is a Permitted Party within the meaning of this paragraph and that Landlord has the right to terminate this Lease in connection with the assignment or sublease pursuant to this Section 17.01(f) or such assignment or sublease shall be deemed consented to by Landlord. A notice that contains the information described in clauses (i) through (iv) shall be deemed an offer ("Takeback Offer") from Tenant to Landlord whereby Landlord may terminate this Lease. If Tenant's notice does not expressly state the items described in clauses (i) through (iv) including that the proposed assignee or sublessee is to a Permitted Party, such notice shall constitute a request by Tenant for Landlord's consent to sublease the Premises or assign this Lease subject to the other terms of this Section 17.01; such notice shall not constitute a Takeback Offer and Landlord shall not be entitled to terminate this Lease under this Section 17.01(f). The Takeback Offer may be exercised by Landlord by written notice ("Takeback Notice") to Tenant at any time within thirty (30) days after such Takeback Offer has been given by Tenant to Landlord; and during such thirty (30) day period Tenant shall not assign this Lease to such prospective assignee or sublet the Premises to such prospective sublessee unless such assignment is expressly conditioned upon and not effective until the expiration of the 30-day period for Landlord to deliver the Takeback Notice. The term "Permitted Party" shall mean a third party (i) who will operate the Premises for a lawful bona fide retail use consistent with uses at other first-class shopping centers or for the use permitted under Section 6.01 of this Lease, and not in violation of any use restriction in effect for the Shopping Center of which Tenant has been advised within twenty (20) days after Landlord's receipt of 23 28 Tenant's Takeback Offer; (ii) who has a net worth equal to or greater than the then net worth of Tenant; and (iii) who is a national or regional chain of retail stores, or is then operating (directly or indirectly) at least five (5) stores in the States of New York, New Jersey, Pennsylvania, Massachusetts and Connecticut for the same or similar use, or has at least ten (10) years of retail operating experience. Upon such termination, all obligations of Landlord and Tenant (other than those that expressly are stated to survive termination) shall cease to be of further force and effect. Notwithstanding anything in this Section 17.01 to the contrary, Tenant shall have the right, without Landlord's consent, to secure furniture, fixture and equipment financing in the ordinary course of business and to grant to the financing party a security interest in the furniture, fixtures, or equipment. If Landlord exercises its option to terminate this Lease pursuant to this subsection in connection with an assignment or sublet of all of the Premises, then, unless Tenant, within fifteen (15) days after receipt of the Takeback Notice, withdraws Tenant's request for Landlord's consent to the proposed assignment or sublet, this Lease shall end and expire on the effective date designated by Landlord in its Takeback Notice (which date shall not be less than sixty (60) days nor more than one hundred twenty (120) days after the date of the Takeback Notice) as fully and completely as if such early termination date were the original expiration date of the Term, and all Rent shall be apportioned as of such date. If (x) Landlord shall not elect to send a Takeback Notice within said 30-day period and (y) Tenant is not then in default under this Lease beyond any applicable notice or cure periods, Tenant shall be entitled, without any consent by Landlord, to assign this Lease or sublet all of the Premises on substantially the terms for proposed rent (including additional rent), square foot area, term and use and to the Permitted Party, described in Tenant's request for Landlord's consent, provided that if Tenant shall then be in default under this Lease beyond any applicable notice or cure period, then any such assignment or sublet shall not be effective until such defaults are cured. Any assignment or sublet to a Permitted Party shall be subject and subordinate to the terms. conditions and covenants of this Lease (other than with respect to the use set forth in Section 1.03), provided that if the assignee or sublessee will not operate any racing simulator or other rides within the Premises, then notwithstanding anything to the contrary in Section 3.02, Percentage Rent shall be an amount equal to [***] of Gross Receipts in excess of [***]. To the extent necessary, Tenant and Landlord shall execute and deliver a Lease Modification Agreement or other agreement reflecting the new use clause, if any. 17.02 - Effect of Landlord's Consent (a) Any consent by Landlord to a sale, assignment, sublease, mortgage, pledge, license, concession, hypothecation, or transfer of this Lease, shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from the requirement of obtaining prior written consent of Landlord to any further sale, assignment, sublease, mortgage, pledge, hypothecation, or transfer of this Lease. When the consent of Landlord is required hereunder to any proposed assignment or sublease of this Lease, or to the mortgaging, pledging, licensing. concession or hypothecation of this Lease, contemporaneously with the request of Tenant therefor, Tenant shall submit in writing information reasonably sufficient to enable Landlord to make a decision with respect thereto. (b) With respect to any of the consents requested by Tenant, whether or not the Landlord has consented thereto, Tenant shall pay to the Landlord the reasonable counsel fees and disbursements and other expenses incurred by the Landlord in connection therewith. Notwithstanding anything to the contrary in this Section 17.02(b), in no event shall this sum exceed [***]. ARTICLE 18 Compliance with Government Orders 18.01 - Tenant to Comply Tenant, at its own expense, shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state and local governments and of any and all other departments and bureaus applicable to Tenant's particular use of the Premises or to the business conducted by Tenant at the Premises, whether ordinary, extraordinary, foreseen or unforeseen ("Governmental Orders"). In addition, Tenant, at its own expense, shall comply promptly with and execute all rules, orders, regulations and recommendations of the Board of Fire Underwriters, Rating Board and Landlord and Tenant's insurance companies with respect to the prevention of fires and the exposure of liability risks ("Insurance Matters). Tenant, at its own expense, shall furnish and maintain in good order an adequate number and type of fire extinguishers on the Premises at an times. Notwithstanding the foregoing, in no event shall Tenant ever be responsible for any violation of Governmental Orders or Insurance Matters arising directly out of Landlord's Work. Landlord hereby represents that the Premises shall comply with all applicable Governmental Orders and Insurance Matters on the date Landlord delivers possession of the Premises to Tenant. 18.02 - Failure to Comply In case Tenant fails or neglects to comply with any of the Government Orders. Insurance Matters or the ADA (as hereinafter defined) as herein required of Tenant, then Landlord or its agent may enter the Premises and make said repairs and comply with any and all of the Government Orders, Insurance Matters or the ADA at the cost and expense of Tenant, and in case Tenant fails to pay therefor upon notice within five (5) days thereafter, the said cost and expenses, including twelve percent (12%) for administration costs, shall be added to the next month's installment of Fixed Annual Minimum Rent and be due and payable as such or Landlord may deduct the same from any balance remaining in Landlord's hands. This provision is in addition to the right of Landlord to terminate this Lease under Article 15 hereof by reason of default on the part of Tenant. 18.03 - Hazardous Material Tenant shall, at all times, comply with all local, state and federal laws, rules and regulations governing the use, handling and disposal by Tenant of Hazardous Material in the Premises and that portion of the Common Areas *** Confidential treatment requested. 24 29 which Tenant employs for the display of its model NASCAR racing vehicle, as specifically set forth in Section 7.03 of this Lease, including, but not limited to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) and any additions, amendments, or modifications thereto. As used herein, the term "Hazardous Material" shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the Promises is located or the United States Government. Landlord and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Tenant is complying with the terms of this Section. If Tenant is not in compliance with this Section, Landlord shall have the right to immediately enter upon the Premises and take whatever actions as are reasonably necessary to comply including, but not limited to, the removal from the Premises of any Hazardous Material and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Tenant shall pay reasonable out-of-pocket costs incurred by Landlord plus [***] for administration within ten (10) days after Tenant's receipt of a bill therefor. The covenants in this Section 18.03 shall survive the expiration or earlier termination of this Lease. Landlord hereby consents to Tenant's use of (i) hydraulic oil in connection with the operation of the driving simulators and related equipment associated with Tenant's permitted use and (ii) cleaning and office products customarily used in retail or office promises, so long as all of such materials are used, handled, and disposed of in accordance with applicable laws and at no cost to Landlord. 18.04 - Americans With Disabilities Act Tenant, at its own expense, shall at all times comply with and shall cause the Premises and that portion of the Common Areas which Tenant employs for the display of Its model NASCAR racing vehicle, as specifically set forth in Section 7.03 of this Lease, to be in compliance with the requirements of the Americans With Disabilities Act of 1990, and any additions, amendments or modifications thereto and all related regulations (the "ADA"). Landlord, at Landlords sole cost and expense, shall be responsible for insuring that Landlord's Work and the Common Areas are in compliance with the ADA. ARTICLE 19 Subordination, Mortgagee's Rights and Assignment of Rents 19.01 - Subordination The rights and interests of Tenant under this Lease shall be subject and subordinate to any ground lease, mortgage or trust deed now or hereafter placed upon any portion of the Shopping Center, and to any advances made thereunder, and to the interest thereon, and to all renewals, modifications, consolidations, replacements, extensions and re-financings thereof. Tenant agrees that any ground lessor, mortgagee or trustee may elect to give the rights and interest of Tenant under this Lease priority over the lien of its ground lease, mortgage or trust deed. In the event of such election, the rights and interest of Tenant under this Lease automatically shall have priority in whole or in part, over the lien of said ground lease, mortgage or trust deed, and no additional consent or instrument shall be necessary or required. However, Tenant agrees to execute and deliver such instruments as may be reasonably requested by any ground lessor, mortgagee or trustee for such purposes, and in the event Tenant fails to do so within ten (10) days after demand in writing, Tenant does hereby make, constitute and irrevocably appoint Landlord as its attorney-in-fact (which shall be deemed to be coupled with an interest) and in its name, place and stead so to do. In the event Landlord shall elect to refinance the Shopping Center during the term, Tenant's subordination to such future lender shall be expressly conditioned upon Tenant's receipt of a non-disturbance agreement reasonably acceptable to both Tenant and such future lender. Landlord will deliver to Tenant, on or before September 15, 1999, a non-disturbance agreement from each existing ground lessor and lender with an interest in the Shopping Center, and will use reasonable efforts to obtain the non-disturbance agreement in a form reasonably acceptable to Tenant. In the event Landlord is unable to obtain such non-disturbance agreement by September 15, 1999, then Tenant shall not be obligated to accept possession of the Premises and there shall be a day for day postponement of the Term Commencement Date until Landlord obtains such non-disturbance agreement. If Landlord is unable to obtain such non-disturbance agreement by September 15, 1999, then Tenant may terminate this Lease upon thirty (30) days notice to Landlord. Landlord, at any time after the execution of this Lease, may, in good faith, give notice to Tenant that Landlord is unable despite its reasonable efforts to obtain the non-disturbance agreement on the form requested by Tenant. At such time, if Tenant refuses to accept the form of non-disturbance agreement that Landlord is able to secure from its Lender, Landlord may terminate this Lease upon thirty (30) days notice to Tenant. 19.02 - Mortgagee's Rights (a) So long as any such ground lease, trust deed or mortgage remains a lien on any portion of the Shopping Center, Tenant agrees, simultaneously with the giving of any notice to Landlord which is required to be given by this Lease, to give a duplicate copy thereof to the respective ground lessor, mortgagee or trustee, provided Landlord has given Tenant notice of the name and address of any such ground lessor, mortgagee or trustee. Landlord agrees to notify Tenant of any ground lessor, mortgagee or trustee to whom such notice must be sent. Further, Tenant agrees that if Landlord defaults in its performance of any of the covenants under this Lease and if such default entities Tenant to terminate this Lease, the ground lessor, mortgagee or trustee may cure said default within thirty (30) days after any time period required of Landlord; provided, however, that if such default cannot be cured within such time period, Landlord shall be deemed to have cured such default if cure of the default is commenced within such time period, and thereafter diligently and in good faith continued with and actually completed. Landlord shall promptly notify Tenant of its commencement of such cure, and, if necessary, be permitted entry upon the Premises for the purpose of curing any such default. The giving of any such notice to Landlord shall not be properly given under the terms of this Lease and shall be of no force and effect until a duplicate copy thereof is also given to the ground lessor, mortgagee or trustee pursuant to this Section 19.02. *** Confidential treatment requested. 25 30 (b) Tenant hereby acknowledges that so long as any ground lease, mortgage or trust deed is a lien upon the Premises, Landlord cannot agree to reduce the rents below that provided for in this Lease, provide for payments of rent prior to the time herein provided for, nor terminate this Lease prior to the end of the term, except as otherwise provided in this Lease, without first obtaining the written consent of the ground lessor, mortgagee or trustee, and that any such proposed modification or termination without the written consent of said ground lessor, mortgagee or trustee shall be void as against said ground lessor, mortgagee, or trustee. 19.03 - Assignment of Rents (a) With reference to any assignment by Landlord of Landlords interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees: 31 (i) that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage or the ground lessor, shall never be treated as an assumption by such holder or ground lessor any of the obligations, of Landlord hereunder, unless such holder or ground lessor shall, by notice sent to Tenant, specifically otherwise elect; and (ii) that except as aforesaid, such holder or ground lessor shall be treated as having assumed Landlord's obligations hereunder with respect only to those obligations that arise following a foreclosure or deed in lieu thereof, or assumption of Landlords position by a ground lessor only upon foreclosure of such holder's mortgage and the taking of possession of the Premises, or, in the case of a ground lessor, the assumption of Landlord's position hereunder by such ground lessor. Tenant agrees that with respect to those obligations of Landlord that arise prior to a foreclosure or deed in lieu thereof, or assumption of Landlords position by a ground lessor, such foreclosing mortgagee in possession or ground lessor shall have no liability, provided that nothing contained herein shag be deemed to relieve Landlord from performance of any obligations arising under this Lease prior to the date of such assumption nor any such foreclosing mortgagee or ground lessor, as applicable, from performance of non-monetary obligations of a continuing nature arising under this Lease prior to the date of such assumption. (b) Where a party acquires Landlord's interest in property (whether land only, or land and buildings) which includes the Premises, and simultaneously leases the same back, such acquisition shall not be treated as an assumption of Landlord's position hereunder, and this Lease shall thereafter be subject and subordinate at all times to such lease (subject to the provisions of Section 19.01 above). ARTICLE 20 Entry to Premises 20.01 - Entry to Premises by Landlord Landlord shall have the right to enter the Premises at all reasonable times acceptable to both Landlord and Tenant for the purposes of: (i) inspecting the same, (ii) making any repairs to the Premises and performing any work therein that may be necessary or desirable, (iii) exhibiting the Premises for the purpose of sale, ground lease, mortgage or other financing, (iv) exhibiting the Premises (within one year prior to the expiration of the term of this Lease) to prospective tenants. Except in the case of an emergency, Landlord shall be accompanied by a representative of Tenant during any entry to the Premises unless Tenant waives such requirement in writing, in advance of such entry. During any such entry, Landlord shall not interfere with Tenant's access to the Premises. Nothing in this Lease shall imply any duty on the part of Landlord to do work or perform obligations which, under any of the provisions of this Lease, Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a constructive eviction nor a waiver of Tenant's default. ARTICLE 21 Notices and Certificates 21.01 - Notices (a) Any notice, statement, certificate, request or demand required or permitted to be given or delivered in this Lease shall be in writing, and personally delivered, sent by reputable overnight courier, or sent by registered or certified mail, postage prepaid, return receipt requested and addressed to Landlord at the address shown at the beginning of this Lease, and to Tenant at the address shown at the beginning of this Lease, or to such other addresses as Landlord or Tenant shall designate in the manner herein provided. In the case of any default notice sent by Landlord to Tenant, Landlord shall send a copy to: Paul, Hastings, Janofsky & Walker, LLP. 555 South Flower Street, 23rd Floor, Los Angeles, California 90071-2371, Attn: Rick S. Kirkbride. Landlord's managing agent, Pyramid Management Group. Inc., is hereby authorized and designated to give or deliver to Tenant any notice under this Lease. Any such notice, statement, certificate, request or demand shall be deemed given, (i) when actually delivered, if personally delivered or delivered by overnight or other courier or delivery service which confirms delivery in writing, or (ii) within two (2) business days after deposit in the US mail, if sent by registered or certified mail, postage pre-paid, return receipt requested, except in case of notice of change of address or revocation of a prior notice, which shall only be effective upon receipt. (b) At any time or times when Tenant's interest herein is vested in more than one person, firm or corporation, jointly, in common or in severalty, a notice given by Landlord to any one such person, firm or corporation shall be conclusively deemed to have been given to all such persons, firms or corporations. Any notices by Tenant pursuant to the provisions hereof shall be void and ineffective unless signed by all such persons, firms and corporations, unless all such persons, firms and corporations have previously given notice to Landlord, signed by each of them and designating and authorizing one or more of them to give the notice referred to, and such notice shall then be unrevoked by any notice to Landlord. 26 32 21.02 - Estoppel Certificate of Landlord Within ten (10) days after request by Tenant, Landlord, from time to time and without charge, shall deliver to Tenant or to a person, firm or corporation specified by Tenant, a duly executed and acknowledged instrument, certifying: (i) that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; and (ii) whether Landlord knows or does not know, as the case may be, of any default by Tenant in the performance by Tenant of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any. Such certification shall not estop Landlord from thereafter asserting any existing default of which Landlord did not have actual knowledge on the date of execution thereof. 21.03 - Estoppel Certificate of Tenant Within ten (10) days after request by Landlord or Landlord's ground lessor or mortgagee, Tenant, from time to time and without charge. shall deliver to Landlord or the requesting party, or to a person, firm or corporation. specified by Landlord, a duly executed and acknowledged instrument, certifying: (i) that this Lease is unmodified and in full force and effect, or if there has been any modification, that the same is in full force and effect as modified, and identifying the date of any such modification; (ii) whether Tenant knows or does not know, as the case may be, of any default by Landlord in the performance by Landlord of the terms, covenants and conditions of this Lease, and specifying the nature of such defaults, if any; (iii) whether or not there are any then existing permitted set-offs or defenses by Tenant, and if so, specifying them; (iv) the dates to which the Fixed Annual Minimum Rent, Percentage Rent, and Additional Rent have been paid; (V) that the operation and use of the Premises do not involve the generation, treatment, storage, disposal or release of any Hazardous Material or a solid waste into the environment in reportable amounts or in manners which do not comply with all environmental laws and that the Premises is being operated in accordance with all environmental laws, zoning ordinances and building codes; and (vi) such other information as Landlord or Landlord's ground lessor or mortgagee may reasonably request. Such certification shall not estop Tenant from thereafter asserting any existing default of which Tenant did not have actual knowledge on the date of execution thereof. ARTICLE 22 Covenant of Quiet Enjoyment 22.01 - Covenant of Quiet Enjoyment (a) So long as no event of default is existing pursuant to Section 15.01 of this Lease. Tenant shall lawfully, peaceably and quietly have, hold and enjoy the Premises during the term hereof on and after the Term Commencement Date without hindrance or ejection by any persons lawfully claiming under Landlord; but it is understood and agreed that this covenant, and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successor only with respect to breaches occurring during its and their respective ownership of Landlord's interest hereunder. (b) With respect to any services to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish the same when prevented from doing so by strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, or because of war or other emergency, or for any cause beyond Landlord's control. (c) Landlord shall be in default of this Lease if Landlord fails to perform any obligation required to be performed by Landlord under this Lease and if such failure is not cured within thirty (30) days after receipt of Notice from Tenant specifying the nature of such failure. In the event of any such default by Landlord, Tenant shall have the right to exercise all rights and remedies available at law or in equity. Landlord shall reimburse Tenant for any reasonable expenses incurred by Tenant in curing Landlord's failures within twenty (20) days following receipt by Landlord of paid invoices from Tenant. In the event Landlord fails to reimburse Tenant for such amounts within thirty (30) days following receipt by Landlord of paid invoices from Tenant, then Tenant shall have the right to offset such amounts against the next ensuing installments of Rent, Percentage Rent and Additional Rent coming due under this Lease until the entire amount has been recouped by Tenant. 27 33 ARTICLE 23 Miscellaneous Provisions 23.01 - Holdover (a) It is expressly understood by Tenant that Tenants right to possession of the Premises under this Lease shall terminate at the expiration or earlier termination of the term, and should Tenant continue thereafter to remain in possession, Landlord, should it so elect, shall be entitled to the benefits of all provisions of law with respect to summary recovery of possession from a holdover tenant. Tenant shall Indemnify and save harmless Landlord from any claim, damage, expense, cost or loss which Landlord may incur by reason of such holding over. including without limitation, any claim of a succeeding tenant, or any loss by Landlord with respect to a lost opportunity to re-let the Premises. (b) Should Tenant continue to occupy the Premises after the expiration or earlier termination of the term with the consent of the Landlord, such tenancy shall be from month-to-month, and such month-to-month tenancy shall be under the same terms. covenants and conditions as set forth in this Lease, except that Tenant shall pay Fixed Annual Minimum Rent on the basis of [***] times the Fixed Annual Minimum Rent for the last year of the term. 23.02 - Limitation on Landlord's Personal Liability (a) It is understood and agreed that Tenant shall look solely to the estate and property of Landlord in the Shopping Center for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of the Lease to be observed or performed by the Landlord, and any other obligation of Landlord created by or under this Lease, and no other property or assets of Landlord or of its partners, beneficiaries, co-tenants, shareholders, members. or principals (as the case may be) shall be subject to levy, execution or other enforcement procedures for the satisfaction of Tenant's remedies. In no event shall Tenant name Landlord's partners, members, beneficiaries, co-tenants, shareholders or principals to any suit or other proceeding to which Tenant and/or Landlord are a party arising out of or relating to this Lease, unless the naming of such partners, members, beneficiaries, co-tenants, shareholders or principals is required in order to permit the Tenant to obtain jurisdiction over Landlord herein. (b) The term "Landlord," as used in Subsection 23.02(a) and throughout this Lease, shall be limited to mean and include only the owner or owners at the time in question of Landlord's interest in this Lease. Further, in the event of any transfer by Landlord of Landlord's interest in this Lease, Landlord herein named (and in case of any subsequent transfers or conveyances, the then assignor), including each of its partners, beneficiaries, co-tenants, shareholders, members, or principals (as the case may be), shall be automatically freed and relieved, from and after the date of such transfer or conveyance, of all liability for the performance of any covenants and agreements on the part of Landlord that accrue after the date of said transfer (but not for any obligation that accrued prior to the date of said transfer, for which the party assigning Landlord's interest in this Lease shall remain liable, subject to and in accordance with the terms of this Lease). 23.03 - Definition of Tenant's Allocable Share (a) Intentionally deleted. (b) Tenant's Allocable Share of Real Property Taxes pursuant to Section 4.01 shall be the product of multiplying the amount of said Real Property Taxes by a fraction, the numerator of which is the number of square feet of the Premises as set forth in Section 1.01, and the denominator of which is the total number of square feet of all buildings then leased in the Shopping Center on the date as of which such computation is required to be made under the terms of this Lease, after deducting therefrom the square footage of (i) any REA Parcel or other parcel which is separately assessed and the Real Property Taxes of which are paid directly to the taxing authority by the tenant or occupant thereof, (ii) any anchor store and (iii) any theater, within the Shopping Center. (c) Whenever used herein, the term "square feet" shall consist of the area of floor space on all floors measured from the outside face of all exterior walls of the buildings (or the midpoints of any interior walls) and any outdoor sales areas which are mechanically heated or air-conditioned. It shall not include the floor area of any roof structures used for mechanical equipment. Whenever used in this Lease, an "anchor store" is defined to mean a premises in the Shopping Center containing not less than fifty thousand (50,000) square feet. In the event that, at any time the computation of Tenant's Allocable Share under Section 23.03(b) is required to be made, less than [***] of the total number of leasable square feet of all buildings in the Shopping Center is "then leased," then the minimum denominator used in the fraction used for determining Tenant's Allocable Share under Section 23.03(b) shall not be less than [***] of the total number of leasable square feet of all buildings then comprising the Shopping Center (less the deductions set forth in Section 23.03(b)). 23.04 - Force Majeure The period of time during which either party is prevented or delayed in any performance or the making of any improvements or repairs or fulfilling any obligation under this Lease, other than the payment of Fixed Annual Minimum Rent, Percentage Rent and Additional Rent, due to unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil commotion, Acts of God, the public enemy, governmental prohibitions or regulations or inability to obtain materials by reason thereof, or any other causes beyond such party's reasonable control, shall be added to such party's time for performance, and such party shall have no liability by reason of such delay, except that as a condition to Tenant's right to avail itself of Force Majeure, Tenant must give Landlord written notice of such claimed Force Majeure. *** Confidential treatment requested. 28 34 23.05 - Relocation of Tenant Landlord shall have the right to relocate Tenant to another space, the mall frontage of which shall be equal to or greater than that of the Premises, and the square footage of which shall not vary from that of the Premises by greater than one hundred (100) square feet within the Shopping Center after the expiration of the first thirty-six (36) months of the term of this Lease, upon one hundred twenty (120) days Notice to Tenant, at Landlord's cost and expense, which relocation shall in no way affect the obligation or duties of either party hereunder. Landlord shall be obligated for all expenses associated with such relocation, including but not limited to the construction of the now space to a condition and level of quality of finishes at least equivalent to the condition and level of the Premises on the date of Landlord's relocation notice and any actual out-of-pocket costs incurred by Tenant for the printing of now stationary and business cards, and the costs of moving Tenant's Personal Property. In the event Tenant shall fail or refuse to accept the new location within twenty (20) days of such Notice, Landlord at its option, may terminate this Lease upon forty-five (45) days written Notice to Tenant, provided that if Landlord shag fall to give the Notice of Landlord's election to terminate within forty-five (45) days after the expiration of such twenty (20) days, then Landlord's termination right under this Section 23.05 shall be waived and this Lease shall remain in full force and effect through the Termination Date as defined in Section 2.02. Tenant's written consent, which may be withheld in Tenant's sole discretion, shall be required for any relocation which moves the Premises outside the cross-hatched area shown on Exhibit A-2. 23.06 - Changes and Additions Landlord hereby reserves the right at any time, and from time to time, to make alterations or additions to, and to build additional stories on the building in which the Premises are located and to build adjoining the same. Landlord also reserves the right at any time, and from time to time, to construct other buildings and improvements in Landlord's Tract, to enlarge or otherwise modify the Shopping Center, to make alterations therein or additions thereto, to build additional stories on any building or buildings within the Landlords Tract to build adjacent thereto, to construct decks or elevated parking facilities, to install, maintain, use, repair and replace ducts, wires, pipes and conduits passing through or under the Premises serving other parts (now existing or hereafter added) of Shopping Center, and to sell or lease any part of Landlord's Tract. The purpose of the attached Site Plan is to show the approximate location of the Premises within the Shopping Center, and Landlord reserves the right at any time to relocate the various buildings, parking areas and other Common Areas shown on said Site Plan; provided, however, that there shall not be caused thereby any unreasonable obstruction of Tenant's right of access to the Promises or any unreasonable interference with Tenant's use of the Promises for the purpose hereinabove set forth, or the access to and visibility of the Premises as more fully set forth in Section 7.03 of this Lease. 23.07 - Attornment by Tenant If at any time during the term of this Lease the Landlord hereunder shall be the holder of a leasehold estate covering premises which include the Premises, and if such leasehold estate shall be canceled or otherwise terminated prior to the expiration date thereof and prior to the expiration of the term of this Lease, or in the event of the surrender thereof whether voluntary, involuntary or by operation of law, Tenant shall make full and complete attornment to the lessor of such leasehold estate, provided the lessor of such leasehold estate assumes all of Landlord's obligations under this Lease for the balance of the term of this Lease upon the same covenants and conditions as are contained herein so as to establish direct privity between such lessor and Tenant and with the same force and effect as though this Lease was made directly from such lessor to Tenant. Tenant shall then make all rent payments thereafter directly to such lessor. In the event any proceedings are brought for the foreclosure of, or in the event of conveyance by deed in lieu of foreclosure of, or in the event of the exercise of the power of sale under, any mortgage or deed of trust made by Landlord covering the Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the Premises, Tenant shall attorn to and hereby covenants and agrees to execute an instrument in writing reasonably satisfactory to the now owner whereby Tenant attorns to such successor in interest and recognizes such successor as the Landlord under this Lease. 23.08 - Index As used in this Lease, "Index" means the then higher of either of the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or the Consumer Price Index for All Urban Consumers (CPI-U) of the United States Department of Labor's Bureau of Labor Statistics in effect and generally published at the time the computation is to be made. If the aforesaid price indices are no longer published, then another price Index, generally recognized as authoritative, shall be substituted by Landlord. In the event the parties are unable to so agree, the matter shall be submitted to arbitration pursuant to Section 23.18. During any period while the determination of such a dispute is pending, Tenant shall continue to pay the sum previously in effect, provided, however, that the adjusted sum as finally determined shall be retroactive from the prescribed date and any deficiency owed by Tenant shall be paid promptly upon a final determination of the dispute. 23.09 - Survival of Tenant's Obligations Any sums due either party from the other that by the terms herein would be payable, or are incapable of calculation, until after the expiration or earlier termination of this Lease shall survive and remain a continuing obligation until paid. 23.10 - Effect of Landlord's Notice to Terminate Any right on the part of Landlord to terminate this Lease shall, when exercised, require no further act, to the end that at the expiration of the applicable time period, if any, contained in the particular termination provision, this Lease and the term hereunder shall end and expire as fully and completely as if such termination date was the date herein definitely fixed for the end and expiration of this Lease and the term hereof, and upon such date Tenant shall quit and surrender the Premises to Landlord. 29 35 23.11 - Effect of Captions The captions, bold-faced type. underlining. notational references, or legends in this Lease are inserted only for convenient reference or identification of the particular paragraphs. They are in no way intended to describe, interpret, define or limit the scope, extent or interest of this Lease, or any paragraph or provision thereof. 23.12 - Tenant Authorized to Do Business Tenant represents, warrants and covenants that it is upon the date of execution, and throughout the term of this Lease it shall be authorized to do business and in good standing in the state in which the Premises is located. Tenant, if a partnership or corporation, agrees to furnish to Landlord, upon request, evidence of authority for entering into this Lease. 23.13 - Execution in Counterparts This Lease may be executed in one or more counterparts, any one or all of which shall constitute but one agreement. 23.14 - Law Governing, Effect and Gender This Lease, and any dispute concerning this Lease, shall be governed by the laws of the state in which the Premises is located, and any dispute concerning an interpretation of any portion of the Lease or the conduct of the parties hereunder shall be brought in either Syracuse, New York, or in the jurisdiction where the Premises is located. Tenant hereby consents to service of process at the Premises in the event that Tenant does not maintain a separate business office within the state where the Premises is located. This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns, except as expressly provided otherwise. Use of the neutral gender shall be deemed to include the masculine and feminine. 23.15 - Memorandum or Notice of Lease Upon request by either party, Landlord and Tenant agree to execute a Memorandum or Notice of Lease in recordable form pursuant to applicable state law. Upon the expiration or earlier termination of this Lease, the party who shall have recorded such Memorandum or Notice of Lease shall promptly execute any necessary instrument and remove the Memorandum or Notice of Lease from the public records, and upon failure to do so, the other party is hereby appointed attorney-in-fact to execute any such instrument in the recording party's name, place and stead. 23.16 - Complete Agreement This Lease contains and embraces the entire agreement between the parties hereto with respect to the matters contained herein, and it or any part of it may not be changed, altered, modified, limited, terminated, or extended orally or by any agreement between the parties unless such agreement is in writing and signed by the parties hereto, their legal representatives, successors or assigns. Tenant acknowledges and agrees that neither Landlord nor any representative of Landlord nor any broker has made any representation to or agreement with Tenant relating to the Premises, this Lease or the Shopping Center which is not contained in the express terms of this Lease. Tenant acknowledges and agrees that Tenant's execution and delivery of this Lease is based upon Tenant's independent investigation and analysis of the business potential and expenses represented by this Lease, and Tenant hereby expressly waives any and all claims or defenses by Tenant against the enforcement of this Lease which are based upon allegations of representations, projections, estimates, understandings or agreements by Landlord or Landlord's representative that are not contained in the express terms of this Lease. 23.17 - Guaranty of Lease Intentionally deleted. 23.18 - Arbitration Any controversy or claim arising from or relative to any matter in connection with this Lease, with refers to which this Lease shall expressly provide that this paragraph governs, shall be settled by arbitration in the City of Syracuse, New York, in accordance with the rules of the American Arbitration Association or its successor organization, and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. 23.19 - Security Agreement Intentionally deleted. 23.20 - Invalidity of Particular Provisions If any term or provision of this Lease or the application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 23.21 - Execution of Lease by Landlord The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for the Premises, and this document shall be effective and binding only upon the execution and delivery hereof by both the Landlord and Tenant. 30 36 23.22 - Relationship of the Parties Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto it being understood and agreed that neither the method of computation of rent nor any other provision herein contained nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than landlord and tenant. 23.23 - Brokers Landlord represents and warrants to Tenant that it has not employed any realtors or brokers in connection with the negotiation of this Lease. Tenant represents that Tenant has retained as its broker Russell J. Friend of Blatteis Realty ("Tenant's Broker"), and Tenant specifically acknowledges and agrees that any fee payable to Tenants Broker is the sole and exclusive responsibility of Tenant and Landlord shall have no liability therefor. Landlord and Tenant shall each indemnity, defend and hold harmless the other from any cost, expense or claim for brokerage or other commission arising from or out of any breach of the foregoing representation and warranty. 23.24 - Representations Landlord warrants to Tenant that the Shopping Center is in good condition and repair, free of material defects, and that the Shopping Center has been constructed in accordance with applicable laws and requirements. 23.25 - Abatement In the event Tenant is prevented from using the Premises or any portion thereof, for five (5) consecutive business days or ten (10) days in any twelve (12) month period (the "Eligibility Period") as a result of the failure of Landlord to maintain and repair the Shopping Center and the Premises in accordance with its obligations as set forth in this Lease, and such failure interferes with Tenant's operations and use of the Premises, or as a result of any failure to provide services or access to the Premises, or because of the presence of Hazardous Materials in or on the Shopping Center or the land on which the Shopping Center is located resulting from the acts or omissions of any party other than Tenant which pose a health risk to occupants of the Premises, then Tenant's Rent shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using the Premises or a portion thereof, in the proportion that the square footage of the portion of the Premises that Tenant is prevented from using bears to the Tenant Area of the entire Premises. However, in the event that Tenant is prevented from conducting its business in any portion of the Premises under such circumstances for period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not reasonably sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the square footage of such reoccupied portion of the Premises bears to the Tenant Area of the Premises, shall be payable by Tenant from the date such business operations commence. 23.26 - Special Use Permit Except as may be otherwise set forth in Section 5.02(a) of this Lease, Landlord represents that as of the date hereof, no "special" use permit from local governmental authorities is required for Tenant's operation for the permitted use in Section 6.01 within the Premises in accordance with this Lease. The foregoing representation shall not extend to any building or similar permits required for Tenant's Work or a certificate of use and occupancy for the Premises or licenses to conduct business and the like. 23.27 - Tenant Improvement Rebate Notwithstanding anything contained herein to the contrary, provided Tenant is not in default under this Lease beyond the expiration of any applicable notice and cure period, Tenant shall be entitled to an allowance in the amount of [***] per square foot of the Premises ("Tenant Improvement Rebate") (e.g., if the Premises are 4,597 square feet in size, then Tenant shall be entitled to a Tenant Allowance from Landlord in the amount of [***]). The Tenant Improvement Rebate shall be paid to Tenant by Landlord in the form of an abatement (the "Abatement") of any and all charges, fees and reimbursements that otherwise would be due and owing from Tenant to Landlord (including, without limitation, Fixed Monthly Minimum Rent, Percentage Rent, Common Area Charges, insurance, and contributions to the Marketing Fund), except Tenant shall be obligated to pay Tenant's Allocable Share of all Real Property Taxes despite the Abatement. The Abatement shall commence on the Term Commencement Date and shall continue until the amount of the Abatement equals the amount of the Tenant Improvement Rebate. If this Lease is terminated prior to the expiration of the term, Tenant shall pay to Landlord, as Additional Rent, any amount of the Tenant Improvement Rebate received by Tenant (whether in the form of the Abatement or otherwise) in excess of the earned portion of the Tenant Improvement Rebate, which "earned portion" shall be determined by dividing the Tenant Improvement Rebate by the total number of months that would make up the term if not for the prior termination of this Lease (e.g., 120 months if the term is not extended pursuant to Section 2.03 above) and multiplying the result by the number of months (including whole and partial months) that occurred commencing on the Term Commencement Date and ending on the date that this Lease was terminated. For example, if the term is comprised of 120 months and if Tenant operated the Premises after the Term Commencement Date for 70 whole and partial months, then Tenant shall pay to Landlord any amount received by Tenant in excess of 7/12 (i.e., based on 70/120, or the "earned portion") of the Tenant Improvement Rebate. Such amount shall be deemed due as of the date the Lease is terminated and shall be payable within five (5) days following such date. Such amount shall not be subject to credit, offset or mitigation as otherwise provided in Section 15.02(c) of the Lease. *** Confidential treatment requested. 31 37 IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date first above written. CAROUSEL CENTER COMPANY, L.P. By: CAROUSEL GENERAL COMPANY, LLC By: /s/ BRUCE A. KENAN ----------------------------------- MEMBER/AUTHORIZED AGENT SILICON ENTERTAINMENT, INC. By: /s/ CHRIS MORSE -------------------------------- Title: V.P. -------------------------------- (Acknowledgment of LANDLORD) State of New York ss: County of Onondaga On the 18 day of August in the year 1999 before me, the undersigned, a notary public in and for said state, personally appeared Bruce A. Kenan, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual or the person upon behalf of which the individual acted, executed the instrument. /s/ JENNIFER B. HUSE ------------------------------ (Notary Public) (Acknowledgment of TENANT) State of California ss: County of Santa Clara On the 5th day of August in the year 1999 before me, the undersigned, a notary public in and for said state, personally appeared Chris Morse, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the person upon behalf of which the individual(s) acted, executed the instrument. /s/ LAURIE H. SHERMER ------------------------------ (Notary Public) SEAL LAURIE H. SHERMER Commission #1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 32 38 TABLE OF EXHIBITS
Exhibit A...........................................................................................Site Plan Exhibit A-1..........................................................................................Premises Exhibit B......................................................................Description of Landlord's Work Exhibit C........................................................................Description of Tenant's Work Exhibit D..............................................................................Outline Specifications Exhibit E...............................................................................Intentionally deleted Exhibit F......................................................................................Tenant's Signs
33 39 EXHIBIT A Note: This is a schematic plan and is intended to show only the proposed layout of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 40 EXHIBIT A-1 Note: This is a schematic plan and is intended to show only the proposed layout of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. 41 EXHIBIT A-2 Note: This is a schematic plan and is intended to show only the proposed layout of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. - ------------------------------------------------------------------------------- Page 1 42 EXHIBIT A-2 Note: This is a schematic plan and is intended to show only the proposed layout of the Shopping Center. All measures, dimensions and distances are not to scale. The depiction hereon does not constitute a warranty or representation of any kind. - ------------------------------------------------------------------------------- Page 2 43 EXHIBIT B LANDLORD'S WORK The Premises have already been constructed and Tenant accepts the Premises in its "as is" condition. All other work required to prepare the Premises for Tenant's use and occupancy shall be performed by Tenant at its sole cost and expense. 1 44 EXHIBIT C TENANT'S WORK Tenant accepts the Premises in its "as is" condition on the date that possession of the Premises is made available by Landlord, and shall, [***] , and in accordance with the Outline Specifications attached hereto and made a part hereof as Exhibit D, furnish all labor, material, fixtures and equipment necessary to complete, in a good, substantial and approved manner, all work required to bring the Premises to a finished condition ready for the conduct of Tenant's business therein. *** Confidential treatment requested. 1 45 EXHIBIT C Carousel Center, Syracuse, New York Condition of Space: 1. HVAC unit is a 15 ton split unit in good working condition. 2. Floor to deck height is 16 feet. 3. Electrical service available is 200 amps 4. Conduit is 3 inch pvc 5. Tenant's location is 175 feet from electrical room. 6. See attached plan and DCP for further detail Exhibit C Page 2 46 DIMENSION CONTROL PLAN [FLOOR PLAN] 47 NEW CORRIDOR & TENANT SPACE [FLOOR PLAN] 48 [FLOOR PLAN] Exhibit C Page 5 49 EXHIBIT D OUTLINE SPECIFICATIONS A. DESIGN AND CONSTRUCTION Tenant will retain the services of architect(s) and engineer(s) licensed in the state in which the Shopping Center is located for the design of Tenant's Work. Tenant will retain contractors for the completion of Tenant's Work. Tenant and its contractors will at all times cooperate fully with Landlord's employees and contractors, and with other tenants and their contractors. Tenant's architect and engineer will design all Tenant's Work in full compliance with all federal, state and local codes, ordinances, rules and zoning regulations applicable to the Shopping Center and to Tenant's Premises. Tenant's architect and engineer will incorporate by reference or by duplication the Tenant Design Handbook into the final contract documents. Landlord will complete Landlord's Work as set forth in Exhibit B of this Lease under a blanket building permit. Tenant will complete Tenant's Work as set forth in Exhibit C of this Lease under an individual building permit. Tenant will be responsible for all building permit costs and/or any other municipal permit(s) and/or fees required for Tenant's Work. All building permit questions, as they relate to Tenant's Work (Exhibit C) should be directed to the Landlord. B. DIMENSION CONTROL PLAN Landlord will furnish Tenant with two (2) prints of a Dimension Control Plan, setting forth dimensions and design information necessary to complete the design of Tenant's Work. The Dimension Control Plan will be made available following the execution of this Lease. C. TENANT'S DESIGN All final submissions will bear the seal and signature of an architect (and engineer if applicable) licensed to practice in the state in which the Shopping Center is located. Tenant's design will employ the best available technology to provide for maximum energy conservation within the Premises. All HVAC, plumbing and electrical work will be in compliance with ASHRAE Standard 90-80, or the most recent edition thereof. Within two (2) weeks from the later of (a) receipt by Tenant of a Dimension Control Plan from Landlord, or (b) the date of execution of this Lease, Tenant shall submit by overnight delivery service "Preliminary Design Drawings," for Landlord's review, showing the intended design concept and character of proposed finishes. Tenant's submission shall consist of one (1) sepia set and one (1) blueline set of prints. Preliminary Design Drawings will contain basic dimensions of the Premises and shall include, but not necessarily be limited to, the following: 1. Preliminary floor plan with fixturing layout; 2. Preliminary reflected ceiling plan; 3. Storefront elevation showing intended materials and signage, complete with sample of all finish materials; 4. Section through storefront and bulkhead; and 5. Material and color finish sample board of interior and storefront finishes. Landlord will return to Tenant one (1) set of prints marked with Landlord's comments relative to Tenant's preliminary submission within fifteen (15) days after Landlord's receipt of such submission. [***] Within thirty (30) days after the later of (a) receipt by Tenant of the Dimension Control Plans from Landlord, or (b) the date of execution of this Lease, Tenant will submit to Landlord two (2) sets of reproducible prints and six (6) sets of blueline prints of Tenant's "Design Drawings" showing final design, character, and finishes. All design shall conform to the design criteria set forth herein. Tenant's Design Drawings shall include, without limitation, the following for review: 1. Architectural: Floor plan, fixturing layout, room finish schedule, door schedule, partition types, ceiling plan, interior wall and storefront elevations describing signage elevations and shop drawings, sections, and details as appropriate. 2. Mechanical: All equipment, locations, distributions and return systems, diffuser locations, load calculations, controls, and details as appropriate. 3. Electrical: Floor and ceiling plans showing type and location of power and lighting, equipment, controls, projected loads, panel schedules, riser diagram, and details as appropriate. 4. Plumbing: Location and type of water meter, fixtures, supply and waste piping schematics and details as appropriate. 5. Specifications on materials and methods of construction for the above items. 6. Signage Shop Drawings indicating finishes, type, and mounting location. Food merchants will submit "menu board" specifications and/or photographs. 7. Manufacturer's Cuts of fixtures and equipment with finishes. *** Confidential treatment requested. 1 50 8. Certificate of Completion and Affidavit (Appendix 2). 9. Tenant Electrical Load Summary (Appendix 1A). 10. Tenant Design Checklist (Appendix 1). Landlord will return to Tenant one (1) set of sepias of Tenant's Final Design Drawings marked with review comments and required modifications. If Tenant's Design Drawings are returned to Tenant with comments but not bearing the approval of Landlord, Tenant's Design Drawings shall be revised by Tenant, incorporating Landlord's comments, and resubmitted to Landlord for review within ten (10) days of receipt. * Plans will not be returned until Receipt of Appendices 1 and 1A. If the final submission of Tenant's architectural drawings are stamped "Final Approved for Construction as Noted," it is Tenant's or Tenant's representative's responsibility to distribute copies of the final drawings, stamped as such, to the contractors at the job site. Landlord's design review is solely for the purpose of assisting the Tenant and coordinating the store design of the various tenants in the Shopping Center. If in the design review process Landlord does not denote items that are not in compliance with the provisions of the Lease, including these Outline Specifications, the same will not relieve Tenant, Tenant's contractor, Tenant's architect and engineer of their obligations to construct in compliance with these Outline Specifications, and any applicable federal, state and local codes, ordinances, rules and regulations. Any modifications to Tenant's Premises during the term of the Lease must conform to all provisions of the Lease including this Exhibit or, at Landlord's option, Landlord's then-current design criteria, including design review and payment of the fee therefor. Tenant's contractor will construct Tenant's space in accordance with Tenant's final drawings as approved by Landlord and will furnish a signed Certificate of Completion as provided below. Receipt of Appendix 2 (attached) will be required prior to the release of Tenant's security deposit. D. SUBMISSION OF AS-BUILT DRAWINGS AND CERTIFICATE OF COMPLETION (Appendix 1) As a condition of Landlord's approval for Tenant to initially open for business in the Shopping Center, and upon completion of the Premises, Tenant will submit to Landlord for Landlord's permanent project construction files: (1) a set of reproducible "As-Built" drawings which contain all of the information required in Tenant's Design Drawings, updated to accurately reflect the as-built conditions of Tenant's HVAC, electrical and plumbing systems; and (2) a Certificate of Completion (Appendix 2) signed by Tenant, Tenant's architect and contractor, certifying that the Premises have been constructed and completed in accordance with the plans, drawings and specifications previously submitted to and reviewed by Landlord. Tenant must also submit a completed a Stipulation of Cost with appropriate backup documentation as a condition of Landlord's approval. Landlord will be entitled to rely on this Certificate as evidence of Tenant's completion of construction of the Premises pursuant to the provisions of this Lease. E. OUTLINE SPECIFICATIONS The following Outline Specifications will apply to the performance of all work carried out with regard to the Premises: 1. Floor System a. Upper-level Floor System (if applicable) The upper-level floor system will consist of a structural framing system and a concrete slab. Depressions in the slab for floor covering will not be permitted. Electrical floor boxes or plumbing lines must be installed by core drilling through the concrete slab to the lower-level tenant's ceiling space. All such work will be coordinated directly with Landlord. No piping, conduit or other related items may be placed in the concrete slab or on the steel decking. The floor system will be designed for a maximum allowable live load of 100 pounds per square foot. b. Level Floor System The lower level floor system will consist of a concrete floor slab. All work which Tenant desires to be placed below the slab will be installed prior to the slab construction, or Tenant may cut and replace said slab at Tenant's expense only upon approval from Landlord. c. Waterproofing (if applicable) All tenants will ensure the water tightness of their restroom floor system. Waterproofing membranes will extend no less than 4" vertically at all demising walls. Additionally, all food merchants, pet stores and salons will provide a waterproof membrane over their entire floor area with water-fight connections at all floor penetrations. All tenants will ensure water tightness of all floor slab penetrations. Tenant will be responsible for any damage which occurs as a result of, or which is caused directly or indirectly by the failure of Tenant or its contractors to adequately construct, install, or adequately seal all floor penetrations. Food use tenants must install a single waterproof membrane as specified by specific mall. 2. Walls, Partitions and Doors 2 51 a. Demising Partitions All demising partitions will be finished with a minimum of 5/8" fire code gypsum wallboard (unless otherwise required by code), from the floor to the deck, with all joints taped. Exposed walls will be finished with three layers of spackling, sanded and left in paint-ready condition. 1) Insulation in Demising Partitions All demising partitions constructed by the following types of merchants will be insulated with vapor barriers (installed to the warm side of the wall) and sound attenuation blanketing from the floor to the underside of the deck. 1. Food establishments: 2. Game rooms, arcades, video, record and tape stores; 3. Pet stores; 4. Salons; 5. Any other use which produces unusual noise or odor, or heats or cools the Premises 10 degrees (Fahrenheit) +/- beyond the normal range within the Shopping Center or is deemed by Landlord to potentially impact other mall tenants adversely. b. Exterior/Interior Partitions All interior partitions of the Premises will be constructed of metal studs, with gypsum wallboard or other non-combustible finish on all sides. Any combustible materials applied to partitions must receive a U.L. labeled fire-retardant coating, or be placed over a non-combustible substrate material. All exterior walls will be insulated with fiberglass insulation from the floor to the underside of the deck. Insulation will have an integral vapor barrier with an R" value of 19 or greater if required by any federal, state or local code, ordinance, rule or regulation. The insulation will be covered by one (1) layer of 5/8" type 'X' gypsum wallboard from the floor to the underside of the deck. c. Storefront Bulkhead Tenant's storefront bulkhead, if any, will be constructed and finished subject to Landlord's review of signage and overall design. The mall side of Landlord's bulkhead will be finished by Landlord. Tenant's side will be finished with a minimum of 5/8" fire code gypsum wall board running the full height to the structure above (1 hour rated). All materials applied on the mall side of the storefront will be non-combustible as per code and local building regulations. Storefront bulkheads will have an insulation "R" value of at least 11 (except at Walden Galleria, Independence Mall, Carousel Center, Galleria at Crystal Run, Silver City Galleria and Crossgates Mall, where this insulation is not required at this time). d. Plumbing Chases Plumbing chases, whether in Tenant's Premises or beyond, will be constructed with access panels in full compliance with all applicable codes and will be insulated to prevent freezing of water and waste piping. e. Doors Service doors which open into a corridor or Tenant's exterior service area will be framed and installed in locations approved by Landlord. These doors must open in the direction of exit travel, and must be recessed so as not to restrict use of any service corridor as an emergency exit corridor. Tenant will cut and patch the wall provided by Landlord as necessary to properly recess the door(s). Door frames will be made of hollow metal, 14-gauge steel, fully welded, with a reinforced head. Doors will be 3'-8" by 7'-0". 16-gauge steel, reinforced, hollow metal. Hardware will include a locking device which is always operable from the interior, a door bumper, corner guards and a hydraulic door closer. Service doors opening into a service corridor will be 1-1/2 hour rated. Tenant will properly identify its Premises with an engraved sign attached to the exterior of its service door. f. Exits Fire exits will be clearly marked and maintained in accordance with governing codes and ordinances. Tenant will not install any hardware or other device(s) that would prohibit the use of an emergency fire exit. g. Finishes Paint finishes will be a minimum of two (2) even coats with no skips, runs or sags. Before applying any wall covering(s), the underlying surface will be prime coated. 3. Storefront a. Scope The total separation between the Premises and mall, herein referred to as "Storefront" including any show windows, platforms, glass and glazing, lobbies or entries, doors, grilles, bracing and supports, depressions, and any walls between the Premises and the 3 52 mall will be furnished and installed by Tenant in accordance with Design Drawings bearing Landlord's approval. b. Design Review Tenant's Storefront design will be subject to Landlord's approval and will be in harmony with the overall quality and character of the mall. Landlord will review each Storefront design carefully to ensure the suitability of the design to the merchandise sold within the store and to the store's location within the mall. Landlord also reserves the right to modify Tenant's design and material election for the Storefront. c. Storefront Design Guidelines It is the intent of these guidelines to encourage the design of Storefronts which reinforce the concept of the mall as a streetscape. The streetscape is comprised of tenants' Storefronts which have varying shapes, sizes and materials and which also vary in the degree to which they project beyond or are recessed from the bulkhead line. Creativity in the streetscape theme and the use of new and innovative materials is highly encouraged by Landlord; our Design Department is available and willing to assist tenants in creating a noteworthy and exciting design. Landlord's review of Tenant's Design Drawings is for design purposes only. Tenant's architect and/or engineer accepts all responsibility for any non-compliance with federal, state or local codes, ordinances, rules or regulations applicable to Tenant's Premises. d. Storefront 'Pop-Out' Criteria The following sets forth the required criteria for allowable Storefront projections: PLEASE NOTE: Refer to the Dimension Control Plan for the "Condition" which pertains to the 'pop-out' criteria listed below. Tenant may occupy an enclosed projected area beyond the bulkhead line containing up to sixty percent (60%) of the area bounded by the maximum Storefront projection line, the bulkhead line, and the "no build zone" (as defined below), while respecting other setback lines as conditions apply (see Dimension Control Plan). A "no build zone" of either 1'-6" or 1'-0" is required between tenants' Storefronts. See Tenant Design Handbook for details. Overhead projections (minimum 8'-0" A.F.F.) may be constructed anywhere within the area bounded by the maximum Storefront projection line, the "no build zone" and other setback lines as conditions apply (subject to Landlord's approval) (see Dimension Control Plan). The Storefront will or may be built to a height no higher than the bottom of Landlord's bulkhead and shall not project outside the maximum Storefront projection line as shown on the Dimension Control Plan. At all mall Storefront feature columns, any partition of Tenant's storefront which must attach to Landlord's feature column must be full height glass. This glass must intersect at the center line of the feature column and run parallel to Landlord's mall bulkhead for a minimum of 12 inches from the face of the feature column before changing direction. At all Storefront(s), illuminated signs mounted to the outside of the Storefront will not extend below 8'-0" A.F.F. Tenant must appropriately finish the top portion of its projected Storefront with a finish of the same quality and material as that used on the vertical surfaces of Tenant's projected Storefront. Particular Storefront conditions require reference to Tenant's Dimension Control Plan for the location(s) of any column(s) for the purpose of respecting the 12'-6" radius setback of Tenant's "pop-out." In no case will there be a limit on the amount of storefront which may be recessed behind the bulkhead line. e. Characteristics and Materials No artificial images such as applied roofs, dormers, thatch, veneer brick, veneer field stone, pegboard, cork products, carpet, painted gypsum wallboard, vinyl, plastic or metal laminate, nor zolatone will be permitted in the construction of Tenant's Storefront. Backpainted glass, ceramic tile (used in any area of the mall other than in the Food Court) will be permitted only at the sole discretion and with the consent of Landlord. Landlord reserves the right to modify any Storefront design and Tenant's material selection. * The use of combustible materials, fire retardant wood, permitted only by code. It is recommended that Tenant's Storefront design utilize full height tempered glass from floor to bottom of bulkhead as a basic design element. f. Security 4 53 Storefront security can be provided by utilizing coiling, sliding, or folding closures of glass, painted steel, anodized aluminum, or other materials approved by Landlord. All security closures must be fully concealed when open. Overhead door soffits will be constructed and finished in such a way as to conceal all internal areas of the Storefront construction. The opening will be finished on the inside faces of gate/door pocket 12" above the soffit line and 12" inside of the side wall pockets. Side wall gate/door pockets will be constructed with flush, overlay pocket doors to conceal the door and pocket. All such doors will have concealed hardware. g. Construction Materials All Storefront construction and construction materials are subject to federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center. h. Safety All Storefront design and construction shall comply with all federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center regarding transparent glass doors and fixed adjacent transparent glass sidelights to avoid injury from accidental human impact. All markings on glass expanses will be subject to Landlord's review. i. Tempered Glass Any glass or mirror used in Tenant's Storefront construction in any type of vertical plane will be minimum 3/8" tempered safety glass. All overhead glass or mirror used in a horizontal or sloped application must be heat-strengthened laminated glass installed in accordance with governing codes. j. Storefront Base All Storefront construction, excluding doors, must have a tile base. Applicable mall tile may be purchased by Tenant from Landlord and installed by Tenant or by Landlord for Tenant if installed prior to the opening of the Shopping Center. However, Tenant is strongly recommended to utilize a material that compliments the overall storefront design. k. Maximum Projection No element of the Storefront, except signage, will project across Tenant's maximum Storefront projection line. No element of Tenant's Storefront, including signage, will project across Tenant's lease line. l. Hinged Doors Doors in the Storefront, if hinged, will swing toward the mall and be locked in an open position whenever the store is occupied. Such doors will be recessed in the Storefront so as not to swing past Tenant's maximum Storefront projection line. m. Non-Swing Doors Non-swing doors such as sliding glass or folding doors or coiling grilles are acceptable if they are locked in an open position whenever the store is occupied. n. Floor Track Any floor track will be flush with the finished floor. o. Floor Level Tenant will adjust the level of the slab in Tenant's Premises by flash patching or another method to ensure that the level of the finished floor in the Premises corresponds with that of the mall. p. Display Windows All display windows must be adequately illuminated and vented. Direct visual exposure of conventional incandescent lamps will not be permitted. Fluorescent lights will not be permitted in display window areas. q. Structural Support All Storefront work requiring structural support, including sliding door tracks and housing boxes for grilles, will be supported at the head sections by a welded structural steel framework installed by Tenant. Connection to Landlord's roof structure or overhead floor structure for purposes other than horizontal bracing will not be permitted. All overhead rolling grille tube columns will be specified and installed by Tenant with base plates. r. Open Storefronts Where Tenant's Storefront is not enclosed, Tenant's merchandise or fixtures may not be extended farther than Tenant's maximum Storefront projection line. 5 54 4. Floor Covering a. Materials Carpeting will not be permitted within eight feet (8'-0") of the Storefront enclosure line. Areas of the store subject to high traffic will be surfaced with ceramic, marble, or stone pavers or prefinished durable wood flooring. Vinyl composition tile is not allowed in Tenant's sales areas under any circumstances. All flame spread specifications for all flooring material must be provided prior to Tenant's construction for review by the local building department. b. Cutting, Patching and Core Drilling Tenant will cut and patch for any underslab work which is performed after Landlord's original pouring of the slab. Excavated materials must be removed and the subgrade must be thoroughly compacted before restoring the floor slab. Upper-level tenants will not cut the concrete slab. Penetrations for all mechanical, electrical, or plumbing work will be core drilled. c. Flush with Mall Tenant's floor finish will be flush with the mall floor finish, and Tenant will provide necessary finish trim where Tenant's floor finish meets the mall floor finish. d. Mall, Tenant Floor Finish Transition Prior to the opening of the Shopping Center, the mall floor finish will be installed by Landlord to Tenant's lease line at Landlord's cost. Tenant will be responsible for the cost to extend the mall floor finish from Tenant's lease line to the center line of Tenant's Storefront enclosure. At Landlord's option, this work may be completed by Landlord; all such work shall be done at Tenant's expense. After the opening of the Shopping Center, the Tenant is responsible for furnishing and installing any and all mall floor finish necessary to the center line of Tenant's storefront enclosure. 5. Ceilings a. Non-Combustible System All ceilings, related framing, blocking and accessories will be non-combustible. No combustible materials may be used above finished ceiling surfaces. b. Suspension System All ceiling suspension systems will be metal. Support for ceiling hangers will be from the structural members. Support will not be permitted from (but not limited to) the following: metal roof deck, mall duct work, sprinkler pipes, or conduits. Tenant is encouraged to include creative ceiling systems in its sales areas. The ceiling must be suspended drywall, concealed spinal acoustical tile, 2' x 2' acoustical T-Bar ceiling with 3/8" revealed edge, or lath and plaster construction. Acoustical ceiling is to be of tegular tile type only. Acoustical ceiling with 2' x 4' modules (including tiles to simulate 2' x 2' look) will NOT be permitted in sales areas. c. Food Court Ceilings in wet areas must be constructed with greenboard and finished with an enamel paint or other paint which resists moisture penetration. d. Insulation All upper-level ceilings for Crossgates and Poughkeepsie will have an insulation of "R" value of at least 19. Upper-level tenants for Walden Galleria, Carousel Center and Galleria at Crystal Run do not need to insulate their ceilings. All ceilings In one-level centers will have an insulation "R" value of at least 19 and not less than a three-quarter (3/4) hour fire rating. Ceilings in lower-level stores will have a fire rating of not less than one (1) hour. e. Design Where ceilings are omitted for aesthetic or other purposes, design will incorporate all federal, state and local codes, ordinances, rules and regulations applicable to the Shopping Center. 6. Sign Criteria a. Design Tenant's sign design will be coordinated with Tenant's Storefront design and will not be installed until the design is approved by Landlord. Landlord will have the right to remove or require the removal of any signs which either do not meet the Sign Criteria or which are 6 55 not expressly approved by Landlord. The cost of such removal will be at Tenant's expense. Shop drawings of all proposed signage shall be submitted by Tenant to Landlord for approval. The submittal shall include an elevation of the Storefront with signage completely dimensioned and drawn to scale. A material sample board with proposed sign materials is also required. Fabrication and installation of signage will comply with all applicable local codes, ordinances, rules, regulations, and national electrical codes applicable to the Shopping Center. All signage materials will be U.L. rated. All signage shall be incorporated into Tenant's design as an integral part of the Storefront To add individuality, creativity and variety, Tenant is strongly encouraged to incorporate into its design scheme the following recommendations: 1) Signage etched in Storefront glazing or mirror; 2) Back-painted glass with signage etched & back lit; 3) Neon graphics; 4) Illuminated halo effect letters; 5) Metal letters such as cast bronze, polished brass, polished chrome and stainless steel; and 6) Fiber optics. b. Store Identity Tenant's sign will be limited to the identification of Tenant's tradename and/or logo. c. Characteristics Tenant's sign and logo will comply with the following design requirements: 1) Dimensional, individual, internally illuminated metal letters and/or logo may not be taller than eighteen inches (18"), unless in the opinion of Landlord, a larger size would be preferable. Maximum allowable projection from the Storefront will be six inches (6"). 2) Dimensional metal back-lit ("halo-effect") letters or logo with a height of six inches (6") to eighteen inches (18"). Each letter must be at least one inch (1") but no more than five inches (5") in thickness and must be projecting from the Tenant bulkhead surface with one inch (1") maximum spacers. 3) Exposed neon tubes forming letters and/or logos will be permitted at the discretion of Landlord on an individual basis. Dimmer switches will be attached to the sign transformers on all exposed neon tubes. No exposed neon crossovers, raceways, ballast boxes, or transformer boxes will be permitted. 4) Non-dimensional letters and/or logos applied or painted directly on the inside face of the glass Storefront area will be permitted as supplemental signs only. 5) Supergraphic or relief treatments of large amounts of Storefront area will be permitted only at the discretion of Landlord on an individual basis. 6) Signage will not exceed five percent (5%) of the area of Tenant's Storefront or twelve (12) square feet (whichever is greater). 7) Signage will not exceed two-thirds (2/3) of the width of Tenant's demised Premises. d. Prohibited Signs The following types of signs or signage will be prohibited: 1) Boxed or cabinet type signs; 2) Vacuum-formed plastic luminous letters and/or logos; 3) Blade signs; 4) Paper signs of any type; 5) Artificial wood and wood grain plastic laminate; 6) Animated component, flashing lights, or noise making signs of any type; 7) Signs utilizing plastic laminate; 8) Exposed neon; and 9) Dimensional graphic signage. e. Illumination All signage will be adequately illuminated by Tenant, utilizing a method which is approved by Landlord. f. Exterior Signage Except for Tenant's approved mall Storefront sign, no exterior signage by Tenant will be allowed. 7 56 g. Menu Boards Menu boards and price lists are subject to Landlord's review and approval. All such signage will be compatible with the remainder of the Premises and with the overall quality and design of the mall, and will be of a size. color and illumination level to be readily visible. "Photo signage" will be reviewed by Landlord. No "supplier" signs or advertising will be permitted. 7. Furnishings and Trade Fixtures All furnishings and trade fixtures will be new and of first quality, including installation. 8. Heating, Ventilating and Air Conditioning Delivery schedules require HVAC units to be ordered prior to Landlord's receipt of specific Tenant's specific store design data. Should Tenant require other and/or additional HVAC units due to Tenant's design or other specific use, such information should be immediately relayed to Landlord in writing separate from the plans submission process (upon completion of Tenant's architect's and/or engineer's calculations). Landlord will make arrangements for such additional or upgraded equipment required if so desired by Tenant at Tenant's expense. Prior to the opening of the Shopping Center, any and all additional, upgraded or other equipment requested by Tenant is at the control of Landlord and at Tenant's expense. Other design criteria relating to Tenant's work includes: a. Ductwork Ductwork will be sized, fabricated and installed in accordance with ASHRAE 90-80 or later edition thereof and SMACNA standards. Ductwork will be installed with fiberglass insulation and vapor barrier. Ductwork which passes through fire rated wells will be equipped with U.L. approved fire dampers as required by code, and with adequate access to such dampers. All return air will be run in insulated ducts. Any flex duct used from main trunk lines to diffusers shall be limited to six (6) feet in length. Tenant must provide condensate drains for all split system equipment used by Tenant. Ductboard is NOT allowed. Ceiling plenums will not be permitted. b. Exhaust Upper-level tenants will furnish and install complete exhaust systems where required. Lower-level and upper-level tenants may be required to connect their exhaust system to a master system provided by Landlord. All tenants are to ensure that systems are independent of each other for toilet rooms, equipment requiring venting including refrigeration or hot presses, cooking, heat, and/or other processes permitted by Landlord which produce air contaminants. Additionally, all tenants are to ensure that the discharge through the roof to the atmosphere properly vents odors and/or fumes away from the building, building openings and fresh air intakes. Tenant restroom exhaust duct systems will have a maximum external static pressure drop of .25 w.g. All roof penetrations must be performed by Landlord's designated contractor at Tenant's expense. See Exhibit C, Item 14, "Roof Work" for required special protection. c. Outside Air Landlord will provide a common outside air duct accessible to all lower-level tenants and applicable upper-level tenants not having direct roof access. All hood exhausts must be installed with tempered make up air, including ductwork directly through the roof. Additionally, all Food tenants' hood exhaust systems will have a minimum of ninety-five percent (95%) of its capacity of make up air introduced into the food preparation area directly from the outside. d. Supplementary Heating Tenant will provide electric unit heaters or wall heaters where required at exterior wall exposures to maintain minimum comfortable winter temperature levels. Tenant's design will provide for a constant ambient minimum temperature of 45 degrees (Fahrenheit) above Tenant's ceiling through the use of ceiling transfer grills, additional electric resistance units, or other methods approved by Landlord. e. Temporary Construction Heat During Tenant's construction period, Tenant will provide any necessary temporary heat required for protection and completion of Tenant's Work. f. Water Cooled or Heated Equipment No water cooled or heated equipment will be permitted unless water is recirculated and may be used only when specific permission is granted by Landlord. g. "As-Built" HVAC Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's HVAC system. 8 57 9. Plumbing a. Quality Tenant, in designing the plumbing system, will use the best and most recent technology available for conservation of water and energy. Fixtures will be of good standard manufacture at least equal in quality to American Standard. Flush valves will not be permitted. All faucets will have water saving aerators. Tenant will supply and install or purchase from the applicable municipality, if required, a water meter of sufficient size to serve the Premises. b. Hot Water Heaters Water heaters will be automatic electric, 480 or 277 volt, 3 phase, with all necessary safety controls and drains. Water heaters located overhead will be supported independently of Landlord's structural framing system. Appropriate structural detailing will be included with Tenant's submission to Landlord for approval by Landlord and Landlord's engineer. Tenants whose only water usage is for small toilet room(s) may utilize "instant hot" hot water heaters or conventional heaters up to a maximum six (6) gallon capacity. c. Hair Interceptors Individual hair interceptors will be installed on all sinks, basins, and special sanitary units which may in any way receive human or animal hair. All hair interceptors must be made accessible and must be regularly maintained. d. Grease Interceptors Individual grease interceptors, adequately sized, and in compliance with state, local and other government health departments having jurisdiction over the Shopping Center will be installed and maintained on all grease producing and other kitchen equipment, and will bear the seal of the Plumbing Drainage Institute (PDI). All grease interceptors will be the type that will plug solid if not maintained. e. Decor No fountains or decorative devices will be used unless they are a recirculating type device. f. Sanitary Sewer Vents Tenant will connect sanitary sewer vent pipes to Landlord's common vent system, or vent through the roof, as applicable. Any roof penetrations must be made by Landlord's designated roofing contractor at Tenant's expense. g. Trash Compactors All tenants serving food to the public will install individual trash compactors within the Premises to precompact all trash into sealed, leak-proof containers. h. "As-Built" Plumbing Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's entire plumbing system. 10. Electrical a. Quality All electrical materials will be new, and bear the U.L. label. Selection of fixtures and lighting levels within the Premises will be in strict accordance with the provisions outlined in the latest editions of ASHRAE 90-80, and the I.E.S. Lighting Handbook, and will be In conformance with the applicable energy conservation codes. b. Codes All work will meet the requirements of the latest National Electric Code, and all applicable local, state and federal codes, applicable regulations of the local telephone and power companies, and ASHRAE 90-80 or the latest edition thereof. c. Certificates Tenant will be responsible for making all necessary applications for certificates regarding Tenant's Work. Upon completion of all electrical work, Tenant will furnish to Landlord a copy of the certificate of approval, issued by the local authority having jurisdiction over such installation. d. Voltage All fluorescent lighting and all heating and cooling equipment must be operated on 480 or 277 volts from Tenant's high-voltage panel. All Tenant transformers must be supported independently of Landlord's structure. 9 58 e. Night Lighting Tenant must provide a separate night lighting circuit on a non-controlled panel (one (1) light fixture per 2,000 square feet), and a lock-on breaker for this circuit, or as designated by local authorities. f. Door Bell Tenant will install an electrical, push-button operated door bell immediately adjacent to Tenant's service door, mounted at 6'-9" A.F.F. in the door jamb. Installations in exterior wall surfaces will NOT be permitted. g. Controls HVAC and non-constant electrical loads will be monitored by Landlord's Building Management System. Constant loads, such as night lights, emergency lights, exit lights, exit signs, alarm systems, employee time clocks, computer cash register systems, electric rolling grills and refrigeration and/or life safety equipment systems will be on non-controlled electrical panels. In locations where lighting is not controlled by Landlord's Building Management System, Tenant will install a seven-day time clock system with reserve spring capacity to control all non-constant loads. h. Wiring No exposed wiring of any sort (extension cords, etc.) will be permitted subsequent to the period of Tenant's initial build-out. j. Ceiling Lighting In Tenant's sales areas, 2' x 4' fluorescent ceiling lighting fixtures are prohibited. Exposed tube fluorescent lights are not permitted. Fluorescent lighting must have parabolic reflective lenses satisfactory to Landlord. j. "As-Built" Electrical Drawings Tenant will provide Landlord with "As-Built" drawings of Tenant's electrical system. k. Checkmeter Upon Tenant's request, Landlord will furnish Tenant with the specifications for a utility-quality checkmeter acceptable to Landlord's and with Landlord's specifications for installation thereof. 11. General Lighting The general lighting of the mall has been designed to allow each tenant's Storefront and sales area to be a prominent focal point. The following required lighting criteria has been established: a. All lighting in 'pop-out' Storefronts will be incandescent. Storefront lighting must meet all requirements as set forth by Landlord and its consultants; b. All accent lighting for the Storefront 'pop-out' areas must meet the criteria stated in the Tenant Design Handbook and is subject to Landlord's review; C. All fluorescent lighting will be low brightness type. Acceptable lamp colors are warm white and deluxe warm white. Acrylic lenses or non-shielded fluorescent tubes will NOT be permitted in Tenant's sales area. All fluorescent lighting will be 277 volt, deep cell louver, or parabolic reflective lenses; d. Fluorescent lighting will NOT be permitted within eight (8) feet of the Storefront closure line; e. Installation of Tenant's lighting in mall Common Areas is NOT permitted; and f. Tenant will comply with all applicable energy conservation and construction codes. 12. Fire Protection a. Other Fire Protection Tenant will install and maintain above the ceiling any and all fire protection devices and equipment, smoke barriers, etc. as required by code(s) in the jurisdiction where the Shopping Center is located. Tenant will install and maintain automatic exhaust hood extinguisher systems and any special equipment or retardant required by the nature of Tenant's design or business, as determined by Landlord or applicable codes. b. Damage Any damage caused by Tenant to Landlord's sprinkler system will be repaired by Landlord at Tenant's expense. c. Hindrance of Sprinkler System 10 59 Tenant's merchandising, fixturing, storage, and other practices will not be conducted in such a manner as to hinder the effectiveness of the sprinkler system. d. Fire Extinguishers Tenant will install and maintain Type ABC fire extinguishers as approved by the local fire department and Landlord's fire and casualty insurer. e. Modifications All modifications, additions, repairs or relocations to the sprinkler system required for Tenant's use, prior to the Grand Opening, will be performed by Landlord's sprinkler contractor, at Tenant's expense. i. Smoke Detectors Tenant will install smoke detectors which automatically shut down the HVAC unit(s) if activated. Smoke detectors will be ceiling mounted in both sales and stock/storage areas with one (1) smoke detector for every 2,000 square feet of each area and/or in the return or supply air duct as required by governing authorities and/or Landlord's fire and casualty insurer. Depending on the local code jurisdiction, the strictest of the three above-referenced requirements will apply. 13. Sanitary Tenant will be responsible for its own toilet requirements per all applicable codes. Common Areas toilets will not be used in Tenant's calculations. a. Temporary Sanitary Tenant will be responsible for all temporary sanitary facilities required during the construction of Tenant's space. 14. Food Court Tenant Criteria a. All wall surfaces visible by the public in Tenant's food preparation areas will be faced with glazed ceramic tile. All other wall surfaces will also be finished with FRP, marlite panel or stainless steel. b. Tenant will furnish and install a minimum of R-11 insulation with a vapor barrier from the floor to the underside of the structure above at all demising walls and in all ceiling areas. At exterior walls, the value of Insulation will be a minimum of R-19. c. Tenant will furnish and install ceramic or quarry tile flooring throughout Tenant's floor area. d. Tenant will have the option of using the following countertop finishes: 1) Plastic slab (Corian, Avonite Formica 2000X, or its equivalent); 2) Stainless steel; 3) Wood butcher block; 4) Ceramic tile; 5) Marble, or other smooth finish stone. e. Locations for any additional rooftop equipment required by Tenant's design will be subject to approval by Landlord; any such additional equipment required will be at Tenant's expense. f. In addition to all of the other submittal requirements, Tenant will submit with its preliminary submittal all proposed finished for all equipment, signage, etc., which will be visible to the public. 15. General Conditions a. Occupancy Date Landlord will notify Tenant of the date on which the Premises will be available for Tenant's Work ("Occupancy Date"). Except as otherwise set forth in the lease and to the extent legally permissible, Tenant agrees that time is of the essence and agrees to commence installation of Tenant's Work no later than five (5) days following the Occupancy Date. b. Occupancy Period The period beginning on the Occupancy Date and terminating on the Term Commencement Date of this Lease will be known as the "Occupancy Period." c. Establishment of Schedules 60 Tenant, its agents, contractors and employees will comply with schedules which Landlord will establish from time to time, governing submittals by Tenant of design information for Landlord's approval, construction operations, occupancy by Tenant, opening for business, and other occurrences, for the purpose of coordinating the efforts of Tenant or Tenant's contractors, and Landlord. All parties will cooperate with Landlord In expediting work, and 61 will provide work schedules, status reports, and updates upon Landlord's request until Tenant opens for business. d. Failure to meet Schedule Any cost incurred by Landlord as a result of Tenant's failure to meet the schedule requirements herein described will be Tenant's responsibility; such costs will be payable by Tenant to Landlord upon Landlord's demand. Any modification to Landlords Work or Tenant's Work necessitated by Tenant's failure to undertake or complete Tenant's Work as required under this Lease will become the responsibility of Tenant. Upon three (3) days written notice thereof, Landlord may request that Tenant's general contractor cease work, and Landlord may complete, at Tenant's expense, any work deemed by Landlord to jeopardize Tenant's required opening date. Upon three (3) days written notice thereof, Landlord may remove Tenant's general contractor due to non-compliance with rules and regulations listed below or published on site. e. Construction Rules and Regulations of the Mall after Grand Opening 1) Tenant will erect and maintain a temporary barrier throughout the construction period. Said barrier is subject to the following requirements - it shall: a) Not extend beyond three feet (3') into the walking corridors. At all times, a ten foot (10') minimum clearance must be maintained in the mall Common Areas; b) Be constructed of metal studs and 5/8" or 1/2" fire rated gypsum wallboard: c) Be taped and finished; d) Be painted (paint number to be specified by Landlord) and have a finished vinyl or rubber base; e) Be twelve feet (12') high, sealed to contain dust, and insulated minimize sound transmission; f) Have a factory-made door with lockset which will be kept closed. The door will swing into the store and be equipped with a door closer. A working copy of the key will be marked accordingly and left in the mail office; g) Be maintained on a daily basis as necessary (i.e., paint, sheetrock, repair, etc.); h) Any such temporary Storefront barrier may not be dismantled until the permanent Storefront is completed; i) Any such temporary Storefront barrier may not be fastened to the finished floor, demise piers or any other permanent finishes or fixtures in the mall; j) Not contain advertising of contractors or associated trades. 2) No jackhammering, or use of other equipment producing a high noise or dust level during shopping hours will be permitted. 3) All construction materials will be delivered via service entrances. For stores without service entrances, all materials will be delivered either before or after standard mall operating hours. 4) Doors are not to be wedged open. 5) Contractor and employee vehicles will be parked in areas as directed by Landlord. 6) Tenant will dispose of all waste materials (except concrete, masonry or structural steel) in dumpsters or other approved containers provided by Tenant which are located in areas designated by Landlord. Absolutely no waste material is to be discarded in adjoining spaces, other vacant spaces, mall areas or Landlord's compactor. 7) No building systems will be shut down without the express prior permission of Landlord. 8) All work will be performed in a neat and orderly fashion. 9) Tenant will notify the mall office personnel of the following prior to starting work: a) The name, address, and temporary residence location of contractors working in the space; and b) The starting date and anticipated completion date of all work. 12 62 10) If Exhibit C established that Tenant accepts the Premises "As Is," then any demolition which may be required will be performed by Tenant at Tenant's expense. f. Compliance with Construction Rules and Regulations As a condition of Landlord's approval of Tenant or Tenant's contractor taking occupancy of the Premises, Tenant or Tenant's contractor will be required to deposit with Landlord the sum of [***] to be held by Landlord as security for the compliance by Tenant and Tenant's contractor with the Construction Rules and Regulations set forth herein and the other construction requirements as set forth in Exhibits C and D. Tenant and Tenant's contractor will reimburse Landlord for the cost of any damage or disruption caused by the failure of Tenant or Tenant's contractor to comply with the Construction Rules and Regulations. Any such cost(s) will be first recovered by Landlord from the security deposit made hereunder. Upon the recovery of cost(s), Tenant will restore the security deposit to the original sum of [***]. Landlord will return the security deposit or the amount remaining thereof upon satisfaction of the following conditions: (i) the satisfactory completion of Tenant's Work as required under the Lease, including Landlord's punchlist; (ii) delivery of a Certificate of Occupancy to Landlord; (iii) within [***] days following Landlord's acceptance of Tenant's properly completed Certificate of Completion, the submission of "As-Built" drawings as may be required hereunder; (iv) the receipt of copies of lien releases issued to Tenant from each subcontractor and the general contractor. Request for the return of the security deposit must be made to Landlord in writing. g. Compliance with Laws Tenant and Tenant's contractor will, at its/their expense, comply with all applicable statutes, ordinances, rules, orders, laws, regulations, codes and recommendations of all governmental agencies and their authorized agents which have jurisdiction over Tenant's Work; and, with respect to the prevention of fire and exposure to liability risks, to the Board of Fire Underwriters, Rating Board, and Landlord and Tenant's insurance companies. Tenant and/or Tenant's contractor will apply for, pay all fees for, and obtain all necessary permits, licenses and certificates. A copy of same will be delivered to Landlord and will be posted in a prominent place within the Premises before Tenant begins work. Tenant will furnish Landlord with a copy of a Certificate of Occupancy prior to opening for business. h. Non-interference Tenant will perform its work so as not to interfere with the completion of Landlord's Work or the work of other tenants. i. Quality of Materials: Warranty All materials furnished and incorporated in Tenant's Work will be new, unused, and of the quality and characteristics specified herein. If the quality and characteristics of certain materials are not specifically set forth herein, materials used will be those customarily used in first-class work of similar nature and character. Tenant will guarantee, and will require all parties furnishing and incorporating materials in Tenant's Work to guarantee said work to be free from any and all defects in workmanship and material for a period of five (5) years from the date of completion thereof. Tenant will be responsible for the costs of correction of such defects, which costs will include any and all expenses and damages resulting from said defects. Tenant's agreements with its contractors will contain language so providing and further providing that all guarantees and warranties will inure to the benefit of both Landlord and Tenant, as their respective interests appear, and that such guarantees and warranties can be directly enforced by either. j. Easements Tenant will install and maintain proper access panels as may be required for the regular maintenance of Tenant's and Landlord's equipment. Where applicable, tenants will recognize the rights of Landlord and of tenants located above or below to run pipes, ducts, conduits, or related items servicing the mall or other areas through Tenant's Premises. Tenant will cooperate with Landlord and other tenants; hours and times when work will be performed will be agreed upon by the parties involved. Any dispute arising hereunder will be resolved by Landlord. k. Insurance 1) Tenant will secure, pay for and maintain, or cause its contractor(s) to secure, pay for and maintain, during Tenant's construction and fixturing work within the Premises, all of the insurance policies required herein in the amounts as set forth below. Tenant will not permit its contractor(s) to commence any work until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. 2) Tenant's Contractors' and Subcontractors' Required Minimum Coverages and Limits of Liability. *** Confidential treatment requested. 13 63 a) Comprehensive General Liability, including personal injury and property damage, completed operations, explosions, collapse, and underground operations, if any, broad form property damage, contractor's protective liability, in the minimum amount of [***] Combined Single Limit; b) Auto Liability, Bodily Injury and Property Damage (including non-owned and hired vehicles) in the minimum amount of [***] Combined Single Limit; and c) Statutory Workers' Compensation, Employer's Liability and Disability Benefits. Umbrella Coverage in the minimum amount of [***]. Such insurance will insure the contractor and/or subcontractor against any and all claims for personal injury, including death resulting therefrom and damage to the property of others caused by accident and arising from the contractors' and/or subcontractors' operations and whether such operations are performed by the contractor(s), subcontractor(s), or by anyone directly or indirectly employed by them. 3) Protective Liability Insurance Tenant will provide Owner's Protective Liability Insurance that will insure Landlord and Tenant against any and all liability to third parties for damages because of personal injury liability (or death resulting therefrom) and property damage liability of others or a combination thereof which may arise from work in connection with the Premises, and any other liability for damages which Tenant's contractor or subcontractors are required to insure against under any provisions herein. Said insurance will be provided in the minimum amount of [***] Combined Single Limit. 4) Tenant's Builder's Risk Insurance - Completed Value Builder's Risk Material Damage Insurance Tenant will provide an "All Physical Loss" Builder's Risk insurance policy on all Tenant's Work to be performed in the Premises as it relates to the building within which the Premises is located. The policy will include Tenant, its contractor and subcontractors and Landlord as named insureds, as their interests appear. The amount of insurance to be provided will be [***] of the full replacement cost. 5) All such insurance policies required above will name Landlord as an additional insured, except Workers' Compensation Insurance, which will contain an endorsement waiving all rights of subrogation against Landlord. Certificates of Insurance will provide that no reduction in the amounts or limits of liability or cancellation of such insurance coverage will be undertaken without thirty (30) days prior written notice to Landlord. All insurance policies required above will be written by companies authorized under the laws of the state in which the Shopping Center is located and such policies must be satisfactory to Landlord. l. Indemnity Tenant will fully protect, defend, indemnify and hold harmless Landlord and Landlord's Managing Agent(s) and their employees, partners, officers, directors, agents, heirs, executors, administrators, successors, and assigns against any and all claims, actions, damages, liabilities, costs and expenses, including any and all attorneys' fees, arising from, because of, or out of the performance or non-performance of Tenant's Work or the use or occupancy of the Premises for Tenant's Work. m. Hazardous Materials Tenant will not install, nor cause or allow to be installed, nor use any hazardous materials in Tenant's Work without the express prior written consent of Landlord. Tenant will guarantee and require all parties furnishing and incorporating materials in Tenant's Work to guarantee that hazardous materials have not been furnished or incorporated in Tenant's Work. Tenant will be responsible for any and all cost(s) of correction which will include all expenses and damages, whether direct or indirect, resulting from the installation or use of hazardous materials. Tenant's agreements with its contractor(s) and subcontractor(s), if any, will contain language so providing and further, warranting that hazardous materials were neither installed nor used in the Premises; such warranties shall inure to the benefit of both Landlord and Tenant, and can therefore be directly enforced by either. *** Confidential treatment requested. 64 APPENDIX 1A TENANT ELECTRICAL LOAD SUMMARY (Please complete the following form and include as part of the Final Drawing Submittal to the Landlord.) Tenant: ______________________________ Space No.: ____________________ Mall: ________________________________ GLA: ____________________ Landlord provides as standard 10 watts per square foot. Food Court Tenants are provided with 15 watts per square foot. The information provided below is necessary in order to properly size the Mall's electrical distribution capacity. Upgrades over the Landlord's supplied wattage will be billed to the Tenant. Winter: Summer: 1. Connected Cooling Load: Compressor(s): ______ Watts Inside Fan: ______ Watts Outside Fan(s): ______ Watts Power Exhaust: ______ Watts 2. Connected Heating Load: Compressor(s): ______ Watts (Heat Pump) Inside Fan: ______ Watts Outside Fan(s): ______ Watts (Heat Pump) Heat Coil(s): ______ Watts 3. Connected Constant Lighting Load: (not to be included in occupied lighting load below) ______ Watts 4. Connected Constant Equipment Load: (not to be included in occupied equipment load below) ______ Watts 5. Connected Occupied Lighting Load: (not to be included in occupied lighting load above) ______ Watts 6. Connected Occupied Equipment Load: (not to be included in occupied equipment load above) ______ Watts 7. Total Connected Load: (the greater of item 1 or 2 plus items 3 through 6) ______ Watts Completed By: Electrical Engineer's Name: ________________ Date: ________________ Firm Name: _________________________________ Address: _________________________________ Stamp: ________________ Phone: _____________________________________ 1 65 APPENDIX 2 CERTIFICATE OF COMPLETION AND AFFIDAVIT OF CONTRACTOR'S COMPLIANCE WITH APPROVED PLANS (COMPLETE AND SUBMIT TO LANDLORD UPON COMPLETION OF TENANT'S WORK CONSTRUCTION) RE: Construction of STORE -------------------------------- ----------------------------------------------- MALL This is to state that I have made an inspection of the site on completion, and I hereby certify that the Premises has been completed in accordance with the Landlord approved final plans and specifications except as noted below. Dated: , 19 Tenant: ------------ -- ------------------------------------------ By: ------------------------------------------ Title: ------------------------------------------ Dated: , 19 Contractor: ------------ -- -------------------------------------- Name: -------------------------------------- Address: -------------------------------------- Signature: -------------------------------------- Title: -------------------------------------- - ------------------------------------------------------------------------------- List all changes, if any, to previously approved plans and specifications required during construction: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AS-BUILT DRAWINGS ENCLOSED (IF APPLICABLE): ---------- ---------- CERTIFICATE OF OCCUPANCY ATTACHED (WHERE REQUIRED): ---------- ---------- UNDERWRITER'S CERTIFICATE ATTACHED (WHERE REQUIRED): ---------- - ---------- 2 66 [PHOTO - UNDER CAROUSEL] View from Main Entrance under Carousel Carousel Center - Syracuse, New York 67 [PHOTO - LOWER LEVEL COMMON AREA CAROUSEL CENTER -- SYRACUSE, NEW YORK] EX-10.23 25 LEASE, OPRY MILLS 1 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Exhibit 10.23 LEASE SILICON ENTERTAINMENT, INC., a California corporation ------------------------------- TENANT NASCAR SILICON MOTOR SPEEDWAY and/or SILICON MOTOR SPEEDWAY ------------------------------- TRADE NAME N/A ------------------------------- GUARANTOR OPRY MILLS 2 TABLE OF CONTENTS Page ---- ARTICLE I.............................................................. 4 GRANT AND TERM.................................................... 4 Section 1.1 Leased Premises................................. 4 Section 1.2 Term............................................ 7 Section 1.3 Opening......................................... 8 Section 1.4 Late Opening.................................... 8 ARTICLE II............................................................. 8 RENT AND DEPOSIT.................................................. 8 Section 2.1. Minimum Rent.................................... 8 Section 2.2. Percentage Rent................................. 9 Section 2.3. Payments By Tenant.............................. 12 Section 2.4. Security Deposit [Intentionally Deleted]........ 12 Section 2.5. Late Charge..................................... 12 ARTICLE III............................................................ 13 PREPARATION OF LEASED PREMISES.................................... 13 Section 3.1. Landlord's Work................................. 13 Section 3.2. Delivery of Possession.......................... 13 Section 3.3. Tenant's Work................................... 13 Section 3.4. Alterations by Tenant........................... 15 Section 3.5. Removal by Tenant............................... 16 ARTICLE IV............................................................. 16 CONDUCT OF BUSINESS............................................... 16 Section 4.1. Use and Trade Name.............................. 16 Section 4.2. Operation of Business........................... 17 Section 4.3. Sign............................................ 18 Section 4.5. Tenant's Warranties............................. 19 Section 4.5. Storage and Office Space........................ 19 Section 4.6. Care of Premises................................ 20 Section 4.7. Notice by Tenant................................ 20 Section 4.8. Radius.......................................... 20 ARTICLE V.............................................................. 20 COMMON AREA....................................................... 20 Section 5.1. Use of Common Area.............................. 20 Section 5.2. Common Area Maintenance Expenses................ 21 ARTICLE VI............................................................. 23 REPAIRS AND MAINTENANCE........................................... 23 Section 6.1. Repairs and Maintenance by Landlord............. 23 Section 6.2. Repairs and Maintenance by Tenant............... 24 ARTICLE VII............................................................ 25 TAXES............................................................. 25 Section 7.1. Tax Liability................................... 25 Section 7.2. Method of Payment............................... 26 ARTICLE VIII........................................................... 26 INSURANCE, INDEMNITY AND LIABILITY................................ 26 Section 8.1. Landlord's Insurance Obligations................ 26 Section 8.2. Tenant's Insurance Obligations.................. 27 Section 8.3. Mutual Covenant................................. 28 i 3 Section 8.4. Covenant to Hold Harmless...........................28 Section 8.5. Loss and Damage.....................................29 ARTICLE IX...................................................................29 DESTRUCTION OF LEASED PREMISES..........................................29 Section 9.1. Continuance of Lease................................29 Section 9.2. Reconstruction......................................30 ARTICLE X....................................................................30 CONDEMNATION............................................................30 Section 10.1. Eminent Domain......................................30 Section 10.2. Rent Apportionment..................................31 Section 10.3. Temporary Taking....................................31 ARTICLE XI...................................................................31 ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE............................31 Section 11.1. No Assignment, Subletting or Encumbering of Lease...31 Section 11.2. Assignment or Sublet................................35 Section 11.3. Transfer of Landlord's Interest.....................35 ARTICLE XII..................................................................35 SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE...........35 Section 12.1. Subordination.......................................35 Section 12.2. Attornment..........................................36 Section 12.3. Financing...........................................36 Section 12.4. Estoppel Certificate................................36 Section 12.5. Remedies............................................37 ARTICLE XIII.................................................................37 ADVERTISING AND PROMOTION...............................................37 Section 13.1. Promotion Fund......................................37 Section 13.2. Promotion Fund Contribution.........................37 Section 13.3. Advertisements [Intentionally Deleted]..............38 Section 13.4. Network.............................................38 ARTICLE XIV..................................................................38 DEFAULT AND REMEDIES....................................................38 Section 14.1. Elements of Default.................................38 Section 14.2. Landlord's Remedies.................................39 Section 14.3. Bankruptcy..........................................41 Section 14.4. Additional Remedies and Waivers.....................42 Section 14.5. Landlord's Cure of Default..........................42 Section 14.6. Security Interest...................................42 ARTICLE XV...................................................................42 RIGHT OF ACCESS.........................................................42 ARTICLE XVI..................................................................43 DELAYS..................................................................43 ARTICLE XVII.................................................................43 END OF TERM.............................................................43 Section 17.1. Return of Leased Premises...........................43 Section 17.2. Holding Over........................................43 ARTICLE XVIII ...............................................................44 COVENANT OF QUIET ENJOYMENT.............................................44 ii 4 ARTICLE XIX ............................................... 44 UTILITIES ............................................ 44 Section 19.1 Utilities ......................... 44 Section 19.2 Electricity, Telephone and Gas .... 44 Section 19.3 Trash and Garbage Removal ......... 45 Section 19.4 Water and Sewer ................... 45 Section 19.5 Grease Interceptors ............... 45 ARTICLE XX ................................................ 45 MISCELLANEOUS ........................................ 45 Section 20.1 Entire Agreement .................. 45 Section 20.2 Notices ........................... 45 Section 20.3 Governing Law ..................... 46 Section 20.4 Successors ........................ 46 Section 20.5 Liability of Landlord ............. 46 Section 20.6 Brokers ........................... 46 Section 20.7 Transfer by Landlord .............. 46 Section 20.8 No Partnership .................... 46 Section 20.9 Waiver of Counterclaims............ 46 Section 20.10 Waiver of Jury Trial............... 47 Section 20.11 Severability ...................... 47 Section 20.12 No Waiver ......................... 47 Section 20.13 Consumer Price Index .............. 47 Section 20.14 Interest .......................... 47 Section 20.15 Excavation ........................ 47 Section 20.16 Rules and Regulations ............. 47 Section 20.17 Financial Statements .............. 48 Section 20.18 General Rules of Construction ..... 48 Section 20.19 Recording ......................... 48 Section 20.20 Effective Date .................... 48 Section 20.21 Headings .......................... 48 Section 20.22 Managing Agent .................... 48 ADDENDUM EXHIBITS: Exhibit A Site Plan Exhibit B Measurement of Leased Premises Exhibit C Landlord's Work Exhibit D Tenant's Work Exhibit E Sign Criteria Exhibit F Commencement and Expiration Date Declaration Exhibit H Agreement of Subordinate Non-Disturbance and Attornment Exhibit H-1 Tenant Estoppel Certificate iii 5 THIS LEASE dated as of this 23rd day of August, 1999 (the "Lease") by and between OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, the address of which is c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209 (hereinafter referred to as "Landlord") and SILICON ENTERTAINMENT, INC., a Delaware corporation, the address of which is 210 Hacienda Avenue, Campbell, California 95008 (hereinafter referred to as "Tenant"). RECITAL Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord, the Leased Premises, for the Term commencing on the Commencement Date, subject to the terms, covenants, conditions and provisions of this Lease. Landlord shall have the right, at any time prior to the earlier of (i) the Delivery of Possession Date of the Leased Premises or (ii) October 1, 1999, by written notice to Tenant, to relocate the Leased Premises in either direction (from side to side from the outside boundary of the Leased Premises) by not more than forty (40) feet, provided that the configuration of the Leased Premises is substantially the same in the relocated space, that there is not more than one other tenant space between the shifted Leased Premises and the courtyard and that the visibility of the Leased Premises from the enclosed mall is not materially and adversely impacted ("Shift"), upon any such Shift, the size and description of the Leased Premises shall be appropriately modified to reflect any resulting proportional adjustment in the Rent based upon the change in size of the Leased Premises. If the Landlord initiates a Shift pursuant to the foregoing and after the receipt by Tenant of the initial Lease Outline Drawing (as described in Exhibit D) then Landlord will pay for Tenant's actual costs associated with the Shift, including without limitation, the costs associated with a redesign of the Leased Premises and the Fixturing Period will be extended one day for each day of delay created by the Shift. If the Commencement Date is not the first day of a month, Minimum Rent for the month in which the Commencement Date occurs shall be prorated to the end of the month and paid as the second monthly installment of Minimum Rent on the first day of the next month and, after the expiration of the number of years in the Term, the Term shall expire on the last day of the same month in which the Commencement Date of the Term occurred, it being the intention of the parties that the Term expire on the last day of a month. When the Commencement Date has been determined, Landlord and Tenant shall execute, acknowledge and deliver a written statement in recordable form specifying the Commencement and Expiration Dates of the Term and, if there shall have been any changes in the floor area of the Leased Premises, such statement shall reflect such change or changes. Said statement upon execution and delivery shall be deemed to be a part of this Lease. 6 DATA SHEET The following references furnish data to be incorporated in the specified Sections of this Lease and shall be construed to incorporate all of the terms of the entire Section as stated in this Lease: (1) SECTION 1.1: DESCRIPTION OF LEASED PREMISES: Store number: 429, consisting of approximately 6,007 square feet of floor area as shown on Exhibit A attached hereto and made a part hereof, with no less than fifty (50') lineal feet of frontage measured from center of demising wall to center of demising wall. (2) SECTION 1.2: TERM: COMMENCEMENT DATE: The earlier of (i) the later of (a) the Grand Opening or (B) the date following the expiration of a one hundred twenty (120) day fixturing period ("Fixturing Period") following the Delivery of Possession Date (as defined in Section 3.2), or (ii) the date the Leased Premises is open for business to the public. It is estimated that the Delivery of Possession Date will be January 4, 2000. ORIGINAL TERM: Five (5). OPTION PERIOD: Subject to Section 1.2 of this Lease, five (5) years. (3) SECTION 2.1: MINIMUM RENT: Original Term: From the Commencement Date and continuing through the expiration of the Original Term, the sum of [***] annually ([***] psf), payable in equal consecutive monthly installments of [***] each. Option Period: Beginning with the [***] year of the Option Period and continuing through the expiration of the Option Period, the sum of [***] annually ([***] psf), payable in equal consecutive monthly installments of [***] each. (4) SECTION 2.2: PERCENTAGE RENT: Percentage Factor: [***] Sales Break Point for the Original Term: From the Commencement Date and continuing through the expiration of the Original Term: [***]. Sales Break Point for the Option Period: Beginning with the [***] year of the Option Period and continuing through the expiration of the Option Period: [***]. (5) SECTION 2.4: SECURITY DEPOSIT: N/A (6) SECTION 4.1: PERMITTED USE: *** Confidential treatment requested. 2 7 Tenant shall use the Leased Premises for the use set forth below and for no other purpose: Conducting an interactive entertainment center featuring among other things, racing simulators and other related retail and entertainment uses. Such uses may include but shall not be limited to the installation and operation of simulators and the sale of auto racing, including NASCAR Silicon Motor Speedway merchandise, NASCAR driver merchandise and other entertainment merchandise related to NASCAR; and for the sale of snack food items only and hot and cold non-alcoholic beverages (selections to be based on Landlord's reasonable approval subject to existing exclusive uses) for on-the-premises consumption, provided said snack food and beverage service shall not be operated or licensed by a nationally-recognized fast-food chain. Tenant shall have the right to conduct group sales events ("Events") from the Leased Premises at which time a portion of the Leased Premises may be closed to the general public. During Events Tenant may retain an outside catering service (giving preference to restaurant operators within the Retail Development) to provide food and beverage service (including alcoholic beverage service if Tenant or the caterer obtains all necessary permits) TRADE NAME: NASCAR Silicon Motor Speedway and/or Silicon Motor Speedway (7) SECTION 13.2: FUND CONTRIBUTION: [***] psf of floor area in the Leased Premises GRAND OPENING FEE (INITIAL CONTRIBUTION): Subject to the terms of Section 13.2 hereof, [***] psf of floor area in the Leased Premises (8) GUARANTOR: N/A (9) GRAND OPENING DATE: Spring, 2000 (10) TEMPORARY CHARGES: [***] psf of floor area in the Leased Premises (11) CONSTRUCTION CHARGEBACKS: N/A (12) CONSTRUCTION ALLOWANCE: [***] psf of floor area in the Leased Premises *** Confidential treatment requested. 3 8 ARTICLE I GRANT AND TERM Section 1.1 Leased Premises. (a) Landlord, in consideration of the Rent (as defined in Section 2.3) to be paid and the covenants to be performed by Tenant, does hereby lease and demise to Tenant, and Tenant hereby rents and hires from Landlord for the Term herein set forth, the Leased Premises which are described as set forth in the Data Sheet attached hereto, in the retail development designated as Opry Mills or by such other name as Landlord may from time to time hereafter designate (hereinafter "Retail Development"). The term "State" as used herein shall mean the State or Commonwealth of Tennessee. For all purposes in this Lease, a "Major Tenant" is any occupant of 20,000 square feet or more of floor area in the Retail Development and a "Major Tenant Space" is any space in the Retail Development containing 20,000 square feet or more. It is agreed that, wherever the term "Shopping Center" is used herein, it shall mean the Retail Development excluding the Major Tenant Spaces, except as otherwise specifically stated herein. Exhibit A sets forth the general layout of the Retail Development. Landlord does not warrant or represent that the Retail Development or the Leased Premises will be constructed exactly as shown thereon or that it will be completed by a specific date, but Landlord does warrant that the Leased Premises and the Retail Development will have the general configuration shown on Exhibit A. Notwithstanding anything contained in this Lease to the contrary, Landlord shall have the right, at any time and from time to time, without notice to or consent of Tenant, and without in any manner diminishing Tenant's obligations under this Lease, to make alterations or additions to, and build additional stories on the building in which the leased Premises are located and to build adjoining the same, to construct other buildings and improvements of any type in the Retail Development or the common areas, or any part thereof, including the right to locate and/or erect thereon permanent or temporary kiosks and structures, to enlarge the Retail Development, and to make alterations therein or additions thereto (provided in no event will any kiosk or other structure be located directly in front of the registration desk within the Leased Premises), to build additional stories on any building or buildings within the Retail Development, and to build adjoining thereto, to construct decks or elevated parking facilities and free standing buildings within the parking lot areas of the Retail Development, and to change the size, location, elevation and nature of any of the stores in the Retail Development other than the Leased Premises or the common areas, or any part thereof. Landlord agrees not to construct kiosks or other similar structures or displays, whether temporary or permanent (hereinafter "Kiosk"), within the mall area in front of the Leased Premises created by extending parallel lines from each of the side demising walls of the Leased Premises, ten feet (10') out into the common areas then connecting each line at the point of its termination. In exercising its options hereunder, Landlord agrees to use reasonable efforts (in light of the then existing circumstances) not to materially and unreasonably interfere with the visibility of and access to the Leased Premises from the enclosed mall; it being understood that any structure placed in the common areas shall not block Tenant's signage located on the storefront signband. In the event Landlord elects to enlarge the Retail Development, or any part thereof, any additional area may be included by Landlord in the definition of the Retail Development for purposes of this Lease. Landlord shall also have the general right from time to time to include within and/or to exclude from the defined Shopping Center any existing or future areas and the floor area of the Shopping Center shall be accordingly adjusted. The premises leased to Tenant are herein referred to as the "Leased Premises". The approximate location of the Leased Premises is cross-hatched on the lease plan of the Retail Development attached hereto and made a part hereof as Exhibit A. This Lease of the Leased Premises is subject to all applicable building restrictions, planning and zoning ordinances, governmental rules and regulations, existing underlying leases, and all other encumbrances, covenants, restrictions, easements and agreements affecting the Retail Development and the terms and provisions of certain master declaration, reciprocal easement and operating agreements now or hereafter entered into by Landlord. Landlord acknowledges that Tenant's customers shall be permitted to queue in the common areas while waiting for access to the Leased Premises ("Waiting Area"). The Waiting Area shall be in a location designated by Landlord and reasonably approved by Tenant, provided said Waiting Area permits Tenant's customers to queue in an orderly manner without obstructing pedestrian traffic in the common areas and/or unreasonably disturbing the operation of other tenants in the Retail Development. 4 9 In addition to the Leased Premises. Landlord shall grant Tenant a non-revocable license during the Term for a location in the common area of the Shopping Center which shall be used by Tenant for the display of a full size stockcar, including sign tripods ("Display Area"). The location of the Display Area shall be selected by Landlord, but such location shall always be within the area labeled on Exhibit A-1 as "Display Area". In no event shall Tenant be obligated to pay additional Rent for use of the Display Area; provided, however, that any utility costs associated with the illuminated display shall be the sole responsibility of Tenant. Tenant shall, at its sole cost and expense, construct the illuminated display in accordance with approved plans and specifications, which plans and specifications shall be submitted to Landlord for approval pursuant to the submittal requirements and process outlined in the Tenant Handbook. During such times as Tenant is using the Display Area for the purpose of displaying the stock car or for any other permitted use (as so approved by Landlord), Tenant shall repair and maintain the Display Area in accordance with Section 6.2 of this Lease; in addition, Tenant shall be required to carry insurance for the Display Area providing for the coverage set forth in Section 8.2(a) of this Lease during such times as Tenant is using the Display Area as set forth herein. Upon the Expiration Date (hereinafter defined) or the earlier termination of this Lease. Tenant shall be responsible for the complete removal of the display and shall make any necessary repairs to the Display Area in accordance with Tenant's obligations set forth in Section 17.1 of this Lease. Subject to the provisions of Section 5.1, Tenant shall enjoy a non-exclusive easement, right and privilege for Tenant and its customers, employees and invitees and the customers, employees and invitees of any assignee, sublessee, concessionaire or licensee of Tenant, to use the common areas of the Shopping Center, with Landlord and the other tenants and occupants of floor area within the Shopping Center and their respective customers, employees and invitees. Furthermore, Landlord agrees that any additions, alterations or modifications to the Shopping Center by Landlord shall not adversely affect access to, or visibility of the Leased Premises and, except as otherwise provided for herein, Tenant shall retain substantially the same relative position with respect to Major Tenants of the Shopping Center as of the Commencement Date. (b) After the Commencement Date (as defined in Section 3.2), Landlord reserves the right to relocate Tenant only for the purpose of (i) the addition or expansion of a Major Tenant or (ii) the redevelopment or expansion of the Retail Development involving the addition of a minimum of 100,000 square feet of GLA. Landlord shall provide Tenant with not less than sixty (60) days written notice of such relocation (the "Relocation Period") during which Landlord shall offer to Tenant such alternative location(s) (with approximately the same floor area, configuration and at least fifty feet (50') of frontage) as may be available within that area of the Retail Development labeled "Relocation Zone" on Exhibit A. In the event the parties agree on a specific location, then this Lease shall be amended by substituting the new location for the present location and the square footage, Minimum Rent and Sales Break Point shall be proportionately adjusted based upon the change in the size of the Leased Premises and Landlord and Tenant shall agree upon a mutually acceptable timeframe for the completion of work in the new premises and the relocation of the Tenant to the new premises. Landlord shall, at Landlord's cost and expense, complete the leasehold improvements to the new location in accordance with the working drawings originally approved by Landlord with respect to Tenant's Work in the original Leased Premises (including, without limitation finish work and the installation of fixtures, simulators and other merchandise) and Tenant shall relocate to the new location and, within sixty (60) days after delivery of the new location to Tenant ("Relocation Fixturing Period"), open for business in the new location ("Relocation Date"). Since Tenant will need to move its equipment, including simulators from one space to the other, Tenant shall be permitted to close for a period not to exceed ten (10) days for the purpose of moving the equipment and installing it in the new leased premises ("Relocation Closure"), and during such Relocation Closure Tenant's Rent shall abate. In the event that Tenant is not able to operate in either the original or the relocated Leased Premises during the Relocation Fixturing Period because of the removal and installation of the simulators and other equipment. Rent shall abate until Tenant reopens but in no event after the expiration of the Relocation Fixturing Period. Notwithstanding the foregoing, Tenant may elect to have Landlord construct the relocated space under a new prototype design, but Tenant shall bear the additional costs required as a result of the election of the new design. Landlord recognizes that the installation of simulators is a specialized task for which Tenant's experts will be required and Landlord shall reimburse Tenant for the reasonable internal costs of using Tenant's personnel for the completion of such work. If a relocation of the Leased Premises occurs Landlord shall reimburse Tenant for Tenant's reasonable and actual out-of-pocket costs of moving 5 10 Tenant's equipment and inventory from the original Leased Premises to the new location within forty-five (45) days of Landlord's receipt of a statement from Tenant setting forth such costs together with backup information as Landlord may reasonably require. In the event Landlord offers to Tenant at least one alternative location within the Relocation Zone (or elsewhere at Tenant's sole discretion) with approximately the same floor area, configuration and at least fifty feet (50') of frontage and Landlord and Tenant are unable to agree on an alternative location, then within thirty (30) days after the expiration of the sixty (60) day period set forth above, Landlord shall either (A) terminate this lease by providing Tenant ninety (90) days prior notice, which termination shall be effective on the later of (i) ninety (90) days after notice from Landlord of the termination or (ii) the date that Tenant actually vacates the Leased Premises ("Termination Date") or (B) withdraw the request for relocation. In the event of such termination, Landlord shall pay to Tenant, within thirty (30) days following the later of (a) the Termination Date or (b) the date that Tenant shall have vacated the Leased Premises, a sum equal to the then unamortized cost of Tenant's leasehold improvements which have been paid for by Tenant, such amortization to be on a straight line basis over the Original Term less the value of all simulators equipment removed by Tenant for re-use plus all reasonable costs associated with the moving and storage for up to three (3) months of the simulators and other equipment in the Leased Premises, provided Tenant shall furnish to Landlord such backup information as Landlord may reasonably require. Tenant shall deliver possession of the Leased Premises to Landlord on or before the Termination Date and/or the Relocation Date in "as is" condition subject to the provisions of Sections 3.5 and 17.1. Tenant shall pay all amounts which are due and owing under the Lease or which shall accrue up to such Termination Date or Relocation Date (which amounts shall be paid to Landlord within thirty (30) days of such Termination Date or Relocation Date) and Tenant shall be released from any and all further obligations pursuant to this Lease accruing after such Termination Date or Relocation Date with respect to the vacated Leased Premises, except as otherwise provided in Articles V and VII; however, in the event of relocation, Tenant shall remain liable for all obligations accruing under this Lease after the Relocation Date. (c) The square footage of the Leased Premises (sometimes herein referred to as the gross leaseable floor area or GLA) shall be measured as defined in Exhibit B. The actual square footage in the Leased Premises shall be determined by Landlord's architect. If Tenant disagrees with the square footage so determined, Tenant may advise Landlord in writing within ten (10) days that it contests the same and retain an architect to remeasure the Leased Premises. If Landlord's architect and Tenant's architect do not agree, then the two architects shall retain a third architect whose decision shall be final and binding. The agreed to square footage shall be binding upon both parties hereto, and such determined square footage shall be used in all calculations based on square footage throughout this Lease. If the floor area determined in accordance with the preceding sentence varies from the square foot floor area originally set forth in the Data Sheet, the Minimum Rent set forth in Section 2.1 hereof shall be adjusted by multiplying the Minimum Rent by a fraction, the numerator of which is the square foot floor area determined by Landlord's architect and the denominator of which is the square foot floor area originally set forth in the Data Sheet, and Tenant shall be obligated to pay such Minimum Rent, as adjusted, from the Commencement Date, subject to further adjustments as provided in this Lease but in no event shall Tenant be obligated to pay Minimum Rent on more than [***] additional square feet of GLA. Each monthly installment provided for in Section 2.1 shall be recomputed and shall be that dollar amount which results from dividing the adjusted Minimum Rent by twelve (12). Any and all references in this Lease to Minimum Rent (or the monthly installments thereof) shall be deemed to be references to the Minimum Rent as computed by application of this Section 1.1, subject, however, to the adjustments set forth elsewhere in this Lease. For purposes of this Lease, in determining the gross leaseable floor area or the gross leased and occupied floor area of the Shopping Center, there shall be excluded therefrom project areas and offices, common areas and/or areas under Landlord's control (e.g., electrical/utility rooms, etc.). The exterior walls, roof, storefront and the area beneath the Leased Premises are not demised hereunder, and the use thereof, together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires, people counters, tunnels, sewers and structural elements leading through the Leased Premises in locations which will not materially interfere with Tenant's use thereof and serving other parts of the Retail Development are hereby reserved to Landlord. Landlord reserves an easement above Tenant's finished ceiling or light line to the roof for general access purposes and in connection with the exercise of Landlord's other rights under this Lease. Notwithstanding anything contained in this Lease to the contrary, if as a result of Landlord's exercise of the foregoing rights Tenant is prevented from operating its business within the *** Confidential treatment requested. 6 11 Leased Premises for three (3) or more consecutive days, Landlord shall after written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. SECTION 1.2 TERM. The Term of this Lease shall be for a period commencing on the Commencement Date, and expiring at 11:59 p.m. local time on the final day of the month in which the Original Term or the Option Period, if exercised, expires or other specified date as set forth in the Data Sheet, unless sooner terminated in accordance with the provisions hereof (the "Expiration Date"). Unless otherwise specified in this Lease, the use of the word "Term" shall be deemed to include both the Original Term and the Option Period, if exercised. The term "full year" and "year" as used in this Lease shall mean consecutive periods of twelve (12) months each following the Commencement Date. For all purposes of this Lease, the term "Lease Year" shall have the following meaning: the first Lease Year shall be a period beginning with the Commencement Date and ending on the 31st day of December next following the Commencement Date, and after the first Lease Year, the term Lease Year shall mean a fiscal period of twelve (12) consecutive calendar months commencing on January 1 of each calendar year, except that the last Lease Year shall terminate on the Expiration Date or sooner termination of this Lease. Lease Years containing 365 days or more shall be referred to as "full Lease Years." If the Leased Premises are not delivered to Tenant on or before the expiration of twelve (12) months after the date of Landlord's execution of this Lease then Tenant may cancel and terminate this Lease upon sixty (60) days prior written notice to the Landlord, in which event neither party shall have any further obligation or liability to the other. In the event the Leased Premises are not delivered resulting in Termination of this Lease by Tenant as a result of the Landlord's failure to use Commercially reasonable efforts to complete construction, the Landlord shall reimburse Tenant for its actual out-of-pocket costs associated with this Lease and Leased Premises. Following the Commencement Date of this Lease, Landlord may submit to Tenant a Commencement and Expiration Date Declaration in the form attached hereto as Exhibit F, specifying the information called for in said form, and Tenant shall execute such Declaration within thirty (30) days following submission for purposes of certifying such information; provided, however, that the Declaration shall not be rendered ineffective by Tenant's failure to execute same. Provided Tenant is not in default under this Lease (after expiration of any cure or grace period provided herein) as of the date of exercise hereof. Tenant shall have the option to extend the Term hereof (the "Option") for one (1) additional period of five (5) years (the "Option Period"). The Option shall be exercised, if at all, by written notice to Landlord ("Notice") at least one hundred eighty (180) days prior to the expiration of the Original Term. All terms and conditions of this Lease shall apply during the Option Period except the Minimum Rent and Sales Break Points shall be as scheduled in Sections 2.1 and 2.2 hereof. In the event that Tenant does not exercise the Option by the required date, then such Option shall become null and void and be of no further force or effect. If the Leased Premises or any part thereof be sublet or occupied by any person or entity other than Tenant, then such Option shall become null and void and be of no further force or effect, unless the Lease has been transferred with the prior written consent of Landlord or pursuant to a transfer not requiring the approval or consent of Landlord. If Tenant's Gross Sales during the twelve (12) month period ending two hundred ten (210) days prior to the Expiration Date do not exceed [***] per square foot of floor area in the Leased Premises, then any Notice by Tenant of the Option shall be null and void and Tenant's Notice shall have no force or effect. Tenant shall furnish to Landlord, concurrently with its Notice, a statement certified by an authorized representative or financial officer of Tenant setting forth the amount of Tenant's Gross Sales for the said twelve (12) month period. Notwithstanding the foregoing, in the event Tenant does not achieve Gross Sales (as hereinafter defined) of as least [***] per square foot during the third (3rd) year of the Term hereof, then Landlord and Tenant, for a period of thirty (30) days following the end of the third (3rd) year, shall each have the option, upon one hundred eighty (180) days prior written notice to the other party, of terminating this Lease ("Termination Option") provided, however, that Tenant shall not be entitled to terminate this Lease if Tenant is in default of this Lease beyond the expiration of any applicable grace or cure period. In the event Tenant fails to submit a certified report of annual Gross Sales within twenty (20) days after written notice of its failure to submit such report within the time period required pursuant to Section 2.2 of this Lease, *** Confidential treatment requested. 7 12 then Landlord may use such information as Landlord shall have available to permit Landlord to make a determination as to the amount of Gross Sales achieved by Tenant during the period covered by Landlord's option to terminate, and such information shall be the basis for Landlord exercising its Termination Option and Tenant shall not be permitted to reinstate this Lease after termination for any reason or cause whatsoever, including, but not limited to, the submittal by Tenant of a subsequent sales report either certified or uncertified. In the event that neither party exercises its Termination Option within the required time period, then each such Termination Option shall, upon expiration of the applicable period, become null and void and be of no further force or effect. In the event either party exercises the foregoing Termination Option within the required time period, this Lease shall terminate upon expiration of the one hundred eighty (180) day period subject, however, to the payment by Tenant to Landlord of all sums then due and owing or having accrued to Landlord. In the event that Tenant exercises the Termination Option provided for herein, Tenant shall pay to Landlord the unamortized portion of the Construction Allowance (as hereinafter defined). In the event that Tenant can prove that Tenant's Gross Sales are below [***] per square foot as the result of an act or omission on the part of Landlord, then Landlord shall not be permitted to exercise the Termination Option provided in the immediately preceding paragraph. SECTION 1.3 OPENING. Subject to delays as described in Article XVI, Tenant covenants and agrees to complete its construction within the Leased Premises in accordance with the provisions of this Lease, to satisfy the requirements for issuance of a certificate of acceptance pursuant to Exhibit D attached hereto and made a part hereof, and to open its store for business to the public not later than the Commencement Date. Notwithstanding the foregoing, Landlord hereby notifies Tenant that the anticipated date of the grand opening of the Shopping Center (the "Grand Opening") is the date set forth on the Data Sheet. Tenant shall be obligated to open its store for business to the public on or before the later of (a) the expiration of the Fixturing Period or (B) the Grand Opening. Tenant shall not be permitted to open for business to the public prior to the Grand Opening without the prior written consent of Landlord which consent shall be at Landlord's sole discretion. SECTION 1.4 LATE OPENING. In the event Tenant shall fail to open its store for business to the public upon the Commencement Date for reasons other than Delays, as described in Article XVI, or delays created by Landlord, then in order to compensate Landlord for its loss, Tenant shall pay to Landlord as additional rent (as defined in Section 2.3) over and above the Minimum Rent and all other charges to be paid by Tenant to Landlord pursuant to this Lease, a sum in an amount equal to [***] per day for the Commencement Date and each day after the Commencement Date that Tenant shall have failed to open its store for business. This remedy shall be in addition to any and all other remedies provided for in this Lease in the event of such failure to open. Such additional late opening rent shall be deemed to be in lieu of any Percentage Rent that might have been earned during the period of Tenant's failure to open. ARTICLE II RENT AND DEPOSIT SECTION 2.1. MINIMUM RENT. During the entire Term of this Lease, Tenant shall pay annual minimum rental ("Minimum Rent") for the Leased Premises from the Commencement Date of this Lease in the amount set forth in the Data Sheet attached hereto, which sum shall be payable by Tenant in equal consecutive monthly installments in the sum set forth in the Data Sheet attached hereto, on or before the first day of each month, in advance. The Minimum Rent and each of the monthly installments called for hereunder shall be payable to Landlord, without demand, deduction, set-off or counter-claim, except as otherwise provided herein or permitted by applicable law. The first installment of Minimum Rent shall be paid by Tenant on or before the Commencement Date. If the Commencement Date occurs on other than the first day of a month, the second installment of Minimum Rent shall be prorated at a daily rate on the basis of a thirty (30) day month. *** Confidential treatment requested. 8 13 On the Commencement Date, if either of the following conditions have not been satisfied; (1) at least five (5) Major Tenants are open or ready to open for business; or (2) the "Required Occupancy Level" (as hereinafter defined) has been achieved, then Tenant's obligation for payment of Minimum Rent shall abate and Tenant shall pay to Landlord, in lieu thereof, Interim Rent on the basis of the lesser of (A) the scheduled Minimum Rent and (B) four percent (4%) of all of Tenant's Gross Sales (as defined in Section 2.2 of this Lease) until both of the conditions in (1) and (2) above have been initially satisfied; provided, however, Tenant shall not be entitled to such abatement of Minimum Rent if Tenant fails to open its store in the Leased Premises to the general public on or before the Commencement Date of the Term hereof or if Tenant shall otherwise be in default of this Lease beyond the expiration of any applicable grace or cure period. Said Interim Rent shall be paid to Landlord within ten (10) days following the end of each calendar month, at which time Tenant shall also be required to submit an unaudited statement of Tenant's Gross Sales for such calendar month and for the Lease Year to date. All other terms and conditions of this Lease shall be applicable during such period. For purposes of this paragraph, the term "Required Occupancy Level" shall mean occupants of at least sixty-five percent (65%) of the gross leasable floor area of the Shopping Center are open for business, or instead, at Landlord's sole option. "Required Occupancy Level" shall mean sixty five percent (65%) of the total number of stores shown on the then existing lease plan for the Shopping Center, are occupied and are open for business. In addition, Landlord hereby represents and warrants to Tenant that it has a fully executed lease for a Bass Pro facility, Rainforest Cafe and a multi-plex theater at the Retail Development ("Key Stores"). In the event that a lease is executed with Jillian's for a facility at Opry Mills, Jillian's will be added to the list of Key Stores in place and stead of Rainforest Cafe. In the event that less than two of the Key Stores have opened for business within six (6) months after the Commencement Date then Tenant's obligation for payment of Minimum Rent shall abate and Tenant shall pay to Landlord, in lieu thereof, Interim Rent on the basis of the lesser of (A) the scheduled Minimum Rent and (B) four percent (4%) of all of Tenant's Gross Sales (as defined in Section 2.2 of this Lease) until at least two (2) of the Key Stores are initially open for business; provided, however, Tenant shall not be entitled to such abatement of Minimum Rent if Tenant shall otherwise be in default of this Lease beyond the expiration of any applicable grace or cure period. Said Interim Rent shall be paid to Landlord within ten (10) days following the end of each calendar month, at which time Tenant shall also be required to submit an unaudited statement of Tenant's Gross Sales for such calendar month and for the Lease Year to date. All other terms and conditions of this Lease shall be applicable during such period. In the event that at least two (2) of the Key Stores have not initially opened for business within eighteen (18) months after the Commencement Date, then at the end of such eighteen (18) month period, Tenant may elect to terminate this Lease by providing Landlord within thirty (30) days of the end of such eighteen (18) month period, written notice of its intention to so terminate the Lease ("Key Store Termination Notice") or Tenant may elect to remain in the Leased Premises but must commence paying the then applicable scheduled Minimum Rent as provided for in the Data Sheet of this Lease. In the event that Tenant timely delivers the Key Store Termination Notice, this Lease shall terminate one hundred and eighty (180) days from the date of the Key Store Termination Notice or on such earlier date as may be mutually agreed to between the parties and this Lease and all of the unaccrued rights and obligations of the parties to it shall cease and terminate, as fully and effectively as though the date agreed to were the Expiration Date. In such event, Landlord and Tenant shall execute a Termination Agreement setting forth the terms of such termination. Section 2.2. Percentage Rent. (a) During and for each Lease Year, Tenant shall pay annual percentage rent ("Percentage Rent") equal to the Percentage Factor (see Data Sheet) multiplied by all "Gross Sales" resulting from business conducted in, on or from the Leased Premises during such Lease Year in excess of the applicable Sales Break Point set forth in the Data Sheet. In any Lease Year where there is more than one applicable Sales Break Point, for purposes of computing annual Percentage Rent the following calculation shall be used: each Sales Break Point which was effective during any such Lease Year shall be multiplied by a fraction, the numerator of which is the number of days in the Lease Year that such Sales Break Point was effective and the denominator of which is the actual number of days in such Lease Year (herein the "Adjusted Break Point") and the sum of the Adjusted Break Points shall be the Sales Break Point for such Lease Year. "Gross Sales" is defined to mean the total amount of the actual sales price, whether for cash or otherwise, of all sales of merchandise or services arising out of or payable on account of (and all other receipts or amounts receivable whatsoever with respect to) all the business conducted in, on, or from the Leased Premises by or on account of Tenant or any sublessee, assignee or concessionaire of Tenant for cash or 9 14 otherwise, including all orders for merchandise taken from or filled at or from the Leased Premises, including all deposits not refunded to customers. A "sale" shall be deemed to have been consummated for purposes of this Lease, and the entire amount of the sale price shall be included in Gross Sales, at such time as (i) the transaction is initially reflected in the books or records of Tenant, or any sublease, assignee or concessionaire of Tenant, or (ii) Tenant or such other entity receives all or any portion of the sales price, or (iii) the applicable goods or services are delivered to the customer, whichever first occurs. Tenant shall record at the time of each sale or transaction, in the presence of the customer, all receipts from such sale or other transaction, whether for cash, credit or otherwise, in a cash register or cash registers having a cumulative total, which shall be sealed in a manner approved by Landlord and which shall possess such other features as shall be required by Landlord. There shall be no deduction allowed for direct or indirect discounts, rebates, or other reductions on sales, unless generally offered to the public on a uniform basis, except as otherwise provided below. Tenant may deduct from Gross Sales discount sales to employees, bad debts written off the books of Tenant and charges paid to credit card companies, as otherwise provided below. Tenant may also exclude from Gross Sales any transfer of goods between Tenant's other stores and returns to shippers or manufacturers. The term "Gross Sales" shall exclude, however, proceeds from any sales tax, gross receipts tax or similar tax, by whatever name called which are separately stated and in addition to the purchase price, bona fide transfers of merchandise from the Leased Premises to any other stores or warehouses of Tenant, refunds given to customers for merchandise purchased at the Leased Premises and returned or exchanged, monies received by Tenant but due and owing to the actual provider of the service (e.g. special event catering fees), and sales of Tenant's fixtures and equipment not in the ordinary course of Tenant's business. The term "merchandise" as used in this Lease shall include food and beverages if Tenant is permitted to sell such items pursuant to Section 4.1 hereof. The term "Gross Sales" shall not include, however, the following: (i) the sales price of all merchandise returned and accepted for full credit or the amount of the cash refund or allowance made thereon; (ii) the sums and credits received in settlement of claims for loss or damage to merchandise, (iii) the consideration received in connection with a sale of inventory which occurs other than in the ordinary course of Tenant's business, including, but not limited to, a sale in bulk or to a jobber, liquidator or assignee; (iv) sales taxes, so-called luxury taxes, excise taxes, gross receipt taxes, and other taxes now or hereafter imposed upon the sale or value of merchandise or services, whether added separately to the selling price of the merchandise or services and collected from customers or included in the retail selling price; (v) receipts from public telephones, vending machines, sales of money orders, and the collection of public utility bills; (vi) bankcard discounts (e.g., Visa, MasterCard, etc.), interest, carrying charges, or other finance charges in respect of sales made on credit; (vii) sales of fixtures, trade fixtures, or personal property that are not merchandise held for sale at retail; (viii) sales to senior citizens at discount; (ix) revenue received from mailing, alterations, delivery or other services performed on a non-profit basis for the benefit of customers; (x) Tenant's accounts receivable, not to exceed [***] of Gross Sales, which have been determined to be uncollectible for federal income tax purposes during the applicable lease year, provided however, that if such accounts are actually collected in a later lease year, the amount shall be included in the Gross Sales for such later lease year; (xi) rents, subrents or other consideration received in connection with a permitted assignment, sublease, license, concession or other transfer of any portion of the store (however, Gross Sales of any such transferee shall be included) and license fees otherwise received by Tenant in connection with a third party license agreement; (xii) amounts received for merchandise transferred to any other place of business of Tenant (or its subtenants, concessionaires and/or licensees) or to any business organization affiliated with Tenant, wherever located, provided such merchandise is not used to fill a sale made in the store; (xiii) discounts given for promotional coupons that are redeemed from time to time (xiv) amounts received in connection with remote site promotional activities; (xv) promotional fees earned by Tenant with respect to goods or services offered for sale; and (xvi) amount required to be paid by Tenant under any agreement related to Tenant's use of the NASCAR name, not to exceed [***] of Gross Sales. (b) Tenant shall keep at the Leased Premises or at Tenant's executive offices within the continental United States a full and accurate set of books and records adequately showing the amount of Gross Sales in each Lease Year. The books and records to be kept by Tenant shall include, without *** Confidential treatment requested. 10 15 limitation, (i) cash register tapes, including tapes from temporary registers; (ii) serially pre-numbered sales slips; (iii) detailed original records of any exclusions of deductions from Gross Sales; (iv) sales tax records; and (v) such other records, if any, which would normally be examined by an independent accountant pursuant to accepted auditing standards in performing an audit of Tenant's sales. Such books and records shall be kept in accordance with generally accepted accounting principles and practices, may be saved in microfiche or an electronic storage medium, and shall be retained by Tenant for a period of not less than two (2) years following the end of the Lease Year to which they have reference. When and as Landlord may reasonably require (but no more than once per Lease Year following the first Lease Year unless required by the city, county or State), Tenant shall also furnish to Landlord any and all statements, information, and copies of sales tax reports and returns which separately show financial data for the Leased Premises, and inventory records and other data evidencing Gross Sales. Within twenty (20) days following the end of each calendar month of the Term hereof Tenant shall submit to Landlord an unaudited statement of Gross Sales for such calendar month. Within twenty (20) days following the end of the month in which Tenant's Gross Sales for the Lease Year to date exceed the Sales Break Point, and each month thereafter, Tenant shall pay to Landlord Percentage Rent and shall submit to Landlord a statement certified by Tenant setting forth the Gross Sales for each such period. Within forty-five (45) days after the close of each Lease Year, Tenant shall furnish to Landlord a statement certified by an authorized representative or financial officer of Tenant setting forth the amount of Gross Sales during such Lease Year and showing the amount of Percentage Rent required to be paid by Tenant for such Lease Year. The full amount of the Percentage Rent due shall be paid to Landlord no later than sixty (60) days after the end of each Lease Year and any excess Percentage Rent paid shall be credited against Tenant's next due Rent payment, except for the final Lease Year of the Term for which any excess shall be refunded to Tenant. Landlord and/or Landlord's auditor shall have the right, at any time after thirty (30) business days notice but no more than once per Lease Year after the first Lease Year (if the first Lease Year is a partial Lease Year), to inspect and/or audit the records of Tenant relating to Gross Sales. If the Gross Sales exceed those reported, Tenant shall immediately pay any deficiency in Percentage Rent owing to Landlord. If Gross Sales vary from those reported by [***] of more, Tenant shall pay Landlords's cost of inspection and audit. If Gross Sales vary from those reported by (i) [***] or more in any one (1) Lease Year, or (ii) [***] or more for any two (2) Lease Years out of any five (5) Lease Years, then Landlord shall have the right, at its sole option, to terminate this Lease, with Tenant remaining liable for sums due and owing under this Lease for the balance of the Term provided, however, that Landlord shall be permitted to terminate this Lease only if Landlord can prove that such misstatement was a deliberate act. Tenant agrees that in the event Tenant shall fail to timely submit a Gross Sales statement as required by this Section 2.2(b), Tenant shall pay on demand a late fee of [***] per late statement, as additional rent. (c) In the event that Tenant shall fail to operate its business in the Leased Premises in the manner and on each day as required pursuant to Section 4.2 hereof, then, for the purpose of computing the Percentage Rent for such Lease Year affected by Tenant's failure to operate, the Sales Break Point for such Lease Year shall be adjusted by multiplying the Sales Break Point otherwise applicable for such Lease Year by a fraction, the numerator of which shall be the actual number of days in such short Lease Year or the actual number of days in such Lease Year during which Tenant was open for business and operating in accordance with Section 4.2, and the denominator of which shall be "360". In the event that the first Lease Year is less than twelve (12) months in length, then the Percentage Rent covering such Lease Year shall be paid on Gross Sales in excess of the Sales Break Point computed on a pro rated basis for the period beginning on the Commencement Date of the Term and ending on the succeeding December 31st. (d) *** Confidential treatment requested. 11 16 SECTION 2.3. PAYMENTS BY TENANT. Throughout the Term of this Lease, Tenant shall pay to Landlord, without demands, deductions, set-offs or counterclaims (except as otherwise provided for herein or permitted by applicable law), the Rent, which is hereby defined as the sum of the Minimum Rent, Percentage Rent and all additional rent, when and as the same shall be due and payable hereunder. Unless otherwise stated, all sums of money or charges of any kind or nature, in addition to Minimum Rent and Percentage Rent, payable by Tenant to Landlord pursuant to this Lease or the Exhibits attached hereto are defined as "additional rent" and are due thirty (30) days after the rendering of an invoice therefor, without any deductions, set-offs or counterclaims (except as otherwise provided for herein or permitted by applicable law), and failure to pay such sums of money or charges shall carry the same consequences as Tenant's failure to pay Rent. All payments and charges required to be made by Tenant to Landlord hereunder shall be payable in United States funds, at the address indicated on page 1 of this Lease, unless otherwise specified by written notice from Landlord to Tenant. No payment by Tenant or receipt by Landlord of a lesser amount than the correct Rent shall be deemed to be other than a payment on account and no endorsement or statement on any check or other communication accompanying a check for payment of any amounts payable hereunder shall be deemed an accord and satisfaction, and Landlord may accept such check in payment without prejudice to Landlord's right to recover the balance of any sums owed by Tenant hereunder or to pursue any other remedy available in this Lease, or under law, against Tenant. SECTION 2.4. SECURITY DEPOSIT [INTENTIONALLY DELETED]. SECTION 2.5 LATE CHARGE. In the event any Rent or sums required hereunder to be paid are not received on or before the fifth (5th) calendar day after the same are due, then, for each and every late payment, Tenant shall immediately pay, as additional rent, a late charge equal to the greater of (a) [***], (b) [***] per day for each day after the date due that such payment has not been received by Landlord or (c) [***] per month of the total receivable balance of Tenant outstanding. In the event of Tenant's failure to pay the foregoing late charge, Landlord may deduct said charge from the Security Deposit set forth in Section 2.4 hereof. The provisions herein for late charges shall not be construed to extend the date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligation to pay all such sums at the time or times herein stipulated. Notwithstanding the imposition of such late charges pursuant to this Section 2.5, Tenant shall be in default under this Lease if any or all payments required to be made by Tenant are not made on or before the time due as stipulated in Article XIV, and neither the demand for, nor collection by, Landlord of such late charges shall be construed as a cure of such default on the part of Tenant. It is agreed that the said late charge is a fair and reasonable charge under the circumstances and shall not be construed as interest on a debt payment. In the event any charge imposed hereunder or under any other section of this Lease is either stated to be or construed as interest, then no such interest charge shall be calculated at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Lease. *** Confidential treatment requested. 12 17 ARTICLE III PREPARATION OF LEASED PREMISES SECTION 3.1. LANDLORD'S WORK. Landlord shall construct the building wherein the Leased Premises are to be located and perform the work described in Exhibit C attached hereto and made a part hereof ("Landlord's Work") at Landlord's cost and expense, except as otherwise provided in Exhibit C. Landlord's work shall be completed in a good and workmanlike manner, free of material defects and in compliance with applicable building codes, and zoning and subdivision laws relating to general retail use. All work, in excess of the work described in Exhibit C, done by Landlord at Tenant's written request shall be paid for by Tenant within thirty (30) days after the presentation to Tenant of a bill for such work. Any items of Landlord's Work which are not completed as of delivery of possession shall be identified by Tenant on a punch list to be submitted to Landlord within thirty (30) days after the date of possession and Landlord shall thereafter complete the same. Any items of Landlord's Work which are not timely identified on such a punch list shall be deemed completed, other than latent defects as provided for in Section 6.1 hereof. SECTION 3.2. DELIVERY OF POSSESSION. (a) Landlord, or Landlord's supervising architect, shall give Tenant at least thirty (30) days' prior written notice of the date on which Landlord's Work will be substantially completed in accordance with Exhibit C and the Leased Premises will be available for the performance of Tenant's Work (as defined in Section 3.3) to the extent that Tenant shall be able to perform its work in the Leased Premises without substantial interference resulting from the conduct of Landlord's Work ("Delivery of Possession Date"). Notwithstanding anything to the contrary contained in this Lease, for purposes of calculating the Commencement Date, the Fixturing Period shall not begin before January 1, 2000, unless otherwise agreed to by each of Landlord and Tenant in its sole discretion. Tenant covenants and agrees to take physical possession of the Leased Premises on the Delivery of Possession Date provided that Landlord's Work is "substantially complete." The term "substantially complete" shall mean that Landlord can give Tenant beneficial occupancy of the Leased Premises so that Tenant can begin the performance of Tenant's Work in safety. Landlord and Tenant acknowledge that Landlord and Tenant will be working simultaneously to complete the Leased Premises and that Landlord will be continuing the completion of Landlord's Work during the thirty (30) day period after the Delivery of Possession Date. Landlord and Tenant agree to cooperate so as to avoid interference with each other so that Landlord's Work and Tenant's Work may be completed in a timely manner. The Delivery of Possession Date shall be subsequently confirmed by Landlord, or Landlord's supervising architect, by written notice to Tenant. Failure of Landlord to deliver possession of the Leased Premises within the time and in the condition provided for in this Lease will not give rise to any claim for damages by Tenant against Landlord or permit Tenant to rescind or terminate this Lease except as may be provided in Section 1.2 hereof or as otherwise provided herein. (b) Tenant may, provided Tenant shall not interfere with the conduct of Landlord's Work, and subject to Landlord's reasonable rules and regulations, enter the Leased Premises during normal working hours during the course of Landlord's Work for the purpose of inspecting the Leased Premises and making measurements. At such time prior to the Delivery of Possession Date that Landlord's Work has progressed sufficiently to permit Tenant to perform its work without interfering with Landlord's Work, Landlord may, but shall not be required to, notify Tenant of the same, and Tenant may then enter the Leased Premises in order to begin to install its store fixtures and perform such other work as may be required under the provisions of this Lease in order to ready the store for opening. Throughout the period of Tenant's Work, Tenant shall schedule its work so as not to interfere with any work being performed by Landlord or by any other tenant in the Shopping Center. SECTION 3.3 TENANT'S WORK. (a) Tenant agrees, prior to the commencement of the Term of this Lease, [***], to diligently perform all work of whatever nature in *** Confidential treatment requested. 13 18 accordance with Tenant's obligations set forth in Exhibit D ("Tenant's Work") and all other related work necessary to prepare for the opening to the public of Tenant's store in the Leased Premises in accordance with the provisions of this Lease. Tenant agrees to furnish to Landlord the Store Design Drawings and Working Drawings and Specifications with respect to the Leased Premises prepared in the manner and within the time periods required in Exhibit D. If such Store Design Drawings or Working Drawings and Specifications are not furnished by Tenant to Landlord within the required time period(s) in form to permit approval by Landlord, then the Fixturing Period (as described in the Data Sheet) shall be reduced by one (1) day for each day of delay by Tenant in submitting said Store Design Drawings or Working Drawings and Specifications. Landlord shall to respond to such Store Design Drawings or Working Drawings and Specifications submitted by Tenant pursuant to this Lease within seven (7) business days following Landlord's receipt from Tenant. In the event of Landlord's failure to respond within such seven (7) business day period or there are other delays created by Landlord, the Fixturing Period as described in the Data Sheet shall be extended by one (1) day for each day of additional delay by Landlord. No material deviations from the final Store Design Drawings or Working Drawings and Specifications, once approved by Landlord, shall be permitted unless necessary to comply with applicable governmental requirements or unless otherwise approved by Landlord. Landlord's approval of Tenant's Store Design Drawings and Working Drawing and Specifications shall not constitute the assumption of such items. Tenant's Work shall include the installation of fixtures and equipment and the stocking of the Leased Premises with suitable merchandise. Tenant covenants that all such fixtures and equipment visible to customers shall be new (or like-new) and otherwise reasonably acceptable to Landlord in appearance. In addition to conforming to the requirements specified in Exhibit D, all work performed by Tenant shall comply with such rules and regulations as Landlord and its representatives may make, provided that such rules and regulations are uniformly applied to all similarly situated Shopping Center tenants under construction. To the extent there is a conflict between the terms of such rules and regulations and the terms of this Lease, this Lease shall control. Unless Landlord otherwise directs in writing, Tenant shall not open the Leased Premises for business until all construction has been completed pursuant to the provisions of Exhibit D. It is further understood and agreed that: (i) Landlord shall have no responsibility or liability whatsoever for any loss of, or damage to, any fixtures, equipment, merchandise, or other property belonging to Tenant, installed or left in the Leased Premises except to the extent resulting from the negligence or intentional acts of Landlord, its agents or employees; and (ii) Tenant's entry upon and occupancy of the Leased Premises prior to the Commencement Date shall be governed by and subject to all the provisions, covenants and conditions of this Lease. Tenant shall obtain at its sole cost and immediately thereafter furnish to Landlord all certificates and approvals with respect to work done and installations made by Tenant that may be required for the issuance of a certificate of occupancy for the Leased Premises, so that such certificate of occupancy shall be issued and the Leased Premises shall be ready for the opening of Tenant's business on the Commencement Date. Upon the issuance of the certificate of occupancy, a copy thereof shall be immediately delivered to Landlord. Promptly upon the completion of its work, Tenant, at Tenant's cost, shall repair, clean and restore all portions of the Shopping Center affected by Tenant's Work to their prior condition. To the extent approved by the proper governing authorities, Tenant shall have the right to install atop the roof of Landlord's building in which the Leased Premises are located one (1) antenna and/or one (1) satellite dish and the equipment necessary for Tenant's communications and data transmission network system. The satellite dish shall not be larger than five (5) feet in diameter. The antenna or satellite dish on such roof shall be at a location designated by Landlord and reasonably approved by Tenant. Tenant shall submit to Landlord for its approval plans for the installation of such antenna or satellite dish and necessary equipment, such approval not to be unreasonably withheld, delayed, or conditioned. Tenant shall also provide Landlord with copies of all permits required by the proper governmental authorities regarding such installation, which shall be obtained by Tenant at its sole cost and expense. Landlord's contractor shall cut the roof and patch it (if necessary) at Tenant's expense, and Tenant's contractor shall be subject to Landlord's prior approval, which approval shall not be unreasonably withheld, delayed, or conditioned. Tenant shall be responsible for the cost of repairing any damage to Landlord's building arising from such installation, except to the extent caused by Landlord's contractors. Upon prior written notice to Landlord (except in case of an emergency), Tenant shall have access to the antenna or satellite dish and related equipment for the purpose of maintaining, repairing, replacing and operating the antenna or satellite 14 19 dish. Any utility costs related to the installation and operating of the antenna or satellite dish shall be the sole responsibility of Tenant. Provided Tenant is not in default of this Lease beyond the expiration of any applicable grace or cure period. Landlord hereby agrees to contribute towards the cost of Tenant's Work a Construction Allowance of [***] per square foot of floor area in the Leased Premises. The aforesaid Construction Allowance shall be paid as follows: [***] after [***] of Tenant's Work is completed; [***] upon [***]; and [***] upon [***]. In the event that this Lease is terminated prior to the expiration of the Term hereof as a result of a default on the part of Tenant, Tenant shall repay said Construction Allowance to Landlord in cash upon termination; provided, however, that Tenant's liability for said Construction Allowance shall be reduced at the rate of [***] at the end of each full calendar month during the Term hereof. If Landlord fails to pay Tenant all or any portion of the Construction Allowance after thirty (30) days notice that the same is past due, then, in addition to Tenant's other rights and remedies hereunder, Tenant may withhold payment of Minimum Rent until Tenant has recouped such amount in full together with interest thereon at the interest rate set forth in Section 20.14 hereof. (b) The interest of Landlord in the Leased Premises and the Retail Development shall not be subject to liens for improvements made by or on behalf of Tenant. Nothing contained in this Lease shall be construed as a consent on the part of Landlord to subject Landlord's estate in the Leased Premises or the Retail Development to any lien or liability under applicable law. In the event that any mechanic's, materialman's or other lien or any notices of claim, including without limitation, stop notices (herein "lien") is filed against the Leased Premises or Retail Development as a result of any work, labor, services or materials performed or furnished,or alleged to have been performed or furnished to or for Tenant (excluding work performed by or on behalf of Landlord) or to or for anyone holding the Leased Premises through or under Tenant. Tenant, at its expense, shall cause the lien to be discharged or fully bonded to the satisfaction of Landlord within thirty (30) days after notice of the filing thereof. If Tenant fails to discharge or bond against said mechanic's, materialman's or other lien, Landlord may, in addition to any other remedies Landlord may have, but without obligation to do so, bond against or pay the lien without inquiring into the validity or merits of such lien and all sums so advanced, including reasonable attorney fees incurred by Landlord in defending against such lien, procuring the bond or in the discharge of such lien, shall be paid by Tenant on demand as additional rent. It shall be Tenant's continuing obligation to keep and maintain the Leased Premises and all other parts of the Retail Development free from any and all liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant in connection with the Leased Premises. In addition, Tenant shall replace any bonds posted by Landlord pursuant hereto with a suitable bond of equivalent amount within twenty (20) days after Landlord's demand therefor. (c) During the Term of this Lease, Tenant agrees to repair, refurbish or replace the interior portions of the Leased Premises that are visibly worn or damaged so as to maintain the condition of the Shopping Center as a first class super-regional discount specialty retail mall. SECTION 3.4. ALTERATIONS BY TENANT. Tenant shall not make or cause to be made any alterations, repairs, additions or improvements in or to the Leased Premises (for example, but without limiting the generality of the foregoing, Tenant shall not install or cause to be installed any exterior signs or interior signs visible from the exterior except as permitted by Section 4.3 hereof, floor covering, interior or exterior lighting, plumbing fixtures, shades, canopies or awnings or make any changes to the storefront, mechanical, electrical or sprinkler systems) without the prior written *** Confidential treatment requested. 15 20 consent thereto by Landlord. Tenant shall submit to Landlord plans and specifications for such work at the time consent is sought, in accordance with the criteria and procedures as provided in Exhibit D. In the event Landlord grants such consent, such alterations, repairs, additions or improvements shall be performed in good and workmanlike manner and in accordance with all applicable legal and insurance requirements and all drawings or specifications approved by Landlord, and in accordance with the provisions of this Lease, including the provisions of Section 3.3 governing construction of the Leased Premises. Any work performed by Tenant shall be subject to Landlord's inspection and approval after completion to determine whether the same complies with the requirements of this Lease. Prior to the commencement of any such work by Tenant, Tenant shall obtain the insurance required in Section 8.2. Tenant may from time to time make non-structural alterations to the Leased Premises without Landlord's prior written approval, the aggregate total cost of which shall not exceed [***] in any Lease Year; provided, however, that Tenant shall not be permitted to alter the exterior storefront sign or the exterior of the storefront (other than for repairs) without the prior written consent of Landlord, and provided further that any such non-structural alterations shall not change the overall appearance of the Leased Premises as originally approved by Landlord. SECTION 3.5. REMOVAL BY TENANT. All repairs, alterations, decorations, additions and improvements made by Tenant shall be deemed to be attached to the leasehold and to have become the property of Landlord upon such attachment, and, upon the Expiration Date or sooner termination of this Lease, Tenant shall not remove any of such alterations, decorations, additions and improvements; provided that trade fixtures, simulators and other items noted as "To Be Removed" on Tenant's Construction Documents and Specifications installed by Tenant may be removed if all Rent due herein is paid in full and Tenant is not otherwise in default hereunder; provided further, however, that Landlord may designate by written notice to Tenant given at the time such improvements are installed those alterations, decorations, additions and improvements which shall be removed by Tenant at the Expiration Date or sooner termination of this Lease and Tenant shall, at Tenant's cost, promptly remove the same and repair any damage to the Leased Premises caused by such removal. ARTICLE IV CONDUCT OF BUSINESS SECTION 4.1. USE AND TRADE NAME. Except as otherwise provided herein, Tenant shall continuously use and occupy the Leased Premises during the Term solely for the purpose of conducting the business specifically set forth in the Data Sheet and for no other purpose or purposes. Throughout the Term hereof, Tenant shall (a) operate its business in the Leased Premises under the Trade Name specifically set forth in the Data Sheet and under no other so long as such name shall not be held to be in violation of any applicable law, (b) not change the advertised name or character of the business operated in the Leased Premises, (c) refer to the Shopping Center by name in designating the location of the Leased Premises in all newspaper and other advertising within the Shopping Center market area and in all other references to the location of the Leased Premises, and (d) during the period from the Delivery of Possession Date through sixty (60) days following the Commencement Date, include in all Tenant's newspaper advertising within the Shopping Center market area the designation that Tenant is opening for business in the Shopping Center. If any governmental license(s) or permit(s) shall be required for the proper and lawful conduct of Tenant's business or other activity carried on in the Leased Premises, or if a failure to procure such a license or permit might or would in any way, adversely affect Landlord or the Shopping Center, then Tenant, at Tenant's expense, shall duly procure and thereafter maintain such license(s) or permit(s) and submit the same for inspection by Landlord. Tenant, at Tenant's expense, shall at all times, comply with the requirements of such license(s) or permit(s). Except as provided in Section 1.3, Tenant shall open *** Confidential treatment requested. 16 21 its store in the Leased Premises for business to the public on the Commencement Date, and shall thereafter diligently conduct its regular business operations in the Leased Premises as required by the terms of this Lease. No symbol, design, name, mark or insignia adopted by Tenant shall be used without the prior written approval of Tenant. During the Term of this Lease, and provided Tenant shall not be in default hereof beyond the expiration of any applicable grace or cure period, Landlord agrees that Landlord will not lease space in the Retail Development (other than with respect to spaces leased or to be leased to Major Tenants and presently executed non-Major Tenant leases), to any tenant whose primary use is the entertainment use of auto-racing simulators. In addition, with respect to any non-Major Tenant lease. Landlord shall not be permitted to modify any such lease, either through amendment or assignment, so as to permit the occupant of the space leased thereby to have as its primary use the entertainment use of auto-racing simulators. Landlord hereby represents and warrants to Tenant that Tenant's use of the Leased Premises as contemplated in the Data Sheet does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other tenant of the Shopping Center, and Landlord shall indemnify, defend, protect and hold harmless Tenant from any loss, liability, cost, expense, judgement, action, or claim of any such party arising from the inaccuracy of such representation and warranty. If the trade name of all or substantially all other stores operating under the same Trade Name as set forth in this Section 4.1 shall be changed, then Tenant, with prior written notice to Landlord, may likewise change its Trade Name herein set forth to such other name as adopted for all or substantially all such other stores in first class regional malls or super-regional malls. Notwithstanding the foregoing, in no event shall Tenant's Trade Name duplicate any other trade name in the Retail Development. SECTION 4.2. OPERATION OF BUSINESS. Tenant shall open for business in the Leased Premises and remain open during the entire Term and continuously operate its business in the entire area of the Leased Premises during the entire Term. Tenant shall conduct its business at all times in a high class and reputable manner, maintaining at all times a full staff of employees and a complete stock of merchandise. Tenant shall install and maintain at all times a display of merchandise in the display windows (if any) of the Leased Premises and shall keep the Leased Premises well lighted during all hours that the Shopping Center is open to the public and during such other hours as may be reasonably designated by Landlord but in no event more than one (1) hour after the close of business. In no event shall Tenant conduct or advertise any auction, fire sale, going out of business sale, or bankruptcy sale in or about the Leased Premises without Landlord's prior written consent in each instance, which consent may be withheld by Landlord in its sole and absolute discretion. Tenant shall conduct its business in the Leased Premises in a lawful manner and in good faith during all days and hours specified by Landlord from time to time as the published operating hours for the Shopping Center, Tenant shall not use or allow the Leased Premises to be used for any improper, immoral or objectionable purposes, as determined by Landlord, and Tenant shall not do any act tending to injure the reputation of the Shopping Center as determined by Landlord. Tenant may (but shall not be required), from time to time, upon written notice to Landlord, remain open for business beyond the normal operating hours of the Shopping Center on a daily basis, but such hours of operation shall not extend beyond the time permitted by applicable law or regulations, and in no event beyond the time that is one hour after the release of the last movie from the Theater or 1:00 a.m. whichever is later. In addition, in the event that there is an exterior entrance serving only the Leased Premises, which provides ingress and egress to the general public and such ingress and egress has been approved by the local jurisdiction for non-emergency use, then Tenant shall be permitted to remain open after the Theater is open for business. Tenant agrees to reimburse Landlord for its pro-rata share of all reasonable costs directly relating to all additional hours of operation beyond the normal operating hours of the Theater, which costs include, without limitation, electricity for parking lot lighting and salaries for security personnel. Notwithstanding any provision hereof to the contrary, Tenant shall not be obligated to continuously operate from the Leased Premises during periods in which (i) Tenant is carrying on remodeling activities (but in no event for more than thirty (30) days in any lease year and no more than twice in any five (5) year period), (ii) Tenant is closed for the taking of inventory (but in no event 17 22 for more than two (2) days in any lease year), (iii) Tenant is unable or reasonably unwilling to operate as a result of casualty or natural disaster, condemnation, interruption of utilities or services, extremely inclement weather, civil unrest, operation of the business would expose Tenant's employees, agents or invitees to an unreasonably risk of physical injury or property damage, or other force majeure events, (iv) Tenant's use and occupancy of the Leased Premises is prohibited by any law, ordinance, order or other act of any judicial governmental or quasi-governmental authority, (v) there exists a substantial and material hardship to Tenant or its employees, provided Tenant's failure to continuously occupy under this clause (v) for any such occurrence shall be excused only for a period of forty-eight (48) hours, (vi) Thanksgiving and Christmas, and (vii) during periods in which the Leased Premises are temporarily closed in connection with group sales activities being conducted and the Leased Premises are temporarily closed to the public (as permitted pursuant to Section 4.1 of the Data Sheet). Landlord hereby consents to Tenant's use of hydraulic oil in connection with the operation of the simulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled and disposed of in accordance with applicable laws, Landlord hereby acknowledges that such materials are approved. Landlord recognizes that Tenant's prototype incorporates an open storefront design. Tenant shall be permitted to incorporate the open storefront element into the design of the Leased Premises provided that Tenant, at Tenant's expense shall construct Tenant Work in a manner that does not cause the ambient noise level in adjacent tenant spaces and common areas to exceed 65 db(A). Similarly, Tenant installed equipment within the Leased Premises shall be isolated in a manner that eliminates the transfer of any and all vibrations to adjacent tenant spaces and common areas. Landlord shall be given the opportunity to review and approve Tenant's intended construction methods to isolate such noise and vibrations, which will be included in Tenant's Store Design Drawings submission (as provided for in Exhibit D). Landlord's review and approval of Tenant's Store Design Drawings shall not relieve Tenant of its obligation to limit the ambient noise level and eliminate the transfer of vibrations as required herein. Section 4.3. Sign. Tenant shall install and maintain one (1) sign affixed to the front of the Leased Premises, subject to the prior written approval of Landlord as to design and location and conforming to all applicable legal and insurance requirements. Tenant's sign shall conform to the specifications and requirements contained in Exhibit E attached hereto. Tenant shall keep its approved storefront sign lighted during all hours that the Shopping Center is open to the public and during such other hours as may be reasonably designated by Landlord but in no event more than one (1) hour after the close of business. Tenant shall pay for all costs in connection with such sign and shall be responsible for the cost of proper installation and removal thereof and any damage caused to the Leased Premises thereby. In the event Landlord deems it necessary to remove such sign, then Landlord shall have the right to do so, provided, however, that if the sign has received Landlord's prior written approval and is consistent with the specifications and requirements of Exhibit E, Landlord shall replace said sign as soon as practicable. Except as mentioned above, Tenant shall not place or cause to be placed, erected or maintained on any exterior door, wall or window of the Leased Premises, or the glass of any window or door of the Leased Premises, or on any sidewalk or within any display window space in the Leased Premises, or within five (5) feet of the front of the storefront lease line or opening, or within any entrance to the Leased Premises, any sign (flashing, moving, hanging, handwritten or otherwise), decal, placard, flashing, moving or hanging lights, lettering or any other advertising matter of any kind or description. No symbol, design, name, mark or insignia adopted by Landlord for the Retail Development shall be used without the prior written approval of Landlord. Any interior signs must be in good taste and prepared professionally (not hand-lettered) so as not to detract from the appearance of the Leased Premises or the Shopping Center. Any sign or display visible from the exterior of the Leased Premises which does not meet the above criteria may be removed at any time by Landlord without Landlord incurring any liability therefor, and without such removal constituting a breach of this Lease or entitling Tenant to claim damages on account thereof. Tenant shall be permitted to install a video wall within the Leased Premises (but not within five (5) feet of the storefront leaseline), which video wall may be visible from outside the Leased Premises. Landlord and Tenant agree to use commercially reasonable good faith efforts to cooperate in the development of a storefront design to permit the incorporation of a stock car replica above the 18 23 storefront so long as the installation complies with applicable codes and is reasonably in keeping with the design criteria for entertainment uses in the Retail Development. SECTION 4.4. TENANT'S WARRANTIES. Tenant warrants, represents, covenants and agrees that, in the operation of its business within the Leased Premises, Tenant shall: (a) pay before delinquency any and all taxes, assessments and public charges levied, assessed or imposed upon Tenant's business, or upon Tenant's fixtures, furnishings or equipment in the Leased Premises, or upon any leasehold interest or personal property of any kind, owned by or placed in or about the Leased Premises by Tenant or by anyone claiming by, through or under Tenant, including, without limitation, any transfer taxes, and pay when and as due all license fees, permit fees and charges of a similar nature required for the conduct by Tenant or any subtenant or concessionaire of any business or undertaking authorized hereunder to be conducted in or from the Leased Premises; (b) observe all reasonable requirements promulgated by Landlord at any time and from time to time relating to delivery vehicles, the delivery of merchandise, and the storage and removal of trash and garbage; (c) not use any space outside the Leased Premises for sale, storage or any other undertaking except as provided herein; (d) not use the plumbing facilities in the Leased Premises for any purpose other than that for which they were constructed, nor dispose of any foreign substances therein; (e) except as set forth in Section 4.2., not use any advertising medium or sound devices inside or adjacent to the Leased Premises which produce or transmit sounds which are intended to be audible beyond the interior of the Leased Premises it being expressly understood that Tenant shall be required to soundproof the Leased Premises so as to minimize the impact of the noise created by the Permitted Use on other tenants and patrons of the Retail Development; (f) not permit any odor to emanate from the Leased Premises which is objected to by Landlord or by any tenant or occupant of the Retail Development (and, upon written notice from Landlord, Tenant shall immediately cease and desist from causing such odor, and Landlord may deem the failure by Tenant to do so, a material breach of this Lease); (g) keep the Leased Premises and any platform, loading dock or service area used by Tenant in a neat, clean, safe and sanitary condition; (h) promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction, and observe and comply with all covenants and restrictions of record and all reasonable notices from Landlord's mortgagee, affecting or applicable to the Retail Development or affecting or applicable to the Leased Premises or the cleanliness, safety, occupancy and use of the same, provided such notices from Landlord's mortgagee do not increase Tenant's obligations or decrease Tenant's rights under the Lease, whether or not any such law, ordinance, order, rule, regulation, covenant, restriction, or other requirement is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate structural changes or improvements (provided, however, that Tenant shall not be required to make any structural changes or improvements required pursuant to this Section 4.4(h) with respect to the structural portions of the Leased Premises originally constructed by Landlord, unless such change shall be required by virtue of Tenant's use of the Leased Premises), shall interfere with the use or enjoyment of the Leased Premises, or shall be directed to or imposed upon Tenant or Landlord, and Tenant shall hold Landlord harmless from any and all cost or expense on account thereof (as used in this Lease, the term "legal requirements" shall include the requirements set forth in this subparagraph); (i) not use the parking areas or sidewalks, common areas or any space on or about the Retail Development (outside the Leased Premises) for display, sale, handbilling, advertising, solicitation, or any other similar undertaking; (j) maintain and operate the heating, ventilating and air conditioning system and equipment servicing the Leased Premises so as to adequately heat and cool the same and to maintain at all times, whether or not Tenant is open for business, temperatures in the Leased Premises which will not drain heat or ventilation or air conditioning from the enclosed mall or other interior areas into the Leased Premises and shall not discharge heat, ventilation or air conditioning from the Leased Premises into the enclosed mall or other interior areas; and (k) be authorized to do business in the State, evidence of which must be delivered to Landlord on or before the earlier of (I) the Commencement Date or (II) the date that Tenant opens for business in the Leased Premises. SECTION 4.5 STORAGE AND OFFICE SPACE. Tenant shall store or stock in the Leased Premises only such goods, wares and merchandise as Tenant intends to offer for sale at, in, from, or upon the Leased Premises or as are required to repair and maintain the improvements and simulators in the Leased Premises. This shall not preclude occasional emergency transfers of merchandise to the other stores of Tenant, if any, not located in the Shopping Center. Tenant shall use for office, clerical or other non-selling purposes only such space in the Leased Premises as is from time to time reasonably 19 24 required for Tenant's business therein, and Tenant shall not perform any office or clerical function in the Leased Premises for any store located elsewhere. SECTION 4.6. CARE OF PREMISES. Tenant shall keep the Leased Premises (including the exterior and interior portions of all windows, doors and all other glass and signs) orderly, neat, safe and clean and free from rubbish or dirt at all times and shall store all trash and garbage only in the areas reasonably designated by Landlord for such storage and accumulation. Tenant shall not move any safe, heavy machinery, heavy equipment, or fixtures into or out of the Leased Premises without Landlord's prior written consent, except that, during hours when the Shopping Center is not open to the public. Tenant shall be permitted to move equipment associated with its Permitted Use provided that Tenant uses its best efforts to protect the common area improvements from damage and agrees to assume responsibility for any damage resulting from the same. Tenant agrees that it will not place a load on any floor exceeding the floor load per square foot which such floor was designed to carry, and will not install, operate or maintain in the Leased Premises any heavy equipment except in such manner as to achieve a proper distribution of weight. Landlord and Tenant shall cooperate in their efforts to insure that the Leased Premises are designed to accommodate the Permitted Use. SECTION 4.7. NOTICE BY TENANT. Tenant shall give immediate notice to Landlord in case of fire or accidents in the Leased Premises, or in the building of which the Leased Premises are a part of, or of defects therein or in any fixtures or equipment. SECTION 4.8. RADIUS. Tenant acknowledges that the Retail Development draws it customers from a large geographic area, relying in part on regional and international tourism, and that the success of the Retail Development and income of the Landlord therefrom are dependent upon maximum customer traffic within the Retail Development. In addition, Tenant acknowledges that Landlord is relying on the generation of Percentage Rent from Tenant's Gross Sales at the Leased Premises. During the Term, in the event Tenant, or any person, firm or corporation who or which controls or is controlled by Tenant (an "Affiliate") shall directly or indirectly, either individually or as a partner or stockholder or otherwise, own, operate, or obtain a controlling interest (i.e. own more than fifty percent (50%) of the shares or interest) in any business which is the same as or substantially similar to and in competition with the business of Tenant described in Article IV ("competing business"), which business is conducted within the Area (as said term is herein defined), then the Gross Sales (as said term is defined in this Lease) of any such competing business within said Area shall be included in Tenant's Gross Sales made from the Leased Premises and the Percentage Rent hereunder shall be computed upon the aggregate of Tenant's Gross Sales made from the Leased Premises and made from each such competing business then conducted within said Area. Tenant shall be obligated to provide Landlord with full and complete Gross Sales information and reports with respect to any competing business within the Area in accordance with the requirements of Article II of this Lease and Tenant shall be obligated to include the applicable portion of the Gross Sales of such competing business with the Gross Sales of the Leased Premises and to pay Percentage Rent thereon in accordance with the terms of this Lease. The "Area" shall be defined as the area falling within a radius of ten (10) miles measured from the outside boundary of the Retail Development. This Section 4.8 shall not apply to any competing business which is open and is being operated by Tenant within said Area on the Effective Date. ARTICLE V COMMON AREA SECTION 5.1. USE OF COMMON AREA. Landlord agrees to cause to be operated, managed and maintained during the Term all of the common areas of the Shopping Center. The term "common areas", as used in this Lease, shall mean the parking areas, pedestrian sidewalks and bridges, truckways, loading docks, delivery areas, park areas, pedestrian malls and courts, elevators and escalators, if any, and stairs not contained in leased areas, public restrooms and comfort stations, if any, service areas, fire, service and exit corridors, passageways, landscaped areas, berms and all other areas or improvements which may be provided for the convenience and use of the occupants and tenants of the Retail Development and their respective agents, employees, customers, invitees, and the licensees and invitees of Landlord. The use and occupancy by Tenant of the Leased Premises 20 25 shall include the non-exclusive use, in common with all others to whom Landlord has or may hereafter grant rights to use the same (including, but not limited to, the owners, tenants and occupants of the Shopping Center), of the common areas and of such other facilities as may be designated by Landlord from time to time; subject, however, to rules and regulations for the use thereof which will be uniformly applicable to all Shopping Center tenants as prescribed from time to time by Landlord; provided, however, to the extent there is a conflict between such rules and regulations and the terms of this Lease, the terms of the Lease shall control. In particular, Tenant and its employees shall park their cars only in the areas specifically designated from time to time by Landlord for that purpose. Tenant covenants that it will enforce the parking by its employees in such designated areas. Automobile license numbers of employees' cars shall be furnished by Tenant to Landlord within five (5) days after Landlord's request. In the event any vehicle is parked by an employee of Tenant in a non-employee parking area, Landlord shall have the right to cause the vehicle to be towed to a location designated by Landlord and Tenant shall be obligated to reimburse Landlord for all towing charges. Landlord may at any time close temporarily any common area to make repairs or changes, to prevent the acquisition of public rights in such areas and to discourage non-customer use, provided the same shall not materially adversely affect access to or visibility of the Leased Premises. In addition, Landlord may modify, from time to time, the traffic flow pattern and layout of parking spaces and the entrances-exits to adjoining public streets or walkways, utilize portions of the common areas for entertainment, displays and charitable activities and may do such other acts in and to the common areas as in its judgment may be desirable to improve the convenience or attraction thereof. Landlord agrees to maintain all common areas of the Shopping Center in good order, condition and repair and in a safe, clean, sightly and sanitary condition in accordance with good and accepted shopping center practices. The maintenance obligations of Landlord shall include, without limitation, the re-striping of parking areas when required, repairing of common areas and adequate lighting of all exterior common areas during all hours of darkness during which Tenant shall be open for business and for one (1) hour thereafter: SECTION 5.2. COMMON AREA MAINTENANCE EXPENSES. (a) Tenant agrees to pay to Landlord each Lease Year, in the manner hereinafter provided, Tenant's proportionate share of all costs and expenses (the "Common Area Maintenance Expenses") of every kind and nature paid or incurred by Landlord, or for which Landlord is obligated, during each Lease Year, for operating, equipping, policing and protecting, heating, air conditioning, providing sanitation and sewer and other services, lighting, insuring, repairing, replacing and maintaining (i) the common areas, and (ii) all buildings and roofs within the Retail Development, and (iii) all other areas, facilities and buildings used in connection with the maintenance and/or operation of, and whether located within or outside of, the Retail Development, including without limitation, all roads and driveways serving the Retail Development which are maintained or repaired by Landlord or at Landlord's expense. The Common Area Maintenance Expenses shall include, but are not limited to, costs and expenses of: water, gas, sewage, electricity, refuse disposal, air conditioning, heating and other utilities (without limitation), including all usage, service, hook-up, connection, availability and/or standby fees or charges pertaining to same, and the utility costs; illumination and maintenance of signs, whether located on or off the Retail Development property; salaries of all management personnel; maintenance, repair and replacement of directories, electronic or otherwise, cleaning, lighting, snow removal and landscaping; security control and fire protection; uniforms for maintenance, administrative and security personnel for the Retail Development; management fees; maintenance for wooded areas, retention ponds, wetlands, rivers and riverbank areas; premiums for insurance to the extent maintained by Landlord, for liability, casualty and property damage, including, without limitation, insurance against vandalism, plate glass breakage, fire and extended coverage insurance and such other coverage as determined by Landlord, and liability for defamation and claims of false arrest occurring in and about such areas; personal property taxes; maintaining and replacing the equipment, if any, supplying music to such areas; the reasonable depreciation of equipment used in the operation and maintenance of such areas; total compensation and benefits (including premiums for workers' compensation and other insurance) paid to or on behalf of persons involved in the performance or administration/technical support of the work specified in this Section 5.2; repair, maintenance and cleaning of such areas; operation, repair, maintenance and reasonable depreciation of all temporary and permanent utility systems for the Retail Development, including, without limitation, heating, ventilating and air conditioning systems (HVAC systems), gas system(s), plumbing system(s), 21 26 electrical equipment and irrigational pumping system(s); operation, repair, maintenance and reasonable depreciation of emergency water and sprinkler main system(s) and security alarm system(s); operation maintenance, repair and replacement of mechanical equipment including any automatic door openers, elevators, escalators, lighting fixtures (including replacement of poles, tubes and bulbs) and all other items of equipment used in connection with such areas; paper supplies in restrooms located in or about such areas, cleaning, lighting, striping and landscaping, curbs, gutters, sidewalks, drainage and irrigation ditches, conduits, pipes and canals serving the Retail Development; and there shall also be added to the foregoing costs and expenses an amount equal to [***] of the total of all of the ongoing costs and expenses as Landlord's administrative fee. As stated throughout this Lease, whenever Tenant is obligated to pay its "proportionate share" of a cost, expense or Taxes (as hereinafter defined) such share shall be based on gross leased and occupied floor area in the Shopping Center, and Tenant's proportionate share shall be that fraction, the numerator of which is the total square footage of floor area in the Leased Premises, and the denominator of which is the total square footage of gross leased and occupied floor area (including the Leased Premises) in the Shopping Center. As used throughout this Lease, the "gross leased and occupied floor area" in effect for the whole of any Lease Year shall be the average of the gross leased and occupied floor area in effect on the first day of each calendar month in such Lease Year. Prior to the proration of such Common Area Maintenance Expenses to Tenant, there shall be deducted from the total of such Common Area Maintenance Expenses any amounts specifically contributed by the Major Tenants toward such Common Area Maintenance Expenses. It is further agreed that in no event shall Tenant be obligated for the capital costs of initially constructing the Retail Development or the capital costs of subsequent expansion construction for the Retail Development (i.e., adding new Major Tenants to the development or expanding the Shopping Center or the common areas). Notwithstanding anything contained in this Lease to the contrary, the following shall be excluded from Common Area Maintenance Expenses in calculating Tenant's proportionate share; (i) the capital costs of initially constructing the Retail Development or the capital costs of subsequent expansion construction for the Retail Development; (ii) executive salaries (employees senior to management personnel); (iii) leasing commissions and the expense of preparing leases; (iv) debt service and amortization under any mortgage encumbering the Shopping Center and charges and fees incurred by Landlord in connection with the procurement and recording of such mortgages or rental under any ground lease or other underlying lease; (v) the costs of Landlord's Work in connection with preparing any tenant's space (vi) any costs for which Landlord is reimbursed by insurance proceeds or condemnation awards; (vii) costs for which Landlord is reimbursed by individual tenants of the Shopping Center (viii) to the extent that any employee of Landlord performs work or services other than for the Retail Development, the portion of his salary allocable to work not performed in connection with the Retail Development; (ix) the costs of correcting defects in or inadequacies of the initial design or construction of the Shopping Center, or repair and/or replacement of any of the original materials or equipment required as a result of such defects or inadequacies; (x) any expense resulting from the negligence of Landlord, its agents, servants or employees, or any expense incurred as a direct result of Landlord's failure to use reasonable efforts to minimize expenses to the extent possible without detracting from the standards of a first class Shopping Center; (xi) the cost of any repair to remedy damage caused by or resulting from the negligence of any other tenant(s) in the Shopping Center, including their agents, servants or employees; (xii) repairs or other work occasioned by casualty or the exercise of the right of eminent domain; (xiii) expenses incurred in build out, renovation or other improvement or decoration, painting or redecoration of any leasable area; (xiv) costs incurred due to the violation by Landlord or any tenant or occupant of any term or condition of any lease or rental arrangement covering space in the Shopping Center; (xv) any interest or penalties incurred as a result of Landlord's failure to pay any bill as the same shall become due; (xvi) any and all costs associated with the operation of the business of the entity which constitutes Landlord, intending by this exclusion to distinguish the costs of operation of the common areas (excluded items shall specifically include but shall not be limited to formation of the entity, internal accounting and legal matters, including, but not limited to preparation of tax returns and financial statements and gathering of data therefor, costs of defending any lawsuits, except as the actions of Tenant may be an issue, costs of selling, syndication, financing mortgaging or hypothecating any of Landlord's interest in the Shopping Center, and costs of any disputes between Landlord and its employees); (xvii) advertising and promotional expenditures or customer services, (xviii) costs, fines, or fees incurred by Landlord due to violations of any federal, state or local law, statute or ordinance, or any rules, regulations, judgment or decree of any governmental rule or authority; (xix) the cost of any work or services performed for any facility other than the Shopping Center. Replacements of *** Confidential treatment requested. 22 27 existing improvements, facilities, and equipment (including, by way of example, parking lot repairs, structural repairs, replacement of HVAC or mechanical equipment) otherwise chargeable as Common Area Maintenance Expenses having a useful life of more than one year shall be amortized over the useful life of the replacement, and only the reasonably amortized portion thereof shall be included in Common Area Maintenance Expenses. Tenant's proportionate share of Common Area Maintenance Expenses from the Commencement Date through December 31, 2000 shall not exceed [***] per square foot of floor area in the Leased Premises per Lease Year (proportionately reduced for a partial Lease Year). From [***] through [***], Tenant's proportionate share of Common Area Maintenance Expenses shall not exceed [***] per square foot of floor area in the Leased Premises per Lease Year (proportionately reduced for a partial Lease Year). Beginning [***] and continuing through the expiration of the Original Term and Option Period, if any, Tenant's proportionate share of Common Area Maintenance Expenses shall not be increased by more than [***] per Lease Year over the prior Lease Year's charge. It is hereby agreed that at such times as there are tenants occupying less than eighty-five percent (85%) of the gross leaseable floor area of the Shopping Center, Tenant's proportionate share of the foregoing Common Area Maintenance Expenses shall be computed as if the Shopping Center were eighty-five percent (85%) leased and occupied. (b) Tenant's proportionate share of such Common Area Maintenance Expenses for each Lease Year shall be paid in advance, in equal monthly installments, in the same manner and at the same time as the monthly installments of Minimum Rent are payable hereunder without deduction, offset or diminution of any kind, based on an amount estimated in advance from time to time by Landlord to be Tenant's obligation under this Section 5.2. Notwithstanding the above, in the event Landlord at any time determines that the amount of Common Area Maintenance Expenses actually being paid or incurred by Landlord exceeds the estimate upon which Tenant's proportionate share of Common Area Maintenance Expenses was computed, then Tenant, following a request from Landlord, shall commence to pay with the next monthly installment of Minimum Rent due an amount sufficient to result in Tenant's paying its full proportionate share of Common Area Maintenance Expenses as computed on the basis of Landlord's revised estimate of Common Area Maintenance Expenses. Subsequent to the end of each Lease Year, Landlord shall furnish Tenant with a statement of the actual amount of Tenant's proportionate share of such Common Area Maintenance Expenses for such period which statement shall be in reasonable detail, provided, however, Landlord shall be permitted to describe areas of expenditure by category and shall not be obligated to enumerate each specific expenditure. Upon Tenant's written request therefore, but no more frequently than once per Lease Year, Landlord shall provide Tenant written evidence substantiating up to three (3) particular items included in Tenant's share of Common Area Maintenance Expenses. Landlord shall make reasonable food faith efforts to answer or resolve Tenant's legitimate questions about the Common Area Maintenance Expenses. If the total amount paid by Tenant under this Section 5.2 for any Lease Year shall be less than the actual amount due from Tenant for such Lease Year as shown on such statement, Tenant shall pay Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after the furnishing of each such statement, and if the total amount paid by Tenant hereunder for any such Lease Year shall exceed the actual amount due from Tenant for such Lease Year, such excess shall be credited against the next installment due from Tenant to Landlord under this Section 5.2. ARTICLE VI REPAIRS AND MAINTENANCE SECTION 6.1. REPAIRS AND MAINTENANCE BY LANDLORD. Landlord agrees to keep in good order, condition and repair the roof (including keeping the roof watertight), foundations, exterior (including exterior painting and finish), all structural portions of the Leased Premises (and of the *** Confidential treatment requested. 23 28 building in which the Leased Premises are located) and all plumbing and utility lines not exclusively serving the Leased Premises. Should any repairs, modifications or alterations be required by reason of applicable law, the same shall be made by Landlord at Landlord's cost and expense unless the need for such repairs, modifications or alterations shall result from Tenant's failure to perform its obligations under this Lease or from Tenant's use of the Leased Premises for other than general merchandising purposes. In addition, for the first twelve (12) months only following the Delivery of Possession Date, Landlord shall, upon written notice from Tenant of the necessity therefor, correct any defects in Landlord's Work within the Leased Premises. All costs and expenses incurred by Landlord under this Section 6.1 shall be included in Common Area Maintenance Expenses, other than costs and expenses for Landlord's correction of defects in Landlord's Work or other amount that may be excluded as Common Area Maintenance Expenses pursuant to a specific exclusion contained in Section 5.2 hereof. SECTION 6.2. REPAIRS AND MAINTENANCE BY TENANT. (a) Except for the repairs and maintenance that Landlord is specifically obligated to make or perform pursuant to Section 6.1 above, throughout the entire Term of this Lease, Tenant, at its expense, shall promptly make all repairs and replacements and perform maintenance in and to the Leased Premises and all equipment and fixtures therein or appurtenant thereto, that are necessary or desirable in order to keep the Leased Premises in good order, condition and repair and in safe, dry and tenantable condition. Without limiting the generality of the foregoing, Tenant, at its expense, shall maintain and promptly make any and all necessary repairs to or replacements of: (i) that portion of any pipes, lines, ducts, wires or conduits that exclusively serve the Leased Premises; (ii) the glass windows, plate glass doors, and all fixtures or appurtenances composed of glass that are located in or about the Leased Premises; (iii) Tenant's signs; (iv) the floors and floor coverings, doors and door frames, windows and window frames, walls, storefront including security gates, grilles or enclosures, locks and closing devices, partitions and ceilings in the Leased Premises; (v) heating, ventilating, air conditioning, electrical and plumbing system(s) equipment and fixtures (whether contained within or outside the Leased Premises) which are installed by Tenant or which exclusively serve the Leased Premises; and (vi) the Leased Premises or any part of the Shopping Center when repairs thereto are necessitated by any act or omission (negligent or otherwise) of Tenant or any of Tenant's agents, employees or invitees, or by the failure of Tenant to perform any of its obligations under this Lease. Notwithstanding the foregoing, Landlord shall be responsible for repairs and maintenance necessitated by the negligence or intentional acts of Landlord, its agents or employees. Notwithstanding any contrary provision of this Article VI, Tenant, at its expense, shall make any and all repairs to the Leased Premises as may be necessitated by any break-in, forcible entry or other trespass into or upon the Leased Premises, regardless of whether or not such entry and damage is caused by the negligence or fault of Tenant or occurs during or after business hours. Tenant, at its expense, shall change all air conditioning filters at least five (5) times per year and shall have the air conditioning system professionally inspected and generally serviced at least twice per year. (b) Tenant shall keep and maintain the Leased Premises in a clean, sanitary and safe condition in accordance with the laws of the State and in accordance with all directions, rules and regulations of the health officer, building inspector, the National Fire Protection association and any other officials of the governmental agencies having jurisdiction, at the sole cost and expense of Tenant, and Tenant shall comply with all requirements of laws, ordinances, rules, regulations and orders of any lawful authority having jurisdiction affecting the Leased Premises or Tenant's use thereof. Tenant, at its expense, shall install and maintain fire extinguishers and other fire protection devices as may be required by reason of the conduct of Tenant's business, from time to time by any agency having jurisdiction or the underwriters insuring the building in which the Leased Premises are located. If any bureau, department or official of the Federal or State government requires or recommends the installation of any changes, modifications or alterations in the sprinkler system or additional sprinkler heads or other equipment (hereinafter in this subsection (b) collectively "changes") by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the Leased Premises, or for any other reason, or if any such changes become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rates set by any fire insurance company. Tenant, at Tenant's expense, shall promptly make such changes as required. (c) Provided that Landlord completes Landlord's Work as described in Exhibit C. Tenant agrees that Tenant's use of electrical current will at no time exceed the capacity of the electric 24 29 distribution system and that Tenant will not make any alteration or addition to Tenant's electrical system without Landlord's prior written consent. If Tenant installs any electrical equipment that overloads the electrical lines in the Leased Premises or the Retail Development, Tenant shall, at Tenant's sole cost and expense, be required to make whatever changes to such electrical equipment and in the electric wiring in the Leased Premises (but only after obtaining Landlord's written approval) as may be necessary in order to remedy such overloading and be in compliance with all insurance and legal requirements. All changes required to be made hereby shall result in the continued conformance with the provisions of Exhibit D and this Lease. (d) If Tenant refuses or neglects to properly maintain the Leased Premises, or to commence or to complete repairs promptly and adequately, or if Landlord finds it necessary to make any repairs or replacements otherwise required to be made by Tenant, then Landlord may, after ten (10) days prior written notice to Tenant (except in the event of an emergency in which event no notice shall be required) with Tenant having the opportunity to cure or to commence to cure during such ten (10) day period (in which event Landlord shall not take action so long as Tenant is diligently pursuing such cure to completion), in addition to all other remedies, but without obligation to do so, enter the Leased Premises and proceed forthwith to have such maintenance, repairs or replacements made and Tenant shall pay to Landlord, on demand, the reasonable, out-of-pocket costs and expenses therefor plus a charge of fifteen percent (15%) of such costs and expenses. ARTICLE VII TAXES SECTION 7.1. TAX LIABILITY. Tenant agrees to pay to Landlord Tenant's proportionate share of all taxes and assessments and service payments in lieu of taxes of every nature and kind which may be levied or assessed by, or payable to, any lawful authority during or with respect to each fiscal tax year falling in whole or in part during the Term of this Lease against all or any part of the land, buildings and improvements comprising the Retail Development and any other taxes which Landlord becomes obligated to pay with respect to the Retail Development, whether or not the same are assessed as real or personal property or are payable in advance or in arrears (the "Taxes"). If due to a future change in the method of taxation, any tax, excise or assessment shall be levied or assessed against Landlord, directly or indirectly, in lieu of, in substitution for or as a supplement to any present Taxes or future (real estate or personal property) tax, in whole or in part, including any new tax, excise or assessment upon rentals payable to Landlord by occupants of the Retail Development or upon gross receipts or other income of Landlord derived by Landlord from or upon the interest in the Retail Development of Landlord (or any individuals or entities comprising Landlord), such tax, excise or assessment shall constitute a tax respecting which Tenant is obligated to pay its proportionate share to Landlord as provided herein. If any Taxes or assessed valuation(s) are contested by Landlord, then Tenant's proportionate share of Taxes shall also include Tenant's proportionate share of the cost and expense of consultation services incurred in evaluating and contesting such Taxes or assessed valuation(s). The term "Taxes" shall also include any form of assessment, special assessment, license fee, license tax, business license fee, business license tax, commercial rental tax, levy, charge, tax or similar imposition, imposed by any authority having the direct power to tax, including without limitation any city, county, State or Federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district or any other agency or other public body, whether or not consented to or joined in by Landlord and whether or not retroactive, payable by Landlord thereof as against the land and improvements comprising, or any legal or equitable interest of the Landlord in, the Retail Development. Notwithstanding anything to the contrary contained in this Section 7.1, Tenant shall not be obligated, pursuant to this Section 7.2, to pay Landlord its proportionate share of any inheritance, estate, succession, transfer, gift or franchise tax, levy assessment or surcharge that may be imposed on Landlord or the individuals or entities which constitute the partners of the partnership which is Landlord, unless the same is imposed by way of substitution for all or any part of the "Taxes" otherwise required to be paid in whole or in part by Tenant pursuant to this Lease; the foregoing shall not exempt or exclude from the Taxes to be 25 30 prorated among Shopping Center tenants (including Tenant) levies, taxes, assessments or surcharges based on the rentals or other revenues or gross income of Landlord derived from the Shopping Center (as opposed to Landlord's net income) or other charges payable to Landlord by Tenant or other tenants in or occupants of the Shopping Center. It is hereby agreed that at such times as there are tenants occupying less than eighty percent (80%) of the gross leasable floor area of the Shopping Center, Tenant's proportionate share of the foregoing Taxes shall be computed as if the Shopping Center were eighty percent (80%) leased and occupied. SECTION 7.2. METHOD OF PAYMENT. Tenant's proportionate share of Taxes shall be paid, in advance, in monthly installments on or before the first day of each calendar month, in the same manner and at the same time as the monthly installments of Minimum Rent are payable hereunder without deduction, offset or diminution of any kind, based on an amount estimated by Landlord. Following receipt of all bills for Taxes attributable to any calendar or fiscal year during the Term hereof, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's proportionate share of Taxes for such year. If any bill for any such Taxes is not available, Landlord will estimate the amount of such tax. If the total amount paid by Tenant hereunder for any calendar or fiscal year during the Term of this Lease shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, such deficiency to be paid within thirty (30) days after demand therefor by Landlord; and if the total amount paid by Tenant hereunder for any such calendar or fiscal year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against the next installment of Taxes due from Tenant to Landlord hereunder. For the calendar or fiscal years in which this Lease commences and terminates, Tenant's liability for its proportionate share of any Taxes for such years shall be subject to a pro rata adjustment based on the number of days of said calendar or fiscal years during which the Term of this Lease is in effect. A copy of any such bill for Taxes shall at all times be sufficient evidence of the amount of Taxes assessed or levied against the property to which such bill relates. Prior to or at the commencement of the Term of this Lease and from time to time thereafter throughout the Term hereof, Landlord shall notify Tenant in writing of Landlord's estimate of Tenant's monthly installments due hereunder. Tenant's obligations under this Article VII shall survive the Expiration Date or sooner termination of this Lease. ARTICLE VIII INSURANCE, INDEMNITY AND LIABILITY SECTION 8.1. LANDLORD'S INSURANCE OBLIGATIONS. Landlord agrees to obtain and maintain during the Term hereof, to the extent the same is available, fire and extended coverage insurance, in amounts and coverages and with such special endorsements as Landlord shall determine from time to time, insuring the building in which the Leased Premises are located and the improvements to the Leased Premises provided by Tenant pursuant to this Lease (exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment, plate glass, signs and personal property of Tenant). Landlord shall also carry rental interruption insurance in amounts at least equal to Tenant's total rental obligation for twelve (12) full months under this Lease including the total of the estimated costs to Tenant of Taxes and Common Area Maintenance Expenses (including insurance) for such twelve (12) month period. Landlord will maintain during the Term of this Lease, commercial general liability insurance, insuring against any and all claims for personal injury, bodily injury, death, or property damage, accruing in, on or about the common areas and other portions of the Shopping Center not leased to tenants, with limits of not less than $[***] with respect to bodily injury and death and $[***] with respect to property damage. Further Landlord shall maintain fire and extended coverage insurance insuring the improvements located within the Shopping Center (except for Tenant's trade fixtures, furnishings, operating equipment and personal property) for [***] of the full replacement cost thereof. Tenant acknowledges that such coverage may be provided pursuant to a blanket policy for centers managed by Managing Agent (as defined in Section 20.22 hereof). Tenant shall reimburse Landlord for its proportionate share of the insurance costs incurred by Landlord under this Section 8.1 as part of Tenant's Common Area Maintenance Expenses as provided in Section 5.2 hereof. *** Confidential treatment requested. 26 31 SECTION 8.2. TENANT'S INSURANCE OBLIGATIONS. (a) Provided Tenant is the Tenant named on the Page 1 and a wholly-owned subsidiary of the Guarantor, if any, and Tenant's and Guarantor's, if any, combined net worths are or Tenant's net worth is at least equal to [***], Tenant shall have the right to self-insure for any loss or damage of the type covered by standard fire and extended coverage insurance with respect to personal property located on or within the Leased Premises including alterations and improvements made by Tenant to the extent the same are not covered by Landlord's fire and extended coverage insurance. Tenant and Guarantor shall at their sole expenses, without regard to fault on the part of any person, make and perform any repairs or restorations which are required as a result of a casualty which would be covered by insurance of the type described in this Section 8.2(a). Tenant, at Tenant's sole cost and expense, shall obtain and maintain in effect commencing with the Delivery of Possession Date and continuing throughout the Term of this Lease, insurance policies providing for the following coverage: (i) all risk property insurance against fire, theft, vandalism, malicious mischief, sprinkler leakage and such additional perils as now are or hereafter may be included in a standard extended coverage endorsement from time to time in general use in the State, insuring Tenant's merchandise, trade fixtures, furnishings, equipment and all items of personal property of Tenant and of anyone claiming by, through or under Tenant located on or in the Leased Premises, and the amount of such insurance will be set forth in an "agreed value endorsement" to the policy of such insurance, not less than [***] of the full replacement value thereof without deduction for depreciation, and with a deductible amount of not more than [***], provided, however, any and all proceeds of such insurance, so long as this Lease shall remain in effect, shall be used only to repair or replace or pay for the items so insured; (ii) a commercial general liability policy, including insurance protecting against any and all claims for injury to persons or property occurring in or about the Leased Premises and protecting against assumed or contractual liability under this Lease with respect to the Leased Premises and the operations of Tenant and any subtenant of Tenant in, on or about the Leased Premises, with such policy to be in the minimum amount of [***] single limit coverage; (iii) products liability insurance for merchandise offered for sale or lease from the Leased Premises, including (if this Lease covers leased premises in which food and/or beverages are sold and/or consumed) liquor liability coverage (if applicable to Tenant's business) and coverage for liability arising out of the consumption of food and/or alcoholic beverages on or obtained at the Leased Premises, of not less than [***] per occurrence for personal injury and death and property damage; (iv) workers' compensation coverage as required by law; (v) with respect to alterations, improvements and the like required or permitted to be made by Tenant hereunder, contingent liability and builders risk insurance in amounts satisfactory to Landlord; and (vi) the insurance required under Exhibit D. (b) All insurance policies herein to be procured by Tenant shall: (i) be issued by insurance companies reasonably satisfactory to Landlord and authorized to do business in the State; (ii) be written as primary policy coverage and non-contributing with respect to any coverage which Landlord may carry and that any coverage carried by Landlord shall be excess insurance; (iii) insure and name Landlord, Landlord's managing agent, any mortgagee of the Shopping Center and any parties in interest designated by Landlord as additional insured, as their respective interests may appear (except with respect to workers' compensation insurance); and (iv) contain any express waiver of any right of subrogation by the insurance company against Landlord, Landlord's managing agent and their respective agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives. Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to Tenant's insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease. With respect to each and every one of the insurance policies herein required to be procured by Tenant, on or before the Commencement Date and at least thirty (30) days before any such insurance policy shall expire, Tenant shall deliver to Landlord upon Landlord's written request a duplicate original or certified copy of each such policy or a certificate of the insurer, certifying that such policy has been issued, providing the coverage required by this Section 8.2 and containing provisions specified herein, together with evidence of payment of all applicable premiums. Any insurance required to be carried hereunder may be carried under a blanket policy covering the Leased Premises and other locations of Tenant. Each and every insurance policy required to be carried hereunder by or on behalf of Tenant shall provide (and any certificate evidencing the existence of each such insurance policy shall certify) that, unless Landlord shall first have been given thirty (30) days' prior written notice thereof, the insurer will not cancel, *** Confidential treatment requested. 27 32 materially change or fail to renew the coverage provided by such insurance policy. The term "insurance policy" as used herein shall be deemed to include any extensions or renewals of such insurance policy. In the event that Tenant shall fail to promptly furnish any insurance coverage hereunder required to be procured by Tenant, Landlord, at its sole option, shall have the right after ten (10) days prior written notice to Tenant to obtain the same and pay the premium therefor for a period not exceeding one (1) year in each instance, and the premium so paid by Landlord shall be immediately due and payable by Tenant to Landlord as additional rent. (c) Tenant shall not do or permit to be done any act or thing upon the Leased Premises that will invalidate or be in conflict with fire insurance policies covering the building containing the Leased Premises or any part thereof, including all common areas, or fixtures and property therein, or any other insurance policies or coverage referred to above in this Article VIII; and Tenant shall promptly comply with all rules, orders, regulations, or requirements relating to such insurance policies, and shall not do, or permit anything to be done, in or upon the Leased Premises, or bring or keep anything therein, which shall increase the rate of fire insurance on the building in which the Leased Premises are located or on any property, including all common areas, located therein, or increase the rate or rates of any other insurance referred to hereinabove. If any act or omission of Tenant, its agents, employees or contractors shall result in any increase in the premium rates applicable to any such insurance policies carried by Landlord, or other increased costs to Landlord in connection therewith, then Tenant shall reimburse Landlord on demand as additional rent for the amount of any such increased rates or costs. In particular, if Tenant uses the Leased Premises for the preparation of food, Tenant shall reimburse Landlord on demand, for any part of the premium for insurance coverage under Section 8.1 hereof required to be paid on account of such use of the Leased Premises. Section 8.3. Mutual Covenant. Notwithstanding any provision of this Lease to the contrary, Landlord and Tenant each hereby releases the other, its officers, directors, employees, and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty for which insurance containing a waiver of subrogation is carried by the injured party at the time of such loss, damage or injury regardless of the extent of any recovery by the injured party under such insurance. Both parties agree to carry casualty insurance containing such waiver of subrogation. Additionally, during any time when Tenant is self-insuring its insurance obligations hereunder, Tenant hereby releases the Landlord, its officers, directors, employees and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty, even if such loss, damage or casualty is caused in whole or in part by Landlord or by any party for whom Landlord may be responsible. Section 8.4. Covenant to Hold Harmless. Except with respect to the gross negligence or wilful misconduct of Landlord, its agents or employees (unless covered or required to be covered by Tenant's insurance). Tenant hereby indemnifies and agrees to hold harmless Landlord, its officers, directors, partners, employees and agents and any mortgagee or master lessor of the Shopping Center, from and against any and all claims, actions, damages, liabilities, costs and expenses, including attorneys' fees, that (i) arise from or are in connection with the possession, use, occupancy, management, repair, maintenance or control of the Leased Premises, or any portion thereof, or (ii) arise from or are in connection with any negligent or wrongful act or omission of Tenant or Tenant's agents, employees, contractors, licensees or invitees, or (iii) result from any default, breach, violation or nonperformance of this Lease or any provision hereof by Tenant, or (iv) result from injury to person or property or loss of life sustained in the Leased Premises or outside of the Leased Premises resulting from acts or omissions within the Leased Premises. Tenant shall, at its own cost and expense, defend any and all actions, suits and proceedings which may be brought against Landlord or any mortgagee or master lessor of the Shopping Center with respect to the foregoing. Tenant shall pay, satisfy and discharge any and all judgments, orders and decrees which may be received against Landlord or any such mortgagee or master lessor in connection with the foregoing. In the event Landlord or any other party so indemnified, shall, without fault, be made a party to any litigation commenced by or against Tenant, or if Landlord or any such party shall, in its sole discretion, intervene in such litigation to protect its interest hereunder, then Tenant shall protect and hold them harmless and shall pay all costs, expenses and attorneys' fees incurred or paid by such party(ies) in connection with such litigation. 28 33 Landlord hereby indemnifies and agrees to save harmless Tenant, its officers, directors, partners, employees and agents from and against any and all claims, actions, damages, liabilities, costs and expenses including attorneys' fees, in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in the common areas of the Shopping Center unless caused by the negligence or default of Tenant, its agents, contractors, employees, officers, directors, partners, subtenants or concessionaires. SECTION 8.5. LOSS AND DAMAGE. All Tenant's property of every kind and description which may at any time be in the Leased Premises shall be kept at Tenant's sole risk, and Landlord shall not be liable except to the extent resulting from the negligence or intentional acts of Landlord, its agents or employees to Tenant, its agents, employees or customers, for any damage, loss, compensation, accident, or claims whatsoever resulting to Tenant or its property from the necessity of repairing any portion of the Shopping Center; any interruption in the use of the Leased Premises; the use or operation (by Landlord, Tenant, or any other person or persons whatsoever) of any elevators, heating, cooling, electrical or plumbing equipment or apparatus; the termination of this Lease by reason of the destruction of the Leased Premises; any fire, robbery, theft, or any other casualty; any leakage in any part or portion of the Leased Premises or the Shopping Center; any water, wind, rain or snow that may leak into, or flow from part of the Leased Premises or the Shopping Center; any acts or omissions of any occupant of any space adjacent to or adjoining all or any part of the Leased Premises or any part of the building of which the Leased Premises are a part; any explosion, casualty, utility failure or malfunction, or falling plaster; the bursting, stoppage or leakage of any pipes, sewer pipes, drains, conduits, appliance or plumbing works; or any other cause whatsoever. ARTICLE IX DESTRUCTION OF LEASED PREMISES SECTION 9.1. CONTINUANCE OF LEASE. In the event of any damage to the Leased Premises by fire or other casualty, this Lease shall not be terminated or otherwise affected; except that, (a) if more than twenty-five percent (25%) of the square footage of the Leased Premises shall be damaged by any such fire or other casualty during the last three (3) years of the Term of this Lease (not including any Option Periods) or during any renewal or extension of the Term hereof and the cost of repair or restoration exceeds One Million and 00/100ths Dollars ($1,000,000.00) as estimated by Landlord, or (b) if Landlord is unable to rebuild any portion of the building in which the Leased Premises are located or of the Shopping Center due to any inability (after Landlord uses commercially reasonable efforts) to obtain any required governmental approval in connection therewith, or (c) if more than thirty-five percent (35%) of the floor area of the building in which the Leased Premises are located or of the Shopping Center shall be damaged or destroyed by fire or other casualty, or (d) if twenty-five percent (25%) or more of the building in which the Leased Premises are located or if twenty-five percent (25%) or more of the Shopping Center or the Leased Premises shall be damaged or destroyed at any time by the occurrence of any risk not insured under the insurance required to be carried under Article VIII hereof, then Landlord shall have the option to terminate this Lease within seventy-five (75) days following the occurrence of such fire or other casualty by giving written notice to Tenant during such period, provided Landlord elects to terminate the leases of all or substantially all other Shopping Center tenants which are similarly affected by the casualty and are located in the same section of the mall as the Leased Premises. In the event Landlord exercises any of the foregoing options to terminate, this Lease shall immediately terminate upon Landlord's written notice to Tenant and (i) the entire proceeds of the insurance provided for in Section 8.1 hereof shall be paid by the insurance company or companies directly to Landlord and shall belong to, and be the sole property of Landlord, (ii) the portion of the proceeds of the insurance provided for in Section 8.2 which is allocable to equipment, fixtures and other items, which, by the terms of this Lease, rightfully belong to Landlord upon the termination of this Lease by whatever cause, shall be paid by the insurance company or companies directly to Landlord, and shall belong to, and be the sole property of, Landlord, and (iii) Landlord and Tenant shall be relieved from any and all further liability or obligation accruing under this Lease from and after the date of such termination. 29 34 Further, if Landlord cancels this Lease by virtue of the fact that it is during the last three years of the Lease term, Tenant may nullify Landlord's cancellation within thirty (30) days after receipt thereof by giving notice to Landlord that Tenant elects to extend the term of the Lease pursuant to any such right contained in this Lease, in which event the parties shall proceed to restore in accordance with Section 9.2. SECTION 9.2. RECONSTRUCTION. If the Leased Premises are damaged by fire or other casualty and this Lease is not terminated in accordance with Section 9.1 hereof, then all fire and extended coverage insurance proceeds from policies carried pursuant to Section 8.1 hereof, however recovered, shall be held in escrow and made available for payment of the cost of repairing, replacing and rebuilding the Leased Premises. Within seventy (75) days after the casualty Landlord shall provide Tenant with a good faith estimate of the date on which the reconstruction of the Leased Premises will be completed. The Minimum Rent and other charges payable by Tenant to Landlord shall be abated in proportion to the floor area of the Leased Premises rendered untenantable, and the Sales Break Point shall likewise be proportionately reduced. Payment of Minimum Rent and all other charges so abated shall commence and Tenant shall be obligated to reopen for business ninety (90) days following the date that Landlord advises Tenant that the Leased Premises are tenantable and Landlord has substantially completed Landlord's Reconstruction Work, unless Tenant opens at an earlier time in the damaged area or remains open in such area following destruction or damage, in which event there shall be no abatement or any such abatement shall terminate as of the date of Tenant's earlier reopening. Landlord shall be obligated to commence Landlord's Reconstruction Work and shall diligently pursue the completion of Landlord's Reconstruction Work and shall cause the same to be completed as soon thereafter as possible under the attendant circumstances, but in any event all such Landlord's Reconstruction Work shall be completed and the Leased Premises reopened for business within one hundred eighty (180) days following such fire or casualty. After Landlord has completed Landlord's Reconstruction Work, Tenant shall commence Tenant's Reconstruction Work, at its expense. Tenant shall comply with all laws, ordinances and governmental rules or regulations, and shall perform all work or cause such work to be performed with due diligence and in a first-class manner. All permits required in connection with said repairs, restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost and expense. Any amount expended by Tenant in excess of any insurance proceeds received by Tenant shall be the sole obligation of Tenant. Landlord shall reconstruct such Leased Premises in accordance with the working drawings originally approved by Landlord or with (at Landlord's sole election) new drawings prepared by Tenant and acceptable to Landlord and Tenant ("Landlord's Reconstruction Work"). In no event shall Landlord be required to repair or replace Tenant's merchandise, trade fixtures, furnishings or equipment. If Landlord repairs or rebuilds, Tenant, at Tenant's sole cost, shall repair or replace Tenant's merchandise, trade fixtures, furnishings and equipment in a manner and to at least a condition equal to that prior to the damage or destruction thereof ("Tenant's Reconstruction Work"). Except as may be specifically set forth in this Article IX, Landlord shall not be liable or obligated to Tenant to any extent whatsoever by reason of any fire or other casualty damage to the Leased Premises, or any damages suffered by Tenant by reason thereof, or the deprivation of Tenant's possession of all or any part of the Leased Premises. In the event Landlord has not commenced restoration or rebuilding of the Leased Premises within ninety (90) days of the date of such fire or casualty loss, or if the Leased Premises are not restored/rebuilt to its former condition prior to such fire or casualty loss within one hundred eighty (180) days of the date of such fire or casualty loss, Tenant will have the right, in either case, to terminate this Lease by providing Landlord notice of such election and Tenant will vacate and surrender the Leased Premises pursuant to Section 17.1. ARTICLE X CONDEMNATION SECTION 10.1. EMINENT DOMAIN. If fifty percent (50%) or more of the floor area of the Leased Premises shall be taken or condemned by any governmental authority (including, for purposes of this 30 35 Article X, any purchase by such governmental authority in lieu of a taking), then either party may elect to terminate this Lease by giving notice to the other party not more than ninety (90) days after the date on which such title shall vest in the authority. If the parking facilities are reduced below the minimum parking requirements imposed by the applicable authorities, Landlord may elect to terminate this Lease by giving Tenant notice within one hundred eighty (180) days after such taking. In addition, if two or more Major Tenants in the northern half of the Retail Development (which begins at the southern lease line of Space D shall terminate their leases with Landlord, pursuant to a taking of its store and Landlord cannot replace such Major Tenants because of the taking, Landlord may terminate this Lease by written notice to Tenant within ninety (90) days after Landlord receives notice from such Major Tenants that they are terminating their leases. In the case of any taking or condemnation, whether or not the Term of this Lease shall cease and terminate, the entire award shall be the property of Landlord; provided, however, Tenant shall be entitled to any award as may be made for trade fixtures and other equipment (not including any Tenant's Work required or permitted under this Lease) which under the terms of this Lease would not have become the property of Landlord; further provided, that any such award to Tenant shall not be in diminution of any award otherwise to be made to Landlord in the absence of such award to Tenant. SECTION 10.2. RENT APPORTIONMENT. In the event of any taking or condemnation, the then current Minimum Rent, Sales Break Point and the square foot floor area in the Leased Premises as determined pursuant to Section 1.1 shall be apportioned as of the date when possession of the Leased Premises is required to be delivered to the condemning authority or termination of this Lease, as the case may be, and, if the Term of this Lease shall not have ceased and have been terminated as of said date, Tenant shall be entitled to a pro rata reduction in the Minimum Rent payable and Sales Break Point hereunder, or, if Tenant has prepaid Minimum Rent, Tenant shall be entitled to a pro rata credit for the Minimum Rent paid hereunder, based on the proportion which the floor area taken from the Leased Premises bears to the entire floor area of the Leased Premises immediately prior to such taking. SECTION 10.3. TEMPORARY TAKING. Notwithstanding anything to the contrary in this Article X, the requisitioning of the Leased Premises or any part hereof by military or other public authority for purposes arising out of a temporary emergency or other temporary situation or circumstances shall constitute a taking of the Leased Premises by eminent domain when the use or occupancy by the requisitioning authority is expressly provided to continue, or shall in fact have continued, for a period of one hundred eighty (180) days or more, and if this Lease is not thereafter terminated under the foregoing provisions of this Article X, then for the duration of any period of use and occupancy of the Leased Premises by the requisitioning authority, all the terms and provisions of this Lease and obligations of Tenant hereunder shall remain in full force and effect, except that the Minimum Rent and Sales Break Point shall be reduced in the same proportion that the floor area of the Leased Premises so requisitioned bears to the total floor area of the Leased Premises, and Landlord shall be entitled to whatever compensation may be payable from the requisitioning authority for the use and occupation of the Leased Premises for the period involved. ARTICLE XI ASSIGNMENT, SUBLETTING AND ENCUMBERING LEASE SECTION 11.1. NO ASSIGNMENT, SUBLETTING OR ENCUMBERING OF LEASE. (a) Except as otherwise provided in this Article XI and notwithstanding any references to assignees, subtenants, concessionaires or other similar entities in this Lease, Tenant shall not (i) assign or otherwise transfer, or mortgage or otherwise encumber, this Lease, in whole or in part, or any of its rights hereunder, (ii) sublet the Leased Premises or any part thereof, or permit the use of the Leased Premises or any part thereof by any persons other than Tenant or its agents. Any such attempted or purported transfer, assignment, mortgaging or encumbering of this Lease or any of Tenant's interest hereunder and any attempted or purported subletting or grant of a right to use or occupy all or a portion of the Leased Premises in violation of the foregoing sentence, whether voluntary or involuntary or by operation of law or otherwise, shall be null and void and shall not confer any rights upon any purported transferee, assignee, mortgagee, or occupant, and shall, at Landlord's option, result in a "default" under this 31 36 Lease. Nothing contained elsewhere in this Lease shall authorize Tenant to enter into any franchise, concession, license, permit, subtenancy, departmental operation arrangements or the like, except pursuant to the provisions of this Article XI. Notwithstanding anything to the contrary set forth in this Article XI, the following shall govern with respect to certain types of transfers, it being understood that Tenant shall have the right to assign, sublease or otherwise transfer its rights under this Lease provided that the conditions and requirements applicable to the particular assignment, sublease or other transfer that are specified in subparagraphs (A), (B), (C), OR (D) below are satisfied: (A) INTRA-ORGANIZATIONAL TRANSFER: Tenant shall have the right, without Landlord's consent but with prior written notice to Landlord, to assign this Lease or sublet the Leased Premises to its parent corporation or any of its wholly-owned subsidiaries, or any affiliate or subsidiary of Tenant's parent corporation provided that Tenant shall at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease. (B) ASSIGNMENT AS PART OF A TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF TENANT (Same Use): Subject to Section 11.1(a)(A) above, Landlord's consent shall not be unreasonably withheld or delayed to an assignment of this Lease (by merger, consolidation or otherwise) or a sublease for all or any portion of the Leased Premises to another entity (the "Transferee") to which Tenant shall simultaneously be transferring all or substantially all of its stock or all or substantially all of its assets, provided that the following criteria are met: (1) Tenant shall not at the time of such transfer be in default under any of the terms, covenants and conditions of this Lease beyond any applicable grace period, (2) such Transferee shall agree in writing to perform all of the unperformed terms, covenants and conditions of this Lease, (3) Tenant shall at all times remain primarily obligated for the performance of the terms, covenants and conditions of this Lease and (4) the number of stores being transferred must consist of at least three (3) stores. (C) ASSIGNMENT AS PART OF A TRANSFER OF LESS THAN ALL OR SUBSTANTIALLY ALL OF TENANT'S ASSETS (Same Use): Landlord shall not unreasonably withhold it consent to an assignment, sublease or other transfer ("Transfer") of this Lease to an entity to whom Tenant is transferring less than substantially all of Tenant's assets ("Transferee") provided that the following requirements and conditions shall be satisfied prior to any such Transfer: (i) at the time of such proposed Transfer, Tenant is not in default of any of the terms, covenants or conditions of this Lease beyond any applicable grace or cure period and shall at such time be operating the Leased Premises pursuant to Article IV of this Lease; (ii) the proposed Transferee shall agree in writing to assume all of the terms, covenants and conditions to be performed by Tenant hereunder, including, but not limited to, the obligation to continue to operate the Leased Premises in accordance with Article IV of this Lease; (iii) effective as of the date of such Transfer, the applicable Minimum Rent as provided for in Section 2.1 shall be increased to the sum of the applicable [***] for the time period prior to such Transfer as required to be paid by Tenant pursuant to Section 2.2 hereof and from and after the date of the Transfer the Sales Break Point shall be adjusted also to the quotient of the increased Minimum Rent divided by [***]; (iv) at the time of such Transfer, the proposed Transferee shall have a net worth equal to or greater than [***] [in 1999 Dollars] as shown in current certified financial statements; and (v) the proposed Transferee has proven expertise and experience in operating and managing an entertainment use in a shopping center environment. If the Transfer described in this Section 11.1(a)(C) involves less than four (4) of Tenant's stores, then, in addition to Landlord's right to deny Tenant's proposed Transfer on the grounds that the items enumerated in (i) through (v) of Section 11.1(a)(C) have not been met, Landlord may elect to terminate this Lease and recapture the Leased Premises by written notice delivered to Tenant within fifteen (15) days after Landlord's receipt of notice from Tenant of its intention to complete the Transfer as provided for in this Section 11.1(a)(C) (hereinafter called the "Same Use Recapture Notice"), in which event this Lease shall automatically terminate on the ninetieth (90th) day (hereinafter called the "Same Use Recapture Date") following Tenant's receipt of the Recapture Notice with the same force and effect as if said Same Use Recapture Date had been designated as the expiration date of this Lease, and Landlord and Tenant shall upon such Same Use Recapture Date be *** Confidential treatment requested. 32 37 released from any and all liabilities thereafter accruing hereunder, provided, however that Landlord shall be obligated to repay to Tenant the unamortized portion of the actual cost of Tenant's Work (less the Tenant Allowance) plus the sum of [***] on or before the Same Use Recapture Date. All Minimum Rent, Percentage Rent and additional rent payable by Tenant hereunder shall be apportioned as of the Same Use Recapture Date and Tenant shall promptly pay to Landlord any amounts so determined to be due and owing by Tenant to Landlord, and conversely Landlord shall promptly reimburse Tenant for any amounts prepaid by Tenant for periods subsequent to the Same Use Recapture Date. Notwithstanding any Same Use Recapture Notice given to Tenant by Landlord within the aforesaid fifteen (15) day period, Tenant shall have the right within fifteen (15) days after its receipt of the Same Use Recapture Notice to give Landlord notice (hereinafter called the "Same Use Recision Notice") of its recision of its intention to assign, transfer or sublease, and upon Landlord's receipt of the Same Use Recision Notice the Same Use Recapture Notice previously given by Landlord shall be deemed null and void; in such event, Tenant shall not assign this Lease or sublet the Leased Premises as proposed in the notice of its intention to assign or transfer the Lease or sublet the Leased Premises. (D) ASSIGNMENT WITH PROPOSED CHANGE IN USE: Landlord's consent to an assignment, transfer or sublease which results in a change in use shall not be unreasonably withheld provided that the following criteria are met: (i) the net worth of the assignee, transferee or sublessee shall be equal to or greater than [***] [in 1999 Dollars] as shown in current certified financial statements; (ii) the proposed assignee, transferee or sublessee has proven experience in the retail business to be conducted in the Leased Premises; (iii) the proposed assignment, transfer or sublease applies to the entire Leased Premises; and (iv) the business to be conducted in the Leased Premises shall (A) not violate an existing exclusive or restriction granted for the benefit of another tenant in the Retail Development or (B) complement the merchandising mix and program for the Retail Development being promoted at the time of the proposed assignment (i, ii, iii and iv being collectively referred to as the "Criteria"). In the event Tenant proposes to assign its interest in this Lease or sublet the whole of the Leased Premises pursuant to the terms of this Section 11.1(a)(D), it shall, notwithstanding Section 11.1(c) to the contrary, first give thirty (30) days prior written notice thereof (hereinafter called the "Assignment/Subletting Notice") to Landlord together with all other information required pursuant to Section 11.1(c) hereof. In the event the proposed assignee is unacceptable to Landlord, because in Landlord's reasonable belief the Criteria have not been met, Landlord shall be permitted during the thirty (30) day period to reject the proposed assignment and Tenant shall remain as the tenant in possession of the Leased Premises under the Lease. In addition, within thirty (30) days after Landlord's receipt of an Assignment/Subletting Notice and such required and/or requested information from Tenant as provided in this Section 11.1(a)(D), Landlord may elect by notice (hereinafter called the "Recapture Notice") in writing to Tenant to terminate this Lease and recapture the Leased Premises, in which event this Lease shall automatically terminate on the ninetieth (90th) day (hereinafter called the "Recapture Date") following Tenant's receipt of the Recapture Notice with the same force and effect as if said Recapture Date had been designated as the expiration date of this Lease, and Landlord and Tenant shall upon such Recapture Date be released from any and all liabilities thereafter accruing hereunder, provided, however that Tenant shall be obligated to repay to Landlord the unamortized portion of the Tenant Allowance as provided for in Section 3.3 hereof on or before the Recapture Date. All Minimum Rent, Percentage Rent and additional rent payable by Tenant hereunder shall be apportioned as of the Recapture Date and Tenant shall promptly pay to Landlord any amounts so determined to be due and owing by Tenant to Landlord, and conversely Landlord shall promptly reimburse Tenant for any amounts prepaid by Tenant for periods subsequent to the Recapture Date. Notwithstanding any Recapture Notice given to Tenant by Landlord within the aforesaid thirty (30) day period, Tenant shall have the right within fifteen (15) days after its receipt of the Recapture Notice to give Landlord notice (hereinafter called the "Recision Notice") of its recision of the Assignment/Subletting Notice, and upon Landlord's receipt of the Recision Notice the Recapture Notice previously given by Landlord shall be deemed *** Confidential treatment requested. 33 38 null and void; in such event, Tenant shall not assign this Lease or sublet the Leased Premises as proposed in its Assignment/Subletting Notice. (b) Except as otherwise provided herein, if Tenant is a corporation, the sale, issuance or transfer of any voting capital stock of Tenant or of any corporate entity which directly or indirectly controls Tenant (unless Tenant is a corporation whose stock is publicly traded) which shall result in a change in the voting control of Tenant or the corporation entity which controls Tenant shall be deemed to be a prohibited assignment of this Lease within the meaning of this Article XI. If Tenant is a partnership or an unincorporated association, then the sale, issuance or transfer of a majority interest therein, or the transfer of a majority interest in or a change in the voting control of any partnership or unincorporated association or corporation which directly or indirectly controls Tenant, or the transfer of any portion or all of any general partnership or managing partnership interest, shall be deemed to be a prohibited assignment of this Lease within the meaning of this Article XI. Except as otherwise provided herein, the consent by Landlord to any assignment, transfer, or subletting to any party shall not be construed as a waiver or release of Tenant under the terms of any covenant or obligation under this Lease or as a waiver or release of the non-assignability covenants in their future application, nor shall the collection or acceptance of Rent from any such assignee, transferee, subtenant or occupant constitute a waiver or release of Tenant of any covenant or obligation contained in this Lease. (i) Notwithstanding anything herein contained to the contrary, a sale or transfer of any voting capital stock of Tenant when caused by death (e.g., testamentary transfer) or for estate planning purposes (e.g. inter vivos trust) will not be deemed a prohibited assignment of this Lease. (ii) The provisions of this Section 11.1(b) shall not be deemed to prohibit transfer of limited partnership interests among existing limited or general partners; however, if either general partner ceases to remain a general partner of Tenant such occurrence shall be deemed a prohibited assignment of this Lease under the meaning of this Article XI. (iii) In addition, Tenant may, without violating the provisions of this Article XI, and without consent of or notice to Landlord (i) sell or offer for sale its capital stock to the public in accordance with the qualifications or registration requirements of the state where Tenant is incorporated and the Securities Act of 1933, as amended or (ii) issue or transfer shares of Tenant's capital stock (whether or not such issuance or transfer results in a change in the persons comprising majority shareholders of Tenant) as part of a so-called "private placement". (c) Without conferring any rights upon Tenant not otherwise provided in this Article XI, should Tenant desire to enter into an assignment, sublease or transfer of this Lease or Tenant's rights hereunder, Tenant shall request in writing Landlord's consent to the assignment or, where consent is not required, provide Landlord prior written notice of the same at least fifteen (15) days before the proposed effective date of the assignment (or within such other timeframe as may be provided for herein for a specific type of assignment), providing the following: (i) the full particulars of the proposed assignment, sublease or transfer of this Lease or Tenant's rights hereunder, including its nature (i.e. whether it is an assignment, sublease or transfer) and effective date, terms and conditions; (ii) a description of the identity, net worth and previous business experience of the proposed transferee, including, without limitation, copies of the proposed transferee's latest income, balance sheet and changes in financial position statements (with accompanying notes and disclosures of all material changes thereto) in audited form, if available, and certified as accurate by the proposed transferee; and (iii) any further information reasonably relevant to the proposed assignment and reasonably available to Tenant which Landlord shall request after receipt of Tenant's request for consent. Tenant shall, concurrently with any request for Landlord's consent, pay to Landlord a fee in the sum of [***] for Landlord's review and processing of such request and Landlord shall not be obligated to review such request prior to Landlord's receipt of such fee. All requests for assignment, sublease or transfer shall be forwarded to Landlord at the address provided above and to the on-site mall management office. To the extent Landlord's consent is required, Landlord shall be required to respond within the prescribed period (being a minimum of 15 days) and if Landlord's response is a denial of the proposed transfer, Landlord shall give specific reasons for the denial. If Landlord fails to respond within five (5) business days written notice from Tenant (provided both to Landlord at the *** Confidential treatment requested. 34 39 notice address and to the Mall Manager), which notice must specify that Landlord has failed to respond to the initial request and that failure to respond within five (5) days of the date on the second notice will result in approval, then Landlord shall be deemed to have approved the requested transfer. (d) Except for a permitted assignment or subletting as specified in Section 11.1(a) and (b) and without conferring any rights upon Tenant not otherwise provided in this Article XI, in the event of an assignment or transfer of Tenant's interest in this Lease, or a sublease of all or a portion of the Leased Premises, to a third party, any monthly rent or other payment accruing to Tenant as the result of any such assignment, transfer, or sublease, including any lump sum or periodic payment in any manner relating to such assignment, transfer or sublease, which is in excess of the Rent then payable by Tenant under this Lease less any amounts paid by Tenant in commissions, tenant improvements, unamortized tenant improvements funded by Tenant, and attorneys' fees shall be paid one-half(1/2) of such excess by Tenant to Landlord monthly as additional rent. Landlord may require a certificate from Tenant specifying the full amount of any such payment of whatsoever nature. (e) Notwithstanding any assignment, subletting or transfer of this Lease or Tenant's rights hereunder, Tenant shall remain fully liable on this Lease and for the performance of all terms, covenants and provisions of this Lease; provided, however, if the transferee, or assignee has a net worth equal to or in excess of [***] [in 1999 Dollars] as shown in current certified financial statements on the date of the transfer then Tenant shall be released from its obligations with respect to the Lease from and after the date of the assignment or transfer. SECTION 11.2. ASSIGNMENT OR SUBLET. If this Lease is transferred or assigned, in whole or in part in violation of the terms of this Lease, or if the Leased Premises or any part thereof be sublet or occupied by any person or entity other than Tenant in violation of the terms of this Lease, whether as a result of any act or omission by Tenant, or operation of law, or otherwise, then Landlord, whether before or after default by Tenant, may, in addition to, and not in diminution of or substitution for, any other rights and remedies under this Lease or pursuant to law to which Landlord may be entitled as a result thereof, collect rent from the transferee, assignee, subtenant or occupant and apply the net amount collected to the Rent herein reserved, but no such transfer, assignment, subletting, occupancy or collection shall be deemed a waiver of the covenants contained herein or the acceptance of the transferee, assignee, subtenant, or occupant as Tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant set forth in this Lease unless Tenant has been otherwise released, including without limitation pursuant to Section 11.1(e). SECTION 11.3. TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of Landlord's interest in the Leased Premises, including a sale or lease, the transferor shall be automatically relieved of any and all obligations on the part of Landlord accruing from and after (but not before) the date of such transfer, provided that (a) the interest of the transferor, as Landlord, in any funds then in the hands of Landlord in which Tenant has an interest shall be turned over, subject to such interest, to the then transferee; and (b) notice of such sale, transfer or lease shall be delivered to Tenant as required by law. ARTICLE XII SUBORDINATION, ATTORNMENT, FINANCING AND ESTOPPEL CERTIFICATE SECTION 12.1. SUBORDINATION. Tenant agrees that this Lease shall, at the request of Landlord, be subordinate to any mortgages or deeds of trust that may hereafter be, placed upon the Leased Premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof, provided, as an express condition to such subordination, that the mortgagees or beneficiaries named in said mortgages or deeds of trust shall [***] Confidential treatment requested. 35 40 agree to substantially concurrently with such subordination execute a non-disturbance agreement whereby such mortgagee or beneficiary agrees to recognize the interests of Tenant under this Lease in the event of foreclosure, if Tenant is not then in material default of this Lease beyond the applicable cure period, which non-disturbance agreement shall be evidenced by a document on such mortgagee's or beneficiary's standard form (which must be commercially reasonable, it being understood that the form attached hereto as Exhibit H is acceptable to Landlord and Tenant) and may (at the cost of the party recording the same) be recorded among the land records of the jurisdiction in which the Retail Development lies. Landlord hereby represents to Tenant that as of the date hereof, there are no underlying mortgages, deeds of trust, ground leases or other liens on or affecting the Leased Premises or the Shopping Center except for the Ground Lease referenced in Section 20.24 of the Addendum hereto ("Ground Lease") and Landlord further represents that Tenant is not currently subordinate to any mortgage, deed of trust or other lien or ground lease (except the Ground Lease). Tenant also agrees that any mortgagee or beneficiary may elect to have this Lease constitute a prior lien to its mortgage or deed of trust, and in the event of such election and upon notification by such mortgagee or beneficiary to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of said mortgage or deed of trust. Tenant agrees that upon the request of Landlord, or any mortgagee or beneficiary, Tenant shall execute whatever reasonable instruments may be required to carry out the intent of this Section 12.1 and Section 12.2; provided that no such instrument may contain any matters which increase any of Tenant's obligations under this Lease or decrease any of Tenant's rights under this Lease and such instrument will grant a covenant of non-disturbance to Tenant. SECTION 12.2. ATTORNMENT. In the event any proceedings are brought for the foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure of, or in the event of exercise of the power of sale under, any mortgage and/or deed of trust made by Landlord covering the Leased Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center or any portion thereof containing the Leased Premises, this Lease shall remain in full force and effect and Tenant hereby attorns to, and covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as Landlord under this Lease; provided, however, that Tenant's attornment shall (except with respect to a mortgagee of the Shopping Center succeeding to Landlord's interest as a result of foreclosure or an agreement in lieu of foreclosure, or a workout arrangement) be subject to the successor assuming, in writing, all of the terms, covenants and conditions of this Lease arising after the date of transfer to such successor. Payment by or performance of this Lease by any person, firm or corporation claiming an interest in this Lease or the Leased Premises by, through or under Tenant without Landlord's consent in writing shall not constitute an attornment or create any interest in this Lease or the Leased Premises. SECTION 12.3. FINANCING. [INTENTIONALLY DELETED] SECTION 12.4. ESTOPPEL CERTIFICATE. Tenant shall, without charge therefor, at any time and from time to time, within thirty (30) days after request therefor by Landlord, execute, acknowledge and deliver to Landlord a written estoppel certificate, in reasonable form, certifying to Landlord, any mortgagee, or any purchaser of the Shopping Center or any other person designated by Landlord, as of the date of such estoppel certificate; (i) that Tenant is in possession of the Leased Premises and has accepted the same; (ii) that this Lease is unmodified and in full force and effect (or if there has been modification, that the same is in full force and effect as modified and setting forth such modifications); (iii) whether or not there are then existing any set-offs or defenses against the enforcement of any right or remedy of Landlord, or any duty or obligation of Tenant, hereunder (and, if so, specifying the same in detail); (iv) that Rent is paid currently without any offset or defense thereto, (v) the dates, if any, to which any Rent has been paid in advance; (vi) whether or not there is then existing any claim of Landlord's default under this Lease and if so, specifying the same in detail; (vii) that Tenant has no knowledge of any event having occurred that authorized the termination of this Lease by Tenant (or if Tenant has such knowledge, specifying the same in detail); and (viii) any other matters relating to the status of this Lease that Landlord or its mortgagee may request be confirmed, provided that such facts are accurate and ascertainable. Landlord shall, within thirty (30) days after written request from Tenant, no more often than once in any Lease Year and provided Tenant is not then in default hereunder beyond any applicable cure period, deliver to Tenant or such persons as Tenant may designate, a statement in writing 36 41 certifying to the extent true that: (i) Tenant is in possession of the Leased Premises; (ii) this Lease is in full force and effect (as later modified, if such be the case); (iii) the Rent due hereunder is current; and (iv) that to the best of Landlord's knowledge, information and belief, Tenant is not in default hereunder. SECTION 12.5. REMEDIES. Any failure by Tenant to execute any certificate, statement or instrument in accordance with the foregoing provisions of this Article XII or any financing statement in accordance with the provisions of Section 14.2(a), within the time period provided or if no time period is specified, then within thirty (30) days after written request, shall constitute a "default" under this Lease. ARTICLE XIII ADVERTISING AND PROMOTION SECTION 13.1. PROMOTION FUND. Landlord shall establish an advertising and promotion fund (the "Fund"). The object of the Fund shall be to advertise the Retail Development in the local metropolitan statistical area and to provide a program of events, all of which shall, in Landlord's judgment, serve to enhance and promote the Retail Development and its occupants. Such program of events may include the promotion of coach traffic to the Retail Development and the development of a mall video network within the Retail Development offering a program of information, entertainment and advertisements. The Fund shall be administered by Landlord and the costs and expenses of such administration shall be charged to the Fund. Landlord shall expend all amounts paid to the Fund by the tenants in the Retail Development for the purposes herein set forth. SECTION 13.2. PROMOTION FUND CONTRIBUTION. Tenant's annual contribution to the Fund shall be the Fund Contribution (reduced proportionately for a partial Lease Year) as defined in the Data Sheet. Upon the Grand Opening, Tenant shall also pay Tenant's one-time initial contribution or Grand Opening Fee which is defined in the Data Sheet. The Fund Contribution payable by Tenant for each Lease Year shall be increased commencing with the second Lease Year of the term of this Lease, and each Lease Year thereafter, by a percentage equal to the percentage increase from the "base period" of the Consumer Price Index ("Index") to the "current period" of the Index of the Lease Year for which the adjustment is being made, provided, however, in no event shall such increase exceed [***] per Lease Year; provided, however, if the first Lease Year is less than six (6) months, the first adjustment to the Fund Contribution shall be after the first full Lease Year. Except as herein expressly provided, the term "base period" shall initially refer to the Index published for the month of October immediately preceding the Commencement Date. Following the initial increase in the Fund Contribution hereunder, the term "base period" shall refer to the Index published for the month of October immediately preceding the Lease Year for which the Fund Contribution was last adjusted hereunder. The "current period" of the Index shall refer to the Index published for the month of October immediately preceding the Lease Year for which an adjustment is being made. In the event the Index shall not be published for any of the above-described months, then the Index published for the month closest, but prior, to the described month shall be used in its place. The annual Fund Contribution shall be payable by Tenant to Landlord, or as Landlord may direct, in twelve (12) equal monthly installments, commencing on the Commencement Date, at the same time and in the same manner as the monthly installments of Minimum Rent are payable. Notwithstanding the foregoing, in lieu of Tenant's payment of the Grand Opening Fee, during the period from the Delivery of Possession Date through and including the Grand Opening date ("Advertising Period"), Tenant shall place advertisements (including, without limitation, billboards; signs; newspapers, radio, television ads; and direct mail) at a cost equal to the amount of the Grand Opening Fee that Tenant would have otherwise been obligated to pay ("Eligible Advertising") which shall specifically identify the Leased Premises, including the name and location of the Shopping Center. At or prior to the time the Eligible Advertising is placed, Tenant shall submit to Landlord copies of the actual Eligible Advertising or other written third-party evidence reasonably satisfactory *** Confidential treatment requested. 37 42 to Landlord evidencing the Eligible Advertising, together with all receipts, canceled checks or other third-party evidence reasonably satisfactory to Landlord establishing Tenant's payment for the Eligible Advertising. In the event that the cost of the Eligible Advertising does not meet or exceed the Grand Opening Fee by the end of the Advertising Period, Tenant shall pay the balance to Landlord within thirty (30) days of receipt of a bill from Landlord. SECTION 13.3. ADVERTISEMENTS [INTENTIONALLY DELETED]. SECTION 13.4. NETWORK. Landlord may cause to be developed a mall video network within the Retail Development (the "Network"). The object of the Network shall be to provide a program of information, entertainment and advertisements, which shall, in Landlord's judgment, serve to enhance or promote the Retail Development and its occupants. The Network shall have the right to sell available time and access on the Network for advertisements or other uses. The Network shall be under the sole and exclusive direction of Landlord and shall be administered by Landlord. The costs and expenses paid or incurred by Landlord for administering, operating, equipping, staffing, protecting, insuring, repairing, replacing and maintaining the Network shall be charged to the Fund. Any production by Landlord of advertising messages for Tenant and any air time on or access to the Network is subject to availability, as determined solely by Landlord, and shall be at the then applicable rates and fees set by Landlord. Landlord shall have the right to reject, remove or discontinue showing any video taped advertising message of the business conducted, or to be conducted, in the Leased Premises (herein "Tenant Video") or advertising message on the Network the content of which is, in the opinion of Landlord, unethical, misleading, in bad taste, or shall tend to injure the reputation of the Retail Development or its occupants, or shall be deemed to be detrimental to the Retail Development or is in violation of any applicable rule, law or existing agreement with occupant(s) of the Retail Development. Tenant acknowledges that Tenant shall be solely responsible for the content of its Tenant Video and except with respect to the gross negligence of Landlord and the Network, Tenant agrees to save harmless Landlord, its officers, directors, partners, employees and agents from and against any and all claims, actions, damages, liability, cost or expense, including attorneys' fees that arise from or with respect to the content of such advertising message, including without limitation any claims for infringement of the intellectual property rights of others or actions for unfair competition. Landlord reserves the right at any time to dissolve the Network and cease providing its promotional services as well as Tenant Videos and in lieu thereof, to provide, or cause to be provided, a program of advertising and promotional events which in Landlord's sole judgment, will serve to promote the Retail Development and its occupants. ARTICLE XIV DEFAULT AND REMEDIES SECTION 14.1. ELEMENTS OF DEFAULT. If any one or more of the following events occur, said event or events shall hereby be classified as a "default" as that term is used throughout this Lease: (a)(i) the failure of Tenant to take possession of the Leased Premises within thirty (30) days after the Delivery of Possession Date, or (ii) the failure of Tenant to open its doors for business within thirty (30) days after the date specified in Section 1.3 hereof, or (iii) if Tenant vacates or abandons the Leased Premises and permits the same to remain unoccupied and unattended for three (3) days after written or telephone notice, or (iv) if Tenant fails to maintain normal inventory levels and employee staff for the conduct of its normal business activities in the Leased Premises for three (3) days after written or telephone notice, or (v) the failure of Tenant to operate its business in compliance with Section 4.2 for the purposes specified in Section 4.1 and Tenant fails to cure the same within ten (10) days after written notice, or (vi) in the event of the sale or removal of a substantial portion of Tenant's property located in the Leased Premises in a manner which is outside the ordinary course of Tenant's business; (b) the failure of Tenant to pay any Rent or other charges required to be paid by Tenant when same shall become due and payable hereunder and such failure continues for ten (10) days after written notice; (c) the failure of Tenant to perform or observe any term or condition of this Lease and such failure shall continue for thirty (30) days after written notice; provided, however, such period shall be extended for an additional reasonable period if Tenant has diligently commenced the curing of such default within the thirty (30) days period and is diligently pursuing the same to completion, but in no event shall either the thirty (30) days period or any extension thereof apply to Tenant's 38 43 covenant to operate pursuant to Article IV of this Lease, unless the same is excused pursuant to Article IX or Article X of this Lease; (d) if Tenant shall be given three (3) notices of the same default under subparagraphs (b) or (c) within any period of eighteen (18) months, notwithstanding any subsequent cure of the failure to perform or observe the terms or conditions of this Lease as identified in such notices; (e) if any writ of execution, levy, attachment or other legal process of law shall occur upon a substantial and material part of Tenant's assets, merchandise, fixtures, or Tenant's estate or interest in the Leased Premises; (f) Tenant shall be liquidated or dissolved or shall begin proceedings toward such liquidation or dissolution, or shall in any manner permit the divestiture of all, or any substantial part of Tenant's assets. SECTION 14.2. LANDLORD'S REMEDIES. In the event of any such default or breach by Tenant, Landlord may at any time thereafter, with or without further notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such default or breach; (a) Perform, on behalf and at the expense of Tenant, any obligation of Tenant under this Lease which Tenant has failed to perform and of which Landlord shall have given at least three (3) days' notice (except in the case of emergency, in which event no such notice shall be required), the cost of which performance by Landlord, together with interest therein at the interest rate (as specified in Section 20.14 hereof) from the date of such expenditure, shall be deemed additional rent and shall be payable by Tenant to Landlord upon demand. (b) Without further notice, re-enter and repossess the Leased Premises, by summary proceedings or otherwise, and remove Tenant and all other persons and property from the Leased Premises, and store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant without resort to legal process and without Landlord being deemed guilty of trespass or conversion or becoming liable for any loss or damage occasioned thereby. In connection herewith, Landlord shall have, in addition to any other remedies, any and all self-help remedies, including but not limited to a forcible entry into the Leased Premises or a "lock-out" accomplished by changing the locks on the Leased Premises. No re-entry of the Leased Premises shall be construed as an election by Landlord to accept Tenant's surrender of the Leased Premises or to terminate this Lease unless a written notice of such intention is given by Landlord to Tenant. In the event that Landlord exercises any of the remedies provided for herein which allow it to gain access to the Leased Premises Landlord shall be prohibited from using or permitting the use of Tenant's equipment for operating within the Leased Premises. (c) Declare the entire balance of the Rent, and all other amounts to be paid by Tenant hereunder for the remainder of the Term to be due and payable immediately, and collect such balance in any manner not inconsistent with applicable law. The amount of additional rent and Percentage Rent payable with respect to each Lease Year remaining in the Term after such default (including the Lease Year during which such default occurred) shall be conclusively presumed to be equal to the average additional rent and Percentage Rent payable with respect to each completed Lease Year preceding such default; provided, however, that if such default occurs before the expiration of two (2) Lease Years, then the amount of additional rent and Percentage Rent payable with respect to each Lease Year remaining in the Term after such default (including the Lease Year or partial Lease Year during which such default occurred) shall be conclusively presumed to be equal to twelve (12) times the average monthly additional rent and Percentage Rent payable prior to such default. 39 44 Notwithstanding anything to the contrary contained in this Lease, Landlord herby agrees to use reasonable efforts to mitigate damages; provided, however, that Landlord, in attempting to lease the Leased Premises shall not be obligated to give preference to the Leased Premises over any other available space in the Shopping Center. In consideration of the preceding sentence, Tenant hereby acknowledges that the Leased Premises are located within a super-regional discount specialty retail shopping center and that the quality and record of experience of a prospective tenant and the type of prospective tenant (compared with the then current tenant mix in the Shopping Center) are principal considerations which Landlord shall employ in determining whether to lease the Leased Premises. (d) Terminate this Lease by giving written notice of such termination to Tenant, which termination shall be effective as of the date of such notice or any later date therefor specified by Landlord in such notice (provided, that without limiting the generality of the foregoing provisions, Landlord shall not be deemed to have accepted any abandonment or surrender by Tenant of any or all of the Leased Premises or Tenant's leasehold estate under this Lease unless Landlord has so advised Tenant expressly and in writing, regardless of whether Landlord has re-entered or relet any or all of the Leased Premises or exercised any or all of Landlord's other rights under this Lease or applicable law). (e) In Landlord's own name or otherwise, relet any or all of the Leased Premises with or without any additional premises, for any or all of the remainder of the Term (or, if this Lease has then been terminated, for any or all of the period which would, but for such termination, have constituted the remainder of the Term) or for a period exceeding such remainder, on such terms and subject to such conditions as are acceptable to Landlord (including, by way of example rather than of limitation, the alteration of any or all of the Leased Premises in any manner which, in Landlord's judgment, is necessary or desirable in connection with such reletting, and the allowance of one or more concessions or "free-rent" or reduced-rent periods), and collect and receive the rents thereof. Tenant shall pay to Landlord, at the times and in the manner specified by the provisions of this Lease (unless Landlord has elected to accelerate Rent as provided above in subparagraph(d), in which event Tenant shall be obligated to pay such accelerated amount as provided in such subparagraph), (i) the installments of the Minimum Rent, additional rent and Percentage Rent accruing during such remainder (or, if this Lease has then been terminated, damages equalling the respective amounts of such installments (determined as provided in subparagraph 14.2(c) which would have accrued during such remainder, had this Lease not been terminated)), plus (ii) the cost to Landlord of any such reletting (including, by way of example rather of limitation, any attorney's fees, leasing or brokerage commissions, repair or improvement expenses and the expense of any other actions taken in connection with such reletting) less any monies received by Landlord with respect to such remainder from such reletting of any or all of the Leased Premises. (f) Recover from Tenant, an amount equal to (i) all items of accrued and unpaid Rent, including, without limitation, the then unamortized amount of the Construction Allowance; (ii) all reasonable expenses (including, by way of example rather than of limitation, all repossession costs, management expenses, operating expenses, legal expenses and attorney's fees) incurred by Landlord in curing or seeking to cure any default or in exercising or seeking to exercise any of Landlord's rights and remedies under the provisions of this Lease or at law or in equity on account of any default, plus (iii) interest on all such expenses, at the rate provided in Section 20.14, all of which expenses and interest shall be payable by Tenant immediately on demand therefor by Landlord. (g) Without terminating this Lease, maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have vacated the Leased Premises. In such event, Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover Rent as it becomes due hereunder. (h) Any damage or loss of Rent sustained by Landlord may be recovered by Landlord, at Landlord's option, at the time of the reletting or termination, in a single action or in separate actions, from time to time, as said loss of Rent or damages shall accrue, or in a single proceeding deferred by Landlord or with jurisdiction reserved by the court, until the expiration of the Term of this Lease (in which event Tenant hereby agrees that, at Landlord's option, the cause of action shall not be deemed to have accrued until the date of expiration of said Term). 40 45 (i) Nothing contained herein shall prevent the enforcement of any claim Landlord may have against Tenant for anticipatory breach of this Lease. In the event of any anticipatory breach by Tenant of any of the covenants or provisions hereof or in the event of Tenant's default, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not provided for herein. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy under this Lease or, at law or in equity. Tenant hereby expressly waives for itself and all persons claiming by or through Tenant, any and all rights to redeem, reinstate or restore, or obtain relief from forfeiture of this Lease granted by or under any present or future law in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Leased Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease. (j) In case suit shall be brought for recovery of the Leased Premises, for the recovery of Rent or any other amount due under the provisions of this Lease, or because of the breach of any other covenant herein contained on the part of Tenant to be kept and performed, and a breach shall be established, Tenant shall pay to Landlord all costs and expenses incurred therefor, including Landlord's attorney's reasonable fees and expenses. (k) Nothing herein contained shall limit or prejudice Landlord's right to prove and obtain as damages, by reason of any default by Tenant, an amount equal to the maximum allowed by statue or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved. No expiration or termination of this Lease, abandonment, re-entry by Landlord or vacancy, shall relieve Tenant of any of its liabilities and obligations under this Lease (whether or not any or all of the Leased Premises are relet), and Tenant shall remain liable to Landlord for all damages resulting from any default by Tenant, including any damage resulting from the breach by Tenant of any of its obligations to pay Minimum Rent, Percentage Rent, additional rent and any other sums which Tenant is obligated to pay hereunder. (l) The rights and remedies of Landlord under this Lease shall be deemed to be cumulative, and no one of such rights or remedies shall be exclusive at law or in equity of the other rights and remedies of Landlord on account of a default by Tenant, and the exercise of any one such right or remedy by Landlord shall not impair Landlord's standing, right or power to exercise any other right or remedy. SECTION 14.3. BANKRUPTCY. (a) Neither Tenant's interest in this Lease, nor any estate hereby created in Tenant nor any interest herein or therein, shall pass to any trustee or receiver or assignee for the benefit of creditors or otherwise by operation of law, except as may specifically be provided pursuant to the Bankruptcy Code (11 USC Section 101 et seq.), as the same may be amended from time to time. (b) It is understood and agreed that this Lease is a lease of real property in a shopping center as such lease is described in Section 365 of the Bankruptcy Code, as the same may be amended from time to time. Upon the filing of a petition by or against Tenant under the Bankruptcy Code, Tenant, as debtor and as debtor-in-possession, and any trustee who may be appointed with respect to the assets of or estate in bankruptcy of Tenant, agree to pay monthly in advance on the first day of each month, as reasonable compensation for the use and occupancy of the Leased Premises, an amount equal to all Minimum Rent, additional rent and other charges otherwise due pursuant to this Lease, and to pay Percentage Rent monthly, at the percentage factor set forth in this Lease for the Lease Year in which such month falls, on all of the Gross Sales during such month in excess of [***] of the Sales Break Point for such Lease Year; payment of all such Percentage Rent to be made by the [***] day of the succeeding month. Included within and in addition to any other conditions or obligations imposed upon Tenant or its successor in the event of the assumption and/or assignment of this Lease are the following: (i) the cure of any monetary defaults and reimbursement of pecuniary loss within not more than thirty (30) days of assumption and/or assignment; (ii) the deposit of an additional sum equal to not less than three (3) months' Minimum Rent and additional rent to be held pursuant to the terms of Section 2.4 of this Lease, which sum shall be determined by Landlord, in its sole discretion, to be a necessary deposit to secure the future performance under this Lease by Tenant or its assignee; (iii) the use of the Leased Premises as set forth in Section 4.1 of this Lease and the quality, quantity and/or lines of merchandise, goods or services required to be offered for sale are *** Confidential treatment requested. 41 46 unchanged; and (iv) the prior written consent of any mortgagee to which this Lease has been assigned as collateral security. SECTION 14.4. ADDITIONAL REMEDIES AND WAIVERS. Notwithstanding any other provision contained in this Lease to the contrary, all rights and remedies of Landlord set forth herein (including but not limited to Landlord's rights respecting lockout, re-entry, self-help, repossession, security interests and lien rights and foreclosure) shall be in addition to (and not in substitution of) any and all other rights and remedies now or hereafter provided by law, including but not limited to rights and remedies provided by the statutes, rules, regulations, laws and judicial decisions of the State, and all such rights and remedies shall be cumulative; and none of such rights and remedies so provided by law shall be conditioned or limited by any conditions or limitations on the remedies granted to Landlord under the terms of this Lease, nor upon any notice and/or passage of time that may be required hereunder in order for an event or condition to constitute a default or an event of default as that term is defined in this Lease. SECTION 14.5. LANDLORD'S CURE OF DEFAULT. If Tenant shall be in default hereunder, Landlord shall have the option, but not the obligation, upon three (3) days written notice to Tenant (except in the event of an emergency, in which event no notice shall be required), to cure the act or failure constituting said default for the account of and at the expense of Tenant. Landlord's cure or attempt to cure any act or failure constituting the default by Tenant shall not result in a waiver or release of Tenant. Tenant agrees to pay the costs incurred by Landlord pursuant to this Section 14.5 plus interest, in accordance with Section 20.14 hereof, on all sums expended by Landlord pursuant to this Section 14.5 from the date of such expenditure plus a charge of [***] of such costs, to Landlord upon demand, as additional rent. SECTION 14.6. SECURITY INTEREST. Notwithstanding anything to the contrary contained in this Lease, Tenant may grant a security interest, encumber or pledge its equipment, personal property, inventory and moveable trade fixtures located on or about the Leased Premises, with respect to financing which benefits this store location and Landlord shall agree to subordinate its lien, if any, on such equipment to such financing. In no event, however, shall Tenant be permitted to mortgage, hypothecate, encumber or pledge the leasehold interest in the Leased Premises. SECTION 14.7 TENANT'S REMEDIES. In the event Landlord shall fail to perform any obligation specified in this Lease, which default materially and adversely affects Tenant's operations, then Tenant may, after the continuance of any such default for thirty (30) days after written notice thereof by Tenant to Landlord (except in the event of an emergency when only reasonable notice shall be required to be given to Landlord under the circumstances), cure such default all on behalf of and at the expense of Landlord and do all necessary work and make all necessary payments in connection therewith and Landlord shall, on demand, pay Tenant forthwith, the amount so paid by Tenant together with interest thereon at the rate specified in Section 20.14 hereof from the date of payment until re-payment. ARTICLE XV RIGHT OF ACCESS Landlord may, at any reasonable time or times, upon three (3) days' prior written notice to Tenant (except in the event of an emergency, or if Tenant is in default under this Lease beyond the expiration of any applicable cure period, in which event no notice shall be required), before and after the Commencement Date, enter upon the Leased Premises, any portion thereof and any appurtenance thereto (with men and materials, if required) for the purpose of: (a) inspecting the same; (b) making such repairs, replacements or alterations which Landlord may be required to perform as herein provided or which it may deem desirable for the Leased Premises; and (c) showing the Leased Premises to prospective purchasers, lenders or lessees. Landlord hereby expressly reserves the right, exercisable at any time and from time to time, to erect, use, maintain and repair pipes, conduits, plumbing, vents, ducts and wires in, to, under and through the Leased Premises as and to the extent that Landlord may now or hereafter deem to be necessary or appropriate for the proper operation and maintenance of the Shopping Center. Any redecorating or repair necessitated by reason of location *** Confidential treatment requested. 42 47 of same within the Leased Premises shall be the responsibility of Landlord. Landlord agrees to hold Tenant harmless from any damage or injury to person or property to the extent resulting from Landlord exercising its rights under this Article XV. Notwithstanding anything contained in this Lease to the contrary, if such work prevents Tenant from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. In the exercise of its rights under this Article XV, Landlord shall use reasonable efforts to avoid material interference with the operation of Tenant's business within the Leased Premises, including, without limitation, performing repairs during hours in which Tenant is not open for business or, if the same is not reasonably possible, during Tenant's "off-peak" hours. Landlord agrees that except in the event of an emergency, and provided Tenant shall make an employee of Tenant available to accompany Landlord following Landlord's notice to Tenant of the necessity therefor, Landlord shall not enter the Leased Premises during the Term of this Lease without an employee of Tenant accompanying Landlord's representative. ARTICLE XVI DELAYS If Landlord or Tenant is delayed or prevented from performing any of their respective obligations during the Term of this Lease because of strikes, lockouts, labor troubles, inability to procure materials, failure of power, governmental restrictions, a delay created by the other party, or reasons of a like nature not the fault of the party delayed in performing such obligation (collectively "Delays"), then the period of such delays shall be deemed added to the time herein provided for the performance of any such obligation and the defaulting party shall not be liable for losses or damages caused by such delays; provided, however, that, subsequent to the Commencement Date, this Article XVI shall not apply to the payment of any sums of money required to be paid by Tenant hereunder or any obligation of Landlord or Tenant that can be satisfied by the payment of money, and shall not excuse Tenant from its obligation to continuously operate its business within the Leased Premises in accordance with the provisions of Sections 4.1 and 4.2 hereof. ARTICLE XVII END OF TERM SECTION 17.1. RETURN OF LEASED PREMISES. Upon the Expiration Date or earlier termination of this Lease, Tenant shall quit and surrender to Landlord the Leased Premises, broom-clean, in good order and condition, ordinary wear and tear excepted, and shall surrender to Landlord all keys to or for the Leased Premises and inform Landlord of all combinations of locks, safes and vaults, if any, in the Leased Premises. Subject to the provisions of Section 3.5 hereof, Tenant, at its expense, shall promptly remove all personal property of Tenant, and repair all damage to the Leased Premises caused by such removal. Any personal property of Tenant not removed within ten (10) days following the Expiration Date or earlier termination of this Lease shall be deemed to have been abandoned by Tenant and to have become the property of Landlord, and may be retained or disposed of by Landlord, as Landlord shall desire. Tenant's obligation to observe or perform the covenants set forth in this Section 17.1 shall survive the Expiration Date or earlier termination of this Lease. SECTION 17.2. HOLDING OVER. If Tenant shall hold possession of the Leased Premises after the Expiration Date or earlier termination of this Lease at Landlord's option (a) Tenant shall be deemed to be occupying the Leased Premises as a tenant from month-to-month, at one and one-half times the Minimum Rent and other charges in effect during the last Lease Year immediately preceding such holdover and otherwise subject to all of the terms and conditions of this Lease, or (b) 43 48 Landlord may exercise any other remedies it has under this Lease or at law or in equity including an action for wrongfully holding over. Notwithstanding the foregoing, if Tenant is negotiating in good faith with Landlord to renew or extend the Term of this Lease for the Leased Premises (or a relocation within the Shopping Center), then Tenant may occupy the Leased Premises on a month-to-month tenancy at one-twelfth (1/12) of the annual Minimum Rent for the last year of the Term of the Lease. ARTICLE XVIII COVENANT OF QUIET ENJOYMENT Landlord covenants that if and so long as Tenant pays the Rent and all other charges provided for herein, and performs all of its obligations provided for herein, Tenant shall at all times during the Term hereof peaceably have, hold and enjoy the Leased Premises and a license to use the Display Area as permitted under this Lease, without any interruption or disturbance from Landlord, or anyone lawfully or equitably claiming through or under Landlord, subject to the terms hereof and any mortgage or deed of trust to which this Lease shall be subordinate. ARTICLE XIX UTILITIES SECTION 19.1. UTILITIES. Tenant agrees to connect to and use the utilities (including electricity, water, gas, cooling and/or heating system, telephone and any other utility) supplied to the Leased Premises in accordance with the criteria set forth in the Exhibits attached to this Lease, Landlord's schedule of mechanical and electrical design criteria, Landlord's rules and regulations, and the rules and regulations of the utility companies supplying the service. Tenant shall be solely responsible for and promptly pay all costs and charges, including installation thereof where applicable, for all water, gas, cooling, heat, electricity, sewer and other utilities provided or used in or at the Leased Premises, commencing with the Delivery of Possession Date and continuing throughout the Term of this Lease. Landlord, either directly or through an agent or designee, may elect to supply any of the utilities used upon or furnished to the Leased Premises. If Landlord, either directly or through its designee, shall elect to supply any of the utilities used upon or furnished to the Leased Premises, Tenant agrees to pay as additional rent a per square foot charge based on Tenant's estimated usage, as reflected on a monthly invoice to be provided by Landlord or its designee; provided, however, in no event shall Tenant's total charges for utilities provided by Landlord exceed what Tenant would be charged by the local utility company if it were billed directly by such utility as a direct retail customer. Landlord and its designee shall not be liable to Tenant for any loss, damage or expense which Tenant may sustain if the utilities, or the quality or character of utilities used upon or furnished to the Leased Premises are no longer available or suitable for Tenant's requirements, or if the supply of any such utility ceases or is interrupted as a result of any cause (except as otherwise provided for herein) and no such change, interruption or cessation of service shall constitute an eviction of Tenant. Any furnishing by Landlord or its designee of light, cooling and/or heat or power shall be conditioned upon the availability of adequate energy sources. Landlord or its designee shall have the right to reduce heat, lighting and air conditioning within the Shopping Center, including, without limitation, the Leased Premises and the common areas, as required by any mandatory or voluntary fuel or energy saving allocation, or any similar statute, regulation, order or program. Notwithstanding the foregoing, in the event that any foregoing utility service is interrupted for three (3) consecutive working days solely as a result of any of Landlord's or any of Landlord's agents' wilful acts of misconduct or negligence, and Tenant is unable to operate its business within the Leased Premises as a result thereof, then Landlord shall, after written notice from Tenant to Landlord concerning such interruption, abate Minimum Rent on a day-to-day basis if and until such time as said utility services are restored. SECTION 19.2. ELECTRICITY, TELEPHONE AND GAS. All telephone, electric and gas (with gas being available only to food service tenants) utility required by Tenant for the Leased Premises shall 44 49 (if available) be obtained by Tenant in accordance with Exhibit D and shall be installed by the appropriate company or utility. All charges for such utility service (including the installation thereof) shall be paid by Tenant directly to the company or utility providing any such service, as and when they become due and payable. SECTION 19.3. TRASH AND GARBAGE REMOVAL. Tenant shall be solely responsible for trash and garbage removal from the Leased Premises including the placing of all trash and garbage in containers provided by Landlord or Landlord's contractor for such purpose. In the event Landlord, either directly or through an agent or designee, elects to furnish such service to the tenants in the Shopping Center, Tenant agrees to use only the service provided by Landlord or its designee and to pay for such service (including both the cost of leasing containers and the cost of removal) monthly, as additional rent, in accordance with the uniform schedule of charges to be established by Landlord. In no event shall Tenant be obligated to pay Landlord or its designee more for such trash and garbage removal service than the prevailing competitive rates of reputable independent trash removal contractors for service similar to that provided by Landlord. SECTION 19.4. WATER AND SEWER. The cost of water and sanitary sewer for usage in the Shopping Center shall be included in Common Area Maintenance Expenses, except for food service tenants which may be billed directly by Landlord or by the supplier of water and sanitary service and any other tenants which are billed directly by Landlord or such supplier. Landlord reserves the right to install a water meter in the Leased Premises at any time or from time to time to measure Tenant's consumption of water therein and bill Tenant directly for the cost of such consumption. Tenant shall pay, as additional rent, the amount of each bill within fifteen (15) days after such bill is rendered. SECTION 19.5 GREASE INTERCEPTORS. Landlord, in its commercially reasonable judgment, will arrange for regular periodic service and cleaning of all grease interceptors at Tenant's expense. Cost of service and cleaning of grease interceptors will be allocated among grease interceptors serving food court(s) and grease interceptors serving individual tenants in proportion to grease trap size. Tenants served by individual grease traps will pay their pro rata share of the cost for their grease trap. The share of grease trap service and cleaning cost apportioned to food court grease traps will be paid by food court tenants as part of the food court common facilities expenses. ARTICLE XX MISCELLANEOUS SECTION 20.1. ENTIRE AGREEMENT. This Lease together with the Addendum and the Exhibits, attached hereto and incorporated herein contains the entire agreement between the parties hereto and there are no promises, agreements, conditions, undertakings, or warranties, or representations, oral or written, express or implied, between them other than as herein set forth. No change or modification of this Lease or of any of the provisions hereof shall be valid or effective unless the same is in writing and signed by the parties hereto. No alleged or contended waiver of any of the provisions of this Lease shall be valid or effective unless in writing signed by the party against whom it is sought to be enforced. SECTION 20.2. NOTICES. No notice or other communication given under this Lease shall be effective unless the same is in writing and is delivered in person or mailed by registered or certified mail, return receipt requested, first class, postage prepaid, or delivered by Federal Express or a comparably reliable national air courier service (i.e. one which delivers service in at least 48 states) provided that any such courier service provides written evidence of delivery. Any such notice or communication shall be addressed: (a) If to Landlord, at 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209, Attention: General Counsel, or to such other address as Landlord shall designate by giving notice thereof to Tenant, with a copy for informational purposes only to the Mall Manager of the Retail Development. 45 50 (b) If to Tenant, at the address set forth for Tenant on page 1 of this Lease or at the Leased Premises, or such other address as Tenant shall designate by giving notice thereof to Landlord, with a courtesy copy but not required for effective notice to: Paul, Hastings, Janofsky & Walker LLP, 555 South Flower Street, 23rd Floor, Los Angeles, California 90071, Attn: Rick S. Kirkbride, Esquire. The date of service of any notice or other communication given by mail shall be three (3) days after the date on which such notice is deposited in the U.S. mails. The date of service of any notice given by courier service (as described above) shall be one (1) day after deposit with such courier service. SECTION 20.3. GOVERNING LAW. It is the intent of the parties hereto that all questions with respect to the construction of this Lease and the rights and the liabilities of the parties hereto shall be determined in accordance with the laws of the jurisdiction in which the Leased Premises is located and that all disputes arising hereunder shall be heard and decided in the local jurisdiction where the Leased Premises is located. SECTION 20.4. SUCCESSORS. All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors, and assigns of the said parties; and if there shall be more than one Tenant, or more than one person or entity acting collectively as Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. Any restriction on or requirement imposed upon Tenant hereunder shall be deemed to extend to Tenant's Guarantor, Tenant's sublessees, Tenant's assignees and Tenant's invitees, and it shall be Tenant's obligation to cause the foregoing persons to comply with such restrictions or requirements. No rights, however, shall inure to the benefit of any assignee or other transferee of Tenant, and no rights or benefits shall be conferred upon any such assignee or transferee by reason of this Section 20.4, unless such rights or benefits shall be expressly otherwise set forth in this Lease. SECTION 20.5. LIABILITY OF LANDLORD. Neither Landlord, Landlord's beneficiaries, any persons or entities comprising Landlord, nor any successor in interest to Landlord (or to such persons or entities) shall have any personal liability for any failure by Landlord to perform any term, covenant or condition of this Lease. If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed, and if as a consequence of such default Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right, title and interest of Landlord in the Shopping Center and out of rents or other income from such property receivable by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Shopping Center, subject, nevertheless, to the rights of Landlord's mortgagee, and neither Landlord nor any of the co-partners comprising the partnership which is Landlord herein shall be liable for any deficiency. The foregoing limitation of liability shall be noted in any judgment secured against Landlord and in the judgment index. SECTION 20.6. BROKERS. Tenant warrants and represents that there was no broker or agent other than Blatteis Realty Company, instrumental in consummating this Lease. Tenant agrees to indemnify and hold Landlord harmless against any claims for brokerage or other commissions arising by reason of a breach by Tenant of this representation and warranty. Landlord warrants and represents that there was no broker or agent, acting on its behalf, instrumental in consummating this Lease. Landlord agrees to indemnify and hold Tenant harmless against any claims for brokerage or other commissions arising by reason of a breach by Landlord of this representation and warranty. SECTION 20.7. TRANSFER BY LANDLORD. Landlord hereunder shall have the right to freely assign this Lease without notice to or the consent of Tenant. SECTION 20.8. NO PARTNERSHIP. Notwithstanding the fact that a portion of the Rent reserved hereunder may be a percentage of Tenant's Gross Sales, and notwithstanding anything else to the contrary, Landlord shall not be deemed to be a partner of Tenant or a joint venturer with Tenant. SECTION 20.9. WAIVER OF COUNTERCLAIMS. Tenant shall not impose any counterclaim or counterclaims (other than compulsory counterclaims) in a summary proceeding or other action based 46 51 on termination or holdover, it being the intent of the parties hereto that Tenant be strictly limited in such instance to bringing a separate action in the court of appropriate jurisdiction. The foregoing waiver is a material inducement to Landlord making, executing and delivering this Lease and Tenant's waiver of its right to counterclaim in any summary proceeding or other action based on termination or holdover is done so knowingly, intelligently and voluntarily. SECTION 20.10. WAIVER OF JURY TRIAL. [INTENTIONALLY DELETED]. SECTION 20.11. SEVERABILITY. If any provision of this Lease or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. SECTION 20.12. NO WAIVER. No failure by Landlord to insist upon the strict performance of any term, covenant, agreement, provision, condition or limitation of this Lease to be kept, observed or performed by Tenant, and no failure by Landlord to exercise any right or remedy available upon a breach of any such term, covenant, agreement, provision, condition or limitation of this Lease, shall constitute a waiver of any such breach or of any such term, covenant, agreement, provision, condition or limitation. SECTION 20.13. CONSUMER PRICE INDEX. As used herein, "Consumer Price Index" or "Index" shall mean the Consumer Price Index for All Urban Consumers (1982-84 = 100), U.S. City Average, All Items, published by the United States Department of Labor, Bureau of Labor Statistics (or such comparable index as may be utilized in substitution for or as the successor to the stated Index). If such Index is not published by the Bureau of Labor Statistics or by another similar governmental agency at any time during the Term of this Lease, then the most closely comparable statistics on the purchasing power of the consumer dollar as published by a responsible financial authority and selected by Landlord shall be utilized in lieu of such Index. SECTION 20.14. INTEREST. Any amount due from Tenant to Landlord herein which is not paid when due shall bear interest at a rate per annum equal to the Federal Reserve Bank discount rate as published in the [***] day of the month preceding the date upon which the obligation is incurred (or the next business day thereafter if the [***] is not a weekday) plus [***] unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. In no event shall any interest calculated hereunder be at a rate which is higher than the maximum rate which is allowed under the usury laws of the State, which maximum rate of interest shall be substituted for the rate in excess thereof, if any, computed pursuant to this Section 20.14. SECTION 20.15. EXCAVATION. If an excavation shall be made upon land adjacent to the Leased Premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Leased Premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which the Leased Premises form a part from injury or damage and to support the same by proper foundation, without any claim for damages or indemnity from Landlord, or diminution or abatement of Rent. Notwithstanding anything contained in this Lease to the contrary, if such excavation work prevents Tenant from operating its business within the Leased Premises for three (3) or more consecutive days, Landlord shall after three (3) days' written notice from Tenant to Landlord, abate Minimum Rent after such three (3) days of disruption on a day-to-day basis until Tenant is able to operate its business in the Leased Premises. SECTION 20.16. RULES AND REGULATIONS. Tenant agrees to comply with and observe all reasonable rules and regulations established by Landlord for the Shopping Center from time to time. Tenant's failure to keep and observe such rules and regulations shall constitute a default pursuant to the terms of this Lease in the manner as if the same were contained herein as covenants, which shall carry with it the same consequences under Article XIV hereof as Tenant's failure to pay rent. 47 *** Confidential Treatment Requested 52 SECTION 20.17. FINANCIAL STATEMENTS. Upon Landlord's written request from time to time, but not more than once per Lease Year, Tenant shall, within thirty (30) days after Landlord's request therefor, furnish Landlord financial statements outlining Tenant's then current financial condition and shall furnish financial statements outlining the current financial condition of any Guarantor of this Lease. Landlord shall maintain all financial information provided in a confidential manner; provided, however, that Landlord may disclose such financial statements to Landlord's mortgagees or prospective mortgagees or purchasers. SECTION 20.18. GENERAL RULES OF CONSTRUCTION. (a) This Lease may be executed in several counterparts and the counterparts shall constitute one and the same instrument. (b) Landlord may act under this Lease by its attorney or agent. (c) Wherever a requirement is imposed on Tenant hereunder, Tenant shall be required to perform such requirement at its sole cost and expense unless it is specifically otherwise provided herein. (d)(i) Wherever appropriate herein, the singular includes the plural and the plural includes the singular; (ii) whenever the word "including" is used herein, it shall be deemed to mean "including, but not limited to"; and (iii) the words "re-enter" and "re-entry" as used herein shall not be restricted to their technical legal meaning. (e) Anything in this Lease to the contrary notwithstanding: (i) any provision hereof which permits or requires a party to take any particular action shall be deemed to permit or require, as the case may be, such party to cause such action to be taken; and (ii) any provision hereof which requires any party not to take any particular action shall be deemed to require such party to prevent such action to be taken by any person or by operation of law. SECTION 20.19. RECORDING. Neither this Lease nor any memorandum hereof may be recorded without the express written consent of Landlord. SECTION 20.20. EFFECTIVE DATE. For all purposes hereof, the "Effective Date" of this Lease shall be the date upon which this Lease shall have been executed by both parties and physically delivered by Landlord to Tenant or its attorney. Prior to the Effective Date, neither this Lease nor anything hereunder contained shall be legally binding on either Landlord or Tenant, and the submission of this Lease by Landlord to Tenant prior to such Effective Date for examination or consideration by Tenant or discussion between Landlord and Tenant shall not constitute a reservation of or option for the Leased Premises or create any legal obligation or liability whatsoever on Landlord. SECTION 20.21. HEADINGS. The captions, section numbers, article numbers and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope of intent of such sections or articles of this Lease nor in any way affect this Lease. SECTION 20.22. MANAGING AGENT. Landlord has advised Tenant that it has appointed MillsServices Corp., a Delaware corporation as managing agent of the Retail Development (said managing agent and any successor or substitute managing agent is hereinafter referred to as "Managing Agent"). Tenant shall, until otherwise notified by Landlord, make all payments of Rent required to be made pursuant to this Lease to the Managing Agent payable to Landlord and direct all notices, inquires or other communications to the Managing Agent, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209. [signatures appear on next page] 48 53 IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease as of the day and year first above written. WITNESS: LANDLORD: OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Opry Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner By: /s/ [ILLEGIBLE] 8/23/99 By: /s/ Judith Berson --------------------------------- --------------------------------- By: /s/ [ILLEGIBLE] Judith Berson --------------------------------- Executive Vice President WITNESS/ATTEST: TENANT: SILICON ENTERTAINMENT, a California corporation By: By: /s/ Christopher U. Morse --------------------------------- --------------------------------- By: Name: Christopher U. Morse --------------------------------- --------------------------------- Its: V.P. By: By: /s/ David S. Morse --------------------------------- --------------------------------- By: Name: David S. Morse --------------------------------- --------------------------------- Its: CEO Tenant's Corporate Seal: 49 54 ACKNOWLEDGMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) ) ss. COUNTY OF ARLINGTON ) On this 23rd day of August, 1999, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Lease and acknowledged before me that she was duly authorized and did execute same on behalf of OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. ELAINE SHIRVY CHIN /s/ Elaine Shirvy Chin Notary Public, Commonwealth of Virginia ------------------------------- Arlington County Notary Public My Commission Expires My Commission Expires November 30, 2003 November 30, 2003 [Notarial Seal] ACKNOWLEDGMENT OF CORPORATE TENANT STATE OF CALIFORNIA ) ) ss. CITY/COUNTY OF SANTA CLARA ) On June 30, 1999, before me Laurie H. Shermer a Notary Public in and for said state aforesaid, personally appeared Chris Morse, as V. President and David Morse, as CEO of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. /s/ Laurie H. Shermer ------------------------------------ Notary Public, Santa Clara County, My Commission expires: 9/19/2001 [Notarial Seal] LAURIE H. SHERMER Commission #1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 55 ADDENDUM, ATTACHED TO AND MADE A PART OF LEASE DATED AUGUST 23, 1999, BY AND BETWEEN OPRY MILLS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP, AS "LANDLORD," AND SILICON ENTERTAINMENT, INC., A CALIFORNIA CORPORATION, AS "TENANT." - ----------------------------------------------------------------------------- The Lease is hereby modified and supplemented as set forth herein. Any conflict between a term, condition or provision contained in this Addendum with any term, condition or provision contained in the printed Lease shall be resolved in favor of this Addendum. Add as a new Section 20.23: "SECTION 20.23. LEASE CONTINGENCIES. This Lease is contingent and conditioned upon the securing by Landlord of financing for the Retail Development on terms and conditions, and at a rate of interest and in a loan amount, satisfactory to Landlord in its sole and absolute discretion (said condition being referred to as the "Lease Contingency"). In the event the foregoing Lease Contingency has not been satisfied on or before October 31, 1999, then Landlord shall thereafter have the right to terminate and cancel this Lease upon thirty (30) days prior written notice to Tenant. If the Lease Contingency shall be satisfied prior to the expiration of the aforesaid thirty (30) day notice period, then the notice to terminate and cancel shall be voided and this Lease shall remain in full force and effect. In the event of termination of this Lease as herein provided, this Lease shall cease and come to an end, Landlord shall reimburse Tenant for any advance Rent paid and Landlord shall be obligated to pay Tenant its actual and reasonable costs associated with the Leased Premises, including legal fees associated with lease negotiations and design and construction costs incurred prior to the date of notice from Landlord of its intention to terminate this Lease, and there shall thereupon be no further liability or obligations upon either party under or with respect to this Lease. Each party will, at the other's request, execute an instrument in recordable form containing a release and surrender of all right, title and interest in and to this Lease." Add as a new Section 20.24: "SECTION 20.24. GROUND LEASE. Notwithstanding anything else contained in this Lease, Tenant acknowledges that Landlord's interest in the land upon which the Shopping Center is to be or has been constructed will be that of a ground lessee under a ground lease to be entered into between Landlord and the owner(s) of such land (the "Ground Lease"). Tenant agrees that (i) this Lease is and shall be subordinate to the Ground Lease, as the same may from time to time be modified, extended, restated or replaced, (ii) upon any termination of the Ground Lease, Tenant shall attorn to the ground lessor and recognize said ground lessor as its lessor under this Lease, and (iii) said ground lessor shall be named as an additional insured under Tenant's liability insurance described in Section 8.2 above (provided Tenant has been furnished with the name of such ground lessor). Landlord represents and warrants that the Ground Lease will contain (and any restatement or replacement thereof will contain) provisions pursuant to which the ground lessor irrevocably agrees to recognize this Lease and Tenant's interest hereunder in the event of any termination of the Ground Lease (unless such termination is caused by a casualty or condemnation that also results in a termination of this Lease), so long as Tenant is not then in default under this Lease beyond any applicable cure period; provided that, upon such recognition, the ground lessor shall not (i) have any obligation to Tenant with respect to any portion of the term of this Lease extending beyond the scheduled expiration date of the Ground Lease (which shall be no earlier than October 31, 2048); (ii) be liable for the acts or defaults of any prior landlord (including Landlord); (iii) have any liability to complete any initial construction of the Leased Premises or to fund any allowance granted by any prior landlord (including Landlord) with respect thereto; (iv) be bound by any payments of rent made by Tenant more than thirty (30) days in advance; or (v) be liable for the return of any security deposit not actually received by the ground lessor. None of the foregoing shall be deemed to release the existing Landlord from any liability accruing prior to the date hereof, nor shall this provision be deemed to extend the existing Landlord's liability. Landlord shall obtain from the Ground Lessor a non-disturbance agreement on a commercially reasonable and recordable form in favor of Tenant on or before the date that is thirty (30) days after the Effective Date." 56 IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this Addendum as of the day and year first above written. WITNESS: LANDLORD: OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: Opry Mills, L.L.C., a Delaware limited liability company Its: General Partner By: The Mills Limited Partnership, a Delaware limited partnership Its: Manager By: The Mills Corporation, a Delaware corporation Its: General Partner 8/23/99 By: /s/ [ILLEGIBLE] /s/ Judith Berson --------------------------------- --------------------------------- By: /s/ [ILLEGIBLE] By: Judith Berson --------------------------------- Its: Executive Vice President WITNESS/ATTEST: TENANT: SILICON ENTERTAINMENT, INC., a California corporation By: By: /s/ Christopher U. Morse --------------------------------- --------------------------------- By: Name: Christopher U. Morse --------------------------------- --------------------------------- Its: V.P. --------------------------------- By: By: /s/ David S. Morse --------------------------------- --------------------------------- By: Name: David S. Morse --------------------------------- --------------------------------- Its: CEO 57 ACKNOWLEDGMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) ) ss. COUNTY OF ARLINGTON ) On this 23rd day of August, 1999, before me personally appeared Judith Berson, to me known to be the person who executed the foregoing Addendum and acknowledged before me that she was duly authorized and did execute same on behalf of OPRY MILLS LIMITED PARTNERSHIP, A Delaware limited partnership. ELAINE SHIRVY CHIN /s/ Elaine Shirvy Chin Notary Public, Commonwealth of Virginia ------------------------------- Arlington County Notary Public, Commonwealth of My Commission Expires Virginia November 30, 2003 My Commission expires: November 30, 2003 ACKNOWLEDGEMENT OF CORPORATE TENANT STATE OF CALIFORNIA ) ) ss. CITY/COUNTY OF SANTA CLARA ) On June 30, 1999, before me Laurie H. Shermer a Notary Public in and for the state aforesaid, personally appeared Chris Morse, as Vice President and David Morse, as C.E.O. of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument. /s/ Laurie H. Shermer ------------------------------------ Notary Public, Santa Clara County, My Commission expires: 9/19/2001 [Notarial Seal] LAURIE H. SHERMER Commission #1155999 Notary Public - California Santa Clara County My Comm. Expires Sep 19, 2001 58 [RELOCATION ZONE MAP] RELOCATION ZONE Project: Opry Mills Exhibit: A Reference: Opry Mills Lease Plan LP15 dated 5/19/99. Prepared By: Craig Bennett Assoc./Architects, PC Tenant: SILICON ENTERTAINMENT, INC., a California corporation Date: June 9, 1999 TRADE NAME: NASCAR SILICON MOTOR SPEEDWAY and\or SILICON MOTOR SPEEDWAY STORE: #429 6,007 SF File: [ILLEGIBLE] 59 [DISPLAY AREA MAP] DISPLAY AREA Project: Opry Mills Exhibit: A-1 Reference: Opry Mills Lease Plan LP15 dated 5/19/99. Prepared By: Craig Bennett Assoc./Architects, PC Tenant: SILICON ENTERTAINMENT, INC., a California corporation Date: June 9, 1999 TRADE NAME: NASCAR SILICON MOTOR SPEEDWAY and/or NASCAR MOTOR SPEEDWAY STORE: #429 6,007 SF File: [ILLEGIBLE] 60 [DIAGRAM OF LEASABLE AREA] CALCULATION OF GROSS LEASABLE AREA EXHIBIT B 8/23/94 61 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT C LANDLORD'S WORK -- ROUGH SHELL Preface Work to be performed by Landlord in constructing the Leased Premises shall be limited to those items expressly set forth below as Landlord's Work in this Exhibit C ("Landlord's Work") and, except as otherwise provided in Exhibit C or Exhibit D, such work shall be performed at Landlord's sole cost and expense. All Landlord's Work shall be performed by Landlord in a first class and workmanlike manner using only new and first class materials in accordance with all applicable laws, rules, regulations, codes and ordinances. All other items of work, including the purchase and installation of all materials and equipment necessary for Tenant's use of the Leased Premises shall be provided by Tenant at Tenant's sole expense and shall include but shall not be limited to, those items set forth in Exhibit D, Tenant's Work. The building in which the Leased Premises are a part shall be designed by the architect and engineer retained by the Landlord to design and oversee construction of the Retail Development (herein sometimes referred to as "The Project"). Construction shall meet the requirements for a fully sprinklered building in accordance with the fire protection and building code program of the local jurisdictional authority as well as the Development Agreement and Master Declaration, if applicable. Landlord shall provide Tenant with a Tenant with a Tenant Handbook (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". Except as otherwise provided below, Landlord shall initially construct the following: A. BUILDING SHELL WORK WITHIN AND AROUND THE LEASED PREMISES 1. Shell. Landlord shall construct the building shell (building structure, insulated roof and exterior walls) in which the Leased Premises are to be located. It is expressly agreed and understood that the Leased Premises shall constitute a portion of a covered mall building. 2. Exterior Appurtenances. Public entrance features, canopies and screen walls at the exterior of the building structure shall be provided by Landlord in locations and of a design and in materials deemed appropriate by Landlord. 3. Outside Walls. If Lease Premises abuts an exterior wall, such wall shall be unfinished on the interior. 4. Demising Partitions. Landlord shall install metal wall studs, 16" on center, between all leased premises. Where rated walls are required between Leased Premises and service/exit corridors Landlord shall install 5/8" fire code gypsum board to the roof deck on both Landlord and Tenant sides, along demising partitions separating Tenant from service/exit corridors. 5. Demising Strip. Where Landlord desires, a vertical demising strip may be located at the storefront line between stores. The center line and/or back side of said strip may or may not precisely coincide with the lease line defining the Leased Premises. 6. Exterior Service/Exit Door. Where Leased Premises abuts an outside wall, Landlord shall install one (1) 3'0 X 7'0" x 1-3/4" (prime coated only on inside face) hollow Exhibit C, Rough Shell 5/1/98 Page 1 62 metal door and frame (with 1-1/2 pair butts and temporary lockset) as required by code or Landlord's insurance carrier. The outside face of door will be finished by Landlord to match adjacent construction and may not be modified by Tenant. The location of such door (if any) will be indicated on the Lease Outline Drawing. Tenant's store name and space number will be applied adjacent to the door by Landlord per Landlord's Architect's specifications in accordance with Exhibit D. 7. Interior Service/Exit Door. Where the Leased Premises abuts an interior exit/service corridor, Landlord shall install one (1) 3'0" x 7'0" x 1-3/4" hollow metal door and frame (with 1-1/2 pair butts and temporary lockset), as required by code or Landlord's insurance carrier. The hollow metal door and frame will be finish painted on the corridor side with a color selected by Landlord. Tenant's store name and space number will be applied adjacent to the door by Landlord, per Landlord's Architect's specifications in accordance with Exhibit D. 8. Floor Slab. Landlord shall furnish a 4" thick slab on-grade with smooth trowelled concrete surface. The floor elevation may be 3/4" below finished floor elevation in the mall areas adjacent to the Leased Premises. The slab will be designed to support a load of not less than 125 pounds per square foot. 9. Storefronts and Sign Bands. The configuration of the storefront lease line, as established by Landlord, shall be the line beyond which no element of the storefront may extend and may not necessarily follow the line of construction. The storefront furnished by Tenant shall include one entry complete with security closure. The width of the security closure will be as follows: Storefront width up to 25' - 8' wide Storefront width up to 26' - 35' - 10' wide Storefront width 36' and up -12' wide B. FINISH WORK OUTSIDE THE LEASED PREMISES 1. Exterior Areas. Landlord shall provide parking areas, access roads, delivery areas, drainage systems, walks, ramps, lighting, landscaping and planting, striping, signage, and other facilities and improvements as determined by Landlord in the exterior common area. 2. Interior Areas. Landlord shall provide enclosed air conditioned and lighted malls, courts and entry-ways, lighted delivery areas, service and exit corridors, ramps, public restrooms, meter and valve rooms and all other areas, facilities, and buildings used in the maintenance and operation of The Project as determined by Landlord. C. BUILDING UTILITY SYSTEMS SERVING THE LEASED PREMISES 1. HVAC System. Landlord will provide either 1) a central condenser water distribution system to provide cooling water for air conditioning unit(s) provided by Tenant in the Leased Premises in accordance with the Tenant Handbook referenced in Exhibit D. Landlord's portion of the condenser water system shall terminate at valved and capped outlets within the Leased Premises as indicated on the Lease Outline Drawing or 2) a roof-top package unit system, providing at least 35 tons of air conditioning. In this case Landlord to install roof opening and curb at Tenant's expense for roof-top air conditioning equipment to be furnished and installed by Tenant in accordance with Tenant Handbook from Landlord's HVAC inventory. 2. Electrical System. Landlord shall bring primary electrical service to the Retail Development. An empty secondary electrical distribution conduit only shall be extended by Landlord from the electric room to a point within the Leased Premises Exhibit C, Rough Shell 5/1/98 Page 2 63 as indicated on the Lease Outline Drawing. Electrical service furnished by Landlord shall consist of 277/480 volt 3 phase four wire service 400 amp service. Tenant to complete electrical system in accordance with Exhibit D and the Tenant Handbook. 3. Plumbing System. If required by code, Landlord shall provide 3/4" valved and capped domestic cold water line, a 1" condensate drain line, if applicable, and a 4" sanitary sewer line at the rear of the Leased Premises, as indicated on the Lease Outline Drawing. Tenant shall connect to Landlord's plumbing system and extend service within the Leased Premises according to Tenant's approved plans and in accordance with requirements of Exhibit D and the Tenant Handbook. 4. Sprinkler System. Landlord shall install a wet sprinkler fire protection system in the common areas and within the Leased Premises including, but not limited to, risers, bulk mains, cross mains, branch lines and upturned sprinkler heads at the bar joists. Within the Leased Premises the sprinkler system provided by Landlord shall have one (1) head per 100 square feet. The quantity of heads provided by Landlord will be the minimum required by code or other governing agencies. The mains and cross mains will be designed to accept additional heads up to a maximum coverage of one (1) head per 80 square feet of Leased Premises. Additional or relocated heads shall be installed or relocated by Landlord's designated sprinkler contractor as required by Tenant's layout and as described in Exhibit D and the Tenant Handbook. Tenant shall pay Landlord for the cost thereof in accordance with Exhibit D. 5. Telephone System. Landlord shall at Tenant's expense arrange for telephone intrabuilding cable to be brought to a point within or adjacent to the Leased Premises as indicated on the Lease Outline Drawing. 6. Mechanical Smoke Venting. Landlord's building has been designed to provide smoke venting via mechanical fans, open ceilings and no separation above 12'-0" between Tenant premises. Any Tenant required by Code or the authority having jurisdiction to provide separate smoke venting, or whose tenant space design interferes with normal functioning of Landlord's smoke venting system, must install a complete smoke venting system to meet code in accordance with Exhibit D and the Tenant Handbook. D. GENERAL PROVISIONS 1. Minor changes in any plans or specifications covering Landlord's Work which may be necessary during design and construction of The Project or affecting the Leased Premises shall not in any way invalidate the terms of the Lease or this Exhibit C nor shall it require the Landlord to provide any work not described herein. Notwithstanding the foregoing, any changes which would materially impact Tenant's Store Design and Working Drawings must be made at least sixty (60) days prior to the Delivery of Possession date. 2. Landlord shall have the right to specify or change the location, either before or after construction, of all utility lines, condenser water lines, condensate drain lines, drains, sprinkler mains and valves, and such other facilities within the Leased Premises as are necessary by engineering design and/or Code requirements. These items as described above shall be located so as not to materially interfere with Tenant's use of the Leased Premises. Landlord shall have the right to relocate and specify the location of mechanical and other equipment on the roof over the Leased Premises. To the extent that such utility lines, condenser water lines, condensate drain lines, drains, sprinkler mains and valves and other facilities within the Leased Premises are relocated, Landlord shall be responsible for paying for any changes in either Tenant's plans or connecting Tenant installed improvements to such relocated facilities. Exhibit C, Rough Shell 5/1/98 Page 3 64 3. 4. Landlord shall have the right to perform, at Tenant's expense, any of Tenant's work which Landlord determines in its sole discretion be performed: (a) immediately and/or on an emergency basis for the best interest of The Project, (b) to the extent required for Landlord's compliance with all applicable building codes, or, (c) to the extent necessary to obtain any Certificate of Occupancy required by the Landlord or any other tenant in The Project. Except in the event of an emergency, Landlord shall give Tenant forty-eight (48) hours notice of its intention to undertake such work and Landlord shall refrain from undertaking such work if Tenant commences to cure during such forty-eight (48) hour period. Exhibit C, Rough Shell 5/1/98 Page 4 65 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT D TENANT'S WORK -- ROUGH SHELL PREFACE This Exhibit "D" is intended to describe the obligation of the Tenant in the design and construction of the Leased Premises. Landlord's Work will be limited to the work described in Exhibit C. Any part of Tenant's Work which is accomplished by Landlord for Tenant pursuant to the terms of this Exhibit D will be accomplished by Landlord at Tenant's expense. The work of Tenant described in Exhibit D is intended to complete the Leased Premises in accordance with Tenant's drawings as approved in writing by Landlord to a finished condition ready for the conduct of business therein. All finished installations will be deemed incomplete until approved by Landlord. Tenant's Work shall conform to the procedures, schedules and reimbursement requirements set forth in Sections 2 and 3 of this Exhibit. Exhibit D shall govern over any inconsistencies with Exhibit C. Landlord and Tenant have a common interest in opening the Leased Premises on the Grand Opening Date. To this end, Landlord will coordinate its work with Tenant's work insofar as the schedule for such Grand Opening Date and prudent construction practice allows and will assign one or more tenant coordinators to function as liaison between tenants and Landlord. Further to this end, Tenant and Tenant's contractors agree to abide by Landlord's Construction Rules and Regulations which may be issued from time to time. In order to ensure that the Tenant's store interior and signage design are orderly and aesthetically coordinated with Landlord's building, and to ensure that Landlord's storefront and signage requirements are understood by Tenant, its designers, engineers, contractors, and other representatives, Landlord has drafted and Tenant shall follow the architectural and signage criteria established in the Tenant Handbook (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". In order to ensure that the Tenant's HVAC, plumbing and electrical systems are compatible and coordinated with the Landlord's building, and to ensure that the Landlord's HVAC, plumbing and electrical requirements are understood by Tenant, its designers, engineers, contractors, and other representatives, Landlord has drafted and Tenant shall follow the mechanical and electrical criteria established in the Tenant Handbook. All Tenant construction shall be in accordance with the requirements of all applicable codes, ordinances, rules and regulations of all authorities having jurisdiction over the work including all requirements of the Landlord's insurance carrier. Construction shall conform to the requirements for a fully sprinklered building in accordance with the fire protection and building code program of the local jurisdictional authority as well as the Development Agreement and the Master Declaration if applicable. Tenant shall secure all necessary permits including, but not limited to, occupancy and health department permits from the jurisdictional authorities in sufficient time to allow Tenant to open the Leased Premises on the Grand Opening Date. Tenant shall furnish to Landlord upon receipt, copies of all building permit applications, statements, amendments and the like, and all permits, inspection reports, certificates, and other documents as required by authorities having jurisdiction of The Project. Tenant, at its sole cost and expense, shall perform all work other than work to be performed by Landlord as set forth in Exhibit C, required to complete the Leased Premises to a finished condition ready for the conduct of business therein. All of Tenant's work within the Leased Premises performed pursuant to this Section 1 shall, for the purpose of this Lease to which this Exhibit is attached, be deemed to be improvements made to the Leased Premises by Tenant at Tenant's expense. Exhibit D, Rough Shell 5/1/98 Page 1 66 SECTION 1-TENANT CONSTRUCTION WORK WITHIN THE PREMISES A. GENERAL CRITERIA The criteria and outline specifications set forth herein represent minimum standards for the design, construction, and finish of the Leased Premises by Tenant. 1. JURISDICTIONS AND CODES. The Project is being developed in and under the jurisdictions of the State, County and City in which The Project is located. All design and construction work shall comply with all applicable statutes, ordinances, regulations, laws and codes and the requirements pertaining to service and utilities furnished by utility companies, all applicable state, county, and local statutes and ordinances, and OSHA regulations. 2. PERMITS AND APPROVAL. Prior to the commencement of construction, all building and other permits shall be obtained and posted in a prominent place within the Leased Premises. Landlord's written approval shall be obtained by Tenant prior to the undertaking of any construction work which deviates materially from Tenant's approved Store Working Drawings and Specifications, or which modifies whatsoever Landlord's building shell or utilities, or any work not explicitly shown on said Store Working Drawings and Specifications. Landlord's approval of the foregoing shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency thereof, and Tenant shall be solely responsible. To the extent and material changes, changes which modify the building shell or utility or new work are required, Landlord shall not unreasonably withhold its approval of the same. 3. FLOOR LOADS. The slab on-grade has been designed to carry a total load (dead and live) of 125 pounds per square foot. Any loading imposed by any of Tenant's Work, either on a temporary or permanent basis, shall not exceed 125 lbs./SF ("Allowable Load"). 4. STANDARD PROJECT DETAILS. Standard Project Details, as issued by Landlord's Architect from time and time and as they pertain to Tenant's Work, shall govern with respect to Tenant's Work. Such details shall be incorporated into the Tenant's Store Working Drawings and Specifications for the Leased Premises. 5. MATERIALS. Only new, first-class materials shall be used in the construction of the Leased Premises. Used, first-class materials for interior architectural facades and fixtures may be used provided such materials are noted on the Tenant's plans and approved by Landlord through field inspection. 6. FIELD CONDITIONS. From time to time, the Tenant is obligated to verify conditions pertaining to the Leased Premises prior to and after commencement of construction of its Leased Premises. Tenant shall coordinate its work with the work of Landlord, other tenants, and with existing conditions above, below and adjacent to the Leased Premises. Tenant shall make changes as required to accommodate such work or conditions. 7. TENANT HANDBOOK. Landlord shall provide Tenant with a Tenant Handbook ("Tenant Handbook"), and Tenant shall comply with all design criteria, procedures for drawings, specifications, and construction, and other rules, regulations and provisions therein. To the extent, if at all, that the Tenant Handbook may conflict with the provisions of the Exhibit D, the provisions of the Tenant Handbook shall govern. Exhibit D, Rough Shell 5/1/98 Page 2 67 B. ARCHITECTURAL FINISHES 1. FLOORS. Tenant finish floor covering materials must be selected and adapted in thickness to correspond in elevation exactly with the level of the finished mall floor, which may be approximately 3/4" above the concrete floor of the Leased Premises at the Lease Line. Quality floor materials, such as carpeting, glazed or unglazed tile, wood parquet, or marble shall be used in the sales area of the Leased Premises. All flooring finish materials are subject to Landlord's approval. 2. STOREFRONT. Tenant's storefront shall be designed and constructed by Landlord as provided in Exhibit C and as described in the Tenant Handbook. 3. INTERIOR PARTITIONS. All interior partitions by Tenant within the Leased Premises shall be metal stud construction and shall have 5/8" gypsum board finish on all sides with taped and spackled joints. Any combustible materials applied to partitions shall meet all flamespread and smoke generation requirements of jurisdictional authorities and receive a U.L. labeled fire retardant coating if required by Code. Walls dividing the Leased Premises from service and exit corridors, or other rated enclosures, shall receive, on Tenant's side, sufficient layers of drywall to complete the necessary rating. Landlord shall install service and exit corridor drywall at Tenant's expense. Any Tenant penetrations of rated partitions shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. 4. DEMISING PARTITIONS. Demising partitions are not load bearing and Tenant may not hang fixtures from them. Should Tenant require structure and/or backing to accommodate the loading of Tenant's wall hung fixtures, said request shall be in writing to Landlord for approval. Additional structure and backing shall be furnished and installed by Tenant at Tenant's expense. Tenant shall install drywall, taped and spackled on demising partitions between tenants. No drywall shall be placed on demising partitions above 12'-0" without Landlord's specific approval. Above 12'-0" the Tenant may, subject to Landlord's prior written approval, continue with wire mesh for security purposes if so indicated on Tenant's construction drawings. The Tenant, upon Landlord's approval, may also install drywall to a higher level if openings of sufficient size are provided to assure that the smoke venting system provided by the Landlord functions as designed -- see Tenant Handbook for specific requirements. 5. EXTERIOR WALLS. Tenant shall install all finishes on the inside face of exterior walls within Leased Premises. 6. SERVICE AND EXIT CORRIDOR PARTITIONS. Any Tenant penetrations of rated partitions, and relocations and/or additions to Landlord furnished exit doors, shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. Any framing, cutting, patching of the corridor wall surfaces including the building of vestibules to provide for the nonimpingement of the door into the corridor traffic way, and other work related construction shall be coordinated and consistent with Landlord's work, including but not limited to the provision of 4'-0" high 1/4" masonite board and metal cornerguards. Walls dividing the Leased Premises from service and exit corridors, or other related enclosures, shall receive, on Tenant's side, sufficient layers of drywall to complete the necessary rating. All materials used in corridor construction shall be fire rated. Any Tenant penetrations of rated partitions shall be specifically approved in writing by Landlord and governing authorities as a portion of the permitting process. 7. INTERIOR SERVICE/EXIT CORRIDOR DOORS. If Tenant desires additional service access to Leased Premises other than what is provided by Landlord in Exhibit C then Tenant Exhibit D, Rough Shell 5/1/98 Page 3 68 shall provide and install a 3'-0" X 7'-0" X 1-3/4" 18 gauge interior hollow metal door, labeled as required, with a hollow metal 16 gauge frame, and all hardware, in accordance with governing Codes. Any framing, cutting, and patching of the corridor wall surfaces including the building of vestibules to provide for the non-impingement of the door into the corridor traffic way, and other work related thereto shall be the responsibility of the Tenant. Hollow metal door and frame are to be finished painted on the corridor side with a color selected by Landlord. Tenant's store name will be applied adjacent to the door by Landlord, at Tenant's expense, per Landlord's Architect's specifications. 8. Door Relocation. The relocation of any exterior Tenant door shall be performed by Landlord at Tenant's sole expense and must be coordinated with the structure of Landlord's building. 9. Door Hardware. Tenant shall furnish and install all door locks and exit devices on all interior service doors, exterior doors, exit corridor doors, and storefront, using hardware recommended by Landlord in the Tenant Handbook. 10. Ceiling. Exposed and open grid systems are encouraged. All work related to ceiling and ceiling treatments, if any, shall be the responsibility of Tenant. All ceilings and ceiling treatments shall be of non-combustible material approved by Landlord and shall maintain the degree of openness required to preserve the operation of the smoke venting system and sprinkler system in The Project as established by jurisdictional authority and/or as described in the Tenant Handbook. Tenant's ceiling and ceiling treatment shall be limited to a ceiling height not less than the code required minimum nor higher than the maximum heights indicated in the Tenant Handbook. The structure of Landlord's Building has been designed to accept a super-imposed loading of three (3) pounds per square foot for the installation of Tenant's suspended ceiling and equipment. Access (such as access panels) and other openings shall be provided by Tenant where Landlord deems necessary. Tenants providing ceilings with less than the required degree of openness shall provide smoke venting at Tenant's sole expense, both as required by jurisdictional authorities and as described in the Tenant Handbook. If Tenant's interior partitions and ceiling configuration cause the requirement of additional sprinkler heads, such additional heads shall be installed by Landlord's designated contractor at Tenant's expense both as required by jurisdictional authority and Landlord's insurance carrier. 11. Interior Finishes. All finished interior surfaces must be materials approved by Landlord for appearance. All Tenant fixtures, furniture, carpeting (including underlayment), upholstery materials, drapery and other furnishing must comply with flammability of materials and smoke generation requirements for furniture and furnishings of local jurisdictional authorities. All wood shall be fire retardant in accordance with code requirements. All wood in contact with the floor shall be termite retardant. 12. Finish Hardware. Commercial grade finish hardware, labeled where required, shall be used throughout. All doors shall have at least one and one-half (1-1/2) pair butts, wall or floor stops, kick plates, lock sets and push-pull plates as required. All exit doors shall have hardware as required by Code. 13. Toilet Room. Tenant shall construct restroom facilities, fixtures, toilet partitions, and building specialty items such as toilet room mirrors, dispensers, paper holders and amenities to fully meet the ADA Guidelines and local codes. Exhibit D, Rough Shell 5/1/98 Page 4 69 14. Mezzanines. Mezzanines will not be permitted (other than the approximately 10' x 4' elevated stand which is part of Tenant's prototype store design which must be supported from the floor). 15. Layout and Painting of Exposed Mechanical and Electrical Systems. All Tenant installed ductwork, conduits, pipes and any other mechanical or electrical equipment exposed to public view from outside the Leased Premises, shall be laid out and installed in a neat and orderly configuration. Tenant shall paint the above Tenant improvements with either a black or a mutually agreed to color and finish if Tenant's improvements can be seen from Mainstreet (i.e. those portions of the common area made up of the pedestrian walkways outside of the Leased Premises) above Tenant's storefront elevation or below the top of the storefront but visible from Mainstreet. C. STRUCTURAL 1. Modifications. Any alterations, additions, and/or reinforcements to the structure of Landlord's building required to accommodate Tenant's Work, must be designed by a registered structural engineer at Tenant's expense. Tenant shall leave the structure of Landlord's building as strong or stronger than original design and with finishes unimpaired. Tenant's architect shall calculate or have calculated the structural loads caused by Tenant's improvements and submit those calculations for written approval by Landlord and Landlord's Architect prior to Tenant's construction. 2. Loading. All loads individually hung from the structure in excess of 100 pounds shall be specifically approved by Landlord's structural Engineer for location and method of support. All loads less than 100 pounds that are individually hung from the structure shall be hung in accordance with the guidelines in the Tenant Handbook. D. HEATING, VENTILATING AND AIR CONDITIONING 1. Connection to Condenser Water System (if applicable). Not applicable. 2. HVAC System. A complete air conditioning system to suit Tenant's requirements shall be designed, furnished, installed and maintained by Tenant in accordance with the requirements of the Tenant Handbook. Tenant's portion of the HVAC system shall include an air conditioning unit(s), ducts, insulation, fire dampers, outlets, grilles and controls to maintain temperatures per Tenant Handbook. If roof-top units are required, Landlord shall install roof-top curb at Tenant's expense. All Tenant ductwork shall be internally insulated and Tenant shall make all connections to Landlord installed systems in a manner fully satisfactory to Landlord. 3. Toilet Exhaust System. Tenant installed toilet facilities within the Leased Premises shall include a complete toilet exhaust system according to Code and the requirements of the Tenant Handbook. 4. Outside Air Connection. Landlord, at Tenant's expense, will provide a roofjack for Tenant's connection to provide outside air to Tenant's HVAC system. Tenant shall provide outside air ventilation as required by Code and the Tenant Handbook. No openings for fans, vents, louvers, grilles, or other devices shall be installed in any demising partition, exterior wall, or roof without Landlord's prior written approval. All roof and/or wall penetrations required for Tenant's plumbing, mechanical, Exhibit D, Rough Shell 5/1/98 Page 5 70 electrical work and any other Landlord approved Tenant work shall be made by Landlord's designated contractor at Tenant's expense. 5. Smoke Venting. If the authority having jurisdiction requires individual smoke venting from the Leased Premises, Tenant, at Tenant's expense, shall provide the complete required smoke system, discharging vertically through a roof vent at sufficient velocity to carry the discharge away from any intakes on the roof. Roof vents will be installed by Landlord's designated contractor at Tenant's expense and in accordance With the Tenant Handbook. 6. Refrigeration. Tenants may not connect refrigeration equipment to Landlord's condenser water system. Landlord's condenser water system will not operate during unoccupied hours. Refer to the Tenant Handbook for requirements regarding Tenant's refrigeration equipment. 7. Exhaust/Negative Pressure. All exhaust and make up air systems shall be by Tenant in accordance with Exhibit D and the Tenant Handbook. As determined by Landlord, all tenants producing odors within their premises shall be required to install full height partitions and provide supplemental exhaust to the exterior of the building to keep the premises at a negative pressure relative to Mainstreet and all adjacent areas. E. ELECTRICAL 1. System. Tenant shall design, furnish, install and maintain a complete electrical distribution system, including but not limited to conductors to electrical room connected to load side of meter socket, transformer, distribution panels, circuits, conductors, fixtures and devices, within the Leased Premises in accordance with the requirements of the Tenant Handbook. No appurtenances, including but not limited to light fixtures, antennas, signs, etc., will be affixed to the exterior walls or roof of Landlord's Building without Landlord's express written permission. 2. Electrical Construction. a. Material - All electrical materials shall meet National Electrical Code Standard, unless a better grade is required by local Code. All materials shall be new and shall bear evidence of approval by Underwriter's Laboratory (UL). All conductors shall be copper. Aluminum conductors will not be allowed. b. Lighting Fixtures - Recessed fixtures installed in furred spaces shall be connected by means of flexible conduit and approved fixture wire, connected to a branch circuit outlet box which is independent of the fixture. c. Fluorescent Fixtures - All fixtures shall be provided and installed by Tenant with switch legs and local switches rated 20 amps at 277 volts. All fluorescent fixtures shall have internal protection devices. Fluorescent ballasts shall be high power factor type with individual non-resetting overload protection. Ballast harmonics may not exceed that Total Harmonic Current Distortion allowable by the electric utility. All lamps subject to public view shall have warm white deluxe or better color rendition. Cool white may be used only in storage areas not exposed to public view. d. Electric Meter - Where Landlord does not provide electricity from a master meter and redistribute to Tenants, Tenant shall make direct arrangements with the local electric utility company to furnish and install electric meter to measure Tenant's use of electricity. Exhibit D, Rough Shell 5/1/98 Page 6 71 e. Panel Boards -- Panel boards shall be furnished and installed by Tenant, 120/208 volt panels and 277/480 volt panels shall both be equipped with single or multiple pole bolted thermal magnetic breakers. f. Short Circuit Ratings -- Tenant's electrical distribution system shall be designed to withstand and safely interrupt an available short circuit current indicated in the Tenant Handbook. g. Transformer -- All necessary transformers shall be furnished and installed by Tenant. All ceiling hung transformers over 100 pounds shall be approved by Landlord's Structural Engineer for location and method of support. All ceiling hung transformers less than 10 pounds shall be hung in accordance with the requirements in the Tenant Handbook. h. Nameplates -- The following equipment shall be identified with engraved Bakelite nameplates; distribution panels, motor starters, lighting panels and push-button stations. F. PLUMBING 1. System. Tenant shall connect to Landlord's plumbing system as described in Exhibit C and the Tenant Handbook. Tenant shall provide a complete plumbing system within the Leased Premises, including but not limited to, fixtures and toilet accessories as required by Code. Tenant shall provide accessible clean outs in toilet areas. Plumbing work must be installed according to all appropriate Codes and requirements of the Tenant Handbook. Landlord's approval of Tenant's plans is not a statement that the plans are in compliance with Code or other local requirements. Tenant shall be required to provide vent connections and a toilet room exhaust connection, if necessary, through the roof as required by Code and the Tenant Handbook. All such penetrations shall be by Landlord's designated contractor at Tenant's sole expense. 2. Water Heaters. Electric water heaters shall be automatic and a maximum capacity of 2 k.w. All units shall be UL approved and conform to the requirements of the local Energy Code. Water heaters must have temperature/pressure relief valves with discharge piping according to Code. 3. Water Meters. All restaurants, food court tenants, salons, pet stores and any other high volume users of water (as determined by Landlord) shall furnish and install water meters at Tenant's expense in accordance with the Tenant Handbook. 4. Condensate Drains. Tenant shall extend and connect condensate drain line(s) from Tenant's air conditioning unit(s) in accordance with the Tenant Handbook. 5. Connection. If Tenant's restroom location, on Tenant's Store Working Drawings does not coincide with Landlord's utility location, Tenant, at Tenant's expense, shall move utility to coincide with Tenant's Store Working Drawings with Landlord's prior approval. All cutting and placing of concrete is by Tenant. G. FIRE PROTECTION SYSTEM All revisions to the fire protection system required by Tenant's layout shall be performed by Landlord's designated sprinkler contractor at Tenant's sole expense. Landlord's sprinkler contractor shall design system revisions in accordance with Tenant's Store Working Drawings. Such designs may involve additional heads, relocated heads, heads in refrigeration boxes, toilet rooms, kitchen exhaust ducts, and/or at Tenant's request, heads Exhibit D, Rough Shell 5/1/98 Page 7 72 located to conform with Tenant's ceiling pattern and layout. All design and construction shall be governed by Code and the requirements of Landlord's insurance carrier. Tenants are required by local code to provide fire extinguishers, at least one to be installed within 25 feet of the Tenant's entry off Mainstreet. H. TELEPHONE Tenant shall arrange directly with the local Telephone Company for telephone service. Tenant shall furnish, install and maintain telephone wiring and equipment within the Leased Premises to suit Tenant's requirements at Tenant's expense. I. SIGNAGE Guidelines. All signs shall be designed, constructed and located in accordance with Landlord's sign Criteria, Exhibit E, the Tenant Handbook, and as approved by Landlord. J. FIXTURES AND FURNISHINGS Tenant shall furnish and install in the Leased Premises all fixtures, furnishings, equipment, shelving, trade fixtures, leasehold improvements, interior decorations, graphics, signs, mirrors, cornices, covers and decorative light fixtures, portable fire extinguishers as required by Code and the Tenant Handbook, and other special effects, all as approved by Landlord. All Tenant improvements, other than mechanical equipment, ceilings, and lighting fixtures, shall be floor-mounted unless written approval is obtained from Landlord. K. MISCELLANEOUS REQUIREMENTS 1. Tenant's Contractor. Work undertaken by Tenant at Tenant's expense (a) shall not be awarded to Landlord's contractor without Landlord's written consent, except that an approved list of contractors is attached hereto as Exhibit D-1 and (b) may only be awarded to a reputable and bondable contractor or contractors licensed to do business in the State, County and City in which The Project is located. Tenant's contractor shall adhere to Landlord's policy of a drug and alcohol free workplace. 2. Equipment Screening. Tenants requiring mechanical or electrical equipment, antennas, and the like shall not have the same placed on the roof or the exterior of the building without the prior written approval of Landlord. All such equipment, if allowed, shall be screened from the view of the public from any point within the project site. All screening materials, construction details, and construction techniques shall be approved by Landlord in writing, prior to any such work by Tenant. 3. Clean-Up. Tenant shall cause its contractors to maintain the Leased Premises in a clean and orderly condition during construction. All unusable shipping containers, packaging, and other debris shall be broken down and contained within the Leased Premises until removed by Tenant's contractor to containers provided by Landlord outside Landlord's Building. Flammable waste must be confined to covered metal Exhibit D, Rough Shell 5/1/98 Page 8 73 containers until removed by Tenant. All usable construction material, equipment, fixtures, merchandise, etc. must always be contained within the Leased Premises, Malls, courts, arcades, public corridors, service/exit corridors and the exterior of Landlord's Building shall be kept clean at all times. If Tenant fails to clean up, Tenant hereby authorizes Landlord to clean up for Tenant at Tenant's expense. 4. Full Payment. Tenant shall satisfy Landlord that adequate arrangements have been made to ensure that all Tenant's contractors shall be paid in full for work ordered by Tenant. Tenant is advised to familiarize itself with the mechanic's lien laws in the State in which The Project is located and shall hold the Landlord harmless for any liens filed against the property of the Landlord for the work of the Tenant. 5. Character of Employees. Tenant will not employ any unfit person or anyone not skilled in the work he is performing, or any workman that is incompatible with the balance of the work force or who will cause, or whose presence will cause, labor disputes or work stoppages. In the event any employee(s) of Tenant or Tenant's contractor(s) causes a labor dispute or work stoppage, Tenant expressly agrees to have such employee(s) immediately removed from the Project upon Landlord's request, and that Tenant's failure to do so shall constitute an event of Default under the Tenant's Lease of which this Exhibit is a part. SECTION 2: PROCEDURE AND SCHEDULES FOR THE COMPLETION OF TENANT'S PLANS AND SPECIFICATIONS Unless otherwise notified by Landlord, all prints, specifications, and other material to be furnished by Tenant as herein required shall be sent to: Tenant Coordinator (Address to be furnished when available). Tenant shall engage an architect ("Tenant's Architect") registered in the State and licensed to do business in the County and the City in which The Project is located to prepare the Working Drawings and Specifications to be submitted for Landlord's approval. The fees for Tenant's Architect shall be paid by the Tenant. A. LEASE OUTLINE DRAWINGS Following execution of the Lease of which this Exhibit is a part, Landlord shall furnish Tenant with two (2) prints of the Lease Outline Drawings (LOD) giving technical and design information relative to the Leased Premises along with other drawings that may be helpful to Tenant in the design of its store. B. STORE DESIGN DRAWINGS 1. Within forty-five (45) days of whichever of the following shall be the later to occur: (a) receipt of Lease Outline Drawings from Landlord or (b) the execution Exhibit D, Rough Shell 5/1/98 Page 9 74 of the Lease; the Tenant shall submit to Landlord one (1) set of sepia reproducible prints and three (3) sets of blueline prints of Store Design Drawings, showing the intended design, character, and finishes of the Leased Premises. The Store Design Drawings shall comply with the design criteria of The Project as described in this Exhibit D and in the Tenant Handbook and shall set forth the requirements of Tenant within the Leased Premises. Said Drawings shall include, but not be limited to the following: a. Architectural design of the space, including an elevation of Landlord's storefront showing Tenant's signage, floor plans, elevations, sections, and renderings indicating material and color selections and finishes, and layout including location of fixtures both permanent and movable. Provide the weights of all items to be suspended above from the structure in excess of 100 pounds each. b. Mechanical System: Basic equipment to be used and its location, duct distribution system, diffuser locations, and any louvers or vents to be provided for Tenant by Landlord at Tenant's expense. Provide projected mechanical loads on forms provided by Landlord in the Tenant Handbook. c. Electrical System: Reflected ceiling plans indicating type of lighting fixtures, and floor plans showing outlets and other electrical equipment contemplated with location of panel and switchboard. Provide projected electrical loads on forms provided by Landlord in the Tenant Handbook. d. Plumbing System: Floor plans showing the location, layout, and type of fixtures to be furnished, including riser diagrams. e. Fire Protection System: Location of any specialty heads Tenant's architect may require. f. Tenant shall identify in writing all intended exceptions to the design criteria contained in the Tenant Handbook and/or this Exhibit D. 2. After receipt of Store Design drawings, Landlord shall, within seven (7) business days, return to Tenant One (1) set of Store Design Drawings with modifications and/or approval. If, upon receipt of approved Store Design Drawings bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing within seven (7) days from date of receipt of said drawings, by certified or registered mail addressed to Landlord, at the above address, and the notice address in the Lease. Unless such action is taken, it will be deemed that all comments made by Landlord on Store Design Drawings are acceptable to and adopted by Tenant. 3. If Store Design Drawings are returned to Tenant with comments, but not bearing approval of Landlord, said Store Design Drawings shall immediately be revised by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. C. STORE WORKING DRAWINGS AND SPECIFICATIONS 1. Store Working Drawings and Specifications shall be prepared in strict compliance with the design criteria and requirements as set forth in this Exhibit D and the Tenant Handbook and shall adhere to the Store Design Drawings as approved by Landlord. Store Working Drawings to minimum scales as called for below, and Specifications shall include, but not be limited to, the following: Exhibit D, Rough Shell 5/1/98 Page 10 75 a. Key plan showing location of the Leased Premises relative to the entire mall. b. Floor plan at a minimum scale of 1/4"=1'0". c. Overall sections at 1/4"=1'0". d. Reflected ceiling plan at a minimum scale of 1/4"=1'0". e. Plans, elevations, and section of storefront (if to be construed by Tenant) at 1/2"=1'0", with finish materials board including manufacturers, model numbers, color numbers, and all other identifying information. Details of storefront at 1-1/2"=1'0". f. Interior elevations at 1/4"=1'0". g. Full sections of types of partitions used at 1/2"=1'0". h. Details of special conditions encountered at 1-1/2"=1'0". i. Door schedule with jamb details at 1-1/2"=1'0". j. Finish and color schedules with samples. k. Plumbing, heating, ventilating, and cooling plans, at 1/4"=1'0". l. Mechanical details at 1-1/2"=1'0". m. Electrical plans at 1/4"=1'0". n. Electrical details, fixture schedules, and one-line electrical riser diagram. o. Mechanical and electrical load tabulations on forms provided by Landlord in the Tenant Handbook. p. Structural load tabulations. q. Specifications covering all of Tenant's Work, including, but not limited to, architectural, electrical, plumbing, heating, ventilating, and air conditioning. r. Layout of fixture location, both permanent and movable. s. Any and all other plans and specifications as may be required by the local fire and building authorities and other governing bodies. 2. All Store Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant, in the form of one (1) set of reproducible sepia prints, specifications and three (3) sets of blueline prints to Landlord for approval within 21 days from receipt by Tenant of Landlord's written approval of Store Design Drawings. 3. As soon as practicable after receipt of Store Working Drawings and Specifications, Landlord shall return to Tenant one (1) set of prints of Store Working Drawings and Specifications with its suggested modifications and/or approval. If, upon receipt of approved Store Working Drawings and Specifications bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing, by certified or registered mail addressed to Landlord at the above address and at the notice address in the Lease, within seven (7) days from the date of receipt of Store Working Drawings and Specifications. Unless such action is taken, it will be deemed that all comments made by Landlord on Store Working Drawings and Specifications are acceptable to and adopted by Tenant. 4. If Store Working Drawings and Specifications are returned to Tenant with comments, but not bearing approval of Landlord, said Store Working Drawings and Specifications shall immediately be revised by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. 5. "For Construction" Store Working Drawings and Specifications prepared by Tenant's Architect shall be submitted by Tenant in the form of one (1) set of mylar reproducible prints and specifications and three (3) sets of blueline prints. "For Construction" shall be marked clearly on each copy in red. Such drawings and specifications shall reflect correction of all Landlord's comments to the Store Working Drawings and specifications returned by Landlord. Exhibit D, Rough Shell 5/1/98 Page 11 76 6. Store Working Drawings shall be submitted to the local Authorities having jurisdiction for building permit after such drawings have been approved by Landlord in the submittal process as outlined above. 7. Landlord and Landlord's architect shall, from time to time, be entitled to monitor Tenant's Work and shall have the right to require all work which does not comply with Tenant's approved Store Working Drawings and Specifications to be corrected within thirty (30) days of notification to Tenant. SECTION 3: PROCEDURE AND SCHEDULES FOR THE CONSTRUCTION OF THE LEASED PREMISES BY TENANT A. COMMENCEMENT OF CONSTRUCTION Tenant shall start construction of its Leased Premises not later than ten (10) days from either of the following dates, whichever shall be the later to occur: (1) The date of receipt by Tenant of written notice from Landlord that Landlord has substantially completed the work to be performed by Landlord under Exhibit C, and payment therefore as required by Exhibit C is due (other than such work which cannot be performed by Landlord until Tenant makes the Leased Premises ready for the performance thereof) and that the Leased Premises are ready for Tenant's work; or (2) the date on which Landlord approves the Tenant's Store Working Drawings and Specifications for the Leased Premises. Tenant shall carry such construction to completion with all due diligence. B. GENERAL REQUIREMENTS 1. Tenant shall submit to Landlord, via certified or registered mail, at least five (5) days prior to the commencement of construction the following information: (a) Copy of building and all other permits needed to perform Tenant's Work within the Leased Premises. (b) The names and addresses of the general, mechanical, plumbing and electrical contractors Tenant intends to engage in the construction of the Leased Premises. (c) The actual commencement of construction date and the estimated date of completion of construction work, fixturing work, and date of projected opening. (d) Itemized statement of estimated construction costs including architectural, engineering, and contracting fees. (e) Evidence of insurance with a company or companies authorized to transact business in which The Project is located as required below. 2. Tenant shall secure, pay for, maintain, and cause its contractors and subcontractors to secure, pay for, and maintain, during the continuance of construction and fixturing work within the Lease Premises, all of the insurance policies required in the amounts as set forth herein, together with such insurance as may from time to time be required Exhibit D, Rough Shell 5/1/98 Page 12 77 by City, County, State or Federal laws, Codes, regulations or authorities. Tenant's Work may not commence, nor may Tenant permit its contractors and subcontractors to commence any work, until all required insurance has been obtained and certificates of such insurance have been delivered to Landlord. Insurance policies shall name the Landlord and assignees, Landlord's Architect and General Contractor for the project as additional insureds. Certificates of insurance coverage shall provide that no change or cancellation of such insurance coverage shall be undertaken without thirty (30) days written notice to Landlord. Landlord shall have the right to require Tenant, and Tenant shall have the duty, to stop work in the Leased Premises immediately if any of the coverage required herein lapses during the course of the work, in which event Tenant's Work may not be resumed until the required insurance is obtained and satisfactory evidence of same is provided to the Landlord. a. Tenant's General Contractor's Required Minimum Coverages and Limits of Liability. (1) Worker's Compensation Insurance, as required by State law, and Employers's Liability Insurance with a limit of not less than [***] (or more if required by the law of the State) and any insurance required by any Employee Benefit Act or similar statute applicable where the work is to be performed as will protect the contractor and subcontractors from any and all liability under the aforementioned act(s) or similar statute. (2) Comprehensive General Liability Insurance (including Contractor's Protective Liability) in an amount not less than [***] per occurrence whether involving personal injury liability (or death resulting therefrom) or property damage liability or a combination thereof (combined single limit coverage) with a minimum aggregate limit of [***]. Such insurance shall include explosion, collapse and underground (X, C and U) coverage and contractual liability coverage for personal injury, death and damage to the property of other arising from construction at the Leased Premises, whether performed by Tenant's contractors, subcontractors, or sub-subcontractors, or by anyone directly or indirectly employed by any of them. (3) Comprehensive Automotive Liability Insurance, for the ownership, maintenance, or operation of any automotive equipment, whether owned, leased or otherwise held, including employer's non-ownership and hired car liability endorsements, in an amount not less than [***] per occurrence and [***] aggregate, combined single limit bodily injury and property damage liability. Such insurance policies shall insure the Tenant's general contractor and all subcontractors against any and all claims for bodily injury, including death resulting therefrom and damage to the property of others arising from its operations at the Leased Premises or in connection with construction of the Leased Premises, whether performed by the Tenant's general contractor, subcontractors, or sub- subcontractors, or by anyone directly or indirectly employed by any of them. b. Tenant's Insurance Requirements (1) Tenant shall obtain Owner's Protective Liability Insurance as will insure Tenant against any and all liability for damage from bodily Exhibit D, Rough Shell 5/1/98 Page 13 *** Confidential Treatment Requested 78 injury, including death resulting therefrom, or property damage or a combination thereof which may arise from work in connection with the Leased Premises, and any other liability for damages which Tenant's general contractor and/or subcontractors are required to insure against under any provisions herein. Landlord and Landlord's Architect and General Contractor shall be named as additional insureds. Said insurance shall be provided in minimum amounts of [***] aggregate, combined single limit bodily injury and property damage liability. (2) Tenant's Work Insurance: Tenant shall insure [***] of the value of the work in the Leased Premises as it relates to the building within which the Leased Premises is located, with an "all risk" perils property insurance policy or a completed value "all risk" perils Builder's Risk policy, naming the interest of the Landlord and the Tenant's general contractor and all subcontractors, as their respective interests may appear. 3. All contractors engaged by Tenant shall be licensed contractors in the State in which The Project is located possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord's General Contractor and other contractors on the job. All work shall be coordinated with the general project work. 4. Tenant's contractors and construction shall comply in all respects with applicable federal, state and local statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the Leased Premises shall be obtained and paid for the Tenant. 5. Tenant shall complete all work within the Leased Premises as expeditiously as possible, but in no event later than in time to open for business on the Grand Opening Date. Should Tenant fail to complete its work within this schedule, Landlord may, at Landlord's option, install temporary storefront or barricade at the Leased Premises at Tenant's expense. Temporary storefront and other work performed by Landlord which was made necessary due to the Tenant's failure to complete its work in time for the Grand Opening Date, shall be payable to the Landlord. 6. Landlord shall have the right to perform, on behalf of and for the account of Tenant any of Tenant's work which Landlord deems necessary to be done on an emergency basis or which pertains to structural components, the general utility systems for The Project, roof and exterior wall penetrations, or the erection of temporary barricades and temporary signs, during construction for the period following the Opening of The Project for business. Landlord will provide such work at Tenant's expense. 7. Tenant's Work shall be subject to the inspection and approval of Landlord and Landlord's Architect as to compliance with Tenant's approved plans and standards of merchantability, provided that Landlord and Landlord's Architect shall use its commercially reasonable efforts to insure that its work does not interfere with Tenant's Work. 8. Tenant shall pay or reimburse Landlord for all costs incurred by Landlord (including deposits) for all utility meters for the Leased Premises. 9. Upon the completion of the Tenant's Work, all facilities shall be in full use without defects. Exhibit D, Rough Shell 5/1/98 Page 14 *** Confidential Treatment Requested 79 10. All work performed by Tenant shall be performed so as to cause no interference with other Tenants and the construction and operation of The Project. Tenant will take all precautionary steps to protect its facilities and the facilities of others affected by Tenant's Work and properly police same. Construction equipment and materials are to be located within the Leased Premises and truck traffic is to be routed in and from the site, all as directed by Landlord and so as not burden the construction and operation of The Project. 11. Upon and from the completion of Tenant's Work in the Leased Premises and acceptance by Landlord's Architect, a minimum one-year warranty of all work, materials, and equipment shall be provided to Landlord by Tenant, to the extent the same are received by Tenant from its contractors and/or suppliers. 12. Landlord shall have the right to stop Tenant's Work whenever necessary to obtain compliance with applicable building and safety codes or the approved Store Working Drawings and Specifications. 13. Tenant and its contractors shall comply with the guidelines for Tenant work procedures and temporary construction facilities set forth in the Tenant Handbook, and Landlord's Construction Rules and Regulations which may be issued from time to time. 14. Landlord shall have the right to order any Tenant or Tenant's contractor who willfully violates any of the above requirements to cease work, and to remove himself and his equipment and employees from The Project. C. TEMPORARY SERVICES AND FACILITIES DURING CONSTRUCTION 1. Utility costs or charges for any service to the Leased Premises shall be the responsibility of Tenant from the date Tenant commences work or is obligated to commence work, whichever is earlier. 2. If necessary, Tenant will provide temporary heat for the Leased Premises during construction. No open burners are permitted and only electricity must be used for temporary heat. 3. Temporary Electrical Services. If electrical service is not available in the Leased Premises during construction, Landlord shall provide electrical service in an area designated by the Landlord. Tenant shall request, in writing, permission to connect temporary lines to the power source for service to the Leased Premises. Tenant shall reimburse Landlord for the Temporary Electric Service's. 4. Temporary Trash Removal. During initial construction, fixturing and stocking, Landlord shall provide trash removal service from the service areas. It shall be Tenant's responsibility to break boxes down and place trash daily in the containers provided. Trash accumulation will not be permitted overnight in the Leased Premises, mall or service/exit corridors. Tenant shall not allow trash to accumulate within the Leased Premises nor shall Tenant place any trash in the service/exit corridor or mall areas adjacent to the Leased Premises. Tenant shall reimburse Landlord for the Temporary Trash Removal. The period shall start with the date the Tenant starts construction in its premises and ends with the date the Tenant opens for business. In addition, Tenant shall pay any costs incurred by Landlord in removing trash from areas in and around the Leased Premises. Landlord's decision as to which Tenant is Exhibit D, Rough Shell 5/1/98 Page 15 80 responsible for trash left outside the Leased Premises will be reasonable and equitable, and Landlord's decision will be final. 5. PLANS REVIEW/TENANT COORDINATION. Landlord or its architect and/or engineer shall review Tenant's plans and specifications for compliance with the provisions of this Exhibit D and the Tenant Handbook. In addition, Landlord shall assign a Tenant Coordinator(s) to work with Tenant and Tenant's Architect, Engineer and contractor for the design and construction of the Leased Premises. Tenant shall reimburse Landlord for such plan review and tenant coordination as part of the Temporary Charges provided for in C.9. 6. TEMPORARY STOREFRONT. If Tenant is not open for business in the Leased Premises and Landlord's Retail Development is open, or if, in Landlord's sole judgment, Landlord determines that a temporary storefront is necessary so as not to disrupt the construction, opening or operation of any portion of The Project, then Landlord shall install, at Tenant's expense, for Tenant's use during construction a full height temporary barricade on the storefront lease line. Tenant shall reimburse Landlord for the temporary storefront. Upon completion of Tenant's construction and fixturing in the Leased Premises, Tenant shall remove, disassemble and dispose of such temporary storefront. 7. COMING SOON SIGN. If during Tenant's initial construction, fixturing and merchandise stocking, The Project is open (or shall open) for business, Landlord will provide and install, following the earlier to occur of (a) erection of the initial construction barricade, or (b) completion of the storefront for the Leased Premises, a "coming soon" sign on the front (barricade or storefront, as the case may be) of the Leased Premises. Tenant shall reimburse Landlord for providing such sign. 8. SUITE NUMBER AND TENANT-TRADE NAME. Landlord shall furnish and install suite number and Tenant trade name sign adjacent to Tenant's exterior and/or interior rear exit door(s) in accordance with Landlord's standard. Landlord shall also install suite number on Mall storefront. Tenant shall reimburse Landlord for this service. 9. The Charges for Temporary Services and Facilities as described in this subsection C shall be: Landlord's Charge [***] psf 10. The charges identified in C.9 above shall be due and payable within thirty (30) days after billing by Landlord. Landlord may decline at Landlord's sole judgement to proceed with work at Tenant's expense until Landlord's receipt of payment thereof. D. COST PLUS ADMINISTRATION FEE WORK BY LANDLORD IN PREMISES AT TENANT EXPENSE The following work in Tenant's premises shall only be accomplished by Landlord in Landlord's building. The Tenant shall contract with the Landlord to furnish the following work items if required by Tenant's store design at Landlord's actual costs plus ten percent [***] for administration, and the cost of any such item of work shall be payable to Landlord in full within [***] days after receipt of invoice therefore. 1. Openings in rated demising partitions and exterior wall, provided such opening/penetrations have been approved in advance by Landlord in writing. Exhibit D, Rough Shell 5/1/98 Page 16 *** Confidential Treatment Requested 81 2. Roof Openings. With Landlord's prior written permission, roof openings for any purpose shall include supporting structures, curbs, roof patching and flashing. Tenant shall be responsible for installation of ducts, pipes, equipment and counter flashing. Landlord reserves the right to refuse to permit the furnishing of any openings which exceed the capability of the structural system or which in Landlord's opinion would have an appearance detrimental to Landlord's Building. 3. Plumbing Service. With Landlord's written permission, additional sanitary sewer or relocation of sanitary sewer. 4. Electric Service. With Landlord's written permission, additional electric service or relocation of electrical service. 5. Storefront. With Landlord's prior written permission, changes to Landlord furnished interior and exterior storefront including but not limited to additional doors and relocation of doors. 6. Landlord's Labor (including overtime, demurrage and waiting time) and equipment used in any work Landlord performs for Tenant. 7. Architectural and/or Engineering fees incurred Landlord as a result of Tenant requesting any services in excess of the standard review services described in Section 8. Building Department Expeditor Fees incurred by landlord in expediting Tenant Building Permit, Controlled Inspection and other requirements for temporary and permanent Certificates of Occupancy on the building and the Tenant Premises. 9. Building Permits, Microfilming and Documentation Fees paid by Landlord on behalf of the Tenant in expediting the approval of Building Permits and other approvals of Agencies having jurisdiction. E. CERTIFICATE OF ACCEPTANCE Upon the completion of Tenant's construction and fixturing work within its Leased Premises Tenant shall so notify Landlord in writing. Landlord, upon receipt of such notice from Tenant, shall issue a Certificate of Acceptance of said premises provided, however, that the issuing of such a Certificate shall be contingent upon all of the following: 1. The satisfactory completion by Tenant of the work to be performed by Tenant under this Exhibit D, in accordance with good workmanship and the approved Construction Documents and Specifications therefor and receipt of a certificate of occupancy from the local jurisdiction. 2. Receipt by Landlord from Landlord's Architect of a premises acceptance letter. This letter can be issued only upon Tenant's correction of the deficiencies noted by Landlord or Landlord's Architect upon any inspection of Leased Premises. 3. Tenant shall have furnished Landlord with waivers of liens and sworn statements, or satisfactory substitutes for same, in such form as may be required by Landlord, and releases of notices of commencement (if any) from all contractors, subcontractors and other person performing labor and/or supplying materials in connection with such work showing that all of said persons have been compensated in full. 4. Submission by Tenant to Landlord of a detailed breakdown of Tenant's final and total construction costs together with receipted invoices showing payment thereof. Exhibit D, Rough Shell 5/1/98 Page 17 82 5. Exhibit D, Rough Shell 5/1/98 Page 18 83 SPECIALTY TENANT LEASE EXHIBIT EXHIBIT E SIGN CRITERIA 1. Tenant is required to identify the Leased Premises by a sign on the storefront. The general criteria for the design of Tenant's signage ("sign criteria") is set forth below. More specific sign criteria for The Project as a whole and certain tenants in certain designated locations such as in food courts and mall courts is set forth in the Tenant Handbook, (Tenant Design Criteria) hereinafter referred to as "Tenant Handbook". 2. Costs incurred in design, construction and installation, as well as maintenance shall be the responsibility of Tenant. The Tenant must obtain permits to erect and connect the sign from local community officials before the sign is installed. 3. It is intended that the signage be developed in an imaginative and varied manner so as to enhance the architectural treatment of the facade in general and be harmonious with the overall architecture and thematic consideration of the mall in particular. Although current signage practices of the Tenant shall be considered, they will not govern the signs to be installed. 4. Approval of signs shall be solely the right of the Landlord, and Tenant must submit all candidates for signage to the Landlord for approval in the form of working drawings before manufacturing or further assembly begins. Submission shall be to Landlord, in the form of shop drawings with all pertinent details necessary for construction and installation included. Submission shall be a minimum of ninety (90) days before proposed installation date, and Tenant is expected to have sign manufactured and ready for installation within forty-five (45) days of approval by Landlord or Landlord's agent before installation, at project site. Landlord reserves the right to reject signs not conforming to approved drawings regardless of stage of completion or installation. 5. The Tenant's storefront sign shall occupy an area of the storefront facade designated in the Tenant Handbook and/or the Lease Outline Drawing, and/or by the Project Architect. The area shall total no more than eight (8) square feet for up to a thirty foot (30') storefront; and twelve (12) square feet for up to a forty foot (40') storefront; sixteen (16) square feet for up to a fifty foot (50') storefront. The design of the storefront is to be considered by Tenant in the development of signage. In general, signs will be installed in the designated sign area above the entry door. Variation of this criteria shall be subject to Landlord's prior written approval, which shall be solely at the discretion of Landlord. No sign shall be installed closer than three feet (3'-0") from the end of the Tenant storefront on both sides. 6. Signage shall be limited to the name of the store. Additional elements will be considered as long as they enlarge, expand, or otherwise clarify the name of the store. 7. Signs which are comprised of unaltered sans serif typefaces are, in general, unacceptable, as will be signs or type faces which are difficult to read. 8. The use of corporate identifications or logos will be considered, but prior use or identification with a particular sign or logo will not govern Landlord's approval for Tenant use. Tenant agrees that Landlord's rejection of particular logo or sign shall not constitute a violation of Lease by Landlord. In the case of conflict between the sign criteria and other provisions of the Lease, Tenant agrees that the sign criteria and Landlord's discretion shall prevail. Tenant shall not hold Landlord liable for damage or injury as a result of the sign criteria or the implementation of the sign criteria by agreement of both parties. Exhibit E, Sign Criteria 5/1/98 Page 1 84 9. A variety of fabrication materials shall be considered, however construction shall be guaranteed for a period of at least five (5) years against peeling, cracking, crazing, blistering, or any other degradation of surface or materials. Tenant shall obtain, from manufacturer of the sign, a five (5) year warranty covering the condition of finished surfaces, construction and operation of sign. 10. All electrical signs shall carry approval of Underwriters Laboratories (U.L.) on all component parts and on the complete display. Maximum brightness of lit signs shall be fifty foot (50') Lamberts measured one foot (1') from the source of light. No blinking, moving or flashing lights shall be allowed. Surface lighting may be reduced in order to accentuate lit signage. There will be no special advantage in terms of visibility of internally lit over externally lit signs. 11. No exposed raceways, ballast boxes or electrical transformers will be permitted except as required to be exposed by local building codes. 12. Landlord shall not be responsible for signs improperly installed or manufactured, and those signs not meeting code requirements shall, at Tenant's expense, be removed and built to code specifications before reinstallation. Signs meeting Landlord's sign criteria, but not meeting local code requirements, shall be the responsibility of Tenant, and Tenant agrees not to hold Landlord liable for costs due to conflict between these sign criteria and code, should such conflict exist under present code or due to future changes in code. Tenant must make required structural modifications at Tenant's expense to Landlord's structure. Also, Landlord's engineer to approve structural modifications. 13. Notwithstanding anything herein contained to the contrary, Tenant shall have the right to replace any existing sign(s) of said Tenant as long as such replacement meets the sign criteria listed within this document, the Tenant Handbook, and is accompanied by Landlord's prior written approval prior to installation. 14. No other signs of any type or purpose, permanent or temporary, shall be permitted to be displayed upon the facade, windows or within the dimension prescribed in Section 4.03 of the Lease, behind an unobstructed window unless and until such sign has been submitted to Landlord and has received Landlord's prior written approval. Landlord shall be the sole judge of what constitutes an unobstructed window. Removal of signage of any type installed without Landlord approval shall be mandatory before said sign shall be considered by Landlord for installation. 15. Landlord shall not be required to approve signage for any reason other than conformance with the sign criteria in this Exhibit E and the Tenant Handbook. Scheduled opening dates and other time constraints shall not be reason to approve signage which Landlord otherwise would consider unsuitable for manufacture or installation. Tenant agrees not to hold Landlord liable for any damage caused to Tenant due to signage or lack of signage as a result of Landlord's insistence upon conformance with the sign criteria or the Landlord's withholding of approval of submitted signage. 16. In the event that Tenant is unable to supply satisfactory signage design by the fixturing period of Tenant's store, Landlord shall have the option of providing such design. In such a case, Tenant agrees to pay prior to store opening all expenses involved in the design, manufacture, and installation of said signage plus [***] cost of administration, and Tenant agrees to waive rights to reject said signage and agrees not to oppose installation of said signage. 17. Signage indicated on drawings and mechanicals submitted for reasons other than signage evaluation (as described in this Exhibit E and the Tenant Handbook) shall not constitute a signage submittal. No approval of such drawings and mechanicals shall constitute approval of signage. Exhibit E, Sign Criteria 5/1/98 Page 2 *** Confidential Treatment Requested 85 18. Food Court Tenants shall be permitted to install one menu board within the Leased Premises subject to Landlord's prior design review and written approval. Refer to the Tenant Handbook for type, size and location allowed. 19. Procedure for Submittal and Approval of Sign Drawings: a. Approval of store design drawings or working drawings and specifications for Tenant's Leased Premises does not constitute approval of any sign work. Approval of signs shall be solely the right of Landlord, and Tenant must submit all candidates for signage to the Landlord for approval in the form of sign designer's working drawings and/or manufacturer's shop drawings before manufacturing or assembly begins. Drawings by Tenant, is architect or anyone not qualified to produce signage drawings are not acceptable. At the same time as Tenant's initial submission of store working drawings and specifications to Landlord, Tenant shall submit one (1) set of reproducible prints and specifications and three (3) sets of blueprints, along with samples of all material and colors, for all its proposed sign work. The drawings shall clearly show location of sign on storefront elevation drawing, size and stroke dimensions, graphics, color, construction, and attachment details. Full information regarding electrical load requirements and brightness in footcandles shall also be included. Landlord reserves the right to reject signs not conforming to approved drawings regardless of state of completion or installation. b. As soon as practical after receipt of the sign drawings, Landlord shall return to Tenant one (1) set of such sign drawings with the suggested modifications and/or approval. If, upon receipt of approved sign drawings bearing Landlord's comments, Tenant wishes to take exception thereto, Tenant may do so in writing, by certified or registered mail addressed to Landlord within seven (7) days from the date of Tenant's receipt of such sign drawings. Unless such action is taken, it will be deemed that all comments made by Landlord on the sign drawings are acceptable to and approved by Tenant. c. If sign drawings and specifications are returned to Tenant with comments, but not bearing approval of Landlord; said drawings and specifications shall be revised immediately by Tenant and resubmitted to Landlord for approval within seven (7) days of their receipt by Tenant. Exhibit E, Sign Criteria 5/1/98 Page 3 86 EXHIBIT F COMMENCEMENT AND EXPIRATION DATE DECLARATION LANDLORD: ___________________________________________________________________ TENANT: ___________________________________________________________________ LEASE DATE: _________________________________________________________________ STORE NUMBER: _______________________________________________________________ Landlord and Tenant acknowledge and agree that the Commencement Date of the above referenced Lease is ________________________ and the Expiration Date of the Lease is _________________________________.
LANDLORD: TENANT: By: ___________________________ By: ___________________________ Its: __________________________ Its: __________________________ Date: _________________________ Date: _________________________
87 EXHIBIT H AGREEMENT OF SUBORDINATION NON-DISTURBANCE AND ATTORNMENT THIS AGREEMENT is made this ________ day of ___________, 199_, by and among OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership having an office c/o The Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, VA 22209 ("Lessor"), SILICON ENTERTAINMENT, INC., a California corporation, having an office at 210 Hacienda Avenue, Campbell, California 95008 ("Lessee") and ______________ having offices at _________________ ("Agent"), as agent for, and as co-lender with such other lenders (collectively, the "Lenders") under the credit facility secured by the hereinafter described Deed of Trust, their successors and assigns or affiliate. WITNESSETH: WHEREAS, Lenders have provided financing for OPRY MILLS shopping center in Nashville, Tennessee (the "Property"); WHEREAS, under a certain lease (the "Lease") Lessor did lease, let, and demise a portion of the Property (such portion of the Property is hereinafter called the "Premises") to Lessee: WHEREAS, Lenders have or will become the owners of indebtedness secured by, among other things, a deed of trust, granted by Lessor to _______, trustee, for the benefit of Agent, on behalf of the Lenders, as beneficiary (the "Deed of Trust"); NOW, THEREFORE, in consideration of the covenants, terms, conditions and agreements herein contained, and in consideration of other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: 1. The Lease and all rights and liens created thereby shall be subject and subordinate in all respects to the Deed of Trust and the lien created thereby, to any advancements made thereunder, and to any increases, extensions, modifications or renewals thereof. 2. So long as Lessee is not in material default under the Lease beyond any applicable grace or cure period, Agent, on behalf of the Lenders, hereby covenants to Lessee that in the event Lenders obtain title to the Premises, either by foreclosure or by deed in lieu of foreclosure, and thereafter obtains the right of possession of the Premises, that the Lease will continue in full force and effect, and Lenders shall recognize the Lease and Lessee's rights thereunder, subject to the provisions of this Agreement. 3. Lessee agrees that from and after the date hereof in the event of any act or omission by Lessor under the Lease which would give Lessee the right, either immediately or after the lapse of a period of time, to terminate the Lease, or to claim a partial or total eviction, Lessee will not exercise any such right (a) until it has given written notice of such act or omission to Agent by certified mail, return receipt requested, and (b) until and unless Lenders fail to remedy such act or omission within thirty (30) days for any act or omission which can be cured by the payment of money, or in the case of any other act or omission, as long as necessary to remedy such act or omission, provided (i) Lenders cause such remedy to be commenced within thirty days, and (ii) Lenders cause completion of such remedy to be pursued with due diligence following such giving of notice and following the time when Lenders shall have become entitled under the Deed of Trust to remedy the same. It is specifically agreed that Lessee shall not, as to Lenders, be entitled to require cure of any such default which is personal to Lessor, and therefore not susceptible of cure by Lenders, and that no such uncured default shall entitle Lessee to exercise any rights under the Lease with respect to Lenders. 4. That in the event the interests of Lessor under the Lease shall be transferred to Lenders or Agent or any nominee, designee, assignee of Lenders or any purchaser at foreclosure sale (Lenders, Agent or such other party referred to as a "Lender Party") by reason of foreclosure, deed in lieu of foreclosure, or similar transaction, Lessee hereby covenants and agrees to make, for the benefit and reliance of Lenders, full and complete attornment to the Lender Party as substitute lessor upon the same terms, covenants and conditions as provided in the Lease, except to the extent otherwise set forth herein. 5. The provisions of this Agreement are real property covenants running with the Property, and shall be binding upon and inure to the benefit of the respective parties hereto and their respective heirs, executors, administrators, beneficiaries, successors and assigns, including without limitation any Lender Party. 88 6. Notwithstanding anything contained herein to the contrary, or anything to the contrary in the Lease, Lenders and any Lender Party shall not be: (a) Liable for any act, omission or the breach of any warranty of Lessor, including without limitation, any delay in opening the Project or the Premises for occupancy and any failure to complete the construction of the Premises or the Project or any improvements therein; (b) Subject to any offsets, claims of defenses which Lessee might have as Lessor except for Tenant's offset and deduction rights as provided in Section 3.3 of the Lease; (c) Required or obligated to credit Lessee with any rent for any period beyond the then current rental period which Lessee might have paid Lessor; (d) Bound by any amendments or modifications or voluntary termination of the Lease made without Lender's prior written consent, other than exercise of rights, options or elections contained in the Lease; or (e) Bound to be liable for refund of any security deposit except to the extent actually received by Lenders or a Lender Party. 7. Lessee shall not, without the express written consent of Lenders: (a) Cancel, terminate or surrender the Lease, except as provided therein or in any modification or amendment specified herein or hereafter consented to by Lenders; (b) After the date hereof, enter into any agreement with Lessor or its successors or assigns, which grants any concession with respect to the Lease or which materially compromises, discounts or otherwise reduced the rent called for thereunder; or (c) After the date hereof, prepay rent more than one (1) month in advance. 8. Lessor and Lessee hereby jointly and severally agree for the benefit and reliance of Lenders, that neither this Agreement, nor any assignment of the Lease for collateral purposes, nor anything to the contrary in the aforesaid Lease or in any modifications or amendment thereto shall, prior to Lenders' acquisition of Lessor's interest in and possession of the Property (and thereafter, only to the extent of the Property and not personally), operate to give rise or create any responsibility or liability upon Agent or Lenders for the control, care, management or repair of the Property by any party whatsoever or for any dangerous or defective condition of the Property; or impose responsibility for the carrying out by Agent or Lenders of any of the covenants, terms and conditions of the Lease or any modification or amendment whether or not hereafter consented to by Lenders, or for any negligence in the management, upkeep, repair or control of said Property resulting in loss, injury or death to any lessee, licensee, invitee, guest, employee, agent or stranger. Notwithstanding anything to the contrary in the Lease, Lenders, their successors and assigns (and any Lender Party, as appropriate), shall be responsible for performance of only those covenants and obligations of the Lease accruing after the Lenders', their successors' and assigns' (or Lender Party's, as appropriate), acquisition of Lessor's interests in and possession of the Property; and in the event that Lenders or any Lender Party shall acquire title to the Premises or the Property, Lenders or any Lender Party shall have no obligation, nor incur any liability, beyond Lenders' or any Lender Party's then equity interest, if any, in the Property or the Premises. 9. Lessee covenants and agrees to make rental payments according to the terms of such Assignment of Leases upon written demand by Agent in the event of any default (as described therein). Lessor consents to payments being so made. 10. Lessee agrees that this Agreement satisfies any condition or requirement in the Lease relating to the granting of a non-disturbance agreement. 11. Lessee agrees to execute and deliver from time to time, upon the request of Lessor or of any holder(s) of any of the indebtedness or other obligations secured by the Deed of Trust, a certificate regarding the status of the Lease in the form set forth in Schedule A attached hereto and incorporated herein by reference for all purposes. 12. THIS AGREEMENT AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE AND APPLICABLE UNITED STATES FEDERAL LAW. 89 13. If any bankruptcy proceedings shall hereafter commence with respect to Lessor, and if the Lease is rejected by the trustee pursuant to Section 365 of the United States Bankruptcy Code, Lessee agrees with Lenders (i) not to treat such lease as terminated or to execute a new lease with Lenders or any Lender Party on the same terms as the Lease, and (ii) to remain in possession of the Premises. 14. Any notices hereunder shall be effective upon mailing by certified mail, return receipt requested, or delivery by Federal Express addressed to the recipient at its address set forth in the preambles hereof or as to each party, to such other address as the party may designate by a notice given in accordance with the requirements contained herein. 15. This Agreement contains the entire agreement between the parties hereto. This instrument may be executed in multiple counterparts, all of which shall be deemed originals and with the same document. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this document to physically form one document. EXECUTED as of the date first above written. LESSOR: OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership By: OPRY MILLS, L.L.C., a Delaware limited liability company, its general partner By: THE MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, its manager By: THE MILLS CORPORATION, a Delaware corporation, its general partner By: __________________________________________________ Judith Berson Its: Executive Vice President LENDER: ________________________________, as Agent By: __________________________________________________ Authorized Signatory LESSEE: SILICON ENTERTAINMENT, INC., a California corporation By: __________________________________________________ Its: __________________________________________________ 90 ACKNOWLEDGMENT OF LANDLORD COMMONWEALTH OF VIRGINIA ) ) ss. COUNTY OF ARLINGTON ) On this ____ day of ______, 19__, before me personally appeared JUDITH BERSON, to me known to be the person who executed the foregoing Agreement of Subordination, Non-Disturbance and Attornment and acknowledged before me that she was duly authorized and did execute same on behalf of OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership. _______________________________ Notary Public My Commission expires: ________ ACKNOWLEDGMENT OF CORPORATE TENANT STATE OF ___________________ ) ) ss. CITY/COUNTY OF _____________ ) On ________________, 19__, before me ________________, a Notary Public in and for said state aforesaid, personally appeared ________________, as ________________ and ________________, as ________________ of SILICON ENTERTAINMENT, INC., a California corporation, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. _______________________________ Notary Public, county, My Commission expires: ________ [Notarial Seal] ACKNOWLEDGMENT OF LENDER STATE OF ___________________ ) ) ss. CITY/COUNTY OF _____________ ) On this __ day of _______________, 19__, before me ________________, notary public, personally appeared ________________, the ________________ of ________________, proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity and that by his/her signature on the instrument the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal _________________________________ Notary Public My Commission expires: _________ 91 EXHIBIT H-1 TENANT ESTOPPEL CERTIFICATE TO: _________________, its successors and assigns or an affiliate (referred to herein as "LENDER"), for itself and as agent for one or more co-lenders: 1. The undersigned is the Lessee under that certain Lease together with all amendments, modifications and supplements thereto (the "Lease") by and between OPRY MILLS LIMITED PARTNERSHIP, a Delaware limited partnership, as Lessor and SILICON ENTERTAINMENT, INC., a California corporation, having an office at 210 Hacienda Avenue, Campbell, California 95008, as Lessee, covering those certain premises described therein and located at Opry Mills, Nashville, Tennessee ("Premises"). 2. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Lease. 3. Except for any amendments, modifications and supplements described in Schedule A, the Lease has not been modified, changed, altered or amended in any respect and is the only Lease or agreement between the Lessee and Lessor or its agents affecting the Premises. 4. Lessee has made no agreements with Lessor or its agents or employees concerning free rent, partial rent, rebate of rental payments or any other type of rental concession except as set forth in the Lease. 5. No rent has been prepaid for more than one (1) month. 6. The Lease is in full force and effect and Lessee has no right to terminate the Lease (other than by reason of default by Lessor). As of the date hereof, Lessee is entitled to no credit, no free rent and no offset or deduction in rent, except as set forth in the Lease. 7. The Lessee and Lessor are not in default under the Lease and, to the best of Lessee's knowledge, there is no event which with notice or passage of time would constitute a default by Lessee or Lessor under the Lease. 8. Lessor has and is under no obligation to Lessee with respect to payment of the cost of tenant improvement work to the Premises, except as specifically set forth in the Lease. 9. The Lease does not contain and the Lessee does not have any outstanding options or rights of first refusal to purchase the Premises or any part thereof or the real property of which the Premises are a part. 10. No actions, whether voluntary or otherwise, are pending against the Lessee under the bankruptcy laws of the United States or any state thereof. 11. Any notices sent to Lender or its affiliates shall be sent certified mail, return receipt requested and addressed to ____________, at its offices at ______________________________. 12. This certification is made knowing that Lender relies upon the truth of this certification in making certain fundings. Dated as of this ______ day of ____________________, 199_. SILICON ENTERTAINMENT, INC., a California corporation By: _________________________________________________ Its: ________________________________________________ EX-10.24 26 AGREEMENT OF LEASE BETWEEN MALL OF GEORGIA 1 Exhibit 10.24 THE CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT AGREEMENT OF LEASE BETWEEN MALL OF GEORGIA, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY AND SILICON ENTERTAINMENT, INC. D/B/A "NASCAR SILICON MOTOR SPEEDWAY" OR "SILICON MOTOR SPEEDWAY" 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 Definitions....................................................................................... 1-1 ARTICLE 2 Construction ..................................................................................... 2-1 Section 2.1 Tenant's Work...................................................................... 2-1 Section 2.2 Performance of Tenant's Work....................................................... 2-1 Section 2.3 Remedies for Tenant's Failure or Delay to Submit Plans or Perform Work............................................................... 2-2 Section 2.4 Ownership of Improvements.......................................................... 2-2 Section 2.5 Failure to Open or to do Business.................................................. 2-2 Section 2.6 Remodeling of Premises............................................................. 2-2 ARTICLE 3 Rent ............................................................................................. 3-1 Section 3.1 Payment............................................................................ 3-1 Section 3.2 Fixed Rent......................................................................... 3-1 Section 3.3 Percentage Rent.................................................................... 3-1 Section 3.4 Tax Rent........................................................................... 3-3 Section 3.5 Common Area Rent................................................................... 3-5 Section 3.6 Additional Rent.................................................................... 3-8 Section 3.7 Rent for a Partial Month........................................................... 3-8 Section 3.8 Late Charges and Interest.......................................................... 3-8 Section 3.9 Taxes.............................................................................. 3-8 ARTICLE 4 Common Areas ..................................................................................... 4-1 Section 4.1 Common Areas....................................................................... 4-1 ARTICLE 5 Landlord's Additional Covenants................................................................... 5-1 Section 5.1 Repairs by Landlord................................................................ 5-1 Section 5.2 Quiet Enjoyment.................................................................... 5-1 ARTICLE 6 Tenant's Additional Covenants..................................................................... 6-1 Section 6.1 Affirmative Covenants.............................................................. 6-1 Section 6.2 Negative Covenants................................................................. 6-8 ARTICLE 7 Destruction: Condemnation........................................................................ 7-1 Section 7.1 Fire or Other Casualty............................................................. 7-1 Section 7.2 Eminent Domain..................................................................... 7-2 ARTICLE 8 Defaults and Remedies............................................................................. 8-1 Section 8.1 Bankruptcy, Insolvency............................................................. 8-1 Section 8.2 Default............................................................................ 8-1 Section 8.3 Remedies of Landlord............................................................... 8-2 Section 8.4 Waiver of Trial by Jury: Tenant Not to Counter-Claim............................... 8-3 Section 8.5 Holdover by Tenant................................................................. 8-3
i 3 Section 8.6 Landlord's Right to Cure Defaults.................................................. 8-4 Section 8.7 Effect of Waivers of Default....................................................... 8-4 Section 8.8 Security Deposit................................................................... 8-4 ARTICLE 9 Additional Provisions............................................................................. 9-1 Section 9.1 Notices from One Party to the Other................................................ 9-1 Section 9.2 Brokerage.......................................................................... 9-1 Section 9.3 Estoppel Certificates.............................................................. 9-1 Section 9.4 Applicable Law and Construction.................................................... 9-1 Section 9.5 Relationship of the Parties........................................................ 9-1 Section 9.6 Limitations on Liability........................................................... 9-2 Section 9.7 Landlord's Entry Rights............................................................ 9-2 Section 9.8 Subordination...................................................................... 9-3 Section 9.9 Construction on Adjacent Premises or Buildings..................................... 9-4 Section 9.10 Mall Expansion..................................................................... 9-4 Section 9.11 Short Form Lease................................................................... 9-6 Section 9.12 Binding Effect of Lease............................................................ 9-6 Section 9.13 Effect of Unavoidable Delays....................................................... 9-7 Section 9.14 No Oral Changes.................................................................... 9-7 Section 9.15 Executed Counterparts of Lease..................................................... 9-7 Section 9.16 Landlord's Liability............................................................... 9-7
ii 4 AGREEMENT OF LEASE made as of Sept. 23rd, 1999 between MALL OF GEORGIA, L.L.C., a Delaware limited liability company, having its principal place of business at 115 West Washington, Indianapolis, Indiana 46204 (the Landlord) and SILICON ENTERTAINMENT, INC., d/b/a "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway", a California corporation, having its principal place of business at 210 Hacienda Avenue, Campbell, California 95008, (the Tenant). RECITAL Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord, the Premises, for the Term, commencing on the Commencement Date, subject to the terms, covenants, conditions and provisions of this Lease. If the Commencement Date is not the first (1st) day of a month, Rent for the month in which the Commencement Date occurs shall be prorated to the end of the month, the first (1st) full monthly installment of Rent shall be due on the first (1st) day of the next month and after the expiration of the number of years in the Term, the Term shall expire on the last day of the same month in which the Commencement Date of the Term occurred, it being the intention of the parties that the Term expire on the last day of a month. If there shall be any change in the Floor Space of the Premises, Landlord and Tenant shall execute and deliver a written statement reflecting such change or changes, in no event, however, shall the Size of the Premises or the amount of Lease line frontage on the enclosed mall be materially reduced without consent of Tenant. Said statement upon execution and delivery shall be deemed to be a part of this Lease. 5 ARTICLE 1 DEFINITIONS Whenever used in this Lease, the following terms shall have the meanings indicated below. Premises Store No. 2068, Second Level, as shown on Exhibit B. Term Ten (10) Years Commencement Date The earlier of (i) the date Tenant opens for business at the Premises, and (ii) the later of (a) the Grand Opening of the Shopping Center, or (b) the expiration of Tenant's Work Period. Size of Premises 5,895 square feet Fixed Rent [***] per year for each of the first (1st) through [***] years, and [***] per year for each of the [***] through [***] years. Environmental Charge The initial amount of [***] per year, subject to adjustment as provided in Exhibit C. Percentage Rent Rate [***] Percent Promotion Fund Charge [***] per year initially or such other greater amount as shall be determined pursuant to Section 6.1 L. Security Deposit None Tenant's Work Period The period of [***] days after the date possession of the Premises is made available to Tenant in the condition required hereby. Tenant's Trade Name "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway" Guarantor None Broker Russell Friend Blatteis Realty Company 233 South Beverly Drive
- ---------- *** confidential treatment requested 1-1 6 Beverly Hills, CA 90212 Construction Barrier Fee Tenant shall only be required to erect a construction barrier in the event Tenant is not open for the Grand Opening. In the event that a construction barrier is required, Tenant shall be permitted to construct its own barrier, at its sole cost and expense and such barrier must conform to the requirements of the Shopping Center Criteria and all Governmental Authorities. Construction Deposit None Plan Review Fees None Number of Department Stores Four (4) Percentage of Advertising None Required Permitted Use Tenant shall use the Premises for the use set forth below and for no other purpose: The premises shall be occupied and used by Tenant for the purpose of conducting therein the business of an auto racing entertainment center and other related retail uses. The entertainment facility may include a combination of driving simulators, but shall not include coin operated machines as typically found in conventional video arcade game room type operations. Incidental thereto, Tenant shall be permitted to use the Premises for the display and retail sale of auto racing and other auto racing themed or related entertainment merchandise. Tenant shall be permitted to sell some concessions from the Premises as mutually agreed to from time to time by Landlord and Tenant. Tenant shall not use or permit or suffer to use of the Premises for any other business or purpose. Tenant shall have the right, in an area not to exceed [***] percent of the Floor Space of the Premises to sell snack food items including, but not limited to popcorn and hot and cold non-alcoholic beverages. Landlord hereby represents and warrants to Tenant that Tenant's use of the Premises as contemplated in this paragraph does not violate any exclusivity clause or other agreement between Landlord and any other party, including any other tenant of the Shopping Center and Landlord shall indemnify, defend, protect and hold harmless Tenant from any loss, liability, cost,
- ---------- *** confidential treatment requested 1-2 7 expense, judgment, action or claim of any such party arising from the inaccuracy of such representation and warranty. Tenant shall have the right to temporarily prohibit or restrict access to the Premises by members of the public from time to time for conducting group sales or promotional activities. In connection with such group sales activities, Tenant may contract with private caterers to provide food and beverage service (including alcoholic beverage service) for the group sales customers. Provided they are not within [***] feet of the lease line, Tenant shall have the right to install up to [***] soft drink vending machines at the Premises. Additional Rent The Percentage Rent, Storage Rent, if any, Common Area Rent, Tax Rent and Taxes, Environmental Charge, Promotion Fund Charge and all other amounts, except Fixed Rent, payable by Tenant under this Lease. Affiliate Any Person which controls or is controlled by the Person in question or is controlled by the same Persons which shall then control the Person in question and any Person which is a member with the Person in question in a relationship of joint venture, partnership or other form of business association; the term "control" means, with respect to a corporation, the ownership of stock possessing, or the right to exercise, at least fifty (50%) percent of the total combined voting power of all classes of the controlled corporation, issued, outstanding and entitled to vote for the election of directors, whether such ownership be direct ownership or indirect ownership through another Person. Common Areas As defined in Section 4.1. Common Area Operating Costs As defined in Subsections 3.5 A (2) and 3.5 B (2). Common Area Rent As defined in Subsections 3.5 A (1) and 3.5 B (1). Department Store A retail store occupying not less than an aggregate of 50,000 square feet of Floor Space on one or more levels, for the sale in combination or solely, of a variety of goods and services such as wearing apparel, accessories, general merchandise, home furnishings, fittings, appliances, housewares, furniture, floor coverings and the like. Except for the purposes described in Section 3.2 and Subsection 6.1B, the term
- ---------- *** confidential treatment requested 1-3 8 "Department Store" shall be deemed to include any movie theatre complex or non-retail operation occupying the third (3rd) level of the Enclosed Shopping Center and any other building, improvement or structure, not devoted primarily to retail use, such as an office building or hotel/motel, unless same is deemed by Landlord not to be part of the Shopping Center. Enclosed Shopping Center That portion of the Shopping Center containing an enclosed mall and stores which front on said enclosed mall, as shown in orange on Exhibit A hereto. Floor Space The space available for occupancy by each tenant within the exterior faces of the walls between the tenant's premises and any Common Area or, if the tenant's premises are enclosed by one or more walls abutting leaseable space, the space within such exterior faces and the center of such walls; if the tenant's premises are not surrounded by walls, then the space within and up to the lease line of the premises shall be included in the computation. For the purposes of the definition, store fronts shall not be deemed to be walls. No deduction or exclusion shall be made from Floor Space otherwise computed by reason of stairs, elevators, escalators, interior partitions or other interior construction or equipment. Governmental Authority The United States, the state, county, city, town, village and any water, sewer or school or other district covering the area in which the Shopping Center is located, and any political subdivision thereof or any local public or quasi-public authority, agency, department, commission, board, bureau or instrumentality of any of them including, with respect to matters pertaining to insurance, boards of fire underwriters, rating bureaus and the like, to the extent they have power to impose conditions on the issuance of policies or the coverage thereof. Governmental Requirement Any law, ordinance, code, order, rule or regulation of any Governmental Authority. Gross Leaseable Area The aggregate of all Floor Space in the Shopping Center excluding Storage Space, if any, and excluding for the purposes of the computation of Tax Rent pursuant to Section 3.4., Floor Space which is part of either a parcel or improvement which is separately assessed for the purpose of assessment of Taxes, to the extent the Taxes thereon are paid by the tenant or occupant thereof.
1-4 9 Gross Sales As defined in Subsection 3.3B. Landlord The party named as Landlord herein until a sale, transfer or lease, and thereafter the Person or Persons, collectively, who shall, for the time being, be liable for the obligations of Landlord under the provisions of Subsection 9.16A of this Lease. Lease Year For the purposes of Percentage Rent only, the period of twelve (12) consecutive months from January 1 to December 31 of each year during the Term. If the date Tenant opens for business or the expiration of the Term does not coincide with the beginning or end of a Lease Year, the periods preceding or following the commencement or end of each full Lease Year, as the case may be, shall be deemed independent, partial Lease Years. Necessary Approvals Any permit, license, certificate or approval or other evidence of compliance with any Governmental Requirement necessary to the lawful occupancy of the Premises for the Permitted Use and the issuance of the insurance required to be carried by Tenant. Percentage Rent As defined in Subsections 3.3A and 3.3B. Person A natural person, firm, partnership, association, business trust or corporation, as the case may be. Rent The Fixed Rent and the Additional Rent. Retail Restriction Limit As defined in Subsection 6.2A. Shopping Center Mall of Georgia at Mill Creek, as outlined in green on Exhibit A hereto, located in Gwinnett County, Georgia, plus (i) any other parcels of land at any time designated by Landlord to be added thereto (but only so long as any such designation remains unrevoked) which are used for Shopping Center or related purposes, including, but not limited to, recharge or catch basins, drainage and detention ponds, sumps, access and circulatory roadways to and from public streets, parking, the furnishing to the Shopping Center of any utility, amenity or other service, shuttle transit to and from the Shopping Center, recreation areas for customers of the Shopping Center, or for any other improvement appropriate or related to the operation or functioning of the Shopping Center; together with (ii) all
1-5 10 present and future buildings on and improvements to any such parcels. Specialty Store A retail store occupying not less than an aggregate of 25,000 square feet of Floor Space on one or more levels. Storage Space Space not contained within any tenant's premises which is used solely for the storage of merchandise and other items. Tax Rent and Taxes As defined in Section 3.4. Tenant's Work As set forth in Sections 2.1 and 2.2. Village Area That portion of the Shopping Center containing stores which do not front on the enclosed mall, as shown in yellow on Exhibit A hereto. Exhibit A Shopping Center. Exhibit B Premises. Exhibit C Utilities. Exhibit D (optional) Food Court Area.
1-6 11 ARTICLE 2 CONSTRUCTION Section 2.1. Tenant's Work. Not later than the twentieth (20th) day after the execution and delivery of this Lease by Landlord, Tenant shall furnish to Landlord for Landlord's approval, in accordance with the Shopping Center Information Manual and Design Criteria, plans and specifications which shall provide for the complete remodeling (or finishing in the event the Premises have not been previously occupied) of the Premises. Within [***] days following the Commencement Date, Tenant shall pay to Landlord, a Plan Review Fee calculated in accordance with the fee schedule set forth in Article 1. Tenant agrees, at its sole cost and expense, to construct and make such improvements in the Premises in accordance with the approved plans and specifications. Tenant has inspected the Premises, is familiar with their condition and accepts same "as is" and in their present condition and Landlord shall not be obligated to do any further construction or to make any additional improvements in the Premises, except as may otherwise be expressly provided herein. Tenant understands that Landlord's approval of its plans and specifications is primarily for conceptual purposes and such approval shall not constitute a representation or warranty of any kind with respect thereto, including, without limitation, the cost of Tenant's Work, compliance with Governmental Requirements or suitability of design. Tenant acknowledges receipt of the Shopping Center Tenant Information Manual and Design Criteria, the provisions of which are incorporated herein by reference. Section 2.2 Performance of Tenant's Work. As soon as practicable after Landlord shall have approved Tenant's plans and specifications and possession of the Premises shall be made available to Tenant and Tenant shall have obtained all Necessary Approvals with respect to commencement of Tenant's Work, Tenant shall enter the Premises and shall proceed with due diligence and dispatch to make improvements and install fixtures and other equipment and a full stock of inventory therein, in accordance with the approved plans and specifications and all Governmental Requirements. Such work and installation shall not interfere with any work to be done by Landlord in other portions of the Shopping Center, shall be done with labor which is not incompatible with other labor employed at the Shopping Center without creating any conflict or work stoppage with, under or as a result of any labor agreement to which Landlord or its contractors may be a party, and in compliance with such rules and regulations as Landlord may reasonably make. Except for Landlord's negligence and willful acts (subject, however, to the waiver of subrogation elsewhere set forth in this Lease), Landlord shall have no responsibility or liability whatsoever for any loss of or damage to any fixtures or other equipment or inventory installed or left in the Premises, and Tenant's entry on and occupancy of the Premises shall be governed by and subject to all the provisions, covenants and conditions of this Lease other than those requiring payment of Rent. Prior to commencing any construction work in the Premises, Tenant shall (i) obtain a building permit and furnish a copy of same to Landlord and (ii) deposit with Landlord (or cause its general contractor to deposit) the Construction Deposit set forth in Article 1, said deposit (less any amount retained by Landlord as reimbursement for sums expended in performing Tenant's construction obligations) shall be returned upon completion of - ---------- *** confidential treatment requested 2-1 12 Tenant's Work including punchlist items and clean-up. Tenant shall also obtain and furnish to Landlord, to be delivered not later than the end of Tenant's Work Period, lien waivers from all contractors, subcontractors and materialmen, and all licenses, certificates and approvals with respect to work done and installations made by Tenant that may be required from the Governmental Authorities with respect to Tenant's Work, use and occupancy. During Tenant's Work Period and throughout the Term of this Lease, Tenant shall not do or suffer anything to be done whereby the Premises or the Shopping Center may be encumbered by a mechanic's lien, and Tenant shall, whenever any mechanic's lien is filed against the Premises or the Shopping Center purporting to be for labor, materials or services furnished or to be furnished to Tenant, discharge or remove the same of record within thirty (30) days after the date of filing. Notice is hereby given that Landlord shall not be liable for any labor, materials or services furnished or to be furnished to Tenant. Tenant shall complete Tenant's Work and open for business to the public not later than the expiration of Tenant's Work Period. Landlord and Tenant agree that the timely performance of Tenant's obligations under this Article 2 is a material inducement to the execution and delivery of this Lease by Landlord. Section 2.3. Remedies for Tenant's Failure or Delay to Submit Plans or Perform Work. If Tenant fails or omits to make timely submission to Landlord of any plans or specifications or delays in performing or completing Tenant's Work, such failure or delay shall constitute a default hereunder and shall be governed by Article 8 hereof. Section 2.4. Ownership of Improvements. All installations, alterations, additions or improvements upon the Premises, made by either party, including all heating, ventilating and air conditioning equipment, electrical and plumbing equipment and fixtures, carpeting or other floor covering and wall coverings, pipes, ducts, conduits, wiring, paneling, partitions, railings, mezzanine floors, galleries and the like, shall, unless Landlord otherwise elects by giving Tenant notice not less than thirty (30) days prior to the expiration or other termination of this Lease, become the property of Landlord and shall remain upon and be surrendered with the Premises as a part thereof at the expiration or sooner termination of the Term. None of the foregoing shall be deemed to include Tenant's trade fixtures, furniture and other personal property. Tenant shall not be required to remove at the end of the Term any installations made with Landlord's consent unless Landlord shall so specify at the time its consent is given. Section 2.5 Failure to Open or to do Business. The parties covenant and agree that because of the difficulty or impossibility of determining Landlord's damages, should Tenant (i) subject to Unavoidable Delays, fail to open for business within the number of days allowed for Tenant's Work Period, or (ii) at any time during the Term, vacate, abandon or desert the Premises, or (iii) subject to Unavoidable Delays, at any time during the Term, cease operating its business therein, then, in any such event if Landlord does not terminate this Lease, Tenant shall pay to Landlord, in addition to Fixed and Additional Rent, [***] the Premises and Tenant's business therein are not continuously and uninterruptedly operated by Tenant. - ---------- *** confidential treatment requested 2-2 13 Section 2.6. Remodeling of Premises. Between the [***] and [***] months of the Term, Tenant shall furnish to Landlord for Landlord's approval, plans and specifications which shall provide for the remodeling of the Premises in order to [***]. Within [***] days following receipt of Landlord's approval of said plans and specifications, Tenant shall commence remodeling the Premises in accordance with the approved plans and specifications and shall complete such remodel within [***] days thereafter. In no event shall Tenant, in connection with its remodeling of the Premises, close for business at the Premises for more than [***] days, in the aggregate, and in no event shall Tenant be entitled to receive an abatement of or credit against the Rent due hereunder as a result of any such closure. - ---------- *** confidential treatment requested 2-3 14 ARTICLE 3 RENT Section 3.1. Payment. Tenant covenants and agrees, at all times during the Term, to perform promptly all of the obligations of Tenant set forth in this Lease and to pay when due all Rent, charges, costs and other sums (all of which shall be deemed to be Additional Rent) which by the terms of this Lease are to be paid by Tenant. All Rent shall be paid in lawful money of the United States which shall be legal tender for payment of all debts and dues, public and private, at the time of payment, at the address of Landlord set forth in this Lease or at such other place as Landlord in writing may designate, without (except as may be otherwise herein expressly provided) any set-off or deduction whatsoever and without any prior demand or notice therefor. Section 3.2. Fixed Rent. Tenant shall pay the annual Fixed Rent in equal monthly installments in advance on the first (1st) day of each calendar month included in the Term. If the Shopping Center shall, at any time during the Term of this Lease, contain in excess of the number of Department Stores set forth in Article 1, the Fixed Rent herein provided for shall automatically be increased by [***] percent upon the date each additional Department Store is opened for business. Section 3.3. Percentage Rent. A. Tenant shall also pay, as "Percentage Rent" for each Lease Year included in the Term, payable as hereinafter provided, the amount, if any, by which Tenant's Gross Sales transacted during such Lease Year, [***], shall exceed the [***] payable for the same period; provided, however, that there shall be excluded from such computation any [***]. B. The term "Gross Sales" as used herein is defined to mean the total amount in dollars of the actual prices charged, whether for cash or on credit or trade-in or partly for cash, credit or trade-in, for all sales or leases of merchandise, food, beverages and services (including finance or service charges thereon), redeemed gift or merchandise certificates, irrespective of where sold, and all other receipts of business conducted at, in, on, about or from the Premises, including, but not limited to, all mail or telephone orders received or filled at, in, on, about or from the Premises, and including all deposits not refunded, all orders taken at, in, on, about or from the Premises, whether or not said orders are filled elsewhere, total receipts of sales through any vending machine or other coin or token operated device, other than not more than [***] vending machines used exclusively by Tenant's employees, and total sales by any sublessee, concessionaire or licensee or any other occupant otherwise at, in, on, about or from the Premises, and sales and receipts occurring or arising as a result of solicitation off the Premises conducted by personnel operating from, or reporting to, or under the supervision of any employee of Tenant located at the Premises. Provided that Tenant keeps proper evidence thereof, Gross Sales shall not, however, include (i) any sums collected and paid out for any retail sales tax or retail excise - ---------- *** confidential treatment requested 3-1 15 tax imposed by any Governmental Authority and paid directly by Tenant to that Governmental Authority and separately stated, (ii) any exchange of goods or merchandise between the stores or warehouses of Tenant where such exchange of goods or merchandise is made solely for the convenient operation of the business of Tenant and not for the purpose of consummating a sale which had theretofore been made at, in, on, about or from the Premises, nor for the purpose of depriving Landlord of the benefits of a sale which otherwise would be made at, in, on, about or from the Premises, (iii) the amount of returns to shippers or manufacturers, (iv) the amount of any cash or credit refund, limited to the sales prices, made upon any sale where the merchandise sold, or some part thereof, is thereafter returned by the purchaser and accepted by Tenant, (v) sales of fixtures (after use thereof) which are not a part of Tenant's stock-in-trade, (vi) the amount of any discount on sales to employees of the Premises, (vii) to the extent that the amount thereof was previously included in Gross Sales, bad debts, not exceeding [***] percent of Gross Sales per Lease Year, (viii) to the extent such charges do not materially exceed Tenant's costs, separately stated charges for alterations, repairs, giftwrapping and delivery services rendered to Tenant's customers, and (ix) sales of gift certificates. Each layaway sale shall be treated as a sale (to the extent of the amount received) when Tenant shall receive any payment from its customer. Each sale upon installment or credit shall be treated as a sale for the full amount when Tenant shall receive any payment from its customer, and subject to the limitation set forth above, no deduction shall be allowed for uncollectible credit accounts. Each lease of merchandise shall be treated as a sale in the month in which made for a price equal to the total rent payable during the term of the lease. Notwithstanding anything contained in this Subsection with respect to inclusion in Gross Sales of all receipts of sales made through any vending machine or other coin or token operated device, the operation of any such device shall be subject to the prior written consent of Landlord, as provided in Subsection 6.2E hereof. C. Tenant shall utilize, and cause to be utilized, cash registers equipped with sealed continuous totals or such other devices for recording sales as Landlord shall reasonably approve to record all sales, and Tenant shall keep at its principal office in the continental United States for at least [***] months after expiration of each Lease Year full, true and accurate books of account and records conforming to generally accepted accounting principles showing all of the Gross Sales transacted at, in, on, about or from the Premises for such Lease Year, including all sales or similar tax reports and returns, dated cash register tapes, sales checks, sales books, bank deposit records, computer tapes, disc, chips, print-outs or other storage media and any other records normally maintained by Tenant and other supporting data. Landlord shall have the right, from time to time, to inspect Tenant's recordkeeping system and, in connection therewith, to make test audits of Gross Sales. Within [***] days after the end of each calendar month, or portion thereof, Tenant shall furnish to Landlord a statement signed and verified by Tenant (or by an authorized officer if Tenant be a corporation) of the Gross Sales transacted during such month or portion thereof; and within [***] days after the end of each Lease Year and within [***] days after the end of the Term, Tenant shall furnish to Landlord a statement, hereinafter called the annual statement, certified to Landlord by an executive officer of Tenant, of Gross Sales transacted during the preceding Lease Year included in the Term. The certification by said officer shall expressly state that the Gross Sales shown on said statement conform with and are - ---------- *** confidential treatment requested 3-2 16 computed in compliance with the definition thereof contained in Subsection 3.3B hereof. In the event Gross Sales for each of [***] Lease Years are misstated by more than [***] percent, thereafter the annual statement of Gross Sales must be certified by an independent certified public accountant. Landlord shall have the right, from time to time, by its accountants or representatives, to audit Tenant's Gross Sales and, in connection with such audits, to examine all of Tenant's records (including sales or similar tax returns, an actual inventory of Tenant's stock-in-trade and all supporting data and any other records from which Gross Sales may be tested or determined) of Gross Sales disclosed in any statement given to Landlord by Tenant and Tenant shall make all such records readily available at Tenant's main office, for such examination. If any such audit discloses that the Gross Sales transacted by Tenant exceed those reported, Tenant shall forthwith pay to Landlord such additional Percentage Rent as may be so shown to be payable and, if the actual Gross Sales exceed the Gross Sales reported by Tenant by more than [***] percent, or if Tenant's records or systems do not comply with the requirements of this Subsection, Tenant shall also then pay the reasonable cost of such audit and examination, including travel, food and lodging and related expenses of Landlord's auditors. In the event Tenant has understated Gross Sales by [***] percent or more, Landlord may, in addition to any other remedies, terminate this Lease but Tenant shall remain liable hereunder as set forth in Article 8; provided, however, that Landlord shall not exercise its right to terminate this Lease if Tenant shall demonstrate to Landlord's reasonable satisfaction that such understatement was made inadvertently. Any information obtained by Landlord pursuant to the provisions of this Subsection shall be treated as confidential, except in any litigation or arbitration proceedings between the parties and, except further, that Landlord may disclose such information to prospective buyers, to prospective or existing lenders, in any registration statement filed with the Securities and Exchange Commission or other similar body or in compliance with subpoenas and judicial orders. In no event shall this Subsection be deemed to limit Landlord's rights of pre-trial discovery and disclosure in any action or proceeding. D. If Tenant fails to submit a monthly statement of Gross Sales within [***] days following Landlord's request therefor, then until such statement is received by Landlord, Gross Sales for such month shall be deemed equal to Tenant's highest previously reported monthly Gross Sales (or, if Tenant has never previously reported, to the Gross Sales reasonably estimated by Landlord), and if such failure shall occur [***] in any Lease Year, Landlord may, at Tenant's expense, conduct an audit of Tenant's Gross Sales as set forth in Subsection 3.3C above. E. Percentage Rent shall be payable by Tenant not later than the [***] day of each calendar month for and in respect to the preceding calendar month. Such payment shall be a sum equal to the amount by which Tenant's Gross Sales for the then current Lease Year, through the last day of the preceding month, multiplied by the Percentage Rent Rate, shall exceed the Fixed Rent payable for said period, less payments previously made with respect to such Lease Year. Upon receipt by Landlord of the certified annual statement of Gross Sales to be furnished as hereinabove provided, there shall be an adjustment between Landlord and Tenant with payment to or credit by Landlord, as the case may be, to the end that Landlord shall receive the entire amount of Percentage Rent payable under this Lease for the preceding Lease Year and no more. - ---------- *** confidential treatment requested 3-3 17 Section 3.4. Tax Rent. A. Tenant shall pay to Landlord, as Additional Rent, Tax Rent in an amount equal to the product obtained by multiplying Taxes by a fraction, the numerator of which shall be the Floor Space of the Premises excluding Storage Space, if any, and the denominator of which shall be the portion of the aggregate leased and occupied Floor Space in the Shopping Center which is included in the assessment which constitutes the basis for the Taxes, but excluding Storage Space, if any, buildings or areas occupied by Department Stores and Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks; provided, however, that Tenant's Tax Rent for any year shall not exceed the amount which would otherwise be payable by Tenant hereunder if the denominator of said fraction were [***] percent of the Gross Leaseable Area of that portion of the Shopping Center included in the assessment, exclusive of Department Stores, Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks. Tax Rent shall be payable at least [***] days prior to the due date of any Taxes or installment thereof; however, Landlord may, if it so elects, collect Tax Rent from Tenant on a monthly basis, in which event Tenant shall pay, with each monthly installment of Fixed Rent, one-twelfth (1/12) of the annual amount estimated by Landlord to be due hereunder. In the event Taxes for the then current tax year are not known, monthly installments shall be based on the preceding tax year with immediate adjustment as soon as current taxes become known. If at the time any Taxes or installments are required to be paid, the amount of Tenant's previously made monthly payments is insufficient to pay Tenant's share, Tenant shall pay such deficiency within [***] days after demand therefor. In the event of any excess, it shall be credited and applied to future Tax Rent payments, except that any excess in the last year of the Term shall be refunded at the end of the Term. B. Should the taxing authority include in Taxes as a separately stated item the value of any improvements made by or for the benefit of Tenant, or include machinery, equipment, fixtures, inventory or other personal property or assets used by Tenant in the Premises, then Tenant shall pay the entire tax attributable to such items. C. Nothing herein contained shall be construed to include as a tax which shall be the basis of Tax Rent, any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax or capital levy that is or may be imposed upon Landlord, provided, however, that if, at any time during the Term, the method of taxation prevailing at the Commencement Date of this Lease shall be altered so that in lieu of or as a substitute for the whole or any part of the taxes now levied, assessed or imposed on real estate as such, there shall be levied, assessed or imposed (i) a tax on the rents received from real estate, or (ii) a tax or license fee imposed on Landlord which is otherwise measured by or based, in whole or in part, upon the Shopping Center or any portion thereof, then the same shall be included in the computation of Tax Rent hereunder, computed as if the amount of such tax or fee so payable were that due if the Shopping Center were the only property of Landlord subject thereto. - ---------- *** confidential treatment requested 3-4 18 D. For the purpose of this Section 3.4, the term "Taxes" shall include all real estate taxes, assessments, license fees or charges, excise on rent, water and sewer rents, any sums including interest or any payments in lieu or in substitution thereof on any bonds or debt (except industrial revenue bonds or similar indebtedness incurred for construction of non-public facilities) incurred by any Governmental Authority and payable by Landlord in connection with the Shopping Center and other governmental impositions, payments and charges of every kind and nature whatsoever, extraordinary as well as ordinary, foreseeable and unforeseeable, and each and every installment thereof which shall or may during the Term of this Lease be levied, assessed, imposed, become due and payable, or liens upon or arising in connection with the use, occupancy or possession of or grow due or payable out of, or for, the Shopping Center, or any part thereof or any land, building or other improvements therein, including any and all fees or expenses incurred in connection with the institution, prosecution, conduct and maintenance of any negotiations, settlements, actions or proceedings with respect to the amount of any Taxes, less the contributions or payments, if any, paid to Landlord with respect to Taxes by Department Stores, Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks, such deduction to be credited to the year in which actually received. Taxes shall not include any of the foregoing relating to any parcel or improvement included in the Shopping Center which, except for insignificant portions thereof, comprises a separate tax lot or is separately assessed or valued for the purpose of real estate taxes to the extent the taxes thereon are paid by a single tenant or occupant thereof, and further excluding any charge such as a water meter charge, sewer rent, if any, based thereon, which is measured by the consumption by the actual user of the item or service for which the charge is made. Whether or not Landlord shall take the benefit of the provisions of any statute or ordinance permitting an assessment for public betterment or improvements to be paid over a period of time, Landlord shall, nevertheless, be deemed to have taken such benefit so that the term Taxes shall include only the current annual installment of any such assessment and the interest on unpaid installments. A tax bill or copy thereof submitted by Landlord to Tenant shall be conclusive evidence of the amount of taxes or installments thereof. E. In the event Landlord shall obtain a tax refund as a result of tax reduction proceedings or other proceedings of similar nature, then Tenant shall, provided Tenant is not then in default beyond any opportunity to cure elsewhere set forth in this Lease, and after the final conclusion of all appeals or other remedies, be entitled to its pro rata share of the net refund obtained based upon Tax Rent paid by Tenant which is the subject of the refund. As used herein, the term "net refund" means the refund plus interest, if any, thereon, less appraisal, engineering, expert testimony, attorneys', printing and filing fees and all other costs and expenses of the proceeding, to the extent such fees, costs and expenses have not been previously included in Taxes under Subsection 3.4D, and less an administrative fee to Landlord in the amount of not more than [***] percent of the original refund. Tenant shall not have the right to institute or participate in any such proceedings, it being understood that the commencement, maintenance, settlement or conduct thereof shall be in the sole discretion of Landlord. Section 3.5. Common Area Rent. - ---------- *** confidential treatment requested 3-5 19 A. (1) Tenant shall pay to Landlord as Additional Rent, an amount equal to the product obtained by multiplying Interior Common Area Operating Costs for each fiscal year adopted by Landlord by a fraction, the numerator of which shall be the Floor Space of the Premises excluding Storage Space, if any, and the denominator of which shall be the aggregate of all leased and occupied Floor Space in the Enclosed Shopping Center, excluding the Floor Space of Storage Space, if any, and any buildings or areas occupied by Department Stores, Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks; provided, however, that the denominator of said fraction shall never be less than [***] percent of the Gross Leaseable Area of the Enclosed Shopping Center, exclusive of Department Stores, Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks. Tenant shall pay, with each monthly installment of Fixed Rent, one-twelfth (1/12) of the annual amount estimated by Landlord to be due hereunder, subject to adjustment. (2) As used in this Lease, the term Interior Common Area Operating Costs shall mean all costs and expenses incurred by Landlord in maintaining, managing, operating, repairing, replacing and protecting the Common Areas of the Enclosed Shopping Center, all in a manner consistent with the highest shopping center standards, including the cost of all work necessary to preserve and maintain the value, utility and appearance of said Common Areas. Interior Common Area Operating Costs shall specifically include, without limitation, all costs and expenses incurred in connection with the following: lighting, heating, ventilating, and air conditioning the Common Areas of the Enclosed Shopping Center; painting and decorating non-leaseable areas; gardening, including planting and replacing flowers and plants; compliance with environmental, health and safety regulations and standards promulgated by applicable Governmental Authorities; sanitary control, including extermination; removal of rubbish, garbage and other refuse; contracted security personnel, security systems and all other security measures; acquisition (including rental fees), maintenance, repair and replacement of fixtures, machinery, equipment, and supplies used in the operation and maintenance of the Common Areas of the Enclosed Shopping Center, and all personal property taxes and/or fees payable with respect to such items; maintenance, repair and replacement of Enclosed Shopping Center signs, ceilings, elevators, escalators and utility systems; maintenance, repair and replacement of all roofs over non-leaseable areas in the Enclosed Shopping Center; acquisition, maintenance, repair and replacement of cost saving devices commonly used in properties comparable to the Shopping Center; music program services and loud speaker systems; cleaning of non-leaseable areas; maintenance, repair and replacement of decorations in non-leasable areas; water for interior fountains and restrooms; acquisition, maintenance, repair and replacement of seasonal decorations; resolution of disputes or litigation with persons attempting to use the Common Areas of the Enclosed Shopping Center for commercial purposes; professional and technical fees and all other disbursements incurred in connection with the performance of any of the foregoing; other similar direct costs of the type incurred in the operation of comparable properties; and [***] percent of all of the foregoing costs to cover Landlord's administrative and overhead expenses. From the aggregate of the aforementioned costs and expenses, there shall be deducted the payments, if any, made with respect to Interior Common Area Costs by Department Stores, Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks, such deduction - ---------- *** confidential treatment requested 3-6 20 to be credited to the year for which such payments are applicable irrespective of the fiscal year in which such payments are actually received. B. (1) Tenant shall pay to Landlord as Additional Rent, an amount equal to the product obtained by multiplying Exterior Common Area Operating Costs for each fiscal year adopted by Landlord by a fraction, the numerator of which shall be the Floor Space of the Premises excluding Storage Space, if any, and the denominator of which shall be the aggregate of all leased and occupied Floor Space in the Shopping Center, excluding Storage Space, if any, any buildings or areas occupied by Department Stores and Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks; provided, however, that Tenant's share of Exterior Common Area Operating Costs for any fiscal year shall not exceed the amount which would otherwise be payable by Tenant hereunder if the denominator of said fraction were [***] percent of the Gross Leaseable Area of the Shopping Center, exclusive of Department Stores and Specialty Stores, stores not fronting on the enclosed mall, and temporary kiosks. Tenant shall pay, with each monthly installment of Fixed Rent, one-twelfth (1/12) of the annual amount estimated by Landlord to be due hereunder, subject to adjustment. (2) As used in this Lease, the term Exterior Common Area Operating Costs shall mean all costs and expenses incurred by Landlord in maintaining, managing, operating, repairing, replacing and protecting the Exterior Common Areas of the Shopping Center, excluding the Common Areas of the Village Area, all in a manner consistent with the highest shopping center standards, including the cost of all work necessary to preserve and maintain the value, utility and appearance of the Exterior Common Areas. Exterior Common Area Operating Costs shall specifically include, without limitation, all costs and expenses incurred in connection with the following: lighting the Exterior Common Areas; providing snow and ice removal; maintenance, repair and replacement of all parking lot surfaces, including striping, repaving and sealcoating; gardening and landscaping, including planting and replacing flowers, shrubbery and trees; policing and regulating vehicle and pedestrian traffic, including the cost of any contracted security personnel; providing off-site employee parking facilities, including transportation to and from such facilities; maintenance, repair and replacement of sewer and storm drainage systems, waste disposal facilities, lift stations, retention ponds or basins and sump facilities; removal of rubbish and other refuse from the Exterior Common Areas; acquisition (including rental fees), maintenance, repair and replacement of machinery, equipment, vehicles and supplies used in the operation and maintenance of the exterior Common Areas, and all personal property taxes and/or fees payable with respect to such items; maintenance, repair and replacement of exterior Shopping Center signs, curbs and walkways; painting and decorating exterior structures and improvements; water for exterior fountains, if any; salaries and other costs (including training costs, employee benefits and workers' compensation insurance) of Shopping Center personnel, such as security and maintenance staff, the regional property manager (a reasonable allocation), the Shopping Center manager, assistant manager, property accountant, secretaries and office staff; resolution of disputes or litigation with Persons attempting to use the Exterior Common Areas for non-commercial purposes; professional and technical fees and all other disbursements incurred in connection with the performance of any of the foregoing; the cost of acquiring, - ---------- *** confidential treatment requested 3-7 21 maintaining and administering such "all risk" insurance (including rental income, flood and earthquake), boiler and machinery insurance, comprehensive general and umbrella liability insurance and such other insurance for the Shopping Center as Landlord may, from time to time, deem necessary, or in lieu thereof or in combination therewith, the costs attributable to that portion of the coverage which Landlord shall elect to self-insure, including the cost of administering Landlord's self-insurance program; dues and assessments allocable to the Shopping Center pursuant to the Declaration of Covenants, Conditions and Restrictions for the Mill Creek development, including any property owners association; other similar direct costs of the type incurred in the operation of the exterior areas of comparable properties; and [***] percent of all of the foregoing costs to cover Landlord's administrative and overhead expenses. Costs and expenses incurred by Landlord solely in connection with or for the benefit of the Common Areas of the Village Area of the Shopping Center, shall not be included as Exterior Common Area Operating Costs. From the aggregate of the aforementioned costs and expenses, there shall be deducted the payments, if any, made with respect to Exterior Operating Costs by Department Stores, Specialty Stores, stores not fronting on the enclosed mall and temporary kiosks, such deduction to be credited to the year for which such payments are applicable irrespective of the fiscal year in which such payments are actually received. C. With respect to costs which Landlord may elect to depreciate (or amortize) in lieu of including such costs in Common Area Operating Costs for a single fiscal year, only that portion of the depreciation (or amortization) allocable to the year for which Common Area Operating Costs are being determined shall be included in then current Common Area Operating Costs, it being understood, however, that interest (at a rate equal to the prime rate being charged from time to time by Citibank, N.A. during the year for which Common Area Operating Costs are being determined) on the then undepreciated (or unamortized) portion of such costs shall be included in Common Area Costs. In no event shall Common Area Operating Costs include the costs and expenses incurred by Landlord in constructing new buildings in the Shopping Center or expanding or improving leasable area or the costs and expenses incurred by Landlord for repairs and replacements with respect to which Landlord receives insurance proceeds or condemnation awards. D. After the end of each fiscal year adopted by Landlord, Landlord shall furnish to Tenant a statement showing in reasonable detail the information relevant or necessary to the calculation and determination of Landlord's actual Interior and Exterior Common Area Operating Costs, as hereinabove defined, for the fiscal year in question. If the monthly charges paid by Tenant during such fiscal year, as hereinabove provided, shall be less than (i) Landlord's actual Interior Common Area Operating Costs for such fiscal year, as shown by such statement, multiplied by the fraction referred to in Subsection 3.5A, plus (ii) Landlord's actual Exterior Common Area Operating Costs for such fiscal year, as shown by such statement, multiplied by the fraction referred to in Subsection 3.5B, Tenant shall pay to Landlord the excess within [***] days after service of such statement. If, however, the said monthly charges shall exceed Landlord's actual costs multiplied by said fractions, Landlord shall, with the submission of said statement, credit or refund to Tenant the excess. - ---------- *** confidential treatment requested 3-8 22 Section 3.6. Additional Rent. Unless another time shall be herein expressly provided, Additional Rent shall be due and payable within [***] days following demand or together with the next-succeeding installment of Fixed Rent, whichever shall first occur, and Landlord shall have the same remedies for failure to pay the Additional Rent as for a non-payment of Fixed Rent. Tenant's failure to object to any final statement, invoice or billing rendered by Landlord within a period of [***] days after receipt thereof shall constitute Tenant's acquiescence with respect thereto and shall render such statement, invoice or billing an account stated between Landlord and Tenant. Section 3.7. Rent for a Partial Month. For any portion of a calendar month included at the beginning or end of the Term, Tenant shall pay one-thirtieth (1/30) of each monthly installment of Rent for each day of such portion, payable in advance at the beginning of such portion, except that Percentage Rent for such portion shall be computed and paid as provided in Section 3.3 hereof. Section 3.8. Late Charges and Interest. Tenant shall pay, as Additional Rent, a service charge in the amount of [***] for bookkeeping and administrative expenses, if any Rent due hereunder is not received within [***] days following its due date. In addition, as of the [***] day following service of notice by Landlord that a payment of Rent is overdue, interest shall accrue on the overdue amount, retroactive to the original due date, at the lesser of the highest rate permitted to be paid by Tenant in the state in which the Shopping Center is located or an annual rate of [***] percent more than the prime interest rate of Citibank N.A., located in New York, New York. Section 3.9. Taxes. Tenant shall pay, as Additional Rent, for any documentary stamps or other transfer fees or any other sales or use taxes or other taxes, impositions or levies of or required by any Governmental Authority, including interest or penalties thereon, arising out of or by reason of this Lease or the amount of Rent payable hereunder. - ---------- *** confidential treatment requested 3-9 23 ARTICLE 4 COMMON AREAS Section 4.1. Common Areas. Landlord hereby grants to Tenant a non-exclusive license to use (i) the parking areas provided by Landlord in the Shopping Center for the accommodation and parking of vehicles of Tenant and its officers, agents and employees and customers while such customers are shopping in the Premises or in any other portion of the Shopping Center, (ii) the public conveniences of the Shopping Center, including any connecting passageways and lobbies used in conjunction with hotels and/or office buildings, and (iii) all other areas in the Shopping Center, including the enclosed mall, to be used in common by tenants of the Shopping Center, such parking areas, public conveniences and other common areas being hereafter collectively referred to as "Common Areas". Notwithstanding any of the provisions herein contained, Landlord retains and reserves the non-exclusive right to the use of the Common Areas. A. Exhibit A sets forth the general layout of the Shopping Center, but shall not be deemed to be a warranty, representation or agreement on the part of Landlord that the Shopping Center will be or will continue to be exactly as indicated on said diagram, and Landlord reserves the right to (i) increase, eliminate, reduce or change the number, type, size, location, elevation, nature and use of any of the Common Areas or the buildings comprising the Shopping Center, (ii) make changes, additions, subtractions, alterations or improvements in or to such Common Areas, including, but not limited to, the construction of decked or subsurface parking, (iii) withdraw portions of the Shopping Center from Common Area or add Common Area to the Shopping Center, including non-contiguous parcels for parking and other related Shopping Center purposes and (iv) construct buildings, additional Department Stores, kiosks and other improvements in the Common Areas. Tenant shall have no rights with respect to the land or improvements below floor slab level or above the interior surface of the ceiling of the Premises or air rights above the Premises. B. Landlord shall not, pursuant to Subsection 4.1A, create any permanent, substantial, adverse interference with access to or visibility of the Premises from the covered mall upon which the front of the Premises abuts. However, this provision shall not preclude Landlord from installing carts or erecting kiosks or similar improvements anywhere in the covered mall, so long as any kiosks or similar improvements which are located in front of the Premises are approximately centered in the mall. Tenant's sole remedy in the event of Landlord's failure to comply with this Subsection 4.1B shall be to terminate this Lease. In the event Tenant, as the result of Landlord's failure to so comply, shall exercise its right to terminate this Lease, Landlord shall pay, within [***] days following the date Tenant vacates and surrenders the Premises, the then unamortized cost of the permanent leasehold improvements (excluding, inter alia, trade fixtures and equipment, furnishings, decorations, inventory and other items of personal property) initially made by Tenant pursuant to Article 2 of this Lease, assuming a useful life equal to the length of the original Term of this Lease and amortization on a straight line - ---------- *** confidential treatment requested 4-1 24 basis. Tenant shall, not later than [***] days following the Commencement Date, deliver an affidavit of an officer of Tenant and a certificate of Tenant's architect accompanied by such bills, contracts, receipts, invoices, cancelled checks and the like as Landlord may reasonably require, specifying the cost of the Tenant's leasehold improvements, which amount shall, unless disputed by Landlord, thereupon be the basis for the amount to be paid by Landlord pursuant to this Subsection. Failure to timely deliver such affidavit, certificate and supporting data shall constitute a waiver of Tenant's right to such payment. C. Tenant, its officers, agents and employees shall park their vehicles only in areas from time to time designated by Landlord as the area for such parking, provided that such areas shall be located in or not more than [***] mile from the perimeter boundary of the Shopping Center. Tenant shall, within [***] days following written notice from Landlord, furnish Landlord, or its authorized agent, the state automobile license numbers assigned to its automobiles and the automobiles of all its employees employed in the Premises. Tenant shall not at any time park any trucks or any delivery vehicles in the parking area. Landlord shall have the right, after service of [***] or more notices to Tenant regarding improper parking, to levy an assessment payable by Tenant in a sum not to exceed [***] per day for each and every car belonging to Tenant, its agents, servants, contractors, licensees or employees which shall thereafter park in an area other than that designated by Landlord as a parking area for such vehicles. Such assessment shall be payable by Tenant on the next due date for Fixed Rent and shall be considered Additional Rent. D. Common Areas shall be subject to such reasonable rules and regulations, including the right to impose parking charges or fees and to allocate parking areas on a uniform or non-discriminatory basis and to prohibit the use of the Shopping Center by such Persons as Landlord determines, as the same may be amended or modified, as Landlord may, from time to time, adopt as provided in this Lease. E. Landlord reserves the right to close, if necessary, all or any portion of the Common Areas for the minimum length of time as may, in the reasonable opinion of Landlord's counsel, be legally sufficient to prevent a dedication thereof or the accrual of the right of the public therein, to close temporarily, if necessary, all or any part of the parking areas to discourage non-customer parking and to do and perform such other acts in and to the Common Areas as in the use of good business judgment of Landlord will improve the use thereof. - ---------- *** confidential treatment requested 4-2 25 ARTICLE 5 LANDLORD'S ADDITIONAL COVENANTS Section 5.1. Repairs by Landlord. Landlord shall keep the exterior walls, foundations, downspouts, gutters and roofs of the buildings, and the plumbing, electrical and other utility system serving but which are located outside of the Premises, in good order, condition and repair and shall make necessary structural repairs to the exterior walls of the buildings (excluding, however, repairs to windows, doors, saddles, plate glass, store fronts and air conditioning and heating installations and wiring, pipes and other utility installations located outside of the Premises which are used exclusively by Tenant), the dividing walls between the Premises and space occupied or to be occupied by others and the load-bearing walls and load-bearing columns, if any, within the Premises, provided that Landlord shall not be obligated hereby to do any work required to be done because of any damage caused by any act, omission or negligence of Tenant and its invitees, licensees, their respective officers, agents and employees or their customers. Except where Landlord has actual notice of the necessity for such repair, Landlord shall not be required to commence any such repair until after notice from Tenant that the same is necessary, which notice, except in case of any emergency, shall be in writing and shall allow Landlord [***] days in which to commence such repair. The fact that the costs incurred by Landlord in connection with any of the foregoing are includable in Common Area Operating Costs pursuant to Subsections 3.5A and 3.5B shall not affect Landlord's performance obligations under this Section 5.1. When necessary by reason of accident or other cause occurring in the Premises, or elsewhere in the Shopping Center, or in order to make any repairs or alterations or improvements in or relating to the Premises or to other portions of the Shopping Center, Landlord reserves the right to interrupt the supply to the Premises of steam, condenser water or cooled air for air conditioning, electricity, water and gas and also to suspend the operation of the heating and air conditioning system, if any, until said repairs, alterations or improvements shall have been completed. If, as a result of Landlord's performance of its obligations or exercise of its rights under this Section 5.1, there is created a substantial and material interference with Tenant's ability to conduct its business in the Premises and Tenant therefor closes for more than [***] consecutive business days, Tenant shall be entitled to an abatement of Fixed Rent for each day after the [***] business day during which the condition continues. Other than the aforesaid, there shall be no abatement of Rent because of any such interruption or suspension; however, Landlord shall pursue such work with reasonable continuity, diligence and dispatch and in such a manner as (consistent with good practice) to cause a minimum of interference with Tenant's use of the Premises. Section 5.2 Quiet Enjoyment. Landlord covenants that Tenant, on paying the Rent and performing Tenant's obligations in this Lease, shall peacefully and quietly have, hold and enjoy the Premises and the appurtenances throughout the Term without hindrance, ejection or molestation by any Person lawfully claiming under Landlord subject to the other terms and provisions of this Lease and to any agreements to which this Lease may be or become subject and subordinate. - ---------- *** confidential treatment requested 5-1 26 ARTICLE 6 TENANT'S ADDITIONAL COVENANTS Section 6.1. Affirmative Covenants. Tenant covenants, at its expense, at all times during the Term: A. To use the Premises only for the Permitted Use: to operate its business in the Premises under Tenant's Trade Name (or such other trade name as is adopted by a majority of stores operating under the Trade Name); and to conduct its business at all times in a dignified manner and in conformity with the highest standards of practice obtaining among superior type stores, shops or concerns dealing in the same or similar merchandise and in such manner as to produce the maximum volume of Gross Sales and to help establish and maintain a high reputation for the Shopping Center. B. To continuously and uninterruptedly use, occupy and operate for retail sales purposes, all of the Premises other than such minor portions thereof as are reasonably required for storage and office purposes; to use such storage and office space only in connection with the business conducted by Tenant in the Premises; to furnish and install all trade fixtures and permitted signs; to carry a complete stock of seasonal merchandise; to maintain an adequate number of trained personnel for efficient service to customers; to open for business and remain open during the entire Term from at least 10:00 A.M. to 9:30 P.M. Mondays through Saturdays and 12:30 P.M. to 6:00 P.M. on Sundays, and to light its display windows and signs during those hours and on those days when the covered mall is kept illuminated by Landlord (but Tenant shall not be obligated to keep the same illuminated beyond 11:00 P.M. on any day). Tenant shall, if not in conflict with any Governmental Requirements, and providing that (i) at least one Department Store is open on such days or for such hours and (ii) Landlord shall agree to cause the Shopping Center to remain open for such days or for such hours, also open for business on such days or for such additional hours. C. To store in the Premises only such merchandise as is to be offered for sale at retail within a reasonable time after receipt; to store all trash and refuse in appropriate containers within the Premises so as not to be visible to the shopping public and to attend to the daily disposal thereof in the manner approved by Landlord; to keep all drains inside the Premises open; and to receive, deliver, load and unload goods, merchandise, supplies, fixtures, equipment, furniture and rubbish through proper service doors and at times established by Landlord, provided, however, that if Landlord shall furnish or designate trash removal service, Tenant shall accept and use such service and pay Landlord or the Person designated by Landlord, monthly for such service at a rate which shall be no greater than the prevailing competitive rate for equivalent service in the locale. If Landlord shall implement a refuse recycling program for the Shopping Center, Tenant shall participate in such a program and shall comply with all rules and regulations promulgated by Landlord in connection therewith, including, but not limited to, the sorting of refuse by type for deposit in designated containers. D. Except for repairs hereunder to be made by Landlord, to take good care of the Premises and the fixtures and appurtenances therein and make all other necessary repairs and replacements thereto, of every kind whatsoever (including, without limitation, repairs and 6-1 27 replacements to windows, doors, saddles, plate glass, store fronts, air conditioning and heating installations and plumbing inside the Premises or located outside but exclusively serving the Premises and any exterior installation peculiar to the conduct of Tenant's business such as, but not limited to, signs, displays or exterior devices of any nature) which repairs and replacements shall be in quality and class at least equal to the original work. If Tenant fails to make any such repairs or replacements, Landlord may after reasonable notice (other than in the case of an emergency) to Tenant make same for the account of Tenant, at Tenant's expense, which amount shall be considered Additional Rent and shall be due and payable by Tenant when billed by Landlord. Tenant shall not be required to make structural repairs unless the necessity therefor arises by reason of Tenant's Work, installations or alterations made by Tenant, the manner of Tenant's use or occupancy or any other cause created by Tenant. E. To make all repairs, alterations, additions or replacements to the Premises, including appurtenances, equipment, facilities and fixtures therein, arising out of the manner of Tenant's use or occupancy of the Premises or necessary to satisfy any Governmental Requirement; to keep the Premises equipped with all safety appliances so required because of such use or occupancy; and otherwise to comply with the orders and regulations of any Governmental Authority. Tenant shall not be required to make structural alterations unless the necessity therefor arises by reason of Tenant's Work, installations or alterations made by Tenant, the manner of Tenant's use or occupancy or any other cause created by Tenant. F. To pay promptly when due the entire cost of any work to the Premises, including equipment, facilities and fixtures therein, so that the Premises and all of Tenant's fixtures and equipment shall, at all times, be free of encumbrances or liens, including liens for labor and materials; to procure all Necessary Approvals before undertaking such work; to permit Landlord to post and keep posted on the Premises, sufficient, conspicuous notices stating that any improvements are not being made at Landlord's instance; to do all such work in a good and workmanlike manner acceptable to Landlord, employing materials of good quality; to perform such work in such a manner as to insure proper maintenance of good and harmonious labor relationships; to comply with any Governmental Requirement relating thereto. Tenant understands that as part of the rules and regulations promulgated by Landlord in connection with Tenant's Work, Landlord requires a construction barrier which fulfills Landlord's construction criteria to be erected around the mall exposure of the Premises. In the event that such a barrier is already in place at the time Tenant takes possession of the Premises to prosecute Tenant's Work, Tenant shall pay to Landlord, as consideration for Landlord having provided the barrier and thereby having relieved Tenant of responsibility for erecting same, an amount equal to the product of the [***]. Said amount shall be payable to Landlord not later than [***] days following the date on which Tenant commences Tenant's Work and shall constitute Additional Rent under the Lease. Tenant shall within [***] days after completion of any work performed by Tenant, file for record in the appropriate public records, a "notice of completion." G. To defend and save Landlord and Landlord's Managing Agent harmless and indemnified from all injury, loss, claims or damage (including reasonable attorneys' fees and - ---------- *** confidential treatment requested 6-2 28 disbursements incurred by Landlord or its Managing Agent in conducting an investigation and preparing for and conducting a defense) to any Person (including Tenant's employees) or property, arising from, related to, or in any way connected with the use or occupancy of the Premises or the conduct or operation of Tenant's business, unless such injury, loss, claim or damage be attributable to the negligence or willful acts of Landlord or its Managing Agent, or its servants or employees. H. To maintain with responsible companies approved by Landlord (said approval not to be unreasonably withheld), (i) commercial general liability insurance (or comparable coverage, including products liability and blanket contractual liability insurance) against all claims, demands or actions for personal injury, bodily injury or property damage arising from, related to, or in any way connected with Tenant's Work, Tenant's occupation of the Premises, or the conduct and operation of Tenant's business, or caused by actions or omissions to act, where there is a duty to act, of Tenant, its agents, servants and contractors, to the limits of not less than [***] per claim and in the aggregate, which limits may be provided by any combination of primary and umbrella or excess insurance, and which insurance shall be on an occurrence basis and shall be endorsed to name Landlord, its agents and employees as additional insureds; (ii) "All-Risk" property insurance, including such flood and earthquake coverage as Landlord may, from time to time, require covering [***] of Tenant's real and personal property values, such as fixtures and equipment, stock-in-trade, furniture, furnishings, finishes, improvements and betterments installed or made by or on behalf of Tenant in, on or about the Premises, to [***] of their replacement cost without deduction for depreciation, as well as loss of business income (so-called business interruption) coverage, to include the Fixed Rent and Additional Rent payable under this Lease; (iii) if there is air conditioning or refrigeration equipment valued in excess of [***], boiler and machinery coverage at replacement cost, or if there is a boiler or pressure vessel or other similar equipment in the Premises, boiler and machinery coverage in the minimum amount of [***]; and (iv) workers' compensation, disability and such other similar insurance covering all persons employed by Tenant in connection with Tenant's Work and the operation of Tenant's business and with respect to whom death or bodily injury claims could be asserted against Tenant, Landlord or the Shopping Center. All of said insurance shall be in form and with deductibles reasonably satisfactory to Landlord and shall provide that it shall not be subject to cancellation, termination or change except after at least [***] days' prior written notice to Landlord. In the case of boiler and machinery insurance, the policy or policies shall cover Landlord or any designee of Landlord as a loss payee and shall provide that losses sustained by Landlord shall be adjusted by and payable to Landlord. Certificates of insurance evidencing the coverage required pursuant to this Subsection H, together with certificates evidencing coverage on the part of Tenant's contractors, shall be deposited with Landlord not less than [***] days prior to the day Tenant begins Tenant's Work and upon renewals of said policies not less than [***] days prior to the expiration of the term of such coverage. All such policies shall be delivered with satisfactory evidence of the payment of the premium therefor. Landlord and Tenant mutually agree that with respect to any loss which is covered by "All-Risk" property insurance then being carried by them respectively, or required to be carried, the party carrying or required to carry such insurance and suffering said loss, releases the other of and from any and - ---------- *** confidential treatment requested 6-3 29 all claims with respect to such loss, including amounts within the deductibles, and they further mutually agree that their respective insurance companies shall have no right of subrogation against the other on account thereof. I. In the event of any action or proceeding arising out of or pursuant to this Lease, the successful party shall be entitled to recover its reasonable attorneys' fees and all other costs and expenses incurred in connection with the action or proceeding. J. Within [***] days following receipt of actual notice thereof, to cause to be discharged of record by bonding, payment or otherwise, any mechanic's or similar lien, judgment, encumbrance, security interest, chattel mortgage or notice thereof at any time filed in any public office against the Shopping Center or the Premises (including any fixtures or equipment located therein) or the owner of any interest therein for any work, labor, services, materials, fixtures, equipment or property claimed to have been performed at or furnished to the Shopping Center or Premises for or on behalf of Tenant or any agent or contractor of Tenant, or anyone holding the Premises through or under Tenant. Nothing contained in this Lease shall be construed as a consent on the part of Landlord to subject Landlord's estate in the Premises to any lien or liability under applicable law. K. Upon the expiration or other termination of the Term to quit and surrender the Premises to Landlord, broom clean, in good order and condition, ordinary wear and tear and casualty damages excepted, and to remove all property of Tenant and each alteration addition and improvement made by Tenant as to which Landlord shall have made the election provided for in Section 2.4 hereof, to repair all damage to the Premises caused by such removal and restore the Premises to the condition in which they were prior to the installation of the articles so removed. Any property not so removed and as to which Landlord shall not have made said election, shall be deemed to have been abandoned by Tenant and may be retained or disposed of by Landlord, as Landlord shall desire. However, Tenant shall be responsible for the cost of removal and disposal. If the last day of the Term falls on a day the Shopping Center is closed, the Term shall expire on the business day immediately preceding and Tenant's obligation to observe or perform this covenant shall survive the expiration or termination of the Term. Immediately upon the failure of Tenant to perform any covenant of this Subsection K, Landlord may, without notice, do so, and shall be entitled to receive from Tenant the then cost of performance of such covenant, such damages to be paid in addition to and separate and independently from damages accruing by reason of breach of any other covenant of this Lease. L. (1) Tenant shall pay to Landlord for deposit by Landlord in a promotion fund (the "Promotion Fund"), an amount (the "Promotion Fund Charge") equal to the sum set forth in Article 1, subject to adjustment as hereinafter provided. On the January 1 next following the [***] anniversary of the Commencement Date of this Lease, the amount set forth in Article 1 shall be increased by [***] percent, and on each January 1 thereafter, the Promotion Fund Charge payable for the immediately preceding year shall be increased by [***] percent. The annual charge payable by Tenant under this paragraph shall be paid in equal monthly - ---------- *** confidential treatment requested 6-4 30 installments on the [***] day of each calendar month in advance and shall be prorated for any partial calendar month. The Promotion Fund shall be used by Landlord, at such times and in such manner as shall be determined by Landlord, to pay all costs and expenses (including the costs of administration) associated with the formulation and carrying out of an ongoing program for the promotion of the Shopping Center, which program may include, without limitation, special events, shows, displays, institutional advertising for the Shopping Center, promotional literature to be distributed within the general trade area of the Shopping Center, and other activities designed to attract customers to the Shopping Center. (2) At any time, Landlord may elect to cause a Merchants' Association (an "Association") to be organized, the object of which shall be the general furtherance of the business interests of tenants in the Shopping Center by sales promotion and Shopping Centerwide advertising. Upon the organization of an Association, Tenant shall become (and remain) a member thereof, and the amount which would have otherwise been payable by Tenant to the Promotion Fund pursuant to the provisions of paragraph (1) above shall be discontinued and a sum equal to such amount (subject to adjustment as herein set forth or such greater adjustment as may be assessed from time to time by the Association) shall be paid by Tenant to the Association as dues. The rules and regulations and by-laws of the Association shall be consistent with the obligations of Tenant set forth in this Subsection L, but shall in all other respects be in the form designated by Landlord; it being agreed, however, that nothing therein set forth shall be in conflict with the provisions of this Lease. Landlord, having once exercised its option as set forth in this Subsection, may at any time elect to discontinue operation of the Association, in which case the provisions of paragraph (1) applicable to the Promotion Fund Charge shall again become operative. (3) The failure of any other tenant or occupant of the Shopping Center to contribute to the Promotion Fund or become a member of the Association shall in no way release Tenant from its obligations to do so. (4) If the Shopping Center shall be expanded by adding a Department Store and/or [***] percent or more to the Gross Leaseable Area of the Shopping Center (an "Expansion"), Tenant shall pay to Landlord's Promotion Fund a one-time charge for each such Expansion. Such Expansion charge shall be an amount equal to the annual Promotion Fund Charge payable by Tenant for the Lease Year immediately preceding the year in which work on the Expansion commences and shall be payable upon [***] days' prior written notice from Landlord given at any time subsequent to the commencement of construction. A like amount shall also be payable by Tenant to the Promotion Fund in the event that the Shopping Center shall be substantially renovated. For purposes of this subparagraph, the term "substantial renovation" or any variation thereof shall be deemed to mean a redecoration of the covered mall portion of the Common Areas of the Shopping Center to the extent of at least [***] percent thereof, including new flooring and the painting and/or recovering of the walls. The amount payable to the Promotion Fund in connection with a substantial renovation of the Shopping Center shall be due upon [***] days' prior written notice from Landlord to Tenant, but in no - ---------- *** confidential treatment requested 6-5 31 event prior to commencement of the renovation. In the event of a contemporaneous Expansion and renovation of the Shopping Center, Tenant shall be assessed only the one-time Expansion charge. M. Tenant shall furnish to Landlord an annual statement at the end of each Lease Year showing the amounts spent by Tenant on white space advertising or other advertising media. Each such annual statement shall be made a part of the annual report required to be furnished by Tenant under Section 3.3. If Tenant's annual statement shows that Tenant has expended for such advertising, during the preceding Lease Year, less than the Percentage of Advertising Required, Tenant shall, within [***] days after the required delivery date of its annual statement, pay to the Promotion Fund (or substitute Association) the difference between the amount actually expended for such advertising and the Percentage of Advertising Required. The Promotion Fund Charge (or dues or other payments made by Tenant to the substitute Association) shall not be deemed an amount expended for advertising within the meaning of this Subsection M. All expenditures made by Tenant for advertising in connection with Tenant's other stores, if any, within the trade area of the Shopping Center, may be included by Tenant to comply with this Subsection provided such advertising in all instances includes the Premises and is distributed to the geographical trade area in which the Shopping Center is located. N. To refer to the Shopping Center by its name above stated in designating the location of the Premises in all newspaper or other advertising in the general trade area in which the Shopping Center is located. With respect to any advertisement in which the location of another similar business activity conducted by Tenant in the trade area shall be mentioned, Tenant shall also mention or cause to be mentioned the Trade Name and location of the business conducted at the Premises. O. (1) To the extent that Tenant currently has or in the future shall establish an online site (including but not limited to a World Wide Web site or a section of a proprietary online service) (each a "Site"; collectively, "Sites"), Tenant shall: (a) In promoting its business via such Site, feature Tenant's store at the Shopping Center with substantially the same prominence as that of any other comparable store of Tenant. (b) To the extent that Tenant shall provide such a link in connection with any other comparable store, provide a link off an appropriate page of Tenant's Site to the Mall Site (as hereinafter defined), if Tenant has a Digital Storefront (as hereinafter defined) for such Mall Site. The placement of the link shall be subject to Tenant's reasonable technical and design requirements. (c) Offer Landlord the opportunity to include content from Tenant's Site on one or more of Landlord's Sites, on terms to be mutually agreed upon. - ---------- *** confidential treatment requested 6-6 32 (d) Subject to Section 3.3, to the extent Tenant shall make any sales of goods or services via Tenant's Site and such goods or services are shipped from or delivered to the customer from the Premises, the amount of the actual prices charged, excluding shipping and handling charges, shall be included in Gross Sales and shall be subject to all audit rights otherwise granted to Landlord under Section 3.3. (2) To the extent that Landlord has established or shall establish a Site for the Shopping Center (the "Mall Site"), Tenant shall cooperate with Landlord to establish a "store" for Tenant in such Mall Site, on terms to be mutually agreed upon, in accordance with Landlord's then current format and features. The "store" shall be known as a "Digital Storefront". (a) In connection with the Digital Storefront and the Mall Site, Tenant shall permit Landlord to use Tenant's Trade Name and any graphics approved by Tenant for use in the Shopping Center directory. If so requested by Landlord, Tenant shall also keep Landlord apprised of all sales events and special promotions taking place in the Premises and shall permit Landlord to publicize same via the Digital Storefront and the Mall Site. (b) Subject to Section 3.3, Tenant hereby agrees that, to the extent that Tenant shall make any sales of goods or services via the Digital Storefront or the Mall Site, the amount of the actual prices charged, excluding shipping and handling charges, shall be included in Gross Sales and shall be subject to all audit rights otherwise granted to Landlord under Section 3.3. (3) Notwithstanding anything to the contrary contained in this Subsection 6.10, Tenant shall not be required to: (a) include any information regarding the Premises, the Shopping Center, the Digital Storefront, and/or the Mall Site in Tenant's Site unless Tenant displays at least one other of Tenant's comparable store locations or other specific shopping centers; or (b) include sales of goods or services in Gross Sales which are made via an online service unless such sales are paid for at the Premises or delivered to the purchaser from the Premises or traceable solely to either the Mall Site or the Digital Storefront; or P. To obtain all Necessary Approvals. Q. To provide in accordance with Landlord's sign criteria, a suitable identification sign or signs, bearing Tenant's Trade Name, of such size, design and character as Landlord shall approve and install said sign or signs at a place or places designated by Landlord. Tenant shall maintain any such signs or other installations in good condition and repair. R. To conform to all reasonable rules and regulations which Landlord may make for management and use of the Shopping Center, requiring such conformance by Tenant and Tenant's employees. Such rules and regulations shall be uniform and shall not discriminate against Tenant. - ---------- *** confidential treatment requested 6-7 33 S. To deliver to Landlord, within [***] days after a request for same, all or any of the following items, in such form and containing such evidence of authenticity and regularity as Landlord may reasonably require. (1) Balance sheet, annual report and related financial statements of Tenant, Guarantor, if any, Tenant's parent and all subsidiaries of Tenant for the previous annual period, same to have been prepared in accordance with generally accepted accounting principles. (2) A list of all Affiliates, officers, directors and stockholders of Tenant, including name, title, number and type of shares owned. (3) If Tenant or any Person from whom information as aforesaid is required to be submitted is a corporation whose shares are traded on the "over the counter", American or New York Stock Exchanges then the provisions of paragraphs (1) and (2) above may be satisfied by submission of Tenant's most recent annual report and form 10K together with all other current filings with the Securities Exchange Commission or otherwise made pursuant to Federal securities laws. (4) Certificates executed by the appropriate chief financial officers (or executives) of any entity from whom information is required pursuant to this Subsection to the effect that there has been no material adverse change in its financial status since the date of the most recent information provided to Landlord. (5) A list of all stores operated by any of the Persons from whom information is required as aforesaid (including shareholders of such Persons) or their licensees, franchisees, concessionaires or the like within a radius of five (5) miles of the Shopping Center. Tenant represents that Tenant has the right, power and authority to execute and deliver this Lease, that such execution, delivery and performance of Tenant's obligations shall not cause, create or constitute a default or breach of or under any agreement to which Tenant is a party or by which it is bound. Tenant further represents that the information concerning its financial status, stockholders, parent, subsidiaries and Affiliates, if any, prior to the execution and delivery of this Lease is unchanged, true and correct, accurately represents the financial status of the Person for whom submitted and that there has been no material or adverse change in the financial status of Tenant or said Persons. Section 6.2.Negative Covenants. Tenant covenants at all times during the Term and such further time as Tenant occupies the Premises or any part thereof: A. Except for existing stores, Tenant shall not, nor shall any officer, director, shareholder, Affiliate, franchisee or licensee or the like of Tenant, directly or indirectly operate, manage or have any interest in any other store or facility for the sale at retail of merchandise or services similar to that which is permitted under "Permitted Use", within ten (10) miles of the Shopping Center (the Retail Restriction Limit). For purposes of this Subsection A, the Retail - ---------- *** confidential treatment requested 6-8 34 Restriction Limit shall be measured along a straight line, the beginning of which is the point on the outer perimeter of the Shopping Center which is closest to such other store and the end of which is a point on the main entry doors of such other store. Without limiting Landlord's remedies in the event Tenant should violate this covenant, Landlord may include the Gross Sales of such other store in the Gross Sales transacted in the Premises, for the purpose of computing Percentage Rent due hereunder. In the event Landlord so elects, all of the provisions of Section 3.3 hereof shall be applicable to all records pertaining to such other store. B. Unless specifically set forth in the Permitted Use, not to sell, display or distribute (i) any alcoholic liquors or beverages for consumption on or off the Premises or (ii) any pornographic or obscene or sexually erotic goods, wares, printed material or services or (iii) any drugs or other substances whose use or sale is prohibited or controlled by Governmental Authority, including any merchandise which, although not per se violative of Governmental Requirements, is designed or may reasonably be inferred to have been designed for use in connection with such prohibited or controlled items. C. Not to injure, overload, deface or otherwise harm the Premises or any part thereof or any equipment or installation therein; nor commit any nuisance; nor permit the emission of any objectionable noise or odor; nor, unless specifically permitted by the Permitted Use, bum anything within the Shopping Center; nor permit the collection of trash or refuse contrary to rules and regulations established by Landlord or by any Person not approved or designated by Landlord; nor install or cause to be installed any automatic garbage disposal equipment; nor conduct business at, in, on, about or from all or any part of the Premises on any days or hours that Landlord does not open the Shopping Center for business to the public; nor make any use of the Premises or of any part thereof or equipment therein which is improper, offensive or contrary to any Governmental Requirement or to the rules and regulations of Landlord as such may be promulgated from time to time; nor use any advertising medium that may constitute a nuisance, such as loudspeakers, sound amplifiers or phonographs in a manner to be heard outside the Premises; nor conduct any auction, fire, "going out of business" or bankruptcy sales except under conditions approved by Landlord in writing; nor use or occupy the Premises, or suffer or permit them to be used or occupied in whole or in part, as a surplus store, salvage or "odd lot" store, or for any similar business or activity; nor do any act tending to injure the reputation of the Shopping Center; nor sell or display merchandise on, or otherwise obstruct, the Common Areas or anywhere else in the Shopping Center or distribute handbills or other advertising matter in the Shopping Center outside of the confines of the Premises; nor carry on or permit any business conduct or practice which, in Landlord's judgment, may harm the business reputation of Landlord or reflect unfavorably on the Shopping Center, Landlord or other tenants or which might confuse or mislead the public. Tenant shall, upon notice from Landlord, immediately discontinue any violation of the foregoing provisions. D. Except for those which are interior, non-structural and do not affect the heating, ventilation, air conditioning, mechanical or utility systems of the Premises or Shopping Center and the aggregate cost of which does not exceed [***], not to make any repairs, installations, - ---------- *** confidential treatment requested 6-9 35 alterations or additions or improvements or work to the Premises without, on each occasion, obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld (it being understood that Landlord's withholding of consent shall not be deemed unreasonable where Tenant is unable to demonstrate, to Landlord's reasonable satisfaction, the ability to pay for the proposed work); nor attach interior signs, placards or other advertising media or other objects to the windows, doors, valances or ceiling or locate the same either outside of or within the Premises in such manner as to obstruct the view of Tenant's store from the mall area or from the outside other than insubstantially. If Landlord's consent is required, Tenant shall not commence any work as aforesaid until Tenant shall have filed with Landlord plans and specifications for such work and Landlord shall have approved same, said approval not to be unreasonably withheld. Tenant shall perform such work in accordance with such approved plans and specifications using labor not incompatible with other labor at the Shopping Center and such as will not create any labor disputes or work stoppages. Any work performed by Tenant shall at all times be subject to Landlord's inspection and approval after completion to determine whether same complies with the requirements of the applicable provisions of this Lease. Tenant shall, preceding and during the course of any alteration, addition, enlargement, improvement or construction, post or permit Landlord to post and keep posted in conspicuous places on the Premises, and in addition, serve all Persons who are expected to perform work or supply materials, such notices as are now or hereafter permitted or required to be posted to protect Landlord from having its interest in the Premises made subject to a mechanics' or materialmen's lien arising from such alteration, enlargement, improvement or construction. Prior to commencing construction, Tenant shall give Landlord a list of names and addresses for all such Persons. E. Except those for the sole use of Tenant's employees, not to operate any coin or token operated vending machine or similar device for the sale of any goods, wares, merchandise, food, beverage or services, including, but not limited to, pay telephones, pay lockers, pay toilets, scales, amusement devices and machines for the sale of beverages, foods, candy, cigarettes or toilet commodities, without the prior written consent of Landlord. F. Unless Tenant shall first have received Landlord's written consent with respect thereto, not to assign, sell, mortgage, hypothecate, encumber, pledge, or in any manner transfer this Lease or any interest therein, or sublet the Premises or any part or parts thereof, or grant any concession or license or otherwise permit occupancy of all or any part thereof by anyone with, through or under it; nor shall Tenant grant or create any security interest or mortgage, hypothecate, encumber or pledge any equipment, or improvements located in or about the Premises. A transfer of any of Tenant's or Guarantor's stock or a transfer or change of "control" (as such term is defined under the heading "Affiliate" in Article 1 of this Lease) of Tenant or Guarantor, if Tenant or Guarantor is a corporation or a change in the composition of Persons owning any interest in any non-corporate Tenant shall be deemed an assignment for the purpose of this Subsection F. In the event of the occurrence of any of the foregoing events without Landlord's prior consent, this Lease shall, at Landlord's option, be deemed to have been cancelled, terminated and expired as of the date of the occurrence of said event. Neither the consent by Landlord to any of the foregoing, nor any references in this Lease to concessionaires or licensees shall be construed to relieve Tenant from obtaining the express consent of Landlord to any further act which is prohibited herein, nor shall the collection of Rent by Landlord from any assignee, subtenant or other occupant, after default by Tenant, be deemed a waiver of this 6-10 36 covenant or the acceptance of the assignee, subtenant or occupant as Tenant or a release of Tenant from the further performance by Tenant of the covenants in this Lease on Tenant's part to be performed. (1) The provisions of this Subsection 6.2F shall not be deemed to prohibit (i) transfers of stock among existing stockholders or among spouses, children or grandchildren of existing stockholders or inter vivos or testamentary transfers to trusts established for the benefit of such persons, (ii) a public offering of the stock of Tenant or Guarantor or (iii) the transfer of outstanding voting stock registered under applicable securities laws of Tenant or Guarantor which are traded on a recognized national securities exchange. For the purposes of the preceding clause (iii), the term "voting stock" shall mean shares of stock regularly entitled to vote for the election of all directors of the corporation. (2) Landlord shall not unreasonably withhold its consent to an assignment of this Lease or sublease of the entire Premises to a parent, Affiliate or wholly-owned subsidiary of Tenant or to any entity with which or into which Tenant may consolidate or merge and who shall assume for Landlord's benefit the performance of all of the terms, conditions and covenants of this Lease; provided, however, that the merged or consolidated entity shall have a net worth at least equal to the net worth of Tenant at the time of such consolidation or merger or at the time of the Commencement Date of this Lease, whichever shall be greater, and further provided that the assignee or sublessee shall use the Premises under the Trade Name and only for the Permitted Use. (3) Except for the transactions described in paragraphs (1) and (2) of this Subsection, Tenant may not assign or sublet the Premises until Tenant completes Tenant's Work and opens for business. When Tenant requests Landlord's consent to a transaction other than the types of transactions described in paragraphs (1) and (2) of this Subsection, such requests shall include the name of the proposed transferee of stock, assignee or subtenant and its officers, directors and stockholders and such information as to the financial responsibility, business and reputation of the proposed assignee, transferee of stock or subtenant and its officers, directors and stockholders as Landlord may reasonably require. Upon the receipt of such request and information from Tenant, Landlord shall have the right, to be exercised in writing within thirty (30) days after such receipt, to cancel and terminate this Lease, as of the date set forth in Landlord's notice of exercise of such option, which effective date of termination in Landlord's said notice shall not be less than sixty (60) nor more than one hundred twenty (120) days following the service of such notice. Tenant shall have the right to negate Landlord's cancellation by withdrawing its request within ten (10) days after service of Landlord's notice, whereupon, this Lease and the occupancy hereunder shall continue unchanged and in full force and effect. (a) In the event Landlord shall exercise such cancellation right, Tenant shall surrender possession of the Premises on the date set forth in Landlord's notice and in accordance with the provisions of this Lease relating to surrender of the Premises at the 6-11 37 expiration of the Term. In no event shall the Premises be subdivided or partially sublet nor any request made for permission to do so. (b) In the event Landlord shall not exercise its right to cancel this Lease as provided above, then Landlord's consent to such request shall not be unreasonably withheld in accordance with subparagraph (c) of this paragraph (3), provided such consent to sublease or assignment is effected by a legal document in form and substance satisfactory to Landlord. In no event shall any assignment or subletting to which Landlord may have consented release or relieve Tenant from its obligations fully to perform all of the terms, covenants and conditions of the Lease on its part to be performed. Any assignee or subtenant shall be bound by, subject to and deemed to have assumed performance of all of the terms, conditions and covenants of this Lease, including, but not limited to, the Permitted Use set forth in Article 1 and the Retail Restriction Limit and any and all defaults shall be cured prior to the assignment or subletting. (c) In determining reasonableness, Landlord may take into consideration all relevant factors surrounding the proposed sublease and assignment, including, without limitation, the following: (i) The business reputation of the proposed assignee or subtenant and its officers, directors and stockholders; (ii) The nature of the business of the proposed assignee or subtenant in relation to the tenant mix or balance of the Shopping Center; (iii) The source of the Rent due under this Lease, the financial condition and operating performance of the proposed assignee or subtenant and its guarantors, if any; (iv) Restrictions, if any, contained in lease or other agreements affecting the Shopping Center; (v) The extent to which the proposed assignee or subtenant and Tenant provide Landlord with assurance of future performance hereunder, including, without limitation, the payment of Percentage Rent; and (vi) The number of other stores operated by the proposed assignee or subtenant in the vicinity in which the Shopping Center is located. (4) This paragraph (4) shall not apply to any transactions described in paragraphs (1) and (2) above but shall apply to all other transactions. In the event Tenant shall assign its interest in this Lease or sublet the Premises, then the Fixed Rent specified in Article 1 shall [***], effective as of the date of such assignment or subletting, [***], required to be paid by Tenant pursuant to this Lease for the Lease Year immediately preceding such assignment or - ---------- *** confidential treatment requested 6-12 38 subletting. In no event shall the Fixed Rent, after such assignment or subletting, be [***]. In addition to the foregoing, Tenant agrees that in the event of an assignment or subletting, Tenant shall pay to Landlord any and all consideration, money or thing of value received by Tenant or payable to Tenant in connection with the transaction, except Tenant shall not be required to pay to Landlord consideration received in connection with the sale of Tenant's trade fixtures, equipment, inventory or leasehold improvements. (5) Except for transactions of the types described in paragraphs (1) and (2), in the event of any assignment or subletting, Landlord shall have the right to require that there be deposited with and held by Landlord, in addition to any other security then held by Landlord, an amount equal to [***] months' rent ensuing. (6) Use of the terms "assignment" or "subletting" shall be deemed to include stock or share transfers as to corporations, and transfers of ownership interests in the case of non-corporate entities. (7) Tenant shall pay to Landlord the sum of [***] for the processing of any assignment, sublease or other transaction covered or affected by this Subsection 6.2F. Tenant shall pay to Landlord the sum of [***] for the processing of all other transactions initiated by Tenant which are covered or affected by the other provisions of this Lease. G. Not to permit commercial or piped in music to be played other than in the Premises or in a manner which can be heard outside the Premises or, except for work performed by its own employees during reasonable hours designated by Landlord, not to permit rubbish or garbage removal, window cleaning, janitorial or maintenance services in or about the Premises, except in each such case, by a Person, if any, designated by Landlord. Landlord agrees that the prices to be charged by the Person, if any, so designated to supply or perform any or all of the services referred to in this Subsection G shall be competitive. Landlord reserves the right to provide rubbish and garbage removal service, and if Landlord provides such service, Tenant shall pay for the cost thereof in such amount and at such intervals as Landlord may fairly and reasonably determine, said payments to constitute Additional Rent hereunder. H. Not to place or install or suffer to be placed or installed or maintain any graphics or sign in, upon or outside the Premises or in the Shopping Center unless it complies with Landlord's sign criteria and is approved by Landlord pursuant to Subsection Q of Section 6.1, nor any awning, canopy, banner, flag, pennant, aerial, antenna or the like in or on the Premises. Tenant shall not place in the windows or at or near the entrance to the Premises any sign, graphics, decoration, lettering, advertising matter, shade or blind or other thing of any kind, other than neatly lettered signs of reasonable size placed on the floor thereof identifying articles offered for sale and the prices thereof, without first obtaining Landlord's written approval and consent in each instance, which consent shall not be unreasonably withheld. Tenant further agrees that Landlord shall have the right to disapprove and require the removal of any sign, graphics, lettering, lights, advertising or other forms of inscription located in the front [***] feet - ---------- *** confidential treatment requested 6-13 39 of the Premises. Any signs, lights, lettering or other forms of inscription displayed without prior written approval of Landlord may be removed forthwith by Landlord. The cost of such removal shall be paid by Tenant and Tenant shall thereafter restore the Premises and the building to the condition existing immediately prior to the installation of the removed signs, lettering or inscription. I. Not to place a load upon any floor of the Premises which exceeds the floor load per square foot area which such floor was designated to carry. If Tenant shall desire a floor load in excess of that for which the floor or any portion of the Premises is designed, upon submission to Landlord of plans showing the location of and the desired floor live load for the area in question, Landlord may, at its option, strengthen and reinforce the same, at Tenant's sole expense, so as to carry the live load desired. Business machines and mechanical equipment used by Tenant which cause vibration or noise that may be transmitted to the building or to any occupiable space to such a degree as to be reasonably objectionable to Landlord or to any tenants in the building shall be placed and maintained by Tenant at its expense, in settings of cork, rubber or spring-type vibration eliminators sufficient to eliminate such vibration or noise. 6-14 40 ARTICLE 7 DESTRUCTION: CONDEMNATION Section 7.1. Fire or Other Casualty. A. Tenant shall give prompt notice to Landlord in case of fire or other damage to the Premises. B. If (i) the Enclosed Shopping Center (whether or not the Premises were damaged) shall be damaged to the extent of more than twenty-five (25%) percent of the cost of replacement thereof, or (ii) the proceeds of Landlord's insurance recovered or recoverable as a result of the damage described in subsection (i) preceding shall be substantially insufficient to pay fully for the cost of replacement of the damaged portion of the Enclosed Shopping Center, or (iii) the Premises or the Enclosed Shopping Center shall be damaged as a result of a risk which is not covered by Landlord's insurance or generally commercially available "All-Risk" property insurance, Landlord may terminate this Lease by notice given within ninety (90) days after such event and upon the date specified in such notice, which shall be not less than thirty (30) nor more than sixty (60) days after the giving of said notice, this Lease shall terminate. If the Premises shall be damaged in whole or in part during the last two (2) years of the Term, then either Landlord or Tenant may terminate this Lease by notice given to the other within ninety (90) days after the occurrence of such damage, and upon the date specified in such notice, which shall not be less than thirty (30) nor more than sixty (60) days after the giving of said notice, this Lease shall terminate. If the casualty, or Landlord's repair and restoration work shall render the Premises untenantable, in whole or in part, then, a proportionate credit against Rent (except Percentage Rent, Tax Rent and that portion of Common Area Rent attributable to the cost of insurance) shall be allowed from the date when the damage occurred until the earlier of (i) the day after Landlord has substantially completed the work required to repair and restore the Premises, as set forth in Subsection C of this Section, or (ii) the date Tenant shall have opened for business, or (iii) the date of termination by Landlord, in the event Landlord elects to terminate this Lease. Said proportion shall be computed on the basis of the ratio which the amount of Floor Space rendered untenantable bears to the total Floor Space. If there is a credit against Fixed Rent, in computing the "break even" for Percentage Rent purposes, the amount of Fixed Rent less such credit shall be applied, or if the "break even" is expressed herein as a fixed dollar amount, such amount shall be ratably reduced. C. If this Lease shall not be terminated as provided in Subsection B hereof, Landlord shall, at its expense, repair or restore the Premises with reasonable diligence and dispatch, to the condition obtaining immediately prior to the casualty except that Landlord shall not be required to repair or restore any of Tenant's leasehold improvements or betterments, furniture, furnishings, finishes, decorations or any other installations made by Tenant. Upon the completion by Landlord of repair or restoration, Tenant shall prepare the Premises for occupancy by Tenant in the manner obtaining immediately prior to the damage or destruction in accordance with plans and specifications approved by Landlord. All work of restoration or repair by Tenant shall be subject to the provisions of Article 2. 7-1 41 D. The provisions of this Section 7.1 shall supersede and are in lieu of the provisions of any present or future statute or law to the contrary of the state in which the Shopping Center is located. E. The "cost of replacement", as such term is used in Subsection B hereof, shall be determined by the company or companies insuring Landlord against the casualty in question, or if there shall be no insurance, then, by an independent engineer selected and paid for by Landlord. Section 7.2. Eminent Domain. A. If twenty-five (25%) percent or more of the Floor Space of the Premises shall be taken or condemned by any competent authority for any public or quasi-public use or purpose, either party may elect, by giving notice to the other not more than sixty (60) days after the date on which title shall vest in such authority, to terminate this Lease, and, in either such event, the Term of this Lease shall cease and terminate as of the said date of title vesting. In case of any taking or condemnation, whether or not the Term of this Lease shall cease and terminate, the entire award shall be the property of Landlord and Tenant hereby assigns to Landlord all its right, title and interest in and to any such award. Tenant shall, however, be entitled to claim, prove and receive in the condemnation proceeding such awards as may be allowed for loss of lease, moving expense, fixtures and other equipment installed by it but only if such awards shall be made by the condemnation court in addition to the award made by it for the land and the building or part thereof so taken. B. The current Rent (except Percentage Rent) in the case of any taking or condemnation, shall be apportioned as of the date of vesting of title and, if the Term of the Lease shall not have ceased and have been terminated as of said date, Tenant shall be entitled to a pro rata reduction in the Rent (except Percentage Rent) payable hereunder based on the proportion which the Floor Space of the space taken bears to the entire Floor Space of the Premises immediately prior to such taking. C. If more than fifty (50%) percent of the Floor Space of the Enclosed Shopping Center, or if more than twenty-five (25%) percent of the total Floor Space in the Shopping Center shall be so taken or conveyed, or if so much of the parking facilities shall be so taken or conveyed that a reasonable number of parking spaces necessary, in Landlord's judgment, for the continued operation of the Shopping Center shall not be available for use by patrons of the Shopping Center, then, in any such event, Landlord may, by notice in writing to Tenant delivered on or before the day of surrendering possession to the Governmental Authority, terminate this Lease, and Rent shall be paid or refunded as of the date of termination. D. If this Lease is not terminated pursuant to the provisions of this Section 7.2, Landlord shall, at its expense, but only to the extent of an equitable proportion of the net award or other compensation (after deducting legal and all other fees in connection with obtaining said award) for the portion taken or conveyed, of the building of which the Premises are a part (excluding award for land) make such repairs or alterations as are in Landlord's reasonable judgment necessary to constitute the building a complete architectural and tenantable unit. 7-2 42 ARTICLE 8 DEFAULTS AND REMEDIES Section 8.1. Bankruptcy, Insolvency. A. If (i) Tenant or Guarantor shall become insolvent or make an assignment for the benefit of creditors; or (ii) if there shall be filed against or by Tenant or Guarantor in any court, pursuant to any statute either of the United States or of any state, a petition in bankruptcy or insolvency or for arrangement or reorganization or for the appointment of a receiver or trustee of all or portion of Tenant's or Guarantor's property and it is not discharged within thirty (30) days after filing; or (iii) in the case of a filing under Title 11 of the United States Code (the Federal Bankruptcy Act), if this Lease is not assumed within sixty (60) days after filing; then upon the occurrence of any of such foregoing events, this Lease shall, automatically and as a matter of law, be deemed to have been cancelled, terminated, expired and rejected in which event neither Tenant nor any Person claiming through or under Tenant by virtue of any statute or of an order of any court shall be entitled to acquire or remain in possession of the Premises, and Landlord shall have no further liability hereunder and Tenant or any such Person, if in possession, shall forthwith quit and surrender the Premises. If this Lease shall be so cancelled or terminated, Landlord, in addition to the other rights and remedies of Landlord by virtue of any other provision herein or elsewhere in this Lease contained or by virtue of any statute or rule of law, may retain and apply to damages incurred by Landlord, any Rent, Security Deposit or monies received by Landlord from Tenant or on behalf of Tenant. B. In the event of the termination or rejection of this Lease pursuant to Subsection A hereof, Landlord shall be entitled to recover from Tenant an amount equal to the maximum allowed by any statute, law or rule of law in effect at the time when, and governing the proceeding in which, such damages are to be proved. If this Lease shall have been terminated pursuant to Section 8.2 or otherwise, prior to the occurrence of any of the events described in Subsection 8.1A above, then Landlord's rights under this Lease shall not be affected or prejudiced by this Section 8.1. Section 8.2. Default. A. If Tenant defaults in fulfilling any of the covenants or provisions of this Lease, including, without limiting the generality of the foregoing, the covenants for the payment of Rent when due or any part thereof or for the making of any other payment herein provided or for the performance of any other covenant on Tenant's part to be performed hereunder, and such default shall continue for [***] days in the case of a default in the payment of Rent or other monies, after service by Landlord of written notice upon Tenant specifying the nature of said default, or, [***] days as to any other default except that if a non-monetary default or omission shall be of such a nature that the same cannot be reasonably cured or remedied within said [***], if Tenant shall not in good faith have commenced the curing or remedying of such default within such twenty- - ---------- *** confidential treatment requested 8-1 43 day period, and shall not thereafter diligently proceed therewith to completion, or if any levy, execution or attachment shall be issued against Tenant or any of Tenant's property at the Premises, or if the Premises become abandoned, vacant or deserted, or if Tenant shall default with respect to any other lease between Landlord (or any Affiliate of Landlord) and Tenant (or any Affiliate of Tenant), Landlord may serve upon Tenant a written notice that this Lease and the Term will terminate on a date to be specified therein, which shall be not less than five (5) days after the giving of such notice, and upon the date so specified, this Lease and the Term shall terminate and come to an end as fully and completely as if such date were the date herein definitely fixed for the end and expiration of this Lease and the Term, and Tenant shall then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter set forth; provided, however, that if Tenant shall default (i) in the timely payment of any item of Rent or the timely reporting of Gross Sales as required by Section 3.3 hereof and any such default shall continue or be repeated for [***] consecutive months or for a total of [***] months in any period of [***] months or (ii) in performance of any other particular convenant of this Lease more than [***] times in any period of [***] months, then, notwithstanding that such defaults shall have each been cured within the period after notice as above provided, any further similar default shall be deemed to be deliberate and Landlord thereafter may serve the said written five (5) days' notice of termination without affording to Tenant an opportunity to cure such further default. B. If this Lease shall have been terminated pursuant to Section 8.1 or 8.2, or if Tenant has defaulted (beyond any opportunity to cure hereinabove set forth) in the payment of Rent or in observing any other term, condition or covenant, then, in any of such events, Landlord may institute summary proceedings, re-enter the Premises, dispossess Tenant and the legal representative of Tenant or other occupants of the Premises, and remove their effects and hold the Premises as if this Lease had not been made. Section 8.3. Remedies of Landlord. A. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or otherwise, (i) the Rent shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration; (ii) Landlord may relet the Premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term which may at Landlord's option be less than or exceed the period which would otherwise have constituted the balance of the Term, and may grant commercially reasonable concessions including free rent; and (iii) Tenant or the legal representative of Tenant shall also pay Landlord, for the failure of Tenant to observe and perform Tenant's covenants herein contained, the maximum amount of damages recoverable or at Landlord's option, for each month of the period which would otherwise have constituted the balance of the Term, any deficiency between (x) the sum of (a) [***], (b) [***], (c) [***] that would have been payable for the year in question but for such re-entry or termination, (d) the current [***] and (e) [***] under this Lease, and (y) the net amount, if any, of the [***]. [***]. In computing damages there shall be included such commercially reasonable expenses as Landlord may incur in connection with reletting, such as court costs, attorneys' fees and disbursements, brokerage fees, other costs and expenses incurred by Landlord - ---------- *** confidential treatment requested 8-2 44 and for putting and keeping the Premises in good order or for preparing the same for reletting as hereinafter provided. Any such damages shall, at Landlord's option, be paid in monthly installments by Tenant on the rent day specified in this Lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Landlord to collect the deficiency for any subsequent month by a similar proceeding or, at Landlord's option, in advance, discounted to the then present value. Landlord, at Landlord's option, may make such alterations, repairs, replacements and/or decorations in the Premises as Landlord in Landlord's reasonable judgment considers advisable and necessary for the purpose of reletting the Premises; and the making of such alterations and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Provided that Landlord makes the same effort to relet the Premises as other space in the Enclosed Shopping Center, Landlord shall in no event be liable in any way whatsoever for failure to relet the Premises, or in the event that the Premises are relet, for failure to collect the rent under such reletting. Landlord shall not, in reletting the Premises, be required to prefer the letting of the Premises over any other space in the Enclosed Shopping Center. Landlord shall have in addition to any statutory or other liens or rights, if any, and not in lieu thereof, a lien on all fixtures, equipment and leasehold improvements located at the Premises. B. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy. Section 8.4. Waiver of Trial by Jury: Tenant Not to Counter-Claim. It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive, to the extent permitted by the State in which the Shopping Center is located, trial by jury in any action, proceeding or counter-claim or other claim brought by either of the parties hereto against the other on any matters not relating to negligently caused personal injury or property damage, but otherwise arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and any emergency statutory or any other statutory remedy. Tenant further agrees that unless the failure to do so would constitute a waiver of its right to institute a separate action or proceeding against Landlord, it shall not interpose any counter-claim or cross-claim in a summary dispossess proceeding, unlawful detainer proceeding or in any action or proceeding based on non-payment of Rent or any other payment required of Tenant hereunder, however, Tenant shall not be precluded from disputing the amounts due Landlord. Section 8.5 Holdover by Tenant. In the event Tenant remains in possession of the Premises after the expiration of the Term created hereunder, and without the express written consent of Landlord or the execution and delivery of a new lease, Tenant, at the option of Landlord, shall be deemed to be occupying the Premises as a tenant from month-to-month, terminable at will on thirty (30) days' notice (notwithstanding any contrary provision 8-3 45 of applicable law) by either party, at a monthly rental equal to the sum of (i) [***] the monthly installment of Fixed Rent payable during the last month of the Term, (ii) one-twelfth (1/12) of the average annual Percentage Rent payable hereunder based upon the last [***] Lease Years, (iii) the current monthly Tax Rent payable for the last year of the Term, (iv) the monthly Common Area Rent, (v) the monthly Environmental Charge and (vi) one-twelfth (1/12) of any other Additional Rent or other charges payable, subject to all the other conditions, provisions and obligations of this Lease insofar as the same are applicable to a month-to-month tenancy. Tenant shall not interpose any counter-claim or cross-claim in a summary dispossess proceeding, unlawful detainer proceeding or other action or proceeding based on holdover, however, Tenant shall be permitted to assert appropriate defense to Landlord's claim. Section 8.6. Landlord's Right to Cure Defaults. Landlord may cure, after notice served pursuant to this Article and failure of Tenant to do so, any default by Tenant under this Lease; and whenever Landlord so elects, all costs and expenses incurred by Landlord in curing a default, including, without limitation, reasonable attorneys' fees, together with interest on the amount of costs and expenses so incurred at the rate provided in Section 3.8 hereof, shall be paid by Tenant to Landlord on demand, and shall be recoverable as Additional Rent. Section 8.7. Effect of Waivers of Default. No consent or waiver, expressed or implied, by Landlord to or of any breach of any covenant, condition or duty of Tenant shall be construed as a consent or waiver to or of any other breach of the same or any other covenant, condition or duty of Tenant, unless in writing signed by Landlord. Section 8.8 Security Deposit. Tenant has agreed to deposit with Landlord the Security Deposit as security for the punctual performance by Tenant of each and every obligation of it under this Lease. In the event of any default by Tenant, Landlord may apply or retain all or any part of the Security Deposit to cure the default or to reimburse Landlord for any sum which Landlord may spend by reason of the default. In the case of every such application or retention, Tenant shall, on demand, pay to Landlord the sum so applied or retained which shall be added to the Security Deposit so that the same shall be restored to its original amount. If at the end of the Term, Tenant shall not be in default under this Lease and shall have delivered to Landlord evidence of final utility service readings and payment thereof, the Security Deposit or any balance thereof, shall be returned to Tenant within [***] days. If Landlord shall sell the Shopping Center, or shall lease the Shopping Center, in either case subject to this Lease, or shall otherwise assign or dispose of this Lease, Landlord may assign and turn over the Security Deposit or any balance thereof to Landlord's grantee, lessee or assignee, and Tenant hereby releases and relieves Landlord from any and all liability for the return of said deposit and shall look solely to said grantee, lessee or assignee; it being expressly agreed that this provision shall apply to each and every sale, conveyance or lease of the Shopping Center or assignment or disposition of this Lease. Landlord shall not be required to place the Security Deposit in an interest-bearing account and said fund shall be returned to Tenant without interest. - ---------- *** confidential treatment requested 8-4 46 ARTICLE 9 ADDITIONAL PROVISIONS Section 9.1. Notices from One Party to the Other. Any notice or demand from Landlord to Tenant or from Tenant to Landlord shall be in writing and shall be deemed duly served if mailed by registered or certified mail, return receipt requested, addressed, if to Tenant, at the address of Tenant set forth herein, or to such other address as Tenant shall have last designated by notice in writing to Landlord, and if to Landlord, at the address of Landlord set forth herein or such other address as Landlord shall have designated by notice in writing to Tenant. Notice shall be deemed served when mailed. Section 9.2. Brokerage. Tenant warrants that it has had no dealings with any broker or agent in connection with this Lease other than the Broker, if any, named elsewhere in this Lease and covenants to pay, hold harmless and indemnify Landlord from and against any and all costs, expense or liability for any compensation, commissions and charges claimed by the Broker or by any other broker or agent with respect to this Lease or the negotiation thereof with whom Tenant had dealings. Section 9.3. Estoppel Certificates. Each of the parties agrees that it will, at any time and from time to time, within twenty (20) business days following written notice by the other party herein specifying that it is given pursuant to this Section, execute, acknowledge and deliver to the party who gave such notice a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), and the dates to which the Rent and any other payments due hereunder from Tenant have been paid in advance, if any, and stating whether or not to the best knowledge of the signer of such certificate the other party is in default in performance of any covenant, agreement or condition contained in this Lease, and if so, specifying each such default of which the signer may have knowledge. Section 9.4 Applicable Law and Construction. The laws of the state in which the Shopping Center is located shall govern the validity, performance and enforcement of this Lease. The invalidity or unenforceability of any provision of this Lease shall not affect or impair any other provision. All negotiations, considerations, representations and understandings between the parties are incorporated in this Lease. Landlord or Landlord's agents have made no representations or promises with respect to the Shopping Center or the Premises, except as herein expressly set forth. Tenant further understands that this Lease and every other lease agreement with every other tenant or occupant of the Shopping Center is negotiated on its own merits and Landlord does not make any representation as to the similarity of the terms of this Lease with any other such lease or agreement. The headings of the several articles and sections contained herein are for convenience only and do not define, limit or construe the contents of such articles or sections, it being understood that the so-called "Recital" constitutes part of the agreement between Landlord and Tenant. Whenever herein the singular number is used, the same shall include the plural, and the neuter gender shall include the masculine and feminine genders. Section 9.5. Relationship of the Parties. Nothing contained herein shall be deemed or construed by the parties hereto, or any third party, as creating the relationship of principal and 9-1 47 agent or partnership or joint venture between the parties hereto, it being understood and agreed that neither the method of computation of Rent nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant. Section 9.6. Limitations on Liability. Landlord and Landlord's agents and employees shall not be liable for, and Tenant waives all claims for, loss or damage to Tenant's business or damage to any Person or property sustained by Tenant resulting from any accident or occurrence (unless, subject, however, to the waiver of subrogation provision hereof, caused by or resulting from the negligence or willful acts of Landlord) in or upon the Premises or any other part of the Shopping Center, including, but not limited to, claims for damage resulting from: (i) any equipment or appurtenances becoming out of repair; (ii) injury done or occasioned by wind; (iii) any defect in or failure of plumbing, heating or air conditioning equipment, electric wiring or installation thereof, gas, water and steam pipes, stairs, porches, railings or walks; (iv) broken glass; (v) the backing up of any sewer pipe or downspout; (vi) the bursting, leaking or running of any tank, tub, washstand, water closet, waste pipe, drain or any other pipe or tank in, upon or about the building or the Premises; (vii) the escape of steam or hot water; (viii) water, snow, or ice being upon or coming through the roof, skylight, trapdoor, stairs, doorways, show windows, walks or any other place upon or near the building or the Premises or otherwise; (ix) the falling of any fixture, plaster, tile or stucco; and (x) any act, omission or negligence of other tenants, licensees or of any other Persons or occupants of the Shopping Center. Section 9.7 Landlord's Entry Rights. Landlord or Landlord's agents shall have the right to enter upon the Premises at all reasonable times to examine same and to make such repairs, alterations, improvements or additions to the Premises or to the building as may be necessary, and Landlord shall be allowed to take all materials into and upon the Premises that may be required therefor without the same constituting an eviction of Tenant, in whole or in part, and the Rent shall in nowise abate while such repairs, alterations, improvements or additions are being made by reason of loss or interruption of the business of Tenant because of the prosecution of any such work. However, if as the result of the exercise by Landlord of its rights under this Section 9.7, there is created a substantial and material interference with Tenant's ability to conduct business in the Premises, and Tenant therefore closes for more than [***] consecutive business days, Tenant shall be entitled to an abatement of Fixed Rent for each day after the [***] business day during which the condition continues. Except in emergencies such entry shall be during business hours and on reasonable oral notice to the Person then in charge of the Premises for Tenant. Landlord shall use all reasonable efforts not to unreasonably interfere with or interrupt the conduct and operation of Tenant's business but in no event shall Landlord be required to incur any additional expenses for work to be done during hours or days other than regular business hours or days. Landlord or Landlord's agents shall also have the right to enter upon the Premises after notice as set forth above, at reasonable times to show them to prospective lessees or purchasers of the Shopping Center. During the [***] days prior to the expiration of the Term, Landlord may show the Premises to prospective tenants. If, [***] the end of the Term, Tenant shall have removed all or substantially all of Tenant's property - ---------- *** confidential treatment requested 9-2 48 therefrom, Landlord may [***] enter, renovate and redecorate the Premises without elimination or abatement of Rent or the payment of other compensation to Tenant and such action shall have no effect upon this lease. Section 9.8. Subordination. A. This Lease is and all of Tenant's rights hereunder are subject and subordinate to (i) any ground or underlying (including operation) leases that now exist or may hereafter be placed on the Shopping Center or any part thereof, and (ii) any mortgages or deeds of trust or deeds to secure debt that now exist or may hereafter be placed upon the Shopping Center or the interest under any ground or underlying leases and to any and all advances made thereunder and the interest thereon and to all renewals, replacements, amendments, modifications, consolidations and extensions of any of the foregoing. Tenant covenants and agrees that if any mortgagee of Landlord's interest in any underlying lease or any fee mortgagee succeeds to Landlord's interest under this Lease by foreclosure or otherwise, Tenant will, if requested, attorn to such mortgagee and will recognize such mortgagee as Tenant's landlord under this Lease. At the option of the landlord or any successor landlord thereunder, Tenant agrees that neither the cancellation nor termination of any ground or underlying lease to which this Lease is now or may hereafter become subject or subordinate, nor any foreclosure of a mortgage either affecting the fee title of the Premises or the ground or underlying lease, nor the institution of any suit, action, summary or other proceeding by the landlord or any successor landlord thereof, or any foreclosure proceeding brought by the holders of any such mortgage to recover possession of the leased property, shall by operation of law or otherwise result in the cancellation or termination of this Lease or the obligations of Tenant hereunder, and Tenant covenants and agrees to attorn to the landlord or to any successor to Landlord's interest in the Premises. Tenant shall execute and deliver in recordable form, whatever instruments maybe required to acknowledge or further effectuate the provisions of this Subsection, and in the event Tenant fails to do so within [***] days after demand in writing, such failure shall be deemed a material default hereunder. Any mortgagee or trustee under any such mortgage or deed of trust or deed to secure debt, or the lessor under any such ground or underlying lease may elect that this Lease shall have priority over its mortgage, deed of trust, deed to secure debt, or lease and upon notification of such election by such mortgagee, trustee or lessor to Tenant, this Lease shall be deemed to have priority over said mortgage, deed of trust, deed to secure debt, or ground or underlying lease whether this Lease is dated prior to or subsequent to the date of said mortgage, deed of trust, deed to secure debt, or lease. If the holder of any mortgage, deed of trust, deed to secure debt, or security agreement shall forward to Tenant written notice of the existence of such lien or lease, then Tenant shall, so long as such lien or lease continues, give to such lienholder or lessor the same notice and opportunity to correct any default as is required to be given to Landlord under this Lease but such notice of default may be given to Landlord and such lienholder or lessor concurrently. B. If so requested by Tenant, Landlord shall use reasonable efforts to obtain non-disturbance and attornment agreements from any ground or underlying lessors or present or - ---------- *** confidential treatment requested 9-3 49 future mortgagees of Landlord's interest in the Premises, which efforts shall consist only of Landlord's making a written request for such agreements on behalf of Tenant. Tenant shall cooperate in all respects with Landlord's efforts, shall provide any information reasonably required by such mortgagees or lessors and shall pay such fees or expenses as may be requested by such parties in connection with such agreements. Landlord shall not be required to institute any legal action or proceeding in order to obtain said agreements. The foregoing shall not be deemed a condition to the effectiveness or continuing effectiveness of this Lease. Section 9.9 Construction on Adjacent Premises or Buildings. If any construction, excavation or other building operation shall be about to be made or shall be made on any premises adjoining or above or below the Premises or on any other portion of the Enclosed Shopping Center, Tenant shall permit Landlord, or the adjoining owner, and their respective agents, employees, licensees and contractors, to enter the Premises and to strengthen, add to or shore the foundations, walls, columns or supporting members thereof, and to erect scaffolding and/or protective barricades around and about the Premises (but not so as to preclude entry thereto) and to do any act or thing necessary for the safety or preservation of the Premises. Except as may be expressly set forth to the contrary in this Section 9.9, Tenant's obligations under this Lease shall not be affected by any of the foregoing or any such construction or excavation work, shoring-up, scaffolding or barricading. Landlord shall not be liable in any such case for any inconvenience, disturbance, loss of business or any other annoyance arising from any such construction, excavation, shoring-up, scaffolding or barricades, but Landlord shall use its best efforts so that such work will cause as little inconvenience, annoyance and disturbance to Tenant as possible, consistent with accepted construction practice in the vicinity, and so that such work shall be expeditiously completed. It is understood by Tenant that shopping centers are at times expanded or reconfigured by the addition of new or reconfigured buildings, improvements or structures (including multilevel, decked or subsurface parking structures) and if the foregoing occurs, Landlord shall have the right of access to enter upon the Premises to perform construction work and shall use its reasonable efforts to complete all construction in the Premises as promptly as possible (considering the nature and extent of the construction and subject to prudent construction practices). Landlord shall have the right to require Tenant to temporarily curtail its business or to temporarily close the Premises if necessary in connection with the construction work. Accordingly, (i) if Landlord requires Tenant to temporarily suspend business or to temporarily close the Premises because of any such changes or (ii) if Tenant's use and occupancy of the Premises or Tenant's access to the covered mall in front of the Premises is materially, adversely interfered with and Tenant temporarily closes for business, Tenant shall receive an abatement of Rent (except Percentage Rent) on a per diem basis for the number of days for which Tenant is required to close. Notwithstanding the foregoing, [***] because of the proposed expansion, [***] said expansion. Section 9.10 Mall Expansion. A. In the event Landlord shall add additional buildings to the Enclosed Shopping Center or otherwise expand or reconfigure the Enclosed Shopping Center, Landlord shall have - ---------- *** confidential treatment requested 9-4 50 the right to relocate Tenant's operation to other premises (the "New Premises") in another part of the Enclosed Shopping Center in accordance with the following provisions: The New Premises shall be substantially the same in size and configuration as the Premises described in this Lease and, to the extent reasonably possible, shall be located in an area having, in Landlord's reasonable judgment, comparable pedestrian traffic. If the New Premises have been previously occupied, Landlord shall deliver the New Premises to Tenant in "as is" condition. If the New Premises consist of newly created leasable area, Landlord shall deliver the New Premises to Tenant in a "shell" condition (i.e., Landlord shall provide a concrete slab, demising studs, an empty electrical conduit to the New Premises, sprinkler, water and sewer service to the New Premises, and a common exhaust vent). Landlord shall give Tenant at least two hundred seventy (270) days' notice of Landlord's intention to relocate Tenant's operation to the New Premises. To the extent determined by Landlord to be practicable, Tenant's Work in the New Premises shall be prosecuted while Tenant is open for business in the Premises herein demised and the physical move shall take place during non-business hours, if reasonably possible, or during such other period as shall be mutually agreed upon by Landlord and Tenant. Rent (except Percentage Rent) and all other charges shall abate for any period during which Tenant's operation shall be closed to the public as a result of the relocation and there shall be excluded from the computation set forth in Section 3.3A of this Lease the amount of Fixed Rent which would otherwise be payable for such period. Landlord shall not have the right to relocate Tenant's operation more than once during the Term. If the New Premises are smaller or larger than the Premises described in this Lease, Fixed Rent for the balance of the original Term of this Lease shall be adjusted to a sum computed by multiplying the Fixed Rent specified in Article 1, by a fraction, the numerator of which shall be the total number of square feet of Floor Space in the New Premises and the denominator of which shall be the total number of square feet of Floor Space in the Premises described in this Lease. All other charges based upon Floor Space shall likewise be adjusted proportionately. In addition, the original Term hereof shall be extended for such period of time (the "Extension Period") as shall be necessary to permit Tenant to occupy the New Premises for the same number of days and months as constituted the original Term hereunder [e.g., if Tenant's original Term was seven (7) years and Tenant opens for business in the New Premises on the fifteenth day of the fifty second (52nd) month, the Extension Period will be fifty one (51) months and fifteen (15) days]. During the Extension Period, Fixed Rent shall be payable at such rates as constitute the then fair market rental ("FMR"), as determined in accordance with paragraph (D) hereof, and all Additional Rent, including the Promotion Fund Charge, shall be at the rates and payable on the terms then in effect for new retail leases at the Enclosed Shopping Center. B. In the event the New Premises described in Landlord's relocation notice are unacceptable to Tenant, Tenant shall have the right, as its sole and only remedy, exercisable by written notice to Landlord given within [***] days following receipt of Landlord's relocation notice, to terminate this Lease, such termination to be effective as of the proposed relocation date set forth in Landlord's notice. Failure by Tenant to timely exercise such right shall be deemed a waiver with respect thereto and confirmation that the New Premises are acceptable to Tenant. Such termination shall be Tenant's sole and only remedy in the event of Tenant's refusal to accept relocation to the New Premises, it being understood that should Tenant refuse for any - ---------- *** confidential treatment requested 9-5 51 reason to relocate, but fail to terminate this Lease in accordance with the foregoing, this Lease shall nevertheless expire on the date set forth in Landlord's relocation notice. C. If Tenant shall accept the New Premises, Landlord shall pay, within ninety (90) days following the date Tenant opens for business in the New Premises, the then unamortized cost of the permanent leasehold improvements (excluding, inter alia trade fixtures and equipment, furnishings, decorations, inventory and other items of personal property) initially made by Tenant in the original Premises pursuant to Article 2 of this Lease, assuming a useful life equal to the length of the original Term of this Lease and amortization on a straight line basis. Tenant shall, not later than, ninety (90) days following the Commencement Date, deliver an affidavit of an officer of Tenant and a certificate of Tenant's architect accompanied by such bills, contracts, receipts, invoices, cancelled checks and the like as Landlord may reasonably require, specifying the cost of Tenant's leasehold improvements, which amount shall, unless disputed by Landlord, thereupon be the basis for the amount to be paid by Landlord pursuant to this provision. D. FMR during the Extension Period, if any, shall be determined as follows: (1) Within sixty (60) days following the date of Landlord's relocation notice to Tenant, Landlord shall deliver to Tenant a written proposal setting forth Landlord's determination of FMR (on a per square foot basis) for the New Premises during the Extension Period. (2) Within thirty (30) days thereafter, Tenant shall deliver to Landlord (a) written acceptance of Landlord's proposed FMR or (b) a counterproposal setting forth Tenant's determination of such annual FMR. Failure by Tenant to respond to Landlord's proposal within the aforesaid 30-day period shall be deemed confirmation that Landlord's determination of FMR is acceptable to Tenant. (3) If Tenant shall deliver a counterproposal as aforesaid, then for the ensuing 30-day period, Landlord and Tenant shall conduct good faith negotiations in an effort to agree upon FMR. (4) If Landlord and Tenant are unable to reach agreement within said 30-day period, then, within ten (10) days thereafter, each shall appoint an independent real estate appraiser who is then, and has been for a minimum of ten (10) years, a member of the American Institute of Real Estate Appraisers. If Tenant shall fail to make timely appointment of an appraiser, then Landlord's appraiser shall make the determination of FMR, and such determination shall be binding upon both parties. (5) The appraisers shall, within sixty (60) days following their appointment, render their joint determination of FMR for the New Premises for each year of the Extension Period, and such determination shall be binding and conclusive upon Landlord and Tenant. Should the appraisers be unable to reach agreement as to FMR within said sixty (60)-day period, then 9-6 52 together they shall designate a third appraiser, who shall select either the FMR proposed by Landlord's appraiser or the FMR proposed by Tenant's appraiser as the Fixed Rent (per square foot) to be paid by Tenant for the New Premises during the Extension Period, and such determination by the third appraiser shall be binding and conclusive on both Landlord and Tenant. The cost of the appraisal shall be shared equally by Landlord and Tenant. Section 9.11 Short Form Lease. Tenant agrees not to record this Lease. Either party shall, at the request of the other, execute, acknowledge and deliver, at any time after the date of this Lease, a memorandum or notice of lease prepared by the requesting party, but the provisions of this Lease shall control the rights and obligations of the parties. Section 9.12 Binding Effect of Lease. The covenants, agreements and obligations herein contained, except as herein otherwise specifically provided, shall extend to, bind and inure to the benefit of the parties hereto and their respective personal representatives, heirs, successors and permitted assigns. In particular the provisions of Subsection F of Section 6.2 shall bind the executors, administrators or other personal representatives of Tenant, if an individual, or its successors, if Tenant is a corporation or partnership. Each covenant, agreement, obligation or other provisions herein contained shall be deemed and construed as a separate and independent covenant of the party bound by, undertaking or making the same, not dependent on any other provision of this Lease unless otherwise expressly provided. Section 9.13 Effect of Unavoidable Delays. The provisions of this Section shall be applicable if there shall occur, during the Term, or prior to the commencement thereof, any (i) strike(s), lockout(s) or labor dispute(s); (ii) inability to obtain labor or materials, or reasonable substitutes therefor; or (iii) acts of God, governmental restrictions, regulations or controls, enemy or hostile governmental action, civil commotion, fire or other casualty, or other conditions similar or dissimilar to those enumerated in this item (iii) beyond the reasonable control of the party obligated to perform. If Landlord or Tenant shall, as the result of any of the above-described events, fail punctually to perform any obligation on its part to be performed under this Lease, then such failure shall be excused and not be a breach of this Lease by the party in question, but only to the extent occasioned by such event. If any right or option of either party to take any action under or with respect to this Lease is conditioned upon the same being exercised within any prescribed period of time and such named date, then such prescribed period of time and such named date shall be deemed to be extended or delayed, as the case may be, for a period equal to the period of the delay occasioned by any above-described event. Notwithstanding anything herein contained, the provisions of this Section shall not be applicable to or in determining the date of commencement of or the continuance of Tenant's obligation to pay Rent or its obligations to pay any other sums, moneys, costs, charges or expenses required to be paid by Tenant hereunder. Section 9.14 No Oral Changes. Neither this Lease nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. Section 9.15 Executed Counterparts of Lease. This Lease may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts shall together constitute but one and the same Lease. 9-7 53 Section 9.16 Landlord's Liability. A. In the event of sale or transfer of all or any portion of the Shopping Center or any undivided interest therein, or in the event of the making of a lease of all or substantially all of the Shopping Center, or in the event of a sale or transfer of the leasehold estate under any such lease, the grantor, transferor or lessor, as the case may be, shall thereafter be entirely relieved of all terms, covenants and obligations thereafter to be performed by Landlord under this Lease to the extent of the interest or portion so sold, transferred or leased, provided that (i) any amount then due and payable to Tenant or for which Landlord or the then grantor, transferor or lessor would otherwise then be liable to pay to Tenant (it being understood that the owner of an undivided interest in the fee or any such lease shall be liable only for his or its proportionate share of such amount) shall be paid to Tenant; (ii) the interest of the grantor, transferor or lessor, as Landlord, in any funds then in the hands of Landlord or the then grantor, transferor or lessor in which Tenant has an interest, shall be turned over, subject to such interest, to the then grantee, transferee or lessee; (iii) notice of such sale, transfer or lease shall be delivered to Tenant and (iv) the grantee, transferee or lessee shall assume in writing all of Landlord's obligations under this Lease accruing from the date of the transaction. B. Tenant agrees that it shall look solely to the estate and property of Landlord in the land and buildings comprising the Shopping Center and the income therefrom (subject to prior rights of the holder of any mortgage or deed of trust on any part of the Shopping Center) for the collection of any judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed or performed by Landlord; and no other assets of Landlord, its members or shareholders shall be subject to levy, execution or other procedures for the satisfaction of Tenant's remedies. 9-8 54 IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this Lease as of the day and year first above written. (TENANT) SILICON ENTERTAINMENT, INC. By: /s/ Chris Morse ----------------------------------- (LANDLORD) MALL OF GEORGIA, LLC, a Delaware limited liability company ATTEST: By: CPI-GEORGIA CORPORATION, a Delaware corporation, Managing Member By: /s/ David Simon - ------------------------------------ ----------------------------------- Secretary 9-9 55 (TENANT, if a Corporation) STATE OF CALIFORNIA ) ) ss.: COUNTY OF SANTA CLARA ) On this 2nd day of September, 1999, before me personally came Chris Morse, to me known, who being by me duly sworn, did depose and say that s(he) resides at 210 Hacienda Avenue, Campbell, CA 95008, that (s)he is the Vice President of Silicon Entertainment, the corporation described herein and which executed the foregoing instrument; and that (s)he signed his name thereto by authority of the Board of Directors of the said corporation. /s/ Laurie Shermer ------------------------------- Notary Public 56 RIDERS TO LEASE AGREEMENT dated September 23rd, 1999 between MALL OF GEORGIA, L.L.C., a Delaware limited liability company, as Landlord, and SILICON ENTERTAINMENT, INC., d/b/a "NASCAR Silicon Motor Speedway" or "Silicon Motor Speedway", as Tenant, for Store No. 2068 at Mall of Georgia, Gwinnett County, Georgia. - -------------------------------------------------------------------------------- IN THE EVENT OF ANY INCONSISTENCIES BETWEEN THESE RIDERS AND THE PRINTED FORM OF THIS LEASE, THE RIDERS SHALL BE DEEMED TO CONTROL. RIDER #1 - Construction of Shopping Center Landlord has commenced construction of the Shopping Center of which the Premises will be a part. Tenant will occupy Store No. 2068, consisting of approximately 5,895 square feet. Tenant's Premises in the Enclosed Shopping Center is shown on Exhibit B for illustrative purposes and Landlord reserves the right to increase, eliminate, reduce or change the number, type, size, location, elevation, nature and use of any part of the Enclosed Shopping Center and make changes, additions, subtractions, alterations or improvements in or to the Enclosed Shopping Center. RIDER #2 - amending Article 1 - Size of Premises Landlord and Tenant acknowledge that the Fixed Rent set forth on page 1-1 has been calculated assuming that the Premises shall consist of 5,895 square feet of Floor Space. As soon as practicable after Tenant's Work is completed, Landlord shall cause the Premises to be measured and the Floor Space of the Premises to be determined in accordance with the definition thereof set forth in Article 1. In the event the Floor Space of the Premises varies from 5,895 square feet, the Fixed Rent shall be adjusted on the basis of [***] per square foot for each of the first (1st) through [***] years of the Term and $30.00 per square foot for each of the [***] through [***] years of the Term. The Promotion Fund Charge and Environmental Charge set forth on page 1-1 shall also be adjusted to reflect such variance. In no event, as a result of remeasurement shall the Size of the Premises be deemed to vary by more than [***] square feet. Landlord and Tenant shall execute, acknowledge and deliver a supplemental agreement specifying the adjusted annual Fixed Rent, Promotion Fund Charge and Environmental Charge. The form of the Supplemental Agreement is annexed hereto as Exhibit F. RIDER #3 - Landlord's Work Landlord has performed the work (Landlord's Work) described in Exhibit E annexed hereto and made a part hereof. The cost of those items of Landlord's Work which are to be performed at Tenant's expense are designated on page 5 of Exhibit E. In no event shall the aggregate costs to Tenant of items A, B, C, D, E, G, H and I exceed [***] percent of the cost listed on Exhibit E. Such costs shall be deemed Additional Rent under the Lease, shall be billed - ---------- *** confidential treatment requested 1 57 to Tenant upon commencement of Tenant's Work, and shall be due and payable within [***] days thereafter. After delivering possession of the Premises to Tenant, Landlord shall not then alter the size and/or shape of the Premises without Tenant's consent, which consent may be withheld in Tenant's sole discretion. RIDER #4 - Disputes In the event of any dispute between Landlord and Tenant concerning the date of substantial completion of Landlord's Work or the Size of Premises or any part thereof, or whether or not access to the Premises is available as contemplated in these riders, such dispute shall be determined by an architect selected by Landlord's and Tenant's architect, whose decision shall be binding on the parties and whose fees for such determination shall be borne equally by the parties. Until such determination shall have been made, Tenant shall pay all Rent as, when and in the amounts billed by Landlord, subject to reimbursement, if any, as indicated by decision of the architect. RIDER #5 - Grand Opening Contribution On the first day of the month next following the month in which the Commencement Date occurs, Tenant shall pay to Landlord, as a contribution toward the promotion of the Grand Opening of the Enclosed Shopping Center (the "Grand Opening Contribution") the sum of [***] per square foot]. In addition, Tenant shall reasonably cooperate with Landlord in all Grand Opening activities at no additional cost to Tenant. RIDER #6 - amending Article 1 - Tenant's Trade Name Tenant may change its Trade Name to any other name then being used by substantially all of Tenant's chain of stores currently doing business as "Nascar Silicon Motor Speedway" or "Silicon Motor Speedway"; provided, however, said name does not conflict with a name then being used by another tenant in the Shopping Center. RIDER #7 - amending Article 1 - Construction Barrier Fee Tenant shall install a construction barrier at the Premises and decorate such barrier with a NASCAR motif display announcing Tenant's scheduled opening. RIDER #8 - Tenant's Work and amending Section 2.1 Tenant shall commence Tenant's Work when possession of the Premises is made available to Tenant. Landlord's Work is substantially complete in the Premises, and possession of the Premises shall be deemed to have been delivered to Tenant on the later of (i) the date of the Lease and (ii) the date that Tenant has received its conditional use permit (if necessary) and - ---------- *** confidential treatment requested 2 58 all other approvals required for Tenant to commence Tenant's Work in the Premises. In the event Tenant, despite its good faith efforts to do so, Tenant is unable to secure all Necessary Approvals required for Tenant to conduct its business at the Premises for the Permitted Use within nine (9) months after the date of the Lease, Tenant shall have the right to terminate this Lease. Landlord's Work is substantially completed in accordance with Landlord's plans and specifications on Exhibit E and access to the Premises through the Common Area is available and the Premises are in a condition to accept the installation of Tenant's Work, as reasonably determined by Landlord's architect, notwithstanding that other stores in the Enclosed Shopping Center may not be ready for occupancy by other tenants. Tenant's Work Period shall be as provided in Article 1 of this Lease. Tenant's Work shall be performed in accordance with the terms of the Tenant Design Criteria Manual to be furnished to Tenant by Landlord. RIDER #9 - Temporary Utility Charges during Tenant's Work Period Throughout Tenant's Work Period, Tenant shall pay, promptly upon receipt of bills therefor, for all utilities used at the Premises and for refuse removal, in the amounts referenced in Exhibit E. RIDER #10 - Coordination of Work The timing and progress of Tenant's Work and the work of other tenants, Landlord's Work, and work in the Interior Common Area shall be coordinated with Landlord or its designee. In the event of any dispute with respect to deliveries, parking, storage of equipment or materials or vehicles, traffic flow, or any other matter or thing relating to Landlord's Work, Tenant's Work or the work of other tenants, such dispute shall be determined by Landlord or Landlord's designee, in their sole discretion. Tenant and its agents or contractors, when requested, shall attend at the Shopping Center, during business hours, all construction meetings convened by Landlord or its representative, and they shall comply with all reasonable and nondiscriminatory rules and regulations adopted from time to time by Landlord or its designee. Neither Tenant nor its agents shall park or store any vehicles, equipment, materials or supplies other than within Tenant's Premises, without the specific written consent of Landlord. RIDER #11 - amending Article 1 - Term In the event Tenant's Gross Sales shall be less than [***] in the [***] full (twelve (12) month) Lease Year, Tenant may terminate this Lease by written notice served not later than thirty (30) days after delivery to Landlord of Tenant's annual statement of Gross Sales for the [***] full Lease Year. Tenant's termination notice shall specify a date for the termination of this Lease which shall be not less than ninety (90) days nor more than one hundred eighty (180) days from the date thereof. Tenant's right to terminate as aforesaid and the effectiveness of Tenant's notice is conditioned upon (i) payment by Tenant to Landlord of an amount equal to the unamortized portion of Landlord's Contribution assuming a useful life equal to the original Term and unamortization on - ---------- *** confidential treatment requested 3 59 a straight-line basis, and (ii) payment by Tenant to Landlord of all Rent and other charges due to the date of termination. RIDER #12 - amending Article 1 - Storage Space Page 1-5, line 2, delete "soley" and substitute "solely". RIDER #13 - amending Article 1 - Permitted Use (A) Provided the same have been approved by Landlord on Tenant's Plans, Tenant shall be allowed to place a full size race car within the Premises in the area immediately fronting on Tenant's entrance to the Premises. Landlord acknowledges that the race car may be fitted with operating lights, including flashing lights, a "fogging" device to simulate exhaust emissions and race car sound effects. However, Tenant's operation of such race car shall remain subject to the terms and conditions of the Lease (including, but not limited to Section 6.2 thereof) and shall not cause an adverse effect on the Shopping Center activities conducted in or from the Common Areas or interfere with any other tenant's quiet enjoyment of its premises. (B) Tenant shall be allowed to employ a "greeter" at the Premises who would greet Tenant's customers in the Common Area immediately adjacent to the Premises. (C) Landlord hereby consents to tenant's use of hydraulic oil in connection with the operation of the stimulators and cleaning and office products customarily used in retail or office premises so long as such materials are used, handled, stored and disposed of in accordance with applicable laws. RIDER #14 - amending Article 1 -Necessary Approvals Necessary Approvals shall not include those approvals Landlord is required to secure under this Lease. RIDER #15 - amending Section 2.1 (A) Landlord shall approve or reject to Tenant's plans and specifications within twenty (20) days of submission by Tenant. If Landlord rejects Tenant's plans, Landlord shall provide a detailed explanation why the plans were so rejected. If Landlord responds to Tenant's plans and specifications later than [***] days after any submission by Tenant, the Tenant's Work Period shall be extended on a day for day basis. (B) Landlord agrees that it shall contribute the sum of [***] per square foot of Floor Space at the Premises (Landlord's Contribution) towards the cost of Tenant's Work on the terms set forth below: - ---------- *** confidential treatment requested 4 60 (1) Landlord shall not be required to make Landlord's Contribution unless this Lease is in full force and effect and Tenant is not in default beyond any applicable cure period hereunder and the leasehold improvements (excluding fixtures, furnishings and equipment) at the Premises are free of all liens. (2) Landlord's Contribution shall be used only for alterations, improvements, fixtures and equipment which become part of or attached or affixed to the realty, including heating, ventilating and air conditioning systems, walls, floors and ceiling, but excluding trade fixtures, furniture and furnishing or other personal property. (3) Landlord's Contribution shall be made in installments as follows: [***] upon completion of [***] of Tenant's Work; [***] upon completion of [***] of Tenant's Work. The final installment shall be paid upon the last to occur of (i) the opening for business by Tenant in the Premises and (ii) the completion of Tenant's Work as certified pursuant to Section (4)(b) below. (4) Prior to and as a condition precedent to Landlord's obligation to pay any installment, Tenant shall deliver to Landlord's Managing Agent at the Shopping Center: (a) an affidavit of the principal officer of Tenant to the effect that all leasehold improvements (excluding fixtures, furnishings and equipment) at the Premises are free and clear of all mechanics liens, encumbrances and charges; (b) an affidavit sworn to by Tenant's general contractor to the effect that it has been paid all sums due to it through the date of the affidavit or the requisition date, and all subcontractors, materialmen and suppliers and all costs of labor, including payroll taxes and charges, have been paid through the date of the affidavit or the requisition date; said affidavit to contain the names of all subcontractors, materialmen and suppliers, specific amounts, if any, due to each and to be accompanied by copies of all requisitions; (c) conditional lien waivers with respect to work performed and materials supplied to the date of each respective lien waiver or the requisition date, executed by Tenant's general contractor and all subcontractors, materialmen and suppliers supplying in excess of [***] worth of labor and/or materials; (d) an affidavit from the architect having supervision over Tenant's Work to the effect that Tenant's Work has been completed to the extent necessary to qualify for an advance and in accordance with the plans and specifications approved by Landlord, to such architects actual knowledge, and in compliance with all Governmental Requirements. - ---------- *** confidential treatment requested 5 61 (5) Prior to and as a condition precedent to Landlord's obligation to pay the final installment, Tenant shall also deliver to Landlord's Managing Agent at the Shopping Center: (a) a current search of the public records issued by a title insurance or title abstract company reasonably satisfactory to Landlord showing that the Premises, including all installations therein (excluding fixtures, furnishings, and equipment), are free and clear of all mechanics liens, charges, and encumbrances and that there are no judgments, levies, attachments, liens or tax liens issued, pending or in effect with respect to Tenant; (b) an affidavit sworn to by such subcontractors and suppliers supplying in excess of [***] worth of labor and/or materials to the effect that they have been paid all sums due them. (c) a conditional certificate of occupancy and fire underwriters certificate for the Premises and such other approvals of Tenant's Work which may be necessary for the conduct of Tenant's business or as may be required by any Governmental Authority (subject to any and all approvals to be secured by Landlord under this Lease). (6) Tenant shall not mortgage, pledge, assign or hypothecate Tenant's right to receive Landlord's Contribution. (C) Tenant's acceptance of the Premises is subject to and excluding latent defects and items of repair which are Landlord's responsibility as elsewhere set forth in this Lease. (D) In the event a multiple-user antenna and/or satellite system is installed or caused to be installed in the Shopping Center by Landlord, Tenant shall be permitted to utilize said system pursuant to separate agreement with Landlord and/or the vendor of such system and subject to all provisions regarding the use of such system as contained in such separate agreement, which shall be mutually agreed upon by Tenant and Landlord and/or the vendor of such system. In the event Tenant and Landlord and/or such vendor are unable to mutually agree on terms of a satellite agreement, or such system is not made available for Tenant's use, Tenant shall be permitted to install a satellite dish (hereinafter "Dish") at the Center, subject to the following terms, conditions and limitations: (a) Tenant shall provide [***] days prior written notice of its intent to install the Dish, and shall provide plans and specifications for the location and installation of the Dish for Landlord's review and approval concurrently with such notice. Such plans shall be in accordance with Landlord's current design criteria and must conform to the reasonable requirements of Landlord's roofing consultant, in part, in order to protect Landlord's roof warranties; (b) The location of the Dish shall be on the roof of the Shopping Center or such other location as Landlord, in its sole and absolute discretion, shall approve; - ---------- *** confidential treatment requested 6 62 provided that such location provides for the clear transmission of signals from the Dish, and in no event shall such installation affect the structural integrity of the roof or any other area where the Dish has been installed; (c) The installation and maintenance of the Dish, including any necessary structural support to the roof and/or screening shall be at Tenant's sole cost and expense; (d) The Dish shall be installed within the existing wall screen, if any; however, Landlord may require Tenant to further screen or otherwise shield the Dish from view by providing fencing, screening materials or landscaping satisfactory to Landlord; (e) Tenant shall procure and maintain any approval(s) and/or permits required by any governmental authority having jurisdiction thereof and shall deliver evidence of same to Landlord prior to commencing installation. In the event the use or installation of the Dish is in violation of applicable law or any agreement of Landlord or the Shopping Center regarding the Shopping Center, Tenant shall not be permitted to use, install or maintain the Dish and shall be required to remove the Dish from the Shopping Center; (f) Tenant's installation or operation of the Dish shall in no way interfere with the operation of any other transmission or receiving device at the Center; (g) Tenant shall give Landlord two (2) days prior notice of the necessity to access the Dish for service, except in the case of an emergency, or such shorter period of time as Landlord may allow; (h) The Dish and related equipment shall remain the property of Tenant. Tenant shall remove the Dish at the expiration or earlier termination of the Lease Term and repair any damage occurring as a result thereof, at Tenant's sole cost and expense; and (i) Only one Dish will be permitted at the Center for the joint use of Tenant and Tenant's affiliates. Further, Tenant shall not re-sell satellite dish services to any other tenant or occupant in the Shopping Center (E) Tenant shall submit its Design Drawings to Landlord in compliance with the Design Criteria. In the event that Landlord approves Tenant's Design Drawings (as Tenant may agree to modify such plans and specifications in response to Landlord's comments thereto in accordance with the following sentence), then Landlord will be deemed to have approved the measures taken by Tenant to minimize noise and vibration and, thereafter, Tenant shall not be in default under the Lease as a result of noise or vibration associated with the permitted use of the Premises. In the event that Landlord does not approve Tenant's Design Drawings (for reasons relating to the measures taken therein to minimize noise and vibration) within the timeframe required for Landlord's disapproval in accordance with the Design Criteria, and notwithstanding anything to the contrary contained in the Design Criteria, Landlord shall deliver written notice to Tenant thereof (such notice a "Design Drawing Rejection Notice") and specific reasons therefor 7 63 with reasonable alternative recommendations with respect thereto. Tenant shall, for a period of fifteen (15) business days after Tenant's receipt of the Design Drawing Rejection Notice, have the right to either (i) agree to incorporate Landlord's recommendations or otherwise address the reasons for Landlord's rejection (as set forth in the Design Drawing Rejection Notice) in a manner mutually agreeable to Tenant and Landlord or (ii) terminate the Lease and neither party shall incur any liability as a result of such termination; provided, however, if Landlord's recommendations are commercially reasonable and if the cost that would be incurred by Tenant therefor is equal to [***] or less, then Tenant shall incorporate Landlord's recommendations into its design and proceed with construction; provided, further, upon Tenant's incorporation of Landlord's recommendations into its design, Landlord shall be deemed to have approved the measures taken by Tenant to minimize noise and vibration. Landlord shall have the right to nullify Tenant's right to terminate, as provided above, if, within the aforementioned fifteen (15) day notice period, Landlord notifies Tenant, in writing, that Landlord shall increase Landlord's Contribution by the amount by which the cost to implement Landlord's recommendations exceeds [***]. Notwithstanding the foregoing, if unreasonable noise or vibration occurs (i.e., so as to materially adversely affect the Shopping Center or the business of adjacent tenants) after the Premises are open for business, then Tenant will agree to take such steps as are reasonably necessary to reduce such noise or vibration, as applicable, the cost of which would be split evenly by Landlord and Tenant; provided however, if Tenant's expenditure of Tenant's portion of such costs would, in Tenant's good faith discretion, (1) materially reduce Tenant's expected returns from the operation of the Premises, or (2) affect the performance of one or more of its equipment so as to materially and adversely affect the sensory experience created thereby (e.g., reducing the vertical movement or the volume of the racing simulators), or (3) otherwise make Tenant's operation of its business in the Premises infeasible, then Tenant shall, for a period of thirty (30) days after receiving Landlord's request to make such expenditures, have the right to elect not to make such expenditures as are requested by Landlord and instead terminate this Lease, and neither party shall incur any liability as a result of such termination. RIDER #16 - amending Section 2.2 (A) Page 2-1, line 21, after "specifications" insert "which shall take place as set forth in Section 2.1". (B) Page 2-1, line 27, prior to "interfere" insert "unreasonably". (C) Page 2-1, line 31, after "make" insert "and notify Tenant in writing". (D) Page 2-2, line 3, prior to "the end" insert "[***] days following". (E) Page 2-2, line I 1, after "discharge" insert ", bond". (F) Page 2-2, line 12, delete "[***]" and substitute "[***]". (G) Page 2-2, line 14, after "shall" insert "use best efforts to". - ---------- *** confidential treatment requested 8 64 RIDER #17 - amending Section 2.4 Page 2-2, lines 29-30, delete "not less than ... this Lease" and substitute "at the time Tenant first requests consent thereto". RIDER #18 - amending Section 2.5 Page 2-2, line 39, after "within" insert "[***] days after". RIDER #19 - amending Section 2.5 and 6.1 B Tenant shall not be obligated to continuously operate from the Premises (i) for a period of up to [***] days and after notice to Landlord while Tenant is carrying on remodeling activities, (ii) for up to [***] days per year for the taking of inventory, (iii) while Tenant is unable or reasonably unwilling to operate as a result of casualty or natural disaster, condemnation, interruption of utilities or services, extremely inclement weather, civil unrest, operation of the business would expose Tenants' employees, agents or invitees to an unreasonable risk of physical injury or property damage, or other force majeure events, (iv) while Tenant's use and occupancy of the Premises is prohibited by any law, ordinance, order or other act of any judicial, governmental or quasi-governmental authority. RIDER #20 - amending Section 2.6 Provided Tenant maintains the Premises in a state consistent with the standards required by the Lease and in accordance with Tenant's remodel and maintenance practices for its chain of stores, the provisions of Section 2.6 shall be deemed waived. RIDER #21 - amending Section 3.2 So long as the Tenant operating in the Premises is the Tenant named herein or any assignee of Silicon Entertainment, Inc. pursuant to Section 6.2(F)(2), the second sentence of Section 3.2 shall be deemed deleted. In addition, the foregoing Fixed Rent increase shall only apply to Department Stores which open after the effective date of any such assignment. RIDER #22 - amending Section 3.3B The following shall not be included in (or may be deducted from) Gross Sales: (A) Receipts from bulk sales to jobbers and the like made for the purpose of clearing stock of old and/or obsolete merchandise; (B) Receipts from the bulk sale of the entire stock of merchandise in the Premises, or a substantial portion thereof, to a successor to the business of Tenant; - ---------- *** confidential treatment requested 9 65 (C) Fees charged by credit card companies for the transactions originating in, or from the Premises not to exceed [***] percent of Gross Sales per Lease Year; (D) Sale of fixtures, trade fixtures or personal property after use in the Premises; (E) Free use of games and discounted sales to Tenant's employees not to exceed [***] percent of Gross Sales per Lease Year; (F) Revenue received from mailing, delivery or other service performed on a non-profit basis for the benefit of Tenant's customers; (G) Rents, subrents, or other consideration received in connection with an assignment, sublease, license, concession (however, Gross Sales, if any, for such transferee shall be included) including license fees otherwise payable by Tenant in connection with a third party license agreement; (H) Amounts required to be paid by Tenant under any agreement related to Tenant's use of the NASCAR name, not to exceed [***] percent of Gross Sales per Lease Year; and (1) Discounts given for promotional coupons that are redeemed from time to time not to exceed [***] percent per Gross Sales per Lease Year. RIDER #23 - amending Section 3.3C (A) Page 3-2, line 39, after "to time" insert "but no more than twice per calendar year". (B) Page 3-2, line 41, delete "[***]" and substitute "[***]". (C) Page 3-3, line 1, delete "[***]" and substitute "[***]" in both instances. (D) Page 3-3, lines 8 and 18, delete "[***]" and substitute "[***]". (E) Page 3-3, line 10, after "to time" insert "but no more frequently than twice per calendar year". (F) Page 3-3, line 22, delete "[***]" and substitute "[***]". (G) Page 3-3, line 22, after "more" insert "and such understatement results in underpayment of Percentage Rent". (H) Page 3-3, line 23, delete "but Tenant shall remain liable hereunder" and substitute "and Landlord shall have the remedies". RIDER #24 - amending Section 3.3D - ---------- *** confidential treatment requested 10 66 (A) Page 3-3, line 35, delete "[***]" and substitute "[***]". (B) Page 3-3, line 36, delete "Landlord's request therefor" and substitute "the end of the calendar month". RIDER #25 - amending Section 3.3E Page 3-4, line 1, delete "[***]" and substitute "[***]". RIDER #26 - amending Section 3.4 (A) Page 3-4, line 22, delete "[***]" and substitute "[***]". (B) Page 3-4, line 26, after "elects" insert "upon written notice to Tenant,". (C) Page 3-5, line 42, prior to "tax" insert "rebate, abatements of taxes or". RIDER #27 - amending Section 3.4 (A) With respect to any special assessments made by governmental authorities for street improvement, traffic mitigation or similar physical improvements, Landlord may, at its option, pay any such special assessments in one lump sum when due or, if permitted by law, Landlord may elect to pay such special assessments in installments. In the event Landlord shall pay any special assessment in full when due, Tenant shall nevertheless reimburse Landlord for its share thereof based upon the installment payments including principal and interest which Landlord would have been obligated to pay had Landlord elected to pay the special installment in the maximum number of installments permitted. Tenant's installment payments for such special assessment shall be due and payable on the same dates that they would have been payable to the taxing authority had Landlord elected to pay the special assessment in installments. (B) Tenant shall be required to pay only Tenant's proportionate share of such assessments to the extent Tenant's proportionate and amortized share thereof corresponds to the Lease Term. RIDER #28 - amending Section 3.4C Page 3-4, line 43, prior to "gift" insert "change in ownership". RIDER #29 - amending Section 3.5 (A) Page 3-6, line 23, delete "[***]" and substitute "[***]". (B) Page 3-7, line 29, delete "[***]" and substitute "[***]". - ---------- *** confidential treatment requested 11 67 (C) In no event shall Common Area Operating Costs for the first twelve (12) months of the Term exceed [***] per square foot of Floor Space at the Premises. (D) Commencing the second full year of the Term, the annual increases for Common Area Operating Costs shall not exceed [***] percent. (E) With respect to items costing more than [***], Landlord shall not include such costs in Common Area Operating Costs for the year in which they are incurred, but in lieu thereof shall depreciate (or amortize) such items over a period of not less than [***] nor more than [***] years, as reasonably determined by Landlord in accordance with generally accepted accounting principles for the shopping center industry, consistently applied. In such cases, only that portion of the depreciation (or amortization) allocable to the year for which Common Area Operating Costs are being determined and interest on the undepreciated (or unamortized) portion shall be included in then current costs. (F) Tenant shall not be responsible for payment of any of the following as a Common Area Operating Costs, whether or not otherwise included in the definition of "Common Area Operating Costs": (i) Interest, loan fees, ground lease rental, and other carrying costs related to any mortgage or indebtedness secured by the Shopping Center; (ii) Premiums or deductibles to the extent any other tenant in the Shopping Center causes Landlord's insurance premiums relating to the Premises to increase or obligates Landlord to purchase additional insurance, or any damage resulting from the negligent or willful acts or omissions or breach of any other tenant of the Shopping Center; (iii) New buildings constructed on or within the Shopping Center; (iv) Expenses that under generally accepted accounting principles are treated as capital expenditures to the extent they improve the Common Areas to beyond their original condition or utility (other than those capital expenditures reasonably required for maintenance, repair and replacement of exiting capital items which costs Landlord shall amortize over a period of years as reasonably determined by Landlord and which amortized amount may be included in Common Area Operating Costs; (v) Leasing fees, commissions or other brokerage commissions of any kind, or advertising or promotional expenditures (including costs incurred in leasing to or procuring new tenants with allowances, concessions, or inducements provided by Landlord, such as the cost of leasehold improvements), attorney's fee, or other comparable expenses incurred in connection with attracting any prospective tenant to the Shopping Center or with respect to disputes or litigation with such tenants; - ---------- *** confidential treatment requested 12 68 (vi) Costs incurred due to a violation by Landlord or any tenant (other than Tenant) of the Shopping Center of the terms of this Lease or any other lease or condition, covenant or restriction affecting the Shopping Center, or any laws, rules, regulations or ordinances applicable to the Shopping Center; (vii) Costs of repairs, replacements or other work occasioned by fire, windstorm, earthquake, or other casualty, or the exercise by governmental authorities of the right of eminent domain; (viii) Costs and expenses reimbursed by Tenant or any other third party; except for reimbursements of Common Area Operating Costs; (ix) The cost of repair necessitated by the negligence, willful misconduct or breach of any written agreement by Landlord or Landlord's agents or any other tenant of the Shopping Center; (x) Cost of repairs, replacements, alterations or improvements necessary to make the Shopping Center comply with applicable past, present of future laws, except to the extent compliance with such laws is required as the result of Tenant's particular use of the Premises or alterations or additions made or requested to be made by Tenant; (xi) The cost incurred in performing work or furnishing services for individual tenants in the Shopping Center to the extent such work or services are in excess of the work and services required to be provided to Tenant under the Lease, and costs incurred for the benefit of particular tenants and not generally beneficial to the tenants of the Shopping Center; (xii) Expenses for repair or replacement paid by proceeds of insurance, condemnation awards, warranties or guarantees, or reimbursed by tenants of the Shopping Center; (xiii) Costs of salaries, wages and other employment benefits, except to the extent such costs are fairly allocable to the Shopping Center and not to other shopping centers or projects; (xiv) Amounts that are payable or reimbursable by Landlord to Tenant with respect to Landlord's Contribution provided by Landlord to Tenant in connection with Tenant's construction of leasehold improvements at the Premises; and (xv) Duplication of charges under the Lease. RIDER #30 - amending Section 3.5 D Tenant may audit Landlord's Common Area Operating Costs for such year in order to verify the accuracy thereof, provided that: (a) Tenant specifically designates the year Tenant 13 69 intends to audit, which shall be a year during the Lease Term that is also within [***] years of the date of the audit; (b) such audit is conducted only during regular business hours at the office where Landlord maintains expense records of Landlord's Common Area Operating Costs; (c) Tenant gives Landlord [***] days prior written notice of Tenant's request to audit and Tenant shall deliver to Landlord a copy of the results of such audit within [***] days of its receipt by Tenant; (d) such audit must be conducted by Tenant's employees or an independent nationally recognized accounting firm that is not being compensated on a contingency fee basis; (e) no audit shall be conducted if Tenant has previously conducted an audit for the same time period; (f) such audit shall be at Tenant's sole cost and expense; and (g) any financial or other information provided by Landlord or obtained by Tenant as a result of such audit shall only be pursuant to duly executed confidentiality agreements between Landlord, Tenant and Tenant's agents and employees to whom disclosure is made. Tenant acknowledges that the Landlord considers its financial and other operating information to be confidential and will not disclose such information to any third party without Landlord's prior written consent except to prospective buyers or lenders, Tenant's accountants and attorneys, or in the case of compliance with a subpoena or other legal process provided Tenant gives Landlord at least ten (10) days prior written notice of Tenant's receipt of such subpoena or legal process and Tenant's intent to disclose pursuant thereto. If the audit discloses that Tenant has underpaid, Tenant shall promptly reimburse Landlord of any amount owed. If the audit accurately discloses that Tenant has overpaid, Landlord shall promptly refund such excess. RIDER #31 - amending Section 3.6 (A) Page 3-9, line 22, prior to "demand" insert "written". (B) Page 3-9, line 27, after "thereto" insert "excluding manifest error, which Tenant shall have the continuing right to have corrected". RIDER #32 - amending Section 3.8 (A) Page 3-9, line 38, delete "its due date" and substitute "written notice of such failure". (B) Page 3-9, line 42, delete "[***]" and substitute "[***]". RIDER #33 - amending Section 4.1B (A) Page 4-1, line 27, after "create" insert "material, adverse interference with the access to and/or visibility of the Premises or Tenant's business operation on the Premises, or create". (B) Page 4-1, line 28, prior to "access" insert "pedestrian". - ---------- *** confidential treatment requested 14 70 (C) Page 4- 1, line 32, after "mall" insert "and not immediately fronting the lease line of the Premises". (D) Landlord agrees that except for existing kiosks or replacements thereof, Landlord shall not install or operate or permit any other person to install or operate any kiosks or carts closer than [***] feet parallel to the front of Tenant's mall entrance. (E) Landlord shall (i) provide clear access to Tenant's storefront from the Common Area, and (ii) use reasonable efforts to restrict the theatre queue such that it will not materially and adversely impair access to and visibility of the Premises from the Common Area. (F) Landlord shall maintain such parking as shall be required to be maintained pursuant to its agreements with the Department Stores, as the same may from time to time be modified or amended; it being understood that Tenant shall, without the necessity of any further consents, be bound by such changes in parking requirements as shall be consented or agreed to by the Department Stores or their successors. Tenant's sole and only remedy in the event of a breach of this covenant will be to cancel and terminate this Lease. RIDER #34 - amending Section 4.1C In no event shall the employees of the Premises be required to pay for parking at the Shopping Center while they are working. RIDER #35 - amending Section 5.1 (A) Page 5-1, line 2, after "roofs" insert "(including membrane)". (B) Page 5-1, line 25, after "completed" insert "following notice to Tenant (except in cases of emergency)". (C) Page 5-1, line 25, after "performance of" insert ", or failure to perform,". (D) Page 5-1, line 27, after "Premises" insert "as reasonably determined by Tenant". (E) Landlord shall perform all repairs to the heating, ventilation and air conditioning equipment and systems (including ducts) in the Shopping Center, except those that exclusively serve any tenant's premises. (F) Landlord shall, at Landlord's sole cost and expense, repair any damage or defect in the Premises of the Shopping Center caused by the acts or omissions of Landlord and its agents and contractors. - ---------- *** confidential treatment requested 15 71 RIDER #36 - amending Section 6.1A Page 6-1, line 9, after "manner" insert "using Tenant's commercially reasonable efforts". RIDER #37 - amending Section 6.1B (A) Page 6-1, line 12, delete "To" and substitute "Except as otherwise provided, to". (B) Tenant shall have the right to remain open until 1:00 AM or later if at least one (1) other Tenant is open; provided that entry and exit by customers after the mall is closed is through the food court entrance which shall remain open while Tenant is open for business, and Tenant pays for any additional security staff or devices reasonably required by mall management as a result of Tenant's remaining open later than standard mall hours. In the event other tenants are open after mall hours and the additional security for Tenant's late hours is shared by Tenant and such other tenants, the cost of such additional security shall be evenly divided among such tenants during the additional hours Tenant and such other tenant(s) are simultaneously open. Tenant shall not be responsible to pay any additional costs so long as Tenant is not open for operation after the theatre closes. (C) In no event shall Tenant be required to open prior to 10:00 AM on any day. (D) The parties agree that until such time as Nordstrom opens for business at the Shopping Center, Tenant shall pay, as Opening Rent, on a monthly basis, in lieu of Fixed Rent and Percentage Rent only, [***] percent of Gross Sales made at the Premises, to be paid in accordance with the provisions of Article 3 relating to payment of Percentage Rent. In addition, Tenant shall be obligated to pay all Additional Rent and charges due under the Lease. At such time as Nordstrom opens for business at the Shopping Center, the current Fixed Rent and Percentage Rent, set forth in Article 1 of the Lease shall be reinstated and paid in accordance with Article 3 of this Lease. Notwithstanding the foregoing, Gross Sales transacted at the Premises during the period which Tenant is paying Opening Rent shall not be included in the calculation at Percentage Rent for the applicable Lease Year. RIDER #38 - amending Section 6.1D Tenant shall not be required to maintain plumbing, electrical or other systems that are not located within the Premises or that otherwise do not exclusively serve the Premises, and Tenant shall have no obligation to maintain, repair or replace exterior or structural parts of the Premises, or plumbing, HVAC, elevators, or electrical or mechanical systems (except those exclusively serving the Premises). RIDER #39 - amending Section 6.1E (A) Page 6-2, lines 18-19, delete "the manner of". - ---------- *** confidential treatment requested 16 72 (B) Page 6-2, line 19, after "Tenant's" insert "particular". (C) Page 6-2, line 19, delete "or occupancy". (D) Page 6-2, line 20, after "Requirement" insert "to the extent triggered by Tenant's particular use of the Premises". (E) Page 6-2, line 24, prior to "use" insert "particular". RIDER #40 - amending Section 6.1F (A) Page 6-2, line 26, after "Premises" insert "performed by or on behalf of Tenant and not by Landlord". (B) Page 6-2, line 32, prior to "acceptable" insert "reasonably". RIDER #41 - amending Section 6.1G (A) Page 6-3, line 5, delete "Managing Agent" and substitute "managing agent, if any,". (B) Landlord hereby agrees to defend and save Tenant harmless and indemnified from all injuries, losses, claims and damages (including reasonable attorneys' fees and disbursements) to any Person or property, arising from, related to, or in any way connected with Landlord's use or occupancy of the Common Areas, unless such injury, loss, claim or damage be attributable to the negligence of Tenant or its agents, servants or employees. RIDER #42 - amending Section 6.1H Page 6-3, line 20, delete "[***]" and substitute [***]". RIDER #43 - deleting Section 6.1I Section 6.1I is hereby deemed deleted in its entirety. RIDER #44 - amending Section 6.1J Page 6-4, line 15, delete "[***]" and substitute "[***]". RIDER #45 - amending Section 6.1L (A) Page 6-5, line 4, delete "[***] percent" and substitute "the lesser of (i) [***] percent and (ii) by the [***]. For purposes of this Rider, the "Consumer Price Index" shall mean the Consumer Price Index for U.S. City Average for All Items For All Urban Consumers, 1982- - ---------- *** confidential treatment requested 17 73 84 equals 100 (CPI-U), as published by the United States Department of Labor (or if not published, the most clearly comparable index)." (B) Page 6-5, line 6, delete "[***] percent" and substitute "in the manner set forth above". RIDER #46 - deleting Section 6.1L(4) Section 6.1L(4) is hereby deemed deleted in its entirety. RIDER-#47 - deleting Section 6.1M Section 6.1M is hereby deemed deleted in its entirety. RIDER-#48 - deleting Section 6.1O Section 6.1O is hereby deemed deleted in its entirety. RIDER #49 - deleting Section 6.1P Page 6-7, line 43, after "Approvals" insert "(except those that Landlord's required to obtain)". RIDER #50 - amending Section 6.1R Page 6-8, line 6, delete "To" and insert "Following receipt by Tenant of written notice, to". RIDER #51 - amending Section 6.1S (A) Page 6-8, line 11, delete "To" and substitute "Subject to Section 9.18 below,". (B) Page 6-8, line 11, delete "[***]" and substitute "[***]". (C) Page 6-8, line 11, after "same" insert "not more than [***] times during the Term". (D) Subparagraph (4) is hereby deemed deleted in its entirety. (E) Page 6-8, line 36, delete "[***]" and substitute "[***]". RIDER #52 - amending Section 6.2A (A) Page 6-8, line 7, prior to "officer" insert "then-current". - ---------- *** confidential treatment requested 18 74 (B) Page 6-8, line 10, delete "ten (10)" and substitute "eight (8)". (C) The Retail Restriction Limit shall not apply to any existing or future stores of Tenant, or any Affiliate of Tenant, operating under a different trade name and having a different merchandise mix. (D) The Retail Restriction Limit shall not apply to Tenant's remote site promotional activities. RIDER #53 - amending Section 6.2B Page 6-9, line 22, prior to "beverages" insert "alcoholic". RIDER #54 - amending Section 6.2C Landlord acknowledges that race car simulator noise and track announcer heard outside the Premises shall not be deemed objectionable. RIDER #55 - amending Section 6.2D Page 6-10, line 12, delete "[***]" and substitute "[***]". RIDER #56 - amending Section 6.2E Page 6-10, line 38, after "employees" insert "and except for those allowed by the Permitted Use". RIDER #57 - amending Section 6.2F (A) Notwithstanding anything in Section 6.2F to the contrary, provided such does not involve a change of control, any issuance or transfers of private stock that are exempt under Securities and Exchange Commission regulations. (B) Nothing contained in this Lease shall be deemed to prohibit Tenant from encumbering its trade fixtures and the equipment with security agreements, but no security interest shall be permitted as to any alterations, installations or improvements which by the terms of this Lease become part of the Premises. (C) Tenant shall have the right to issue or transfer Tenant's Stock without Landlord's Consent. (D) In the event of assignment or other transfer by Tenant of its interest in this Lease (whether by merger, consolidation, agency, franchise, or otherwise) and the assignee or transferee (i) has a net worth equal to or greater than the net worth of Tenant on the Commencement Date of this Lease or at the time of such assignment (whichever is greater) and - ---------- *** confidential treatment requested 19 75 (ii) assumes all obligations imposed by this Lease, then as of the effective date of the assignment, Tenant, Tenant shall be released from all obligations imposed by this Lease. The form and substance of legal documents shall be reasonably satisfactory to Landlord. RIDER #58 - amending Section 6.2F(2) Section 6.2F(2) is hereby deleted and the following is substituted in lieu thereof: "After completion of Tenant's Work and the opening of the Premises for business, Tenant, without Landlord's consent, may assign this Lease or sublease the entire Premises to a parent, Affiliate or wholly owned subsidiary of Tenant (or the Guarantor, if any) or to any entity with which or into which Tenant (or the Guarantor, if any) may consolidate or merge or to whom all of the assets and business of the chain of Tenant is sold as a going concern, and who shall assume for Landlord's benefit the performance of all of the terms, conditions and covenants of this Lease; provided, however, that the merged or consolidated entity or transferee of assets shall have a net worth at least equal to the net worth of Tenant at the time of such consolidation, merger or transfer or at the time of the Commencement Date of this Lease, whichever shall be greater; and further provided that the assignee or sublessee shall use the Premises under the Trade Name and only for the purpose stated in the "Permitted Use" clause." RIDER #59 - amending Section 6.2F(3) (A) Page 6-11, line 44, delete "and stockholders". (B) Page 6-11, line 49 through line 1 on page 6-12, delete "responsibility" and substitute "status". (C) Page 6-12, line 9, delete "ten (10)" and substitute "thirty (30)". (D) Page 6-12, line 19, after "withheld" insert "or delayed". (E) In the event Landlord exercises its right to terminate this Lease pursuant to Section 6.2 F (3), Landlord shall pay to Tenant the unamortized value, less the amount of Landlord's Contribution, and any liens or encumbrances, of Tenant's leasehold improvements (excluding removable personal property and fixtures). Tenant shall, not later than ninety (90) days following its opening for business in the Premises, deliver an affidavit of an officer of Tenant and a certificate of Tenant's architect, accompanied by bills, receipts, invoices, canceled checks and the like, specifying the cost of Tenant's Work which shall thereupon be the basis for the amount to be paid by Landlord pursuant to this provision. Failure to timely deliver such affidavit and certificate shall constitute a waiver of Tenant's right to such payment. As of the termination date, Tenant shall have no further liability for items arising or accruing after such date. (F) Page 6-12, lines 34-35, delete "and its officers, directors and stockholders". 20 76 (G) Page 6-12, line 37, after "nature" insert ", if different from Tenant's business at the Premises,". (H) Subparagraph 6.2F(3)(c)(v) is hereby deemed deleted. RIDER #60 - amending Section 6.2F(4) (A) Page 6-13, line 19, after "transaction" insert "less out-of-pocket leasing commissions, tenant improvement costs, advertising costs and other related expenses paid to third parties". (B) If an assignment or sublease occurs in connection with the sale of Tenant's business and a portion of the sales price is allocated to the goodwill of the business, the payment of said excess rent or other consideration to Landlord as Additional Rent hereunder shall exclude the valuation of goodwill. (C) Page 6-13, line 13, after "Percentage Rent" insert "as averaged for the prior [***] Lease Years". RIDER #61 - amending Section 6.2F(5) Page 6-13, line 25, delete "[***]" and substitute "[***]". RIDER #62 - amending Section 6.2F(7) (A) Page 6-13, line 32, delete "[***]" and substitute "[***]". (B) Page 6-13, line 34, delete "[***]" and substitute "[***]". RIDER #63 - amending Section 6.2G (A) Page 6-13, line 37, delete "Not" and substitute "Except as otherwise provided herein, not". (B) Page 6-13, line 43, after "competitive" insert "with fair market value prevailing". (C) Page 6-14, line 3, after "determine" insert "not to exceed prevailing fair market rates". RIDER #64 - amending Section 6.2H Tenant shall be permitted to use professionally prepared signs consistent with signs displayed in Tenant's other locations operating under the Trade Name. - ---------- *** confidential treatment requested 21 77 RIDER #65 - amending Section 6.2I Page 6-14, lines 23-27, delete "If Tenant ... load desired." RIDER #66 - amending Section 7.1B If the Premises are damaged and the reasonably estimated time to repair the damage will exceed [***] days, then Tenant shall have the right to terminate this Lease by delivering written notice to Landlord within thirty (30) days after the estimated time for rebuilding is determined. RIDER #67 - amending Section 8.1 (A) Page 8-1, line 3, delete "become insolvent or". (B) Page 8-1, line 6, delete "or insolvency". RIDER #68 - amending Section 8.2 (A) Page 8-1, lines 38 and 40, delete "[***]" and substitute "[***]". (B) Page 8-2, line 1, delete "[***]" and substitute "[***]". (C) Page 8-2, line 3, after "Premises" insert "for a period in excess of [***] days". (D) Page 8-2, lines 4-6, delete "or if Tenant ... of Tenant)". (E) Page 8-2, line 17, delete "[***]" and substitute "[***]". RIDER #69 - amending Section 8.3 (A) Page 8-2, line 33, delete "dispossess" and substitute "dispossession". (B) Landlord shall use reasonable efforts to relet the Premises, it being understood that such efforts shall consist of the same efforts as Landlord makes with respect to other vacant space in the Shopping Center and that Landlord shall not be required to prefer the reletting of the Premises over any other vacant or empty space in the Shopping Center or to accept a tenant for any use or purpose other than a use or purpose acceptable to Landlord. (C) Page 8-3, line 11, delete "[***]" and substitute "[***] percent of". (D) The last sentence of this Section 8.3A is hereby deemed deleted. (E) Anything in Section 8.3 A to the contrary notwithstanding, it is agreed that where reference is made in said Section to sums becoming due and payable to Landlord for Fixed Rent and Additional Rent for the entire unexpired balance of the Term, or anything therein referring to - ---------- *** confidential treatment requested 22 78 payment of Fixed Rent and Additional Rent by Tenant to Landlord in a lump sum shall mean that such payments will be made monthly, with no acceleration, over the balance of the Term or, alternatively, that Landlord shall have the right to sue at the end of the Term for amounts accruing to Landlord to the date thereof. RIDER #70 - deleting Section 8.8 Section 8.8 is hereby deemed deleted in its entirety. RIDER #71 - amending Section 9.1 (A) Page 9-1, line 7, delete "mailed" and substitute "received or refused". (B) Landlord agrees to use reasonable efforts to give copies of default notices to Tenant's attorneys; however, the failure to give such a notice shall not affect the validity of any notice otherwise properly given. Tenant's attorneys are: PAUL, HASTINGS, JANOFSKY & WALKER LLP 555 SOUTH FLOWER STREET 23RD FLOOR LOS ANGELES, CALIFORNIA 90071-2371 ATTENTION: RICK S. KIRKBRIDE, ESQ. RIDER #72 - amending Section 9.7 (A) Page 9-3, line 5, delete "[***]" and substitute "[***]". (B) Page 9-3, line 30, after "time" insert "upon reasonable notice to Tenant". RIDER #73 - amending Section 9.8A Page 9-3, line 34, prior to "instruments" insert "reasonable". RIDER #74 - amending Section 9.8B (A) Page 9-4, line 8, delete "If so requested by Tenant,". (B) Page 9-3, line 20, after the word "foregoing" add the following: "(any one or more of the foregoing individually or collectively called an "Encumbrance") provided however that with respect to Encumbrances recorded after the date hereof, this Lease shall not be subordinate to such Encumbrance unless and until Landlord obtains, at Tenant's cost and expense, from the holder of the Encumbrance placed against the Premises, a non-disturbance agreement in recordable form which is reasonably acceptable to Tenant and provides that in the - ---------- *** confidential treatment requested 23 79 event of any foreclosure, sale under a power of sale, ground or master lease termination or transfer in lieu of any of the foregoing or the exercise of any other remedy pursuant to any such Encumbrance (a) Tenant's use, possession and enjoyment of the Premises shall not be disturbed and this Lease shall continue in full force and effect so long as Tenant is not in default hereunder beyond any applicable cure period, and (b) this Lease shall automatically become a direct lease between any successor to Landlord's interest, as Landlord, and Tenant as if such successor were the Landlord originally named hereunder." (B) Page 9-3, line 23, delete ", if requested,". (C) Page 9-3, lines 24-25, delete "At the option ... thereunder,". (D) Page 9-3, line 37, after the word "hereunder" add the following: "Notwithstanding the foregoing, Tenant's obligation to execute the documents as provided in this Subsection shall be subject to the express limitation that (i) such documents shall be strictly limited to the matters which are subject of this Subsection, and (ii) no such document may materially increase any of Tenant's obligations hereunder or materially decrease any of Tenant's rights under this Lease." RIDER #75 - deleting Section 9.10 Section 9.10 is hereby deleted in its entirety. RIDER #76 - amending Section 9.16B Page 9-9, line 4, after "Center)" insert "and proceeds thereof". RIDER #77 - deleting Section 9.16C Section 9.16C is hereby deemed deleted in its entirety. RIDER #78 - deleting Section 9.17 Section 9.17 is hereby deemed deleted in its entirety. RIDER #79 - adding Section 9.18 - Confidentiality In handling any confidential information Landlord shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Lease, except that disclosure of such information may be made (i) to the subsidiaries or affiliates of Landlord in connection with their present or prospective business relations with Landlord, (ii) to prospective transferees or purchasers of any interest in the Lease, provided that they have entered into a comparable confidentiality agreement in favor of Tenant and have delivered a copy to Tenant (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Landlord and (v) as Landlord may deem appropriate in connection with the exercise of any remedies hereunder. Confidential information hereunder shall not include information that either (a) as in the public domain, or becomes part of the public domain, after 24 80 disclosure to Landlord through no fault of Landlord; or (b) is disclosed to Landlord by a third party, provided Landlord does not have knowledge that such third party is prohibited from disclosing such information. RIDER #80 - Special Stipulations (A) Landlord's Covenants, Representations and Warranties. Landlord represents and warrants to Tenant, and covenants and agrees with Tenant, the following: (i) Landlord is a Delaware limited partnership, duly organized under the laws of Delaware, validly existing and in good standing under the laws of Georgia; (ii) Landlord has good and marketable fee simple title in and to a portion of the Center and a leasehold interest in a portion of the Center; (iii) Landlord, and the undersigned signatories executing this Lease on behalf of Landlord, are duly authorized and empowered to enter into this Lease with Tenant; and (iv) There are no restrictive covenants, zoning or other ordinances or any Laws prohibiting any of the permitted uses of the Premises set forth in this Lease by Tenant. (B) (i) Unless and until Tenant vacates the Premises in violation of this Lease, or Tenant no longer occupies the Premises for the Permitted Use, then Landlord will not lease space within the Shopping Center to (a) any tenant whose permitted use allows the operation of motion-based automobile driving simulators, or any tenant whose trade name contains the word "NASCAR" (hereinafter referred to as "Competing Business"). If (x) Landlord violates or suffers the violation of this paragraph, and (y) Tenant's Gross Sales for any [***] month period during the first [***] years such violation exists are at least [***] percent less than Tenant's Gross Sales for the prior [***] month period, then effective retroactive to the day such Competing Business opens for business, Tenant shall pay the lesser of (i) [***] and (ii) [***] percent of its [***], for so long as such Competing Business remains open in the Shopping Center. If a Competing Business is open for a period in excess of [***] consecutive months, Tenant shall have the right to terminate this Lease upon thirty (30) days' written notice to Landlord. Notwithstanding the foregoing, the restriction hereinabove set forth in this paragraph shall be inapplicable to the following: any tenant or occupant open for business in the Shopping Center on the date of this Lease who by the terms of its Lease or operating agreement is not prohibited or restricted from operating a Competing Business from its premises; provided, however, to the extent the lease under which any of the foregoing tenants or occupants is not prohibited or restricted from operating a Competing Business would nevertheless require such tenant or occupant to obtain Landlord's consent for (or otherwise permit Landlord the opportunity to object to) a change in use, an assignment or sublet or other change in the manner that such tenant or occupant (or its successor assign) does business that would result in such tenant or occupant - ---------- *** confidential treatment requested 25 81 engaging in such Competing Business, Landlord agrees that it shall not grant such consent to (or object to, as appropriate) such change in use or assignment or sublet or other change (i.e., Landlord shall take such affirmative action that is favorable to Tenant under the circumstances); Game Works; any tenant occupying an outlot parcel in the Center, and any Department Store or Specialty Store in the Shopping Center. Additionally, Jillian's may have up to [***] motion based automobile driving simulators without being considered a Competing Business. Notwithstanding anything in this Lease to the contrary, Gross Sales transacted during the period which Tenant is paying Alternative Rent shall not be included in the calculation of Percentage Rent for the applicable Lease Year. (ii) In the event Tenant shall exercise its right to terminate this Lease, as provided above, Landlord shall pay, within [***] days following the date Tenant vacates and surrenders the Premises herein demised, the then unamortized cost of the permanent leasehold improvements (excluding, inter alia, trade fixtures and equipment, furnishings, decorations, inventory and other items of personal property) initially made by Tenant pursuant to Article 2 of this Lease, less the amount of Landlord's contribution, assuming a useful life equal to the length of the original Term of this Lease and amortization on a straight line basis. (C) In the event of any action or proceeding arising out of or pursuant to this Lease, the successful party shall be entitled to recover its reasonable attorney's fees and all other costs and expenses incurred in connection with the action or proceeding. - ---------- *** confidential treatment requested 26 82 MALL OF GEORGIA EXHIBIT "A" GRAPHIC 83 EXHIBIT B GRAPHIC 84 EXHIBIT C Utilities 1. The initial Environmental Charge shall be as follows: The initial amount of [***] per year, of which [***] per year is for the Electric Component [***] per year is for the Non-Electric Portion of the Chilled Air Component, [***] is for the Electric Portion of the Chilled Air Component, [***] per year is for the Facilities Fee, and [***] per year is for sanitary sewer and domestic water, all subject to adjustment as provided herein. 2. Utilities. As of the Commencement Date, all mains, conduits and other facilities necessary for supplying electric energy, domestic water, chilled air and sanitary sewer facilities to the Premises will have been installed by Landlord. Tenant shall pay to Landlord for the furnishing of such services, computed in the manner hereinafter provided, the Environmental Charge. The Environmental Charge shall be paid in equal monthly installments in advance, simultaneously with the payment of Fixed Rent. Tenant shall be solely responsible and shall pay separately for all charges for telephone and for any other utilities used or consumed in the Premises, except those utilities furnished by Landlord, the charge for which is included in the Environmental Charge. 3. Electric Energy and Water. Landlord will (subject to Paragraph 12 of this Exhibit) furnish electric energy for Tenant's lighting and power needs in the Premises and domestic water and sanitary sewer services, subject to the restrictions and limitations on Tenant set forth in this Lease. Tenant shall accept and use the electric energy and domestic water and sanitary sewer facilities furnished by Landlord to the Premises. Tenant, at its own expense, shall furnish and maintain all electric, lighting and power apparatus and plumbing apparatus needed in the Premises. Except as otherwise provided in paragraph 9 of this Exhibit C, Tenant shall not be charged for domestic water and sanitary sewer facilities by way of measuring the use or consumption thereof in the Premises on any meter or other mechanical device based upon amount of use, the cost of furnishing domestic water and sanitary facilities being covered by Tenant's payment as set forth in paragraph 1 above. 4. Facilities Fee. Tenant shall pay to Landlord a Facilities Fee in the amount set forth in Paragraph 1 of this Exhibit C. The Facilities Fee represents an amount agreed upon by Landlord and Tenant as an appropriate sum for the use by Tenant of the utility systems provided by Landlord in the Shopping Center. 5. Chilled Air. Landlord will (subject to paragraph 12 hereof) furnish chilled air to the Premises, subject to the restrictions and limitations on Tenant set forth in this Exhibit C. Tenant shall accept and use such chilled air to air condition and heat the Premises. Tenant, at its own expense, shall furnish a thermostat and mixing (VAV) box to be specified by Landlord to heat the chilled air provided by Landlord and shall provide the distribution system for chilled/heated air within the Premises. In the event Tenant's approved plans set forth a cooling requirement (as - ---------- *** confidential treatment requested C-1 85 reasonably determined by Landlord, in its sole discretion) which would exceed 1.15 CFM per square foot of Floor Space in the Premises, the initial Electric Portion of the Chilled Air Component set forth above shall be adjusted upward by Landlord, in its reasonable determination, to reflect such increased requirement. The expenses of furnishing chilled air to the Premises shall be paid by Tenant to Landlord as part of Tenant's payment of the Environmental Charge and shall be subject to increase as provided for in Paragraph 8. 6. Practices and Rules. The following practices and rules shall apply in connection with Landlord's obligation to furnish electric energy, chilled air, and domestic water and in connection with Tenant's use thereof: A. The Chilled Air Component is predicated upon normal consumption and use of chilled air by Tenant in air conditioning and heating the Premises during the hours specified in Section 6.1 of the Lease. B. Electric energy, chilled air and domestic water shall be made available to Tenant by Landlord on the days when the Shopping Center is open during the hours when the Premises are required to be open as specified in Section 6.1 of the Lease. C. Tenant shall not materially increase its cooling load beyond that installed in the Premises at the Commencement Date of the Lease or as shown on the plans and specifications thereof approved by Landlord. D. Tenant shall not use chilled air for any purpose other than for air conditioning and heating in the Premises, and Tenant shall not use electric energy for any purpose other than for lighting and power demands set forth in Tenant's plans approved by Landlord. E. Landlord shall have the right to inspect the Premises in order to test Tenant's use of chilled air and domestic water and in order to install and operate suitable devices for the purposes of determining Tenant's demands for temperatures. The time and frequency of such inspections shall be at Landlord's sole option, but said test shall be conducted in a manner so as to minimize interference with or disturbance of Tenant's operations at the Premises. In the event that inspection indicates that Tenant's chilled air usage deviates from or materially exceeds the conditions herein set forth, Landlord shall have the right (in addition to any other rights) to require Tenant to pay the cost of such excess usage and the costs of said inspection and to require Tenant to provide, at Tenant's expense, all remedial action or equipment required to conform Tenant's installations and operations to the conditions set forth in this Exhibit C. Any such charges payable by Tenant shall be deemed Additional Rent and shall be payable to Landlord within [***] days after demand. 7. Electric Component. The Environmental Charge as set forth in Paragraph 1 of this Exhibit includes and sets forth Landlord's initial estimate of the Electric Component thereof, which estimate shall be subject to adjustment as set forth below. - ---------- *** confidential treatment requested C-2 86 A. Simultaneously with the submission of Tenant's plans and specifications for Tenant's Work at the Premises, Tenant shall submit to Landlord detailed electrical plans and specifications, including, without limitation, a list of all electrical fixtures, equipment and furnishings, the names, model numbers, electrical ratings and maximum inrush current of each electric consuming item to be located at the Premises. Provided that Tenant's electrical plans and specifications do not indicate that Tenant will consume substantially more electric energy than Landlord's estimated tenant average, the Electric Component of the Environmental Charge will be billed at the rate of [***] per square foot of Floor Space per annum from the Commencement Date through the December 31 next following the Commencement Date. Commencing on the January 1 next following the Commencement Date, the Electric Component will be adjusted and billed as set forth in paragraph B below. B. As part of Tenant's Work, Tenant shall purchase and install an electric check meter, as set forth in the Shopping Center Tenant Information Manual and Design Criteria. Such check meter shall measure both the kilowatts used in the Premises and the kilowatt hours used in the Premises, both of which measurements shall be used in computing electric service consumption and the annual Electric Component of Tenant's Environmental Charge (Electric power consumed by Tenant's heating system is included in the Electric Component). Promptly following the end of each calendar month throughout the Term, Landlord shall cause all electric check meters serving the Premises to be read. Promptly following the end of the calendar year in which the Commencement Date occurs, Landlord shall cause the actual Electric Component payable by Tenant from the Commencement Date to the following December 31 to be calculated. If the aggregate amount billed to Tenant as the Electric Component for said period shall be less than Tenant's actual Electric Component, Tenant shall pay the differential to Landlord within [***] days after receipt of Landlord's invoice therefor. If the aggregate amount billed to Tenant as the Electric Component for said period shall be more than Tenant's actual Electric Component, Landlord shall credit such amount to future Environmental Charge payments. In each successive calendar year thereafter, the monthly Electric Component billed to Tenant shall be one-twelfth (1/12) of the prior year's actual (annualized) Electric Component, and promptly following the end of each such year, Landlord shall cause the actual annual Electric Component payable by Tenant to be calculated. If Tenant's actual Electric Component shall be more than the aggregate of Tenant's monthly payments for the subject year, Tenant shall pay the differential to Landlord as aforesaid. So long as Landlord provides electricity to the Premises on a submetered basis, Tenant shall purchase electricity from Landlord or Landlord's designated agent at the same rates Tenant would be required to pay if Tenant were to purchase electric energy directly from the utility company furnishing electric energy to the Shopping Center, it being understood that the term "rate" shall include all fees, adjustments, tariffs and surcharges that Tenant would be required to pay to said utility company. Where more than one such check meter measures the service to Tenant, the service rendered through each submeter may be computed and billed separately in accordance with the above. In the event that such bills are not paid within [***] days after the same are rendered, Landlord may, in addition to any other remedy available to Landlord, without further notice, discontinue the service of electric current to the Premises without releasing Tenant from any liability under the Lease and without - ---------- *** confidential treatment requested C-3 87 Landlord or Landlord's agent incurring any liability for any damage or loss sustained by Tenant by such discontinuance of services. C. If there are imposed any taxes or if there is an increase in the amount of present taxes upon the sale or furnishing of electric energy to the Shopping Center or to the Premises, then the Electric Component (and the Electric Portion of the Chilled Air Component) shall be increased in the same proportion as the increase or assessment to Landlord. Such taxes shall be paid by Tenant to Landlord in the same manner as if such taxes were to be paid directly by Tenant. As used in this Article, the term "taxes" shall mean any and all taxes, ordinary or extraordinary, foreseen or unforeseen, levied, imposed or assessed in connection with the furnishing of electric energy to the Premises or to the Shopping Center. D. Tenant shall not make any material alteration or addition to the electric system of the Premises without the prior written approval of Landlord, which approval shall not be unreasonably withheld. 8. Chilled Air. The Environmental Charge as set forth in Paragraph 1 includes a component for the furnishing by Landlord to the Premises of chilled air for use by Tenant for air conditioning and heating purposes (the Chilled Air Component of the Environmental Charge). The Chilled Air Component is composed of a sum applicable to the purchase by Landlord of electric energy for the production of chilled air (the Electric Portion) and all other charges related to the production of chilled air (the Non-Electric Portion). The Electric Portion shall be increased for the same causes and in the same manner as the Electric Component of the Environmental Charge is increased as set forth in Paragraph 7. The Non-Electric Portion shall be increased as provided in Paragraph 17 hereof. 9. Water and Sewer. A. The Environmental Charge as set forth in Paragraph 1 included a component for the furnishing by Landlord to the Premises of domestic water and the right to use the sanitary sewer system of the Shopping Center (the Water and Sewer Component). If the rate charged by the public utility, Governmental Authority or other entity supplying water to the Shopping Center shall be increased, then the Water and Sewer Component shall be increased in the same proportion as the increase to Landlord. It is understood that as used in this paragraph, the term "rate" shall include any surcharges which Landlord is required to pay in connection with obtaining domestic water and/or sanitary sewer services for the Shopping Center. B. If Landlord shall so request, Tenant shall install a water meter to measure the amount of water consumed at the Premises. Landlord shall read the meter on a regular basis, and Tenant shall pay to Landlord, in lieu of the amount set forth in paragraph 1 hereof the amount, based on consumption, which Tenant would otherwise pay to the utility company providing water to the Shopping Center. 10. Disputes. Any dispute between Landlord and Tenant arising out of or relating to the amount of increase of the Environmental Charge which Tenant is required to pay pursuant to this Exhibit C shall be determined promptly by a reputable independent electrical engineer to be C-4 88 selected by Landlord and paid by Tenant. The determination of said engineer shall be binding and conclusive on Landlord and Tenant. 11. Effective Dates. All increases of the Environmental Charge as a result of any of the events described in this Exhibit shall be effective as of the date the event occurs which constitutes the basis for such increase and the provisions of this Exhibit shall be cumulative and each of said paragraphs shall operate independently of each other, so that each or all events, if they occur, shall be a separate, cumulative basis for any increase of the Environmental Charge. Landlord reserves the right to bill any increase pursuant to this Exhibit at such times as Landlord shall in its sole discretion determine and the failure to bill any increase pursuant to this Exhibit on the date the event which constitutes the basis for the increase occurs shall not be deemed a waiver of Landlord's right to so bill at a subsequent time, effective, in any event, as of the date the event which constitutes the basis for the increase occurs. Each time an increase in the Environmental Charge occurs pursuant to this Exhibit, Landlord shall notify Tenant of the amount of such increase and the new dollar amount. However, said increase shall be effective from the date the increase became operative. Any decrease in consumption by reason of removal of electric consuming equipment from the Premises shall, provided the equipment is removed, be measured from the date written notice of removal is served upon Landlord. 12. Discontinuance of Utilities. Landlord hereby reserves the right to discontinue furnishing electric energy, chilled air or domestic water to Tenant in the Premises at any time upon not less than [***] days' written notice to Tenant. If Landlord exercises such right of termination, the Lease shall continue in full force and effect and shall be unaffected thereby, except that from and after the effective date of such termination, Landlord shall not be obliged to furnish the discontinued utility to Tenant and the Environmental Charge payable under the Lease shall be reduced by the amount of the discontinued component included therein at the time of discontinuance. If Landlord so discontinues furnishing electric energy or water to Tenant, Tenant shall arrange to obtain same directly from the utility company furnishing the same to the Shopping Center. Electric energy may be furnished to Tenant by means of the then existing building system feeders, risers and wiring to the extent that the same are available, suitable and safe for such purposes. All meters and additional panel boards, feeders, risers, wiring and other conductors and equipment which may be required to obtain electric energy directly from such utility company shall be installed and maintained by Tenant at its expense. 13. Reduction in Power Factor. If Tenant's use of electricity causes reduction in the "power factor" of its electric service below ninety (90%) percent lagging, Tenant will, at Tenant's expense, make the necessary corrections through the proper approved uses of capacitors or other approved devices. 14. Furnishing of Utilities. Any utility which Landlord is required or elects to provide or causes to be provided to the Premises may be furnished by an agent employed or by an independent contractor engaged by Landlord, and Tenant shall accept the same therefrom to the exclusion of all other suppliers. Landlord shall not be liable to any extent to Tenant in damages - ---------- *** confidential treatment requested C-5 89 or otherwise if any one or more of said utilities is interrupted, impaired or terminated because of failures, repairs, installations or improvements, nor shall any such interruption, impairment or termination in any way release Tenant from the performance of any of its obligations under the Lease. 15. Rates if Central Utility Plant is Declared to be a Public Utility. If Landlord's operation of the central utility plant furnishing any utility to the Premises and the other premises served thereby shall be determined to be a public utility service, and rates therefor should be fixed or approved by the public authority having jurisdiction, then such rates for such service shall supersede the provisions of this Exhibit with respect to the determination of the rates to be paid by Tenant for such services, and Tenant shall pay therefor at such rates. 16. Sales and Use Tax. Tenant shall pay all sales, use and other taxes imposed by any Governmental Authority upon the manufacture, sale, use, transmission, distribution or other process necessary or incidental to the furnishing of electric energy and chilled air, and domestic water to the Premises. If Landlord has paid said taxes, Tenant shall reimburse Landlord for the full amount thereof on demand. 17. Increases of Certain Charges. The Non-Electric Portion of the Chilled Air Component of the Environmental Charge shall be adjusted on the January 1 next following the first anniversary of the Commencement Date and on each January 1 thereafter, as provided in the next following sentences. The term "Consumer Price Index" means the Consumer Price Index for U.S. City Average for All Items For All Urban Consumers, 1982-84 equals 100 (CPI-U), as published by the Bureau of Labor Statistics of the United States Department of Labor or if not published then the index of prices most closely comparable. The term "Base Number" means the Consumer Price Index number applicable to the January 1 next following the Commencement Date. The term "Current Number applicable to a calendar year" means the latest Consumer Price Index number published for the month of January (or if no Consumer Price Index is published for January then for the next succeeding month) of each, respective calendar year occurring subsequent to the first anniversary of the Commencement Date. If the latest Current Number applicable to a calendar year exceeds the Base Number, then the new amount of the Non-Electric Portion effective January 1 of each calendar year shall be obtained by multiplying the original amount thereof at the time of execution and delivery of the Lease by a fraction, the numerator of which is the Current Number applicable to any calendar year and the denominator of which is the Base Number; provided, however, that in no event shall the Environmental Charge ever be less than the amount specified in Article 1 of the Lease. 18. Obligations Prior to Commencement Date. Tenant shall pay Environmental Charges for temporary water, chilled air and electricity from the date upon which the Premises are made available to Tenant for Tenant's Work until the Commencement Date, such payment to be at the amounts and rates set forth in Paragraph 1. 19. Communication Services. Landlord may install in the Premises and the Shopping Center such communications lines and systems as Landlord shall elect and, in connection therewith, Landlord may provide communication services (other than voice-grade telephone service) for Tenant's use in the Premises. To the extent that Tenant requires the type of communication services made available by Landlord, Tenant shall use the services offered by Landlord to the C-6 90 exclusion of any other provider. Tenant shall pay Landlord, as an additional component of the Environmental Charge, for the furnishing of such services, in an amount not to exceed what Tenant would pay were Tenant to obtain such services from another provider in the locale in which the Shopping Center is located. 20. All capitalized terms used herein unless otherwise defined shall have the same meaning as in the Lease. C-7 91 Exhibit D Intentionally Deleted 92 EXHIBIT E LANDLORD'S WORK I. Landlord's Work at Tenant's Premises: Landlord shall perform the following work in or at the Premises ("Landlord's Work"). The respective costs of those items of Landlord's Work which are to be reimbursed by Tenant are delineated in the rate schedule which constitutes Part II of this Exhibit E. Said costs shall be deemed Additional Rent under the Lease, shall be billed to Tenant upon completion of Landlord's Work, and shall be due and payable within thirty (30) days thereafter. ITEMS A. Electrical Service An empty conduit sized to service capacity for a 277/480 V, 3 phase, 4 wire, 60 cycle AC service capacity sized to accommodate a maximum load of 20 watts per square foot of Floor Space in the Premises shall be provided from the Landlord's electrical room to a point within the Premises. The location of such conduit shall be indicated on the Lease Outline Drawing. Landlord shall provide a service connection point in the electrical room. B. Telephone Room An 1" empty conduit shall be provided for Tenants not adjacent to a service corridor. A 6" wide cable tray will be provided in the service corridor and the cable tray will terminate in the Landlord's telephone room. C. Sewer Service One (1) 4 inch sanitary sewer connection shall be installed at one point below the Premises. The approximate location of such connection shall be indicated on the Lease Outline Drawing. D. Sanitary Vent Furnish and install one (1) 2" common sanitary vent connection at one point within the Premises. Approximate location and size will be indicated on the Lease Outline Drawing. E. Water Service A 3/4 inch domestic cold water service with ball valve shall be brought to one point within the Premises. The approximate location of such service shall be indicated on the Lease Outline Drawing. F. Sprinklers A sprinkler system flange connection shall be installed within the Premises for extension by Tenant, in accordance with all applicable codes, references design standards and IRI. All branch sprinkler piping within the E-1 93 Premises shall be at Tenant's expense. G. Toilet Exhaust A gravity toilet exhaust duct main shall be provided to each Premise. Approximate location of duct main will be indicated on Lease Outline Drawing. H. Floor Floor Slab. Furnish and install a concrete floor slab designed to support a maximum live load of 75 pounds per square foot and a partition load of 20 pounds per square foot. Smooth troweled finish, no depression, recesses or cutting of slab will be permitted without the prior written approval of Landlord. I. Walls Demising Studs. Furnish and install 6 inch demising metal studs from floor to the underside of the roof deck and/or structural members. J. Roof Roof Penetration. All roof penetrations and flashing will be a Tenant expense and performed solely by Landlord's contractor. Landlord reserves the right to disallow any installation which may exceed the structural capabilities of the roof system or if, in Landlord's opinion, the appearance of such equipment will be detrimental to the appearance of the building. K. Tenant Plan Review Landlord will review Tenant's plans to ascertain that the Tenant and his Architect are in compliance with the Tenant and Information Design Manuals and have designed improvements that uniquely identify the retail store and are a credit to the Tenant and the Mall. L. Construction Deposit Deposit required before Tenant construction can commence to ensure the successful completion of build-out including punch list items, construction clean-up, and administration close-out. M. Intentionally Omitted N. Trash Removal During construction, fixturing and merchandising of the Premises, Landlord will remove Tenant's trash and debris from the building site (not Tenant's Premises) at a cost based upon size of the Premises. Tenant shall deliver trash and debris to designated locations and deposit same in receptacles provided. If Tenant does not maintain the Premises in a clean and orderly condition or properly dispose of its trash and debris in the designated locations, Landlord may perform such work and charge Tenant Landlord's actual cost plus fifteen (15%) percent thereof E-2 94 for administration. O. Temporary Electric Landlord shall provide limited temporary During Construction Service electric service for Tenant's contractors. This is the only temporary electric service available to such contractors. Tenant shall have five (5) days from beginning work to connect to permanent power. P. Temporary Storefront Landlord will furnish and install a painted Closure gypsum board and metal stud wall enclosure at those tenant storefronts' for those tenant spaces' that are not under construction or open at mall grand opening which tenant's contractor can move and use for future construction barricade. II. Landlord's Work - Reimbursed by Tenant A. Electrical Conduit Empty - 2".................. $ 1,100.00 EA B. Telephone Hook/Conduit......................... $ 100.00 EA C. Sanitary Sewer................................. $ 500.00 EA D. Sanitary Vent.................................. $ 600.00 EA E. Water.......................................... $ 500.00 EA F. Sprinkler Shut-Down Fee........................ $ 200.00 EA G. Toilet Exhaust................................. $ 600.00 EA H. Floor 1. Pavers (material only) Floor.................................... $ 15.00/SF Base..................................... $ 15.00/LF 2. Carpet (material only)................... $ 6.50/SF 3. Concrete Slab............................ $ 2.50/SF I. Walls 1. Demising Studs (one-half wall) (No Drywall) 6' metal stud, 16" O.C................... $ 12.00/LF J. Roof Cuts/Penetrations/Flashing................ $ Actual Cost plus 15% Admin K. Tenant Plan Reviews 1. Initial Review........................... $
E-3 95 2. Additional Review........................ $ L. Construction Deposit (Required from Contractor) $ M. Intentionally Omitted N. Trash Removal 1. Up to 1,000 SF........................... $ 500.00 EA 2. 1,001 SF to 3,000 SF..................... $ 1,200.00 EA 3. 3,001 SF or more......................... $ 1,700.00 EA O. Temporary Electric............................. $ 0.38/SF/MTH P. Temporary Storefront Closure................... $ 40.00/LF
E-4 96 EXHIBIT F MODIFICATION OF LEASE LANDLORD NAME AND ADDRESS: MALL OF GEORGIA, L.L.C., a Delaware limited liability company 115 West Washington Street Indianapolis, Indiana 46204 TENANT NAME AND ADDRESS: DATE OF LEASE: PREMISES: Store No. SHOPPING CENTER: Mall of Georgia Gwinnett County, Georgia DATE OF AGREEMENT: R E C I T A L Landlord and Tenant have agreed to amend the Lease in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained it is hereby agreed as follows: 1. The Commencement Date of the Lease shall be _________________ and the Expiration Date of the Term shall be _________________. 2. Landlord and Tenant have agreed that the Size of the Premises is _____________ square feet. 3. The adjusted Fixed Rent shall be as follows: $_______ per year from ______________ through ______________; $_______ per year from ______________ through ______________; and $_______ per year from ______________ through ______________. 4. The adjusted Promotion Fund Charge shall be $_____________ per year initially or such other greater amount as shall be determined pursuant to Section 6.1 L. 5. The adjusted Grand Opening Contribution is $_______________________. F-1 97 6. All additional Rent charges calculated based on the Size of the Premises shall be adjusted according to the adjusted size of the Premises as of the Commencement Date. 7. After execution and delivery of this Modification of Lease, Landlord shall bill Tenant for any monies owed retroactive to the Commencement Date of the Lease. Tenant shall pay such amount within ten (10) days after demand. 8. Except as provided herein all of the terms, conditions and covenants of the lease shall remain the same and in full force and effect. 9. Any capitalized terms used herein shall have the meaning ascribed to it in the Lease. IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of the day and year first above written. Tenant: By: --------------------------------- Title: Landlord: MALL OF GEORGIA, L.L.C., a Delaware limited liability Company By: CPI-Georgia Corporation, a Delaware corporation, Managing Member By: --------------------------------- David Simon, Chief Executive Officer F-2 EX-10.30 27 NOTE PURCHASE AGREEMENT, GALLADIO HOLDING 1 EXHIBIT 10.30 SILICON ENTERTAINMENT, INC. SECURED SUBORDINATED CONVERTIBLE NOTE PURCHASE AGREEMENT JUNE 30, 1999 2 SILICON ENTERTAINMENT, INC. SECURED SUBORDINATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT This Secured Subordinated Convertible Note Purchase Agreement (the "Agreement") is made as of the 30th day of June 1999 by and between Silicon Entertainment, Inc., a California corporation (the "Company"), and each of the investors listed on Exhibit A attached to this Agreement (each a "Purchaser" and together the "Purchasers"). RECITALS The Company desires to issue and sell and the Purchasers desire to purchase secured subordinated convertible promissory notes in substantially the form attached to this Agreement as Exhibit B (the "Notes") which shall be convertible on the terms stated therein into equity securities of the Company as specified in the Notes. The Notes and the equity securities issuable upon conversion or exercise thereof (and the securities issuable upon conversion of such equity securities) are collectively referred to herein as the "Securities." AGREEMENT In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows: 1. PURCHASE AND SALE OF NOTES AND WARRANTS. (a) SALE AND ISSUANCE OF NOTES. Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the Closing and the Company agrees to sell and issue to each Purchaser a Note in the principal amount specified with respect to such Purchaser on Exhibit A to this Agreement. The Company's agreements with each of the Purchasers are separate agreements, and the sales of the Notes to each of the Purchasers are separate sales and issuances; provided that any amendments of this Agreement must be in accordance with Section 9(g). (b) CLOSINGS. The first closing (the "Closing") of the sale and purchase of the Notes, Warrants and Call Options under this Agreement shall take place at the offices of Gray Cary Ware & Freidenrich, LLP, 400 Hamilton Avenue, Palo Alto, California at 10:00 a.m. on June 30, 1999, or at such other time, date and place as are mutually agreeable to the Company and the Purchasers, provided that the aggregate purchase price for the Notes at the time of the Initial Closing shall be not less than $5,000,000. Subsequent closings (each a "Subsequent Closing") of the sale and purchase of Securities under this Agreement shall take place at the offices of Gray Cary Ware & Freidenrich, LLP, no later than December 31, 1999. In no event shall the aggregate purchase price for the Notes at the time of the Initial Closing or any Subsequent Closing exceed $10,000,000. The Initial Closing and the Subsequent Closings, if any, shall hereinafter be referred to individually as a "Closing" and collectively as the "Closings" and the date of any Closing shall hereinafter be referred to as a "Closing Date." At each Closing 1 3 other than the Initial Closing, Exhibit A shall be amended to include additional Purchasers and such new Purchasers shall become parties to this Agreement. The date of the Closing shall hereinafter be referred to as a "Closing Date." (c) DELIVERY. At the Closing, the Company will deliver to each Purchaser the Note to be purchased by such Purchaser against receipt by Company of the purchase price set forth opposite the Purchasers name on the Schedule of Purchasers. 2. SUBORDINATION. The indebtedness evidenced by the Notes shall be expressly subordinated, to the extent and in the manner set forth in the Notes, in right of payment to the prior payment in full of all of the Company's Senior Indebtedness (as defined in the Note), and each Purchaser hereby agrees to enter into such agreements and take such additional action as may be necessary to perfect such subordination. 3. SECURITY INTEREST. The indebtedness represented by the Notes shall be secured by all of the assets of the Company in accordance with the provisions of a security agreement among the Company and the Purchasers in the form attached to this Agreement as Exhibit C (the "Security Agreement"). 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Purchaser that except as set forth in the Schedule of Exceptions attached hereto as Exhibit D: (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. (b) AUTHORIZATION. All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Notes and the Warrants, the shares of the Company's capital stock issuable on conversion or exercise thereof, and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Closing. The Agreement, the Notes, and the Warrants (collectively, the "Transaction Documents") when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors' rights generally, as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. (c) CAPITALIZATION. The authorized capital of the Company consists, or will consist, immediately prior to the Closing, of: (i) 20,000,000 shares of Preferred Stock, of which (A) 3,266,667 shares have been designated Series A Preferred Stock, 3,266,667 of which are issued and outstanding immediately prior to the Closing, (B) 6,222,531 shares have been designated Series B Preferred Stock, 5,528,776 of which are issued and outstanding immediately prior to the 2 4 Closing and (C) 8,500,000 shares have been designated Series C Preferred Stock, 6,974,414 of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of Preferred Stock have been duly authorized, fully paid and are nonassessable. (ii) 40,000,000 shares of Common Stock, 4,309,752 shares of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of Common Stock have been duly authorized, fully paid and are nonassessable and issued in compliance with all applicable federal and state securities laws. The Company has reserved shares of Common Stock for issuance upon conversion of the Preferred Stock. (iii) The Company has reserved 4,360,000 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its Stock Option and Stock Bonus Plans, duly adopted by the Board of Directors and approved by the Company's shareholders (collectively, the "Stock Plans"). Of such reserved shares of Common Stock, as of June 1, 1999, options to purchase 3,837,299 shares have been granted and are currently outstanding, and 522,701 shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. (iv) Except for outstanding options issued pursuant to the Stock Plans and warrants to purchase 631,834 shares of Common Stock and warrants to purchase 53,334 shares of Series B Preferred Stock and 717,644 shares of Series C Preferred Stock, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock. (d) REPORTS OF THE COMPANY; NO MATERIAL ADVERSE CHANGES. The Company has furnished Purchasers with copies of its April 30, 1999 financial statements (collectively, the "Financial Statements"). Said Financial Statements, as of their respective dates, were accurate and complete in all material respects and did not omit any material information required to be set forth therein. Since April 30, 1998 there has not been any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse. (e) INTELLECTUAL PROPERTY RIGHTS. (i) To the best of its knowledge, the Company has sufficient title and ownership of all patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights, and processes (collectively, "Intellectual Property") necessary for its business as now conducted and as proposed to be conducted to the Company's knowledge, without any conflict with or infringement of the rights of others; (ii) Except for agreements with its own employees or consultants, there are not outstanding options, licenses, or agreements of any kind relating to the matters listed in subsection (i) above or that grant rights to any other person to manufacture, license, produce, assemble, market or sell the Company's products, nor is the Company bound by or a party to any options, licenses, or agreements of any kind with respect to the Intellectual Property 3 5 of any other person or entity, other than licenses or agreements relating to the Company's use of certain trademarks of Nascar, and various drivers, race tracks and teams. (iii) The Company has not received any communications alleging that the Company or its employees has violated or infringed or, by conducting its business as proposed, would violate or infringe any of the Intellectual Property of any other person or entity; and (iv) The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of the Company with respect to the Intellectual Property of the Company or otherwise or that would conflict with the Company's business as proposed to be conducted. (f) SECURITY INTERESTS. The grant of security interests in the Security Agreement, when effective by execution of such Security Agreement (and the filings required under the Uniform Commercial Code of the State of California and U.S. Patent and Trademark Office, when completed), creates a valid, binding, and effective security interest in the Collateral (as defined in Section 1 of the Security Agreement), free from any other liens and encumbrances. (g) COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The Company is not in violation or default in any material respect of any provision of its certificate of incorporation or bylaws or in any material respect of any provision of any material mortgage, indenture, agreement, instrument, or contract to which it is a party or by which it is bound, or of any federal or state judgment, order, writ, decree, or any federal or state statute, rule, regulation or restriction applicable to the Company. The execution, delivery, and performance by the Company of the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, will not result in any such violation or be in material conflict with or constitute, with or without the passage of time or giving of notice, either a material default under any such provision or an event that results in the creation of any material lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization, or approval applicable to the Company, its business or operations, or any of its assets or properties. (h) LITIGATION. There is no action, suit, proceeding, or investigation pending or, to the best knowledge of the Company, threatened against the Company that questions the validity of the Transaction Documents, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in any material adverse change in the assets, business properties, prospects or financial condition of the Company. (i) TAXES. The Company has no material liability for any federal, state or local taxes, except for taxes which have accrued and are not yet payable or are being contested by the Company in good faith. The Company has paid all payroll taxes required to be paid by it. 4 6 (j) OFFERING. Assuming the accuracy of the representations and warranties of each Purchaser contained in Section 6 hereof, the offer, issue, and sale of the Securities is and will be exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "1933 Act"), and has been registered or qualified (or are exempt from registration and qualification) under the registration, permit, or qualification requirements of all applicable state securities laws. 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby represents and warrants to the Company that: (a) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities. (b) DISCLOSURE OF INFORMATION. The Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the securities. (c) RESTRICTED SECURITIES. The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser understands that the Securities are "restricted securities" under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser's control, and which the Company is under no obligation and may not be able to satisfy. (d) NO PUBLIC MARKET. The Purchaser understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities. (e) LEGENDS. The Purchaser understands that the Securities, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends: (i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE 5 7 BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." (ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. (f) ACCREDITED INVESTOR. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act. (g) FOREIGN INVESTORS. If a Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), such Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities. Such Purchaser's subscription and payment for, and his or her continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of Purchaser's jurisdiction. 6. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in Section 5 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. (b) QUALIFICATIONS. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing. (c) CONSENTS AND WAIVERS. The Company shall have obtained any and all consents (including all governmental or regulatory consents, approvals or authorizations required in connection with the valid execution and delivery of this Agreement, the Security Agreement and the Amendment to the Rights Agreement), permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement, the Security Agreement and the Amendment to the Rights Agreement. (d) LEGAL INVESTMENT. At the time of the Closing, the purchase of the Notes and Warrants by the Purchasers hereunder shall be legally permitted by all laws and regulations to which the Purchasers and the Company are subject. 6 8 (e) AMENDMENT TO RIGHTS AGREEMENT. The Company, each Purchaser and the other parties listed as signatories thereto shall have executed and delivered Amendment No. 1 to that certain Third Amended and Restated Rights Agreement dated December 31, 1998 in the form attached hereto as Exhibit E. (f) SECURITY AGREEMENT. The Company and the Purchasers shall have executed the Security Agreement. 7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of each Purchaser contained in Section 6 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. (b) QUALIFICATIONS. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing. 8. COVENANTS OF THE COMPANY. (a) NO OTHER INDEBTEDNESS. The Company shall not incur any indebtedness for money borrowed (other than equipment lease financing transaction) to the extent that the Company's aggregate payment obligations thereunder would exceed Ten Million Dollars ($10,000,000) without the Majority Purchasers' prior written consent, which shall not be unreasonably withheld. (b) NO DIVIDENDS. No payment or declaration of a cash dividend, shall be made on the Common Stock of the Company while any Obligation under the Note is outstanding. (c) FINANCIAL STATEMENTS. No later than 30 days following the end of each quarter, the Company shall deliver to the Purchasers its balance sheet as at the end of such period and its income statement for such period and for that portion of the Company's financial reporting year ending with such period. In addition, no later than 90 days following the end of each financial reporting year, the Company shall deliver to the Purchasers its audited balance sheet, income statement, and statement of cash flows for such year. (d) STAY, EXTENSION AND USURY LAWS. The Company convenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, how or at any time hereafter in force, that might affect the covenants or the performance of its obligations under this Agreement and the Notes; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power 7 9 granted to the holders of Notes pursuant to this Agreement, but will suffer and permit the execution of every such power as though no such law has been enacted. (e) LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its subsidiaries shall enter into any transaction or series of transactions to sell, lease, transfer, exchange or otherwise dispose of any of its properties or assets to or to purchase any property or assets from, or for the direct or indirect benefit of, an affiliate of the Company or of any subsidiary of the Company, make any investment in or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the direct or indirect benefit of, an affiliate of the Company or of any subsidiary of the Company (each, including any series of transactions with one or more affiliates, an "Affiliate Transaction"), unless the Board of Directors of the Company or the relevant subsidiary determines, as evidenced by a Board resolution, that the terms of such Affiliate Transaction are fair and reasonable to the Company and no less favorable to the Company or the relevant subsidiary than those that could have been obtained at that time in a comparable arms-length transaction by the Company or such subsidiary with an unrelated Person. (f) MAINTENANCE OF PROPERTIES. The Company will cause all properties used or useful in the conduct of its business or the business of any subsidiary of the Company to be maintained and kept in good condition, repair and working order, subject to normal wear and tear, and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this section (f) shall prevent the Company from discontinuing the operation or maintenance of any such properties if such discontinuance is, as determined by the Company in good faith, desirable in the conduct of its business or the business of any subsidiary and not disadvantageous in any material respect to the holders of the Notes. (g) COMPLIANCE WITH LAWS. The Company shall comply, and shall cause each of its subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except such as are being contested in good faith and by appropriate proceedings and except for such noncompliance as well not in the aggregate have a Material Adverse Effect. (h) EUROPEAN OPERATIONS. Company covenants that it will use best efforts to form in either 2001 or 2002 a new corporation to be called Silicon Entertainment-Europe, Inc. ("Affiliated European Entity") which will be granted the right by the Company to operate NASCAR Silicon Motor Speedway or related version based on Formula One or GT racing in Europe in return for a royalty payment of 6.5% of net revenues to the Company. The Affiliated European Entity will be owned sixty percent (60%) by the Company and forty percent (40%) by the holders of the Notes. Any development required is intended to be performed by the Company and paid by the Affiliated European Entity. The financing of the Affiliated European Entity shall be determined later. If by July 1, 2002 the Affiliated European Entity has not been 8 10 formed, the holders of the Notes may require the Company to repurchase rights to operate in Europe for the cash payment of $600,000. (i) TERMINATION. This Section 9 (except subsection (h)) shall terminate as to each Purchaser at such time as no Obligation under such Purchasers Note is outstanding. 9. MISCELLANEOUS. (a) SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (b) GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. (c) COUNTERPARTS. Note Purchase Agreement and all documents attached to the Note Purchase Agreement (including Note, warrants, Security Agreement and Amendment No. 1 to Amended and Restated Investors Rights Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (d) TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (e) NOTICES. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party's address or facsimile number as set forth below or as subsequently modified by written notice. (f) AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or waived only with the written consent of the Company and the holders of at least a majority in interest of the Notes. Any amendment or waiver effected in accordance with this Section 10(f) shall be binding upon all the Purchasers and all transferees of the Securities, each future holder of all such Securities, and the Company. (g) SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be 9 11 excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms. (h) ENTIRE AGREEMENT. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled. (i) EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Securities. (j) CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT. [Signature Pages Follow] 10 12 The parties have executed this Secured Subordinated Convertible Note and Warrant Purchase Agreement as of the date first written above. COMPANY: SILICON ENTERTAINMENT, INC. By: /s/ ------------------------------------------ Name: Title: Address: PURCHASERS: /s/ --------------------------------------------- (Purchaser) By:________________________________________ Name:______________________________________ (print) Title:_____________________________________ SIGNATURE PAGE TO SECURED SUBORDINATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT 13 EXHIBIT A SCHEDULE OF PURCHASERS
ORIGINAL PRINCIPAL AMOUNT NAME/ADDRESS OF PURCHASER OF NOTE TOTAL PURCHASE PRICE - ------------------------- ------------------------- -------------------- Galladio Holding B.V. $2,260,000 $2,000,000 Attn: Mr. Nicolaas Monteban Wagenaarweg 7 2597 LL The Hague The Netherlands Wagenaarkwartier's - Gravenhage 2,260,000 2,000,000 B.V. Attn: Mr. Nicolaas Monteban Wagenaarweg 7 2597 LL The Hague The Netherlands Van der Lee Partnership 1,130,000 1,000,000 Mr. Nicolaas Monteban Wagenaarweg 7 2597 LL The Hague The Netherlands TOTAL: $5,650,000 $5,000,000
14 EXHIBIT B FORM OF SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE 15 EXHIBIT C FORM OF SECURITY AGREEMENT 16 THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. SILICON ENTERTAINMENT, INC. 8.5% CONVERTIBLE NOTE DUE 2002 No. R- $000,000 SILICON ENTERTAINMENT, INC., a corporation duly organized and existing under the laws of California (the "Company") for value received, hereby promises to pay to ____________ or registered assigns, the principal sum of ____________ on June 30, 2002 and to pay interest thereon, from June 30, 2000, or from the most recent interest payment date to which interest has been paid or duly provided for, semi-annually on June 30 and December 30 in each year, commencing December 30, 2000, at the rate of 8.5 % per annum, until the principal hereof is due. The interest so payable, and punctually paid or duly provided for, on any interest payment date will be paid to the person in whose name this Security (or one or more predecessor Securities) is registered at the close of business on the regular record date for such interest, which shall be the June 30 or December 30 (whether or not a business day), as the case may be, next preceding such interest payment date. Payment of the principal of this Security shall be made upon the surrender of this Security to the Company, at its office at 210 Hacienda Avenue, Campbell, CA 95008, or such other office within the United States as shall be notified by the Company to the holder hereof) (the "Designated Office"), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Payment of interest on this Security shall be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States of America, provided that if the holder shall not have furnished wire instructions in writing to the Company no later than the record date relating to an interest payment date, such payment may be made by U.S. dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Company security register. Each of the Company and the holder of this Security hereby acknowledges and agrees that the principal amount of this Security shall equal one hundred thirteen percent (113%) of the total purchase price paid by such holder to the Company, and that such additional amount shall represent, and shall be expensed by the Company as, the first full year of interest payable on this Security. 1. Conversion. (a) Optional Conversion. The holder of this Security is entitled at any time on or after June 30, 1999 and before the close of business on June 30, 2002 (or in case the holder hereof has exercised his right to require the Company to repurchase this Security or a portion hereof, then in respect of this Security or such portion hereof, as the case may be, until and including, but (unless the Company defaults in making the payment due upon repurchase) not 17 after, the close of business on the Repurchase Date) to convert this Security into fully paid and nonassessable shares (calculated as to each conversion to the nearest share) of Common Stock of the Company at the rate of one (1) share of Common Stock for each $7.50 of principal amount of Security (or at the current adjusted rate if an adjustment has been made as provided below) (the "Conversion Ratio"); provided, however that should this Security be converted by the holder at any time prior to June 30, 2000, the principal amount of this Security shall be reduced by an amount equal to the product of (i) the number of full months elapsed from June 30, 1999 through the date of conversion of this Security divided by twelve (12); (ii) thirteen percent (13%); and (iii) the total purchase price of this Security as set forth on Exhibit A attached hereto. (b) Automatic Conversion. This Security shall automatically be converted into fully paid and nonassessable shares (calculated as to each conversion to the nearest share) of Common Stock of the Company at the rate of one (1) share of Common Stock for each $7.50 of principal amount of Security (or at the Conversion Rate if an adjustment has been made as provided below) one (1) business day after the earlier to occur of (i) the closing of the sale of Common Stock of the Company in an underwritten public offering registered under the Securities Act of 1933, as amended (the "IPO"), at a public offering price of greater than $7.50 per share (as adjusted for any combinations, stock splits, stock dividend, recapitalizations and the like) or (ii) following the IPO, such time that the average closing price of the Company's Common Stock exceeds $10.00 per share for any continuous (4) week period; provided, however that should this Security be converted by the holder at any time prior to June 30, 2000, the principal amount of this Security shall be reduced by an amount equal to the product of (i) the number of full months elapsed from June 30, 1999 through the date of conversion of this Security divided by twelve (12); (ii) thirteen percent (13%); and (iii) the total purchase price of this Security as set forth on Exhibit A attached hereto. (c) Procedure for Conversion. The holder of this Security may exercise the conversion rights as to such Security, or any portion thereof, by surrender of this Security, duly endorsed or assigned to the Company or in blank to the Company at the Designated Office, accompanied by written notice to the Company that the holder hereof elects to convert this Security (or if less than the entire principal amount hereof is to be converted, specifying the portion hereof to be converted). Conversion shall be deemed to have been effected on the date when such delivery is made, or the conditions for automatic conversion set forth in Section 1(b) above have been satisfied. Upon surrender of this Security for conversion, the holder will be entitled to receive the interest accruing on the principal amount of this Security then being converted from the interest payment date next preceding the date of such conversion to such date of conversion. No payment or adjustment is to be made on conversion for dividends on the Common Stock issued on conversion hereof. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest, the Company shall pay a cash adjustment, computed on the basis of the Closing Price of the Common Stock on the date of conversion, or, at its option, the Company shall round up to the next higher whole share. (d) The Conversion Ratio shall be subject to adjustments from time to time as follows: 2 18 (1) In case the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company payable in shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the Determination Date for such dividend or other distribution shall be increased by dividing such Conversion Ratio by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on such Determination Date and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following such Determination Date. For the purposes of this paragraph (1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (2) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (e) Whenever the Conversion Ratio is adjusted as provided in Section 1(d), the Company shall compute the adjusted Conversion Ratio in accordance with Section 1(d) and shall prepare a certificate signed by the chief financial officer of the Company setting forth the adjusted Conversion Ratio and showing in reasonable detail the facts upon which such adjustment is based, and shall promptly deliver such certificate to the holder of this Security. (f) In case: (1) the Company shall declare a dividend or other distribution on its Common Stock payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would require any adjustment pursuant to Section 1(d); or (2) the Company shall authorize the granting to the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (3) of any reclassification of the Common Stock of the Company, or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or (4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or 3 19 (5) the Company or any Subsidiary shall commence a tender offer for all or a portion of the Company's outstanding shares of Common Stock (or shall amend any such tender offer); then the Company shall cause to be delivered to the holder of this Security, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable record, expiration or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined, (y) the date on which the right to make tenders under such tender offer expires or (z) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings described in clauses (1) through (5) of this Section 1(f). (g) The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the Security, the full number of shares of Common Stock then issuable upon the conversion of this Security. (h) Except as provided in the next sentence, the Company will pay any and all taxes and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of the Security. The Company shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the holder of this Security, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid. (i) The Company agrees that all shares of Common Stock which may be delivered upon conversion of the Security, upon such delivery, will have been duly authorized and validly issued and will be fully paid and nonassessable (and shall be issued out of the Company's authorized but unissued Common Stock) and, except as provided in Section 1(h), the Company will pay all taxes, liens and charges with respect to the issue thereof. (j) In case of any consolidation of the Company with any other person, any merger of the Company into another person or of another person into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any conveyance, sale, transfer or lease of all or substantially all of the properties and assets of the Company, the person formed by such consolidation or resulting from such merger or which acquires such properties and assets, as the case may be, shall execute and deliver to the holder of this Security a supplemental agreement providing that such holder have the right thereafter, during the period this Security shall be 4 20 convertible as specified in Sections 1(a) and 1(b), to convert this Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (including any Common Stock retainable) by a holder of the number of shares of Common Stock of the Company into which this Security might have been converted immediately prior to such consolidation, merger, conveyance, sale, transfer or lease, assuming such holder of Common Stock of the Company (i) is not a person with which the Company consolidated, into which the Company merged or which merged into the Company or to which such conveyance, sale, transfer or lease was made, as the case may be (a "Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer, or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, conveyance, sale, transfer or lease by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("Non-electing Share"), then for the purpose of this Section 1(j) the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by the holders of each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-electing Shares). Such supplemental agreement shall provide for adjustments which, for events subsequent to the effective date of such supplemental agreement, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 1. The above provisions of this Section 1(j) shall similarly apply to successive consolidations, mergers, conveyances, sales, transfers or leases. In this paragraph, "securities of the kind receivable" upon such consolidation, merger, conveyance, transfer, sale or lease by a holder of Common Stock means securities that, among other things, are registered and transferable under the Securities Act, and listed and approved for quotation in all securities markets, in each case to the same extent as such securities so receivable by a holder of Common Stock. (k) The Company (i) will effect all registrations with, and obtain all approvals by, all governmental authorities that may be necessary under any United States Federal or state law (including the Securities Act of 1933, the Securities Exchange Act of 1934 and state securities and Blue Sky laws) for the shares of Common Stock issuable upon conversion of this Security to be lawfully issued and delivered as provided herein, and thereafter publicly traded (if permissible under such Securities Act) and qualified or listed as contemplated by clause (ii) (it being understood that the Company shall not be required to register the Common Stock issuable on conversion hereof under the Securities Act, except pursuant to the Rights Agreement between the Company and the initial holder of this Security); and (ii) will list the shares of Common Stock required to be issued and delivered upon conversion of Securities, prior to such issuance or delivery, on each national securities exchange on which outstanding Common Stock is listed or quoted at the time of such delivery, or if the Common Stock is not then listed on any securities exchange, to qualify the Common Stock for quotation on the Nasdaq National Market or such other inter-dealer quotation system, if any, on which the Common Stock is then quoted. 2. Repurchase upon Change in Control. 5 21 (a) In the event that a Change in Control (as hereinafter defined) shall occur, then the holder of this Security shall have the right, at such holder's option, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, this Security, or any portion of the principal amount hereof that is equal to $1,000 or any integral multiple thereof, on the date (the "Repurchase Date") that is 30 days after the date on which the Company gives notice thereof to the holder of this Security, at a purchase price equal to 101% of the principal amount of this Security to be repurchased, plus interest accrued to the Repurchase Date (the "Repurchase Price"); provided, however, that installments of interest on this Security whose stated maturity is on or prior to the Repurchase Date shall be payable to the holder of this Security, or one or more predecessor Securities, registered as such on the relevant Record Date according to their terms. The Company agrees to give the holder of this Security notice of any Change in Control, by facsimile transmission confirmed in writing by overnight courier service, promptly and in any event within two days of the occurrence thereof. (b) To exercise a repurchase right, the holder shall deliver to the Company on or before the 5th day prior to the Repurchase Date, together with this Security, written notice of the holder's exercise of such right, which notice shall set forth the name of the holder, the principal amount of this Security to be repurchased (and, if this Security is to be repurchased in part, the portion of the principal amount thereof to be repurchased and the name of the person in which the portion thereof to remain outstanding after such repurchase is to be registered) and a statement that an election to exercise the repurchase right is being made thereby. Such written notice shall be irrevocable, except that the right of the holder to convert this Security (or the portion hereof with respect to which the repurchase right is being exercised) shall continue until the close of business on the Repurchase Date. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the holder the Repurchase Price in cash, together with accrued and unpaid interest to the Repurchase Date; provided, however, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash, to the holders of this Security, or one or more predecessor Securities, registered as such at the close of business on the relevant regular record date. (d) If this Security (or portion thereof) is surrendered for repurchase and is not so paid on the Repurchase Date, the principal amount of this Security (or such portion hereof, as the case may be) shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at the rate per annum borne by this Security, and shall remain convertible into Common Stock until the principal of this Security (or portion thereof, as the case may be) shall have been paid or duly provided for. (e) If this Security is to be repurchased only in part, it shall be surrendered to the Company at the Designated Office (with, if the Company so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or his attorney duly authorized in writing), and the Company shall execute and make available for delivery to the holder without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. 6 22 (f) For purposes of this Section 2 (1) the term "beneficial owner" shall be determined in accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934; and (2) a "Change in Control" shall be deemed to have occurred at the time, after the original issuance of this Security, of: (i) the acquisition by any person of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such person to exercise 50% or more of the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors (any shares of voting stock of which such person is the beneficial owner that are not then outstanding being deemed outstanding for purposes of calculating such percentage) other than any such acquisition by the Company or any employee benefit plan of the Company; or (ii) any consolidation or merger of the Company with or into, any other person, any merger of another person with or into the Company, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the assets of the Company to another person (other than (a) any such transaction (x) which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock and (y) pursuant to which holders of Common Stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving person immediately after such transaction and (b) any merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock into solely shares of common stock). 3. Events of Default. (a) "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or Harder of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon this Security when it becomes due and payable, and continuance of such default for a period of 15 days; or (2) default by the Company in the performance of its obligations in respect of any conversion of this Security (or any portion hereof) in accordance with Section 1; or (3) failure by the Company to give any notice of a Change of Control required to be delivered in accordance with Section 2(a); or 7 23 (4) default in the performance, or breach, of any material covenant or warranty of the Company herein (other than a covenant or warranty a default in the performance or breach of which is specifically dealt with elsewhere in this Section 3(a)) and continuance of such default or breach for a period of 15 days after there has been given, by registered or certified mail, to the Company by the holders of at least 25 % of the outstanding principal amount of this Security a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company, or under any agreement, mortgage, indenture or instrument under-which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company, with a principal amount then outstanding in excess of $1,000,000, whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay the principal of such indebtedness (in whole or in any part greater than $1,000,000) when due and payable or shall have resulted in such indebtedness (in whole or in any part greater than $1,000,000) becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 15 days after there shall have been given, by registered or certified mail, to the Company by the holders of at least 25 % of the outstanding principal amount of this Security a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or similar relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, 8 24 or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. (b) If an Event of Default (other than an Event of Default specified in Section 3(a)(6) or 3(a)(7)) occurs and is continuing, then in every such case the holder of this Security may declare the principal hereof to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in Section 3(a)(6) or 3(a)(7) occurs and is continuing, the principal of, and accrued interest on, this Security shall ipso facto become immediately due and payable without any declaration or other act of the holders. 4. Subordination. The indebtedness evidenced by this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all the Company's Senior Indebtedness, as hereinafter defined. (a) Senior Indebtedness. As used in this Note, the term "Senior Indebtedness" shall mean the principal of and unpaid accrued interest on (i) up to $2,000,000 of indebtedness of the Company or with respect to which the Company is a guarantor to any bank or other financial institution whose principal business is lending funds on a secured basis, (ii) any indebtedness of the Company with respect to equipment financing transactions which indebtedness shall not exceed the sum of $1.25 million times the number of stores in operation by the Company and (iii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued solely in exchange for such Senior Indebtedness, or any indebtedness arising solely from the satisfaction of such Senior Indebtedness by a guarantor. (b) Default on Senior Indebtedness. If there should occur any receivership, insolvency, assignment for the benefit of creditors, bankruptcy, reorganization or arrangements with creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets, dissolution, liquidation or any other marshaling of the assets and liabilities of the Company, or if this Note shall be declared due and payable upon the occurrence of an event of default with respect to any Senior Indebtedness, then (i) no amount shall be paid by the Company in respect of the principal of or interest on this Note at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof of claim shall be filed with the Company by or on behalf of the Holder of this Note that shall assert any right to receive any payments in respect of the principal of and interest on this Note, except subject to the payment in full of the principal of and interest on all of the Senior Indebtedness then outstanding. If there occurs an event of default that has been declared in writing with respect to any Senior Indebtedness, or in the instrument under which any Senior Indebtedness is outstanding, permitting the holder of such Senior Indebtedness to accelerate the maturity thereof, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be made in respect of the principal of or interest on this Note, unless within 90 days after the happening of such event of default, the maturity of such Senior Indebtedness shall not have been accelerated. 9 25 (c) Effect of Subordination. Subject to the rights, if any, of the holders of Senior Indebtedness under this Section 4 to receive cash, securities or other properties otherwise payable or deliverable to the Holder of this Note, nothing contained in this Section 4 shall impair, as between the Company and the Holder, the obligation of the Company, subject to the terms and conditions hereof, to pay to the Holder the principal hereof and interest hereon as and when the same become due and payable, or shall prevent the Holder of this Note, upon default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law. (d) Subrogation. Subject to the payment in full of all Senior Indebtedness and until this Note shall be paid in full, the Holder shall be subrogated to the rights of the holders of Senior Indebtedness (to the extent of payments or distributions previously made to such holders of Senior Indebtedness pursuant to the provisions of Section 4 above) to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness. No such payments or distributions applicable to the Senior Indebtedness shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and the Holder, be deemed to be a payment by the Company to or on account of this Note; and for the purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness to which the Holder would be entitled except for the provisions of this Section 4 shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and the Holder, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. (e) Undertaking. By its acceptance of this Note, the Holder agrees to execute and deliver such documents as may be reasonably requested from time to time by the Company or the lender of any Senior Indebtedness in order to implement the foregoing provisions of this Section 4. 5. Prepayment. This Note may be prepaid in while or in part at any time by the Company without the prior written consent of Holder. Any such prepayment will be applied first to the payment of expenses due under this Note, second to interest accrued on this Note and third, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of principal of this Note. 6. Other. (a) No provision of this Security shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as herein provided. (b) The Company will give prompt written notice to the holder of Security of any change in the location of the Designated Office. (c) The transfer of this Security is registrable on the Security Register of the Company Upon surrender of this Security for registration of transfer at the Designated Office, duly endorsed by, Or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or his attorney duly authorized in writing, and 10 26 thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. Such Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. No service charge shall be made for any such registration of transfer, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith. Prior to due presentation of this Security for registration of transfer, the Company and any agent of the Company may treat the person in whose name this Security is registered as the owner thereof for all purposes, whether or not this Security be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. (d) This Security shall be governed by and construed in accordance with the laws of the State of California, United States of America. [Signatures to Follow] 11 27 IN WITNESS WHEREOF, the Company has caused this Security to be duly executed under its corporate seal. Dated: June 30, 1999. SILICON ENTERTAINMENT, INC. By: ___________________________________ Printed Name: _________________________ Title: ________________________________ Attest: By: __________________________________ Printed Name: ________________________ Title: ________________________________ 12 28 EXHIBIT A
- ------------------------------------------------------------------------------------------------- NAME/ADDRESS OF PURCHASER ORIGINAL PRINCIPAL AMOUNT TOTAL PURCHASE PRICE OF NOTE - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
13 29 SECURITY AGREEMENT This Security Agreement (the "Agreement") is made as of May __, 1999 by and between Silicon Entertainment, Inc., a California corporation (the "Debtor") in favor of each of the parties listed on Exhibit A hereto (each a "Secured Party" and collectively the "Secured Parties"). RECITALS The Debtor and the Secured Parties are parties to a Secured Subordinated Convertible Note Purchase Agreement of even date with this Agreement (the "Purchase Agreement") pursuant to which the Secured Parties shall purchase Notes (as defined in the Purchase Agreement) from the Debtor. The parties intend that the Debtor's obligations to repay the Notes be secured by all of the assets of the Debtor, subject to the rights of Senior Indebtedness (as defined below in the Note). AGREEMENT In consideration of the purchase of the Notes by the Secured Parties and for other good and valuable consideration, the Debtor hereby agrees with the Secured Parties as follows: 1. GRANT OF SECURITY INTEREST. To secure the Debtor's full and timely performance of all of the Debtor's obligations and liabilities to the Secured Parties pursuant to the Notes (including, without limitation, Debtor's obligation to timely pay the principal amount of, and interest on, the Notes) (the "Obligations"), the Debtor hereby grants to the Secured Parties a continuing security interest (the "Security Interest") in and to all of the property described on Exhibit B to this Agreement (the "Collateral"). 2. AGREEMENT AMONG THE SECURED PARTIES. (a) PAYMENT PRO RATA. Payment to the Secured Parties under the Notes shall be made in proportion to the principal and accrued interest then outstanding on any such date of payment to each, until such obligations are paid or retired in full. (b) SHARING OF PAYMENTS. If any Secured Party shall at any time receive any payment of principal, interest or other charge arising under a Note, or upon any other obligation of Debtor or any sums by virtue of counterclaim, offset, or other lien that may be exercised, or from any security, other than payments made on the same date to all Secured Parties, such Secured Party shall share such payment or payments ratably with the other Secured Parties as to maintain as near as possible the unpaid balance of the loans pro rata according to the Secured Parties' aggregate proportionate interests. (c) SHARING OF COLLATERAL. For purposes of this Agreement, "Event of Default" means Debtor's failure to pay or discharge the Obligations in full in accordance with the terms of the Notes. Upon the occurrence of any Event of Default, and if the Secured Parties proceed to any exercise rights with respect to the Collateral, the Secured Parties shall share the Collateral and the proceeds of such Collateral ratably, without priority of one over the other. 1 30 (d) APPOINTMENT OF AGENT. The Secured Parties agree that Secured Parties holding a majority in interest of the principal amount of Notes outstanding may act together as the agent of all Secured Parties to execute and deliver in their names such instruments, documents, statements and amendments thereto as may be necessary or appropriate to perfect or continue the perfection of the security interest granted in this Agreement. (e) ENFORCEMENT. Enforcement of the Secured Parties' rights hereunder shall be taken by Secured Parties holding a majority in interest of the principal amount of Notes outstanding acting together as the agent for all of the Secured Parties. The action of such percentage taken in accordance with the preceding sentence, shall in each case bind all the Secured Parties. Each of the Secured Parties agrees that any Secured Parties acting under Sections 2(d) and 2(e) shall not be liable for any acts taken in good faith in enforcing the rights of the Secured Parties hereunder. 3. PERFORMANCE BY SECURED PARTIES OF DEBTOR'S OBLIGATIONS. If the Debtor fails to perform or comply with any of its agreements or covenants contained in this Agreement and the Secured Parties perform or comply, or otherwise cause performance or compliance, with such agreement or covenant in accordance with the terms of this Agreement, then the reasonable expenses of the Secured Parties incurred in connection with such performance or compliance shall be payable by the Debtor to the Secured Parties on demand and shall constitute Obligations secured by this Agreement. 4. REMEDIES. If an Event of Default has occurred and is continuing, the Secured Parties may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement relating to the Obligations, all rights and remedies of a secured party under the California Uniform Commercial Code, as amended from time to time (the "Code"). Without limiting the foregoing, the Secured Parties, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law) to or upon the Debtor or any other person (all of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances collect, receive, appropriate and realize upon any or all of the Collateral, and/or may sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver any or all of the Collateral (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of a Secured Party or elsewhere upon such terms and conditions as the Secured Parties may deem advisable, for cash or on credit or for future delivery without assumption of any credit risk. The Secured Parties shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase all or any part of the Collateral so sold, free of any right or equity of redemption in the Debtor, which right or equity is hereby waived or released. The Secured Parties shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable expenses incurred therein or connection with the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Secured Parties under this Agreement (including, without limitation, reasonable attorneys' fees and expenses) to the payment in whole or in part of the Obligations, in such order as the Secured Parties may elect, and only after such application and after the payment by the Secured Parties of any other amount required by any provision of law, need the Secured Parties account for the surplus, if any, to the Debtor. To the extent permitted by applicable law, the 2 31 Debtor waives all claims, damages and demands it may acquire against the Secured Parties arising out of the exercise by the Secured Parties of any of their rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least five (5) days before such sale or other disposition. The Debtor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Secured Parties to collect such deficiency. 5. LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL. The sole duty of a Secured Party with respect to the custody, safekeeping and preservation of the Collateral, under Section 9207 of the Code or otherwise, shall be to deal with it in the same manner as such Secured Party deals with similar property for its own account. Neither the Secured Parties nor any of their directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Debtor or otherwise. 6. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies contained in this Agreement with respect to the Collateral are irrevocable and powers coupled with an interest. 7. NO WAIVER; CUMULATIVE REMEDIES. The Secured Parties shall not by any act (except by a written instrument pursuant to Section 10(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Notes or in any breach of any of the terms and conditions of this Agreement. No failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Secured Parties of any right or remedy under this Agreement on any one occasion shall not be construed as a bar to any right or remedy which the Secured Parties would otherwise have on any subsequent occasion. The rights and remedies provided in this Agreement are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 8. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended with the written consent of the Debtor and of Secured Parties holding a majority in interest of the principal amount of Notes outstanding. Notwithstanding the foregoing or any other provision of this Agreement, no amendment or waiver that adversely affects a Secured Party in a manner different from all of the Secured Parties may be effected without the written consent of such Secured Party. Any amendment or waiver effected in accordance with this Section 10(a) shall be binding upon the parties and their respective successors and assigns. (b) TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall be binding upon the Debtor and its successors and assigns and inure to the benefit of the each Secured Party and its successors and assigns. Nothing in this Agreement, 3 32 express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (c) GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. (d) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (e) TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (f) NOTICES. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party's address or facsimile number as set forth below or on Exhibit A hereto, or as subsequently modified by written notice. (g) SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms. (h) ENTIRE AGREEMENT. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto concerning such subject matter are expressly canceled. 4 33 The Debtor and Secured Parties have caused this Agreement to be duly executed and delivered as of the date first above written. DEBTOR: SILICON ENTERTAINMENT, INC. By: _____________________________________ Name: ___________________________________ Title: __________________________________ Address: ________________________________ Facsimile Number: _______________________ SECURED PARTIES: _________________________________________ By:______________________________________ Name: ___________________________________ Title: __________________________________ SIGNATURE PAGE TO SECURITY AGREEMENT 5 34 EXHIBIT A NAME/ADDRESS AND FACSIMILE ORIGINAL PRINCIPAL NUMBER OF PURCHASER AMOUNT OF NOTE 35 EXHIBIT B The Collateral shall consist of all right, title and interest of Debtor in and to the following: (a) All goods and equipment now owned or hereafter acquired, including without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; (b) All inventory, now owned or hereafter acquired, including without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Debtor's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Debtor's books relating to any of the foregoing; (c) All contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind; (d) All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Debtor arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Debtor, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Debtor and Debtor's books relating to any of the foregoing; (e) All documents, cash, deposit accounts, securities, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Debtor's books relating to the foregoing; (f) All copyrights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all mask work or similar rights available for the protection of semiconductor devices, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; and (g) Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof. EX-10.31 28 NOTE PURCHASE AGREEMENT, GALLADIO HOLDING 9/9/99 1 EXHIBIT 10.31 SILICON ENTERTAINMENT, INC. SUBORDINATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT SEPTEMBER 9, 1999 2 SILICON ENTERTAINMENT, INC. SUBORDINATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT This Subordinated Convertible Note Purchase Agreement (the "Agreement") is made as of the 9th day of September 1999 by and between Silicon Entertainment, Inc., a California corporation (the "Company"), and each of the investors listed on Exhibit A attached to this Agreement (each a "Purchaser" and together the "Purchasers"). RECITALS The Company desires to issue and sell and the Purchasers desire to purchase subordinated convertible promissory notes in substantially the form attached to this Agreement as Exhibit B (the "Notes") and warrants in substantially the form attached to this Agreement as Exhibit C (the "Warrants")which shall be convertible on the terms stated therein into equity securities of the Company as specified in the Notes and Warrants. The Notes and Warrants and the equity securities issuable upon conversion or exercise thereof (and the securities issuable upon conversion of such equity securities) are collectively referred to herein as the "Securities." AGREEMENT In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows: 1. PURCHASE AND SALE OF NOTES AND WARRANTS. (a) SALE AND ISSUANCE OF NOTES. Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the Closing and the Company agrees to sell and issue to each Purchaser a Note in the principal amount specified with respect to such Purchaser on Exhibit A to this Agreement. The Company shall pay to each Purchaser a placement fee of one percent (1%) of the principal amount of such Purchaser's Note (the "Placement Fee"), which Placement Fee shall be deducted from the proceeds paid to the Company at the Closing. The Company's agreements with each of the Purchasers are separate agreements, and the sales of the Notes to each of the Purchasers are separate sales and issuances; provided that any amendments of this Agreement must be in accordance with Section 8(f). (b) SALE AND ISSUANCE OF WARRANTS. Subject to the terms and conditions of this Agreement, for every One Million Dollars ($1,000,000) of principal paid by a Purchaser to the Company pursuant to the Note held by such Purchaser, Company agrees to issue to such Purchaser a warrant to purchase 25,000 shares of the Company's Common Stock at a price of $5.40 per share. (c) CLOSINGS. The first closing (the "Closing") of the sale and purchase of the Notes, Warrants and Call Options under this Agreement shall take place at the offices of the Company on September 9, 1999, or at such other time, date and place as are mutually agreeable 1 3 to the Company and the Purchasers, provided that the aggregate purchase price for the Notes at the time of the Initial Closing shall be not less than $5,000,000. Subsequent closings (each a "Subsequent Closing") of the sale and purchase of Securities under this Agreement shall take place at the offices of Gray Cary Ware & Freidenrich, LLP, no later than December 31, 1999. In no event shall the aggregate purchase price for the Notes at the time of the Initial Closing or any Subsequent Closing exceed $10,000,000. The Initial Closing and the Subsequent Closings, if any, shall hereinafter be referred to individually as a "Closing" and collectively as the "Closings" and the date of any Closing shall hereinafter be referred to as a "Closing Date." At each Closing other than the Initial Closing, Exhibit A shall be amended to include additional Purchasers and such new Purchasers shall become parties to this Agreement. The date of the Closing shall hereinafter be referred to as a "Closing Date." (d) DELIVERY. At the Closing, the Company will deliver to each Purchaser the Note to be purchased by such Purchaser against receipt by Company of the purchase price set forth opposite the Purchasers name on the Schedule of Purchasers. 2. SUBORDINATION. The indebtedness evidenced by the Notes shall be expressly subordinated, to the extent and in the manner set forth in the Notes, in right of payment to the prior payment in full of all of the Company's Senior Indebtedness (as defined in the Note), and each Purchaser hereby agrees to enter into such agreements and take such additional action as may be necessary to perfect such subordination. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Purchaser that except as set forth in the Schedule of Exceptions attached hereto as Exhibit D: (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. (b) AUTHORIZATION. All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Notes and the Warrants, the shares of the Company's capital stock issuable on conversion or exercise thereof, and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Closing. The Agreement, the Notes, and the Warrants (collectively, the "Transaction Documents") when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors' rights generally, as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. (c) CAPITALIZATION. The authorized capital of the Company as of August 1, 1999, consists of: 2 4 (i) 20,000,000 shares of Preferred Stock, of which (A) 3,266,667 shares have been designated Series A Preferred Stock, 3,266,667 of which are issued and outstanding immediately prior to the Closing, (B) 6,222,531 shares have been designated Series B Preferred Stock, 5,538,052 of which are issued and outstanding immediately prior to the Closing and (C) 8,500,000 shares have been designated Series C Preferred Stock, 6,970,892 of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of Preferred Stock have been duly authorized, fully paid and are nonassessable. (ii) 40,000,000 shares of Common Stock, 5,631,111 shares of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of Common Stock have been duly authorized, fully paid and are nonassessable and issued in compliance with all applicable federal and state securities laws. The Company has reserved shares of Common Stock for issuance upon conversion of the Preferred Stock. (iii) The Company has reserved 6,100,000 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its Stock Option and Stock Bonus Plans, duly adopted by the Board of Directors and approved by the Company's shareholders (collectively, the "Stock Plans"). Of such reserved shares of Common Stock, as of August 1, 1999, options to purchase 2,211,195 shares have been granted and are currently outstanding. (iv) Except for outstanding options issued pursuant to the Stock Plans and warrants to purchase 756,034 shares of Common Stock and warrants to purchase 128,001 shares of Series B Preferred Stock and 743,281 shares of Series C Preferred Stock, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock. (d) INTELLECTUAL PROPERTY RIGHTS. (i) To the best of its knowledge, the Company has sufficient title and ownership of all patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights, and processes (collectively, "Intellectual Property") necessary for its business as now conducted and as proposed to be conducted to the Company's knowledge, without any conflict with or infringement of the rights of others; (ii) Except for agreements with its own employees or consultants, there are not outstanding options, licenses, or agreements of any kind relating to the matters listed in subsection (i) above or that grant rights to any other person to manufacture, license, produce, assemble, market or sell the Company's products, nor is the Company bound by or a party to any options, licenses, or agreements of any kind with respect to the Intellectual Property of any other person or entity, other than licenses or agreements relating to the Company's use of certain trademarks of Nascar, and various drivers, race tracks and teams. (iii) The Company has not received any communications alleging that the Company or its employees has violated or infringed or, by conducting its business as 3 5 proposed, would violate or infringe any of the Intellectual Property of any other person or entity; and (iv) The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of the Company with respect to the Intellectual Property of the Company or otherwise or that would conflict with the Company's business as proposed to be conducted. (e) COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The Company is not in violation or default in any material respect of any provision of its certificate of incorporation or bylaws or in any material respect of any provision of any material mortgage, indenture, agreement, instrument, or contract to which it is a party or by which it is bound, or of any federal or state judgment, order, writ, decree, or any federal or state statute, rule, regulation or restriction applicable to the Company. The execution, delivery, and performance by the Company of the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, will not result in any such violation or be in material conflict with or constitute, with or without the passage of time or giving of notice, either a material default under any such provision or an event that results in the creation of any material lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization, or approval applicable to the Company, its business or operations, or any of its assets or properties. (f) LITIGATION. There is no action, suit, proceeding, or investigation pending or, to the best knowledge of the Company, threatened against the Company that questions the validity of the Transaction Documents, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in any material adverse change in the assets, business properties, prospects or financial condition of the Company. (g) TAXES. The Company has no material liability for any federal, state or local taxes, except for taxes which have accrued and are not yet payable or are being contested by the Company in good faith. The Company has paid all payroll taxes required to be paid by it. (h) OFFERING. Assuming the accuracy of the representations and warranties of each Purchaser contained in Section 6 hereof, the offer, issue, and sale of the Securities is and will be exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "1933 Act"), and has been registered or qualified (or are exempt from registration and qualification) under the registration, permit, or qualification requirements of all applicable state securities laws. 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby represents and warrants to the Company that: (a) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee 4 6 or agent, and not with a view to the resale or distribution of any part thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities. (b) DISCLOSURE OF INFORMATION. The Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the securities. (c) RESTRICTED SECURITIES. The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser understands that the Securities are "restricted securities" under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser's control, and which the Company is under no obligation and may not be able to satisfy. (d) NO PUBLIC MARKET. The Purchaser understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities. (e) LEGENDS. The Purchaser understands that the Securities, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends: (i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." (ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. (f) ACCREDITED INVESTOR.The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act. 5 7 (g) FOREIGN INVESTORS. If a Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), such Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities. Such Purchaser's subscription and payment for, and his or her continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of Purchaser's jurisdiction. 5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in Section 5 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. (b) QUALIFICATIONS. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing. (c) CONSENTS AND WAIVERS. The Company shall have obtained any and all consents (including all governmental or regulatory consents, approvals or authorizations required in connection with the valid execution and delivery of this Agreement, the Security Agreement and the Amendment to the Rights Agreement), permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement. the Security Agreement and the Amendment to the Rights Agreement. (d) LEGAL INVESTMENT. At the time of the Closing, the purchase of the Notes and Warrants by the Purchasers hereunder shall be legally permitted by all laws and regulations to which the Purchasers and the Company are subject. 6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of each Purchaser contained in Section 6 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing. (b) QUALIFICATIONS. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing. 6 8 7. COVENANTS OF THE COMPANY. (a) NO OTHER INDEBTEDNESS. The Company shall not incur any indebtedness for money borrowed (other than equipment lease financing transaction) to the extent that the Company's aggregate payment obligations thereunder would exceed Ten Million Dollars ($10,000,000) without the Majority Purchasers' prior written consent, which shall not be unreasonably withheld. (b) NO DIVIDENDS. No payment or declaration of a cash dividend, shall be made on the Common Stock of the Company while any Obligation under the Note is outstanding. (c) FINANCIAL STATEMENTS. No later than 30 days following the end of each quarter, the Company shall deliver to the Purchasers its balance sheet as at the end of such period and its income statement for such period and for that portion of the Company's financial reporting year ending with such period. In addition, no later than 90 days following the end of each financial reporting year, the Company shall deliver to the Purchasers its audited balance sheet, income statement, and statement of cash flows for such year. (d) STAY, EXTENSION AND USURY LAWS. The Company convenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, how or at any time hereafter in force, that might affect the covenants or the performance of its obligations under this Agreement and the Notes; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power granted to the holders of Notes pursuant to this Agreement, but will suffer and permit the execution of every such power as though no such law has been enacted. (e) LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its subsidiaries shall enter into any transaction or series of transactions to sell, lease, transfer, exchange or otherwise dispose of any of its properties or assets to or to purchase any property or assets from, or for the direct or indirect benefit of, an affiliate of the Company or of any subsidiary of the Company, make any investment in or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the direct or indirect benefit of, an affiliate of the Company or of any subsidiary of the Company (each, including any series of transactions with one or more affiliates, an "Affiliate Transaction"), unless the Board of Directors of the Company or the relevant subsidiary determines, as evidenced by a Board resolution, that the terms of such Affiliate Transaction are fair and reasonable to the Company and no less favorable to the Company or the relevant subsidiary than those that could have been obtained at that time in a comparable arms-length transaction by the Company or such subsidiary with an unrelated Person. (f) MAINTENANCE OF PROPERTIES. The Company will cause all properties used or useful in the conduct of its business or the business of any subsidiary of the Company to be maintained and kept in good condition, repair and working order, subject to normal wear and tear, and supplied with all necessary equipment and will cause to be made all necessary repairs, 7 9 renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this section (f) shall prevent the Company from discontinuing the operation or maintenance of any such properties if such discontinuance is, as determined by the Company in good faith, desirable in the conduct of its business or the business of any subsidiary and not disadvantageous in any material respect to the holders of the Notes. (g) COMPLIANCE WITH LAWS. The Company shall comply, and shall cause each of its subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except such as are being contested in good faith and by appropriate proceedings and except for such noncompliance as well not in the aggregate have a Material Adverse Effect. (h) TERMINATION. This Section 7 shall terminate as to each Purchaser at such time as no Obligation under such Purchaser's Note is outstanding. 8. MISCELLANEOUS. (a) SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (b) GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law. 8 10 (c) COUNTERPARTS. Note Purchase Agreement and all documents attached to the Note Purchase Agreement (including Note and Warrants) may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (d) TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (e) NOTICES. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party's address or facsimile number as set forth below or as subsequently modified by written notice. (f) AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or waived only with the written consent of the Company and the holders of at least a majority in interest of the Notes. Any amendment or waiver effected in accordance with this Section 8(f) shall be binding upon all the Purchasers and all transferees of the Securities, each future holder of all such Securities, and the Company. (g) SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms. (h) ENTIRE AGREEMENT. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled. (i) EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Securities. (j) CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF 9 11 THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT. [Signature Pages Follow] 10 12 The parties have executed this Subordinated Convertible Note and Warrant Purchase Agreement as of the date first written above. COMPANY: SILICON ENTERTAINMENT, INC. By: /s/ -------------------------------- Name: Title: Address: PURCHASERS: /s/ ----------------------------------- (Purchaser) By: -------------------------------- Name: ------------------------------ (print) Title: ----------------------------- SIGNATURE PAGE TO SUBORDINATED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT 13 EXHIBIT A SCHEDULE OF PURCHASERS
PRINCIPAL AMOUNT NET PROCEEDS TO COMPANY NAME OF PURCHASER OF NOTE AFTER 1% PLACEMENT FEE ----------------- ---------------- ----------------------- Galladio Holding B.V. $2,000,000 $1,980,000 Van der Lee Partnership $500,000 $495,000 Mr. E.M.H. van der Lee C.S. $500,000 $495,000 Mr. E.W. van der Lee $1,000,000 $990,000 Manschot Opportunity Fund $1,500,000 $1,485,000 ---------- ---------- TOTAL: $5,500,000 $5,445,000
14 EXHIBIT B FORM OF SUBORDINATED CONVERTIBLE PROMISSORY NOTE 15 EXHIBIT C FORM OF WARRANT 16 THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. SILICON ENTERTAINMENT, INC. 12% CONVERTIBLE NOTE DUE 2001 No. N- $0,000,0000 SILICON ENTERTAINMENT, INC., a corporation duly organized and existing under the laws of California (the "Company") for value received, hereby promises to pay to ___________, or registered assigns, the principal sum of _________ Dollars ($_______) on March 9, 2001, and to pay interest thereon from September 9, 1999 at the rate of 12% per annum, due and payable on March 9, 2001. If the principal and interest due on this Security are not repaid on or by March 9, 2001, the interest rate shall increase to 18% per annum. Payment of the principal and interest of this Security shall be made upon the surrender of this Security to the Company, at its office at 210 Hacienda Avenue, Campbell, CA 95008, or such other office within the United States as shall be notified by the Company to the holder hereof) (the "Designated Office"), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The Company shall pay to holder a placement fee of one percent (1%) of the principal amount of this Security, or _____ Dollars ($_______) (the "Placement Fee"). Such Placement Fee shall be deducted from the proceeds to the Company from the issuance and sale of this Security on September 9, 1999. 1. Conversion. (a) Optional Conversion. Notwithstanding Section 5 of this Security, the holder of this Security is entitled at any time on or after September 9, 1999 and before the close of business on March 9, 2001 (or in case the holder hereof has exercised his right to require the Company to repurchase this Security or a portion hereof, then in respect of this Security or such portion hereof, as the case may be, until and including, but (unless the Company defaults in making the payment due upon repurchase) not after, the close of business on the Repurchase Date) to convert this Security into fully paid and nonassessable shares (calculated as to each conversion to the nearest share) of Common Stock of the Company at the rate of one (1) share of Common Stock for each $5.00 of principal amount of Security (or at the current adjusted rate if an adjustment has been made as provided below) (the "Conversion Ratio"). (b) Procedure for Conversion. The holder of this Security may exercise the conversion rights as to such Security, or any portion thereof, by surrender of this Security, duly endorsed or assigned to the Company or in blank to the Company at the Designated Office, 17 accompanied by written notice to the Company that the holder hereof elects to convert this Security (or if less than the entire principal amount hereof is to be converted, specifying the portion hereof to be converted). Conversion shall be deemed to have been effected on the date when such delivery is made. Upon surrender of this Security for conversion, the holder will be entitled to receive the interest accruing on the principal amount of this Security then being converted from the interest payment date next preceding the date of such conversion to such date of conversion. No payment or adjustment is to be made on conversion for dividends on the Common Stock issued on conversion hereof. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest, the Company shall pay a cash adjustment, computed on the basis of the Closing Price of the Common Stock on the date of conversion, or, at its option, the Company shall round up to the next higher whole share. (c) The Conversion Ratio shall be subject to adjustments from time to time as follows: (1) In case the Company shall pay or make a dividend or other distribution on any class of capital stock of the Company payable in shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the Determination Date for such dividend or other distribution shall be increased by dividing such Conversion Ratio by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on such Determination Date and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following such Determination Date. For the purposes of this paragraph (1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (2) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (d) Whenever the Conversion Ratio is adjusted as provided in Section 1(c), the Company shall compute the adjusted Conversion Ratio in accordance with Section 1(c) and shall prepare a certificate signed by the chief financial officer of the Company setting forth the adjusted Conversion Ratio and showing in reasonable detail the facts upon which such adjustment is based, and shall promptly deliver such certificate to the holder of this Security. (e) In case: 2 18 (1) the Company shall declare a dividend or other distribution on its Common Stock payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would require any adjustment pursuant to Section 1(c); or (2) the Company shall authorize the granting to the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (3) of any reclassification of the Common Stock of the Company, or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or (4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (5) the Company or any Subsidiary shall commence a tender offer for all or a portion of the Company's outstanding shares of Common Stock (or shall amend any such tender offer); then the Company shall cause to be delivered to the holder of this Security, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable record, expiration or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined, (y) the date on which the right to make tenders under such tender offer expires or (z) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings described in clauses (1) through (5) of this Section 1(e). (f) The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the Security, the full number of shares of Common Stock then issuable upon the conversion of this Security. (g) Except as provided in the next sentence, the Company will pay any and all taxes and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of the Security. The Company shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the holder of this Security, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the 3 19 Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid. (h) The Company agrees that all shares of Common Stock which may be delivered upon conversion of the Security, upon such delivery, will have been duly authorized and validly issued and will be fully paid and nonassessable (and shall be issued out of the Company's authorized but unissued Common Stock) and, except as provided in Section 1(g), the Company will pay all taxes, liens and charges with respect to the issue thereof. (i) In case of any consolidation of the Company with any other person, any merger of the Company into another person or of another person into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any conveyance, sale, transfer or lease of all or substantially all of the properties and assets of the Company, the person formed by such consolidation or resulting from such merger or which acquires such properties and assets, as the case may be, shall execute and deliver to the holder of this Security a supplemental agreement providing that such holder have the right thereafter, during the period this Security shall be convertible as specified in Section 1(a) to convert this Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (including any Common Stock retainable) by a holder of the number of shares of Common Stock of the Company into which this Security might have been converted immediately prior to such consolidation, merger, conveyance, sale, transfer or lease, assuming such holder of Common Stock of the Company (i) is not a person with which the Company consolidated, into which the Company merged or which merged into the Company or to which such conveyance, sale, transfer or lease was made, as the case may be (a "Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer, or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, conveyance, sale, transfer or lease by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("Non-electing Share"), then for the purpose of this Section 1(i) the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by the holders of each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-electing Shares). Such supplemental agreement shall provide for adjustments which, for events subsequent to the effective date of such supplemental agreement, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 1. The above provisions of this Section 1(i) shall similarly apply to successive consolidations, mergers, conveyances, sales, transfers or leases. In this paragraph, "securities of the kind receivable" upon such consolidation, merger, conveyance, transfer, sale or lease by a holder of Common Stock means securities that, among other things, are registered and transferable under the Securities Act, and listed and approved for quotation in all securities markets, in each case to the same extent as such securities so receivable by a holder of Common Stock. 2. Repurchase upon Change in Control. 4 20 (a) In the event that a Change in Control (as hereinafter defined) shall occur, then the holder of this Security shall have the right, at such holder's option, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, this Security, or any portion of the principal amount hereof that is equal to $1,000 or any integral multiple thereof, on the date (the "Repurchase Date") that is 30 days after the date on which the Company gives notice thereof to the holder of this Security, at a purchase price equal to 101% of the principal amount of this Security to be repurchased, plus interest accrued to the Repurchase Date (the "Repurchase Price"); provided, however, that installments of interest on this Security whose stated maturity is on or prior to the Repurchase Date shall be payable to the holder of this Security, or one or more predecessor Securities, registered as such on the relevant Record Date according to their terms. The Company agrees to give the holder of this Security notice of any Change in Control, by facsimile transmission confirmed in writing by overnight courier service, promptly and in any event within two days of the occurrence thereof. (b) To exercise a repurchase right, the holder shall deliver to the Company on or before the 5th day prior to the Repurchase Date, together with this Security, written notice of the holder's exercise of such right, which notice shall set forth the name of the holder, the principal amount of this Security to be repurchased (and, if this Security is to be repurchased in part, the portion of the principal amount thereof to be repurchased and the name of the person in which the portion thereof to remain outstanding after such repurchase is to be registered) and a statement that an election to exercise the repurchase right is being made thereby. Such written notice shall be irrevocable, except that the right of the holder to convert this Security (or the portion hereof with respect to which the repurchase right is being exercised) shall continue until the close of business on the Repurchase Date. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the holder the Repurchase Price in cash, together with accrued and unpaid interest to the Repurchase Date; provided, however, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash, to the holders of this Security, or one or more predecessor Securities, registered as such at the close of business on the relevant regular record date. (d) If this Security (or portion thereof) is surrendered for repurchase and is not so paid on the Repurchase Date, the principal amount of this Security (or such portion hereof, as the case may be) shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at the rate per annum borne by this Security, and shall remain convertible into Common Stock until the principal of this Security (or portion thereof, as the case may be) shall have been paid or duly provided for. (e) If this Security is to be repurchased only in part, it shall be surrendered to the Company at the Designated Office (with, if the Company so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or his attorney duly authorized in writing), and the Company shall execute and make available for delivery to the holder without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. 5 21 (f) For purposes of this Section 2 (1) the term "beneficial owner" shall be determined in accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934; and (2) a "Change in Control" shall be deemed to have occurred at the time, after the original issuance of this Security, of: (i) the acquisition by any person of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such person to exercise 50% or more of the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors (any shares of voting stock of which such person is the beneficial owner that are not then outstanding being deemed outstanding for purposes of calculating such percentage) other than any such acquisition by the Company or any employee benefit plan of the Company; or (ii) any consolidation or merger of the Company with or into, any other person, any merger of another person with or into the Company, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of the assets of the Company to another person (other than (a) any such transaction (x) which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock and (y) pursuant to which holders of Common Stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving person immediately after such transaction and (b) any merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock into solely shares of common stock). 3. Events of Default. (a) "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or Harder of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon this Security when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default by the Company in the performance of its obligations in respect of any conversion of this Security (or any portion hereof) in accordance with Section 1; or (3) failure by the Company to give any notice of a Change of Control required to be delivered in accordance with Section 2(a); or 6 22 (4) default in the performance, or breach, of any material covenant or warranty of the Company herein (other than a covenant or warranty a default in the performance or breach of which is specifically dealt with elsewhere in this Section 3(a)) and continuance of such default or breach for a period of 30 days after there has been given, by registered or certified mail, to the Company by the holders of at least 25 % of the outstanding principal amount of this Security a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company, or under any agreement, mortgage, indenture or instrument under-which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company, with a principal amount then outstanding in excess of $1,000,000, whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay the principal of such indebtedness (in whole or in any part greater than $1,000,000) when due and payable or shall have resulted in such indebtedness (in whole or in any part greater than $1,000,000) becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the holders of at least 25 % of the outstanding principal amount of this Security a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or similar relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, 7 23 or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. (b) If an Event of Default (other than an Event of Default specified in Section 3(a)(6) or 3(a)(7)) occurs and is continuing, then in every such case the holder of this Security may declare the principal hereof to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in Section 3(a)(6) or 3(a)(7) occurs and is continuing, the principal of, and accrued interest on, this Security shall ipso facto become immediately due and payable without any declaration or other act of the holders. 4. Subordination. The indebtedness evidenced by this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all the Company's Senior Indebtedness, as hereinafter defined. (a) Senior Indebtedness. As used in this Note, the term "Senior Indebtedness" shall mean the principal of and unpaid accrued interest on (i) up to $2,000,000 of indebtedness of the Company or with respect to which the Company is a guarantor to any bank or other financial institution whose principal business is lending funds on a secured basis, (ii) any indebtedness of the Company with respect to equipment financing transactions which indebtedness shall not exceed the sum of $1.25 million times the number of stores in operation by the Company and (iii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued solely in exchange for such Senior Indebtedness, or any indebtedness arising solely from the satisfaction of such Senior Indebtedness by a guarantor. (b) Default on Senior Indebtedness. If there should occur any receivership, insolvency, assignment for the benefit of creditors, bankruptcy, reorganization or arrangements with creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale of all or substantially all of the assets, dissolution, liquidation or any other marshaling of the assets and liabilities of the Company, or if this Note shall be declared due and payable upon the occurrence of an event of default with respect to any Senior Indebtedness, then (i) no amount shall be paid by the Company in respect of the principal of or interest on this Note at the time outstanding, unless and until the principal of and interest on the Senior Indebtedness then outstanding shall be paid in full, and (ii) no claim or proof of claim shall be filed with the Company by or on behalf of the Holder of this Note that shall assert any right to receive any payments in respect of the principal of and interest on this Note, except subject to the payment in full of the principal of and interest on all of the Senior Indebtedness then outstanding. If there occurs an event of default that has been declared in writing with respect to any Senior Indebtedness, or in the instrument under which any Senior Indebtedness is outstanding, permitting the holder of such Senior Indebtedness to accelerate the maturity thereof, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, or all Senior Indebtedness shall have been paid in full, no payment shall be made in respect of the principal of or interest on this Note, unless within 90 days after the happening of such event of default, the maturity of such Senior Indebtedness shall not have been accelerated. 8 24 (c) Effect of Subordination. Subject to the rights, if any, of the holders of Senior Indebtedness under this Section 4 to receive cash, securities or other properties otherwise payable or deliverable to the Holder of this Note, nothing contained in this Section 4 shall impair, as between the Company and the Holder, the obligation of the Company, subject to the terms and conditions hereof, to pay to the Holder the principal hereof and interest hereon as and when the same become due and payable, or shall prevent the Holder of this Note, upon default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law. (d) Subrogation. Subject to the payment in full of all Senior Indebtedness and until this Note shall be paid in full, the Holder shall be subrogated to the rights of the holders of Senior Indebtedness (to the extent of payments or distributions previously made to such holders of Senior Indebtedness pursuant to the provisions of Section 4 above) to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness. No such payments or distributions applicable to the Senior Indebtedness shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and the Holder, be deemed to be a payment by the Company to or on account of this Note; and for the purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness to which the Holder would be entitled except for the provisions of this Section 4 shall, as between the Company and its creditors, other than the holders of Senior Indebtedness and the Holder, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. (e) Undertaking. By its acceptance of this Note, the Holder agrees to execute and deliver such documents as may be reasonably requested from time to time by the Company or the lender of any Senior Indebtedness in order to implement the foregoing provisions of this Section 4. 5. Prepayment. This Note may be prepaid in whole or in part at any time beginning ninety (90) days after September 9, 1999 by the Company without the prior written consent of Holder. Any such prepayment will be applied first to the payment of expenses due under this Note, second to interest accrued on this Note and third, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of principal of this Note. 6. Other. (a) No provision of this Security shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as herein provided. (b) The Company will give prompt written notice to the holder of Security of any change in the location of the Designated Office. (c) The transfer of this Security is registrable on the Security Register of the Company Upon surrender of this Security for registration of transfer at the Designated Office, duly endorsed by, Or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by, the holder hereof or his attorney duly authorized in writing, and 9 25 thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. Such Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. No service charge shall be made for any such registration of transfer, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith. Prior to due presentation of this Security for registration of transfer, the Company and any agent of the Company may treat the person in whose name this Security is registered as the owner thereof for all purposes, whether or not this Security be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. (d) This Security shall be governed by and construed in accordance with the laws of the State of California, United States of America. [Signatures to Follow] 10 26 IN WITNESS WHEREOF, the Company has caused this Security to be duly executed under its corporate seal. Dated: September 9, 1999. SILICON ENTERTAINMENT, INC. By: -------------------------------- Printed Name: ---------------------- Title: ----------------------------- Attest: By: -------------------------------- Printed Name: ---------------------- Title: ----------------------------- 11 27 EXHIBIT A
NET PROCEEDS TO COMPANY AFTER NAME OF PURCHASER PRINCIPAL AMOUNT OF NOTE 1% PLACEMENT FEE ----------------- ------------------------ -----------------------------
12 28 THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. No. 1999- WARRANT TO PURCHASE COMMON STOCK OF SILICON ENTERTAINMENT, INC. (void after September 9, 2004) 1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, Holder (as defined below) is entitled to purchase from Silicon Entertainment, Inc., a California Corporation (the "Company"), at any time before 5:00 p.m. California time on September 9, 2004 ("Termination Date"), at a price per share equal to the Warrant Price (as defined below), the Warrant Stock (as defined below) upon exercise of this Warrant pursuant to Section 6 hereof. 2. Definitions. As used in this Warrant, the following terms shall have the definitions ascribed to them below: (a) "Holder" shall mean _____________ or its assigns. (b) "Securities" shall mean ________ shares of Common Stock. (c) "Warrant Price" shall be $5.40 per share. (d) "Warrant Stock" shall mean the Securities purchasable upon exercise of this Warrant or issuable upon conversion of this Warrant. 3. Fractional Shares. No fractional shares shall be issuable upon exercise or conversion of the Warrant and the number of shares to be issued shall be rounded down to the nearest whole share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying the Holder an amount computed by multiplying the fractional interest by the fair market value of a full share. 4. No Shareholder Rights. This Warrant, by itself, as distinguished from any shares purchased hereunder, shall not entitle its Holder to any of the rights of a shareholder of the Company. 1 29 5. Reservation of Stock. The Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise conversion of this Warrant. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Warrant Stock issuable upon the exercise or conversion of this Warrant. 6. Exercise of Warrant. This Warrant may be exercised in whole or part by the Holder, at any time after the date hereof prior to the termination of this Warrant, by the surrender of this Warrant, together with the Notice of Exercise and Investment Representation Statement in the forms attached hereto as Attachments 1 and 2, respectively, duly completed and executed at the principal office of the Company, specifying the portion of the Warrant to be exercised and accompanied by payment in full of the Warrant Price in cash or by check with respect to the shares of Warrant Stock being purchased. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as Holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full shares of Warrant Stock issuable upon such exercise. If the Warrant shall be exercised for less than the total number of shares of Warrant Stock then issuable upon exercise, promptly after surrender of the Warrant upon such exercise, the Company will execute and deliver a new Warrant, dated the date hereof, evidencing the right of the Holder to the balance of the Warrant Stock purchasable hereunder upon the same terms and conditions set forth herein. 7. Conversion. In lieu of exercising this Warrant or any portion hereof, the Holder hereof shall have the right to convert this Warrant or any portion hereof into Warrant Stock by executing and delivering to the Company at its principal office the written Notice of Conversion and Investment Representation Statement in the forms attached hereto as Attachments 2 and 3, specifying the portion of the Warrant to be converted, and accompanied by this Warrant. The number of shares of Warrant Stock to be issued to Holder upon such conversion shall be computed using the following formula: X = (P)(Y)(A-B)/A where X = the number of shares of Securities to be issued to the Holder for the portion of the Warrant being converted. P = the portion of the Warrant being converted expressed as a decimal fraction. Y = the total number of shares of Securities issuable upon exercise of the Warrant in full. A = the fair market value of one share of Warrant Stock which shall mean (i) the fair market value of the Company's stock issuable 2 30 upon conversion of such share as of the last business day immediately prior to the date the notice of conversion is received by the Company, as determined in good faith by the Company's Board of Directors, or (ii) if this Warrant is being converted in conjunction with a public offering of stock the price to the public per share pursuant to the offering. B = the Warrant Price on the date of conversion. Any portion of this Warrant that is converted shall be immediately canceled. This Warrant or any portion hereof shall be deemed to have been converted immediately prior to the close of business on the date of its surrender for conversion as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such conversion shall be treated for all purposes as Holder of such shares of record as of the close of business on such date. As promptly as practicable after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of full shares of Warrant Stock issuable upon such conversion. If the Warrant shall be converted for less than the total number of shares of Warrant Stock then issuable upon conversion, promptly after surrender of the Warrant upon such conversion, the Company will execute and deliver a new Warrant, dated the date hereof, evidencing the right of the Holder to the balance of the Warrant Stock purchasable hereunder upon the same terms and conditions set forth herein. 8. Adjustment of Exercise Price and Number of Shares. The number of shares issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price therefor are subject to adjustment upon the occurrence of the following events: (a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The Warrant Price and the number of shares issuable upon exercise of this Warrant shall each be proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization or other similar event altering the number of outstanding shares of the Company's capital stock. (b) Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the shares payable in securities of the Company then, and in each such case, the Holder, on exercise of this Warrant at any time after the consummation, effective date or record date of such event, shall receive, in addition to the Warrant Stock (or such other stock or securities) issuable on such exercise prior to such date, the securities of the Company to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant). 9. Adjustment for Capital Reorganization, Consolidation, Merger. If any capital reorganization of the capital stock of the Company, or any consolidation or merger of the Company with or into another corporation, or the sale of all or substantially all of the Company's 3 31 assets to another corporation shall be effected in such a way that holders of the Company's capital stock will be entitled to receive stock, securities or assets with respect to or in exchange for the Company's capital stock, and in each such case the Holder, upon the exercise of this Warrant, at any time after the consummation of such capital reorganization, consolidation, merger, or sale, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which such Holder would have been entitled upon such consummation if such Holder had exercised this Warrant immediately prior to the consummation of such capital reorganization, consolidation, merger, or sale, all subject to further adjustment as provided in this Section 9; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation. 10. Transfer of Warrant. This Warrant may be transferred or assigned by the Holder hereof in whole or in part, provided that (i) the transferor provides, at the Company's request, an opinion of counsel satisfactory to the Company that such transfer does not require registration under the Act and the securities law applicable with respect to any other applicable jurisdiction, and (ii) the Company, in its sole discretion, consents to such assignment or transfer. 11. Termination. This Warrant shall terminate at 5:00 p.m. California time on the Termination Date. 12. Miscellaneous. This Warrant shall be governed by the laws of the State of California, as such laws are applied to contracts to be entered into and performed entirely in California by California residents. The headings in this Warrant are for purposes of convenience and reference only, and shall not be deemed to constitute a part hereof. Neither this Warrant nor any term hereof may be changed or waived orally, but only by an instrument in writing signed by the Company and the Holder of this Warrant. All notices and other communications from the Company to the Holder of this Warrant shall be delivered personally or mailed by first class mail, postage prepaid, to the address furnished to the Company in writing by the last Holder of this Warrant who shall have furnished an address to the Company in writing, and if mailed shall be deemed given three days after deposit in the United States mail. SILICON ENTERTAINMENT, INC. ----------------------------------- David S. Morse, President 4 32 Attachment 1 NOTICE OF EXERCISE TO: SILICON ENTERTAINMENT, INC. 1. The undersigned hereby elects to purchase ____________ shares of the Warrant Stock of Silicon Entertainment, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. 2. Please issue a certificate or certificates representing said shares of Warrant Stock in the name of the undersigned or in such other name as is specified below: ----------------------------------------- (Name) ----------------------------------------- (Address) - ----------------------------------- ----------------------------------- (Date) (Name of Warrant Holder) By: -------------------------------- Title: ----------------------------- A-1-1 33 Attachment 2 INVESTMENT REPRESENTATION STATEMENT Shares of the Securities (as defined in the attached Warrant) of SILICON ENTERTAINMENT, INC. In connection with the purchase of the above-listed securities, the undersigned hereby represents to Silicon Entertainment, Inc. (the "Company") as follows: (a) The securities to be received upon the exercise of the Warrant (the "Securities") will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of selling, granting participation in or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any Securities issuable upon exercise of the Warrant. (b) The undersigned understands that the Securities issuable upon exercise of the Warrant at the time of issuance may not be registered under the Securities Act of 1933, as amended (the "Act"), and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4 (2) of the Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. (c) The undersigned agrees that in no event will it make a disposition of any Securities acquired upon the exercise of the Warrant unless and until (i) it shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) it shall have furnished the Company with an opinion of counsel satisfactory to the Company and Company's counsel to the effect that (A) appropriate action necessary for compliance with the Act and any applicable state securities laws has been taken or an exemption from the registration requirements of the Act and such laws is available, and (B) the proposed transfer will not violate any of said laws. (d) The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this Statement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investments, and has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information which it considered necessary to verify the accuracy of or to amplify the Company's disclosures, and has had all questions which have been asked by it satisfactorily answered by the Company. A-2-1 34 (e) The undersigned acknowledges that the Securities issuable upon exercise of the Warrant must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being through a "broker's transaction" or in transactions directly with a "market makers" (as provided by Rule 144(f)) and the number of shares being sold during any three-month period not exceeding specified limitations. Dated: ----------------------------- ----------------------------------- (Typed or Printed Name) By: -------------------------------- (Signature) ----------------------------------- (Title) A-2-2 35 Attachment 3 NOTICE OF CONVERSION TO: SILICON ENTERTAINMENT, INC. 1. The undersigned hereby elects to acquire ___________ shares of the Securities of Silicon Entertainment, Inc. pursuant to the terms of the attached Warrant, by conversion of _____ percent (___%) of the Warrant. 2. Please issue a certificate or certificates representing said shares of Securities in the name of the undersigned or in such other name as is specified below: ----------------------------------------- (Name) ----------------------------------------- (Address) - ----------------------------------- ----------------------------------- (Date) (Name of Warrant Holder) By: -------------------------------- Title: ----------------------------- A-3-1 EX-23.1 29 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-1 of our report dated June 7, 1999, except for Note 11, which is as of September 9, 1999 relating to the financial statements of Silicon Entertainment, Inc., which appear in such Registration Statement. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Registration Statement. /s/ PricewaterhouseCoopers LLP - ------------------------------ PricewaterhouseCoopers LLP San Jose, California November 4, 1999 -----END PRIVACY-ENHANCED MESSAGE-----