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HomeMy WebLinkAboutResolution 2007-123 lease agreement with coachline shops for the recreation annexMARANA RESOLUTION N0.2007-123 RELATING TO PARKS AND RECREATION; AUTHORIZING THE CREATION OF A RECREATION SERVICES ANNEX IN CONTINENTAL RANCH AND APPROVING AND AUTHORIZING THE MAYOR TO EXECUTE A LEASE AGREEMENT WITH COACHLINE SHOPS, L.L.C. FOR COMMERCIAL SPACE TO HOUSE THE ANNEX WHEREAS the Town desires to establish a Recreation Services Annex to provide pre- school, youth, and adult recreation opportunities in the Continental Ranch area; and WHEREAS the Town has no appropriate facilities in the Continental Ranch area; and WHEREAS commercial space is available from Coachline Shops, LLC at the intersection of Coachline Boulevard and Twin Peaks Road; and WHEREAS the Town has obtained and approved lease terms for three years, and has determined that it is competitive; and WHEREAS the space is finished and ready for immediate occupancy; and WHEREAS the cost of the lease shall be recovered through program fees; and WHEREAS the Mayor and Council of the Town of Marana find that the best interests of the public are served by entering into the lease with Coachline Shops, LLC. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THE TOWN OF MARANA, ARIZONA, that the establishment of the Recreation Services Annex in Continental Ranch is approved, the lease with Coachline Shops, LLC for commercial space to house the Annex; a copy of which is attached to and incorporated in this resolution as Exhibit A, is hereby approved, and the Mayor is hereby authorized to execute it on the Town's behalf. PASSED AND ADOPTED BY THE MAYOR AND COUNCIL OF THE TOWN OF MARANA, ARIZONA, this 26th day of June, 2007. ®q~~9ltal~j®! ®~~®~,OF A~L9 0~ S ~ , ~ ~ ~ ~ a n r n i , - i ~' ~ _' ~s ~'° .. s ~ ~ ~~ ~ r ~ e~ ATTEST: ~®j ~~''~~uito++"`~~ ~~ ~~®~BDIt~O®`®` -el .Bronson, Town Clerk Recreation Services Annex Resolution 6/19/07 Mayor d Honea C6 O m U C6 O U 0 00 a~ Q 0 ._ c~ a~ U cn O O ---- - - ~ ~ -Y ` --~ r ~~ - 1 _~ ~~ .~ =r :~~~ Z T1 \~~~ c ~, ,~ _ ~ _ - - i ~ ~.~ y ~~ ~'~ ~D ~. _~ ~' ' i __ _ __ _ _ ,~ i _. ~~ '. ~_ a W F-+ ~i H AA W ~ R p 0 a 0 .. a •~n~sar~~0~ ~`.~+ •. 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N „ ~ .? o p , ~ ~!. ~ .;~: ~r. .~ ;~ • •'• ~(~. . ~ :~ ~ r.t: - a'a ii i ~~~ ~i~ '- ;jam .{~'. •• .~< Q~. i~ S ~~- ~Y t } • ~~' 2-:.Mr,. ~ (G fj'~ {,r• }~i *. •~/ '~~s p".f r~' f+; 't%. s'•; } ~: ~i ~ N ~ ~ '~" `_" '.; .-- •-- .• i :y ' •: iF .r. :sf -~--~--~-~-- is r 4: .. :r ii y, K '~'i:'t:l.'I`+ is 4"', ;•~te'~ +.. ~ ,fr:i••:4 :~ ~' .yy'ti~i •~Y ~•'.•..i. fit.: -•~ •t,L ^ ~I .y•~ :r'.i' w_. :~.. „J . i'. ~~;f~ 4 rN•'• 7 \ruT\.L~~ 0~ /1,,~~ • ~i - ~~ STANDARD SHOPPING CENTER LEASE COACHLINE BLVD. & TWIN PEAKS ROAD MARANA, ARIZONA BY AND BETWEEN COACHLINE SHOPS, LLC An Arizona limited liability company AS LANDLORD AND Town of Marana A municipality AS TENANT Date: June , 2007 TABLE OF CONTENTS PAGE ARTICLE 1-FUNDAMENTAL LEASE PROVISIONS 2 ARTICLE 2 -PREMISES 6 ARTICLE 3 -RENTAL TERM 6 ARTICLE 4 -RENTAL 7 ARTICLE 5 -COMMON AREAS/COMMON AREA EXPENSES 10 ARTICLE 6 -PROPERTY TAXES/PROPERTY TAXES EXPENSES 12 ARTICLE 7 -INSURANCE/INSURANCE EXPENSES, INDEMNITY , WAIVER OF SUBROGATION 12 ARTICLE 8 -UTILITIES SERVICES/LTTILITY SERVICES EXPENSES 14 ARTICLE 9 -USE AND OPERATION 14 ARTICLE 10 -MAINTENANCE AND SANITATION 16 ARTICLE 11-RULES AND REGULATIONS 17 ARTICLE 12 -CONSTRUCTION, ALTERATION. REPAIR AND LIENS 18 ARTICLE 13 -FIXTURES AND PERSONAL PROPERTY 21 ARTICLE 14 -SURRENDER OF PREMISES 21 ARTICLE 15 -SIGNS 22 ARTICLE 16 -ASSIGNMENT AND SUBLETTNG 23 ARTICLE 17 -SALE OF PREMISES 24 ARTICLE 18 -DEFAULT OF THE TENANT; REMEDIES 24 ARTICLE 19 -DEFAULT BY LANDLORD 27 ARTICLE 20 -ATTORNEYS' FEES 27 ARTICLE 21-DAMAGE OR DESTRUCTION 28 ARTICLE 22 -EMINENT DOMAIN 29 ARTICLE 23 -OFFSET STATEMENT, ATTORMENT AND SUBORDINATION 29 ARTICLE 24 -HOLDING OVER 30 ARTICLE 25 -NOTICES 30 ARTICLE 26 -SECURITY DEPOSIT 30 ARTICLE 27 -RIGHT TO RELOCATE 31 ARTICLE 28 -ACCESS BY LANDLORD, RIGHT OF ENTRY 32 ARTICLE 29 -WASTE, GOVERNMENTAL REGULATIONS 32 ARTICLE 30 -EXCULPATION 32 ARTICLE 31-GRANT OF EASEMENTS 33 ARTICLE 32 -PARTIAL INVALIDITY 33 2 ARTICLE 33 -FINANCIAL STATEMENTS ARTICLE 34 -MISCELLANEOUS PROVISIONS ARTICLE 35 -ADDENDUM TO LEASE EXHIBIT "A" SITE PLAN OF THE PREMISES & SHOPPING CENTER EXHIBIT "B" LANDLORD'S WORK 33 33 37 EXHIBIT "C" SIGN CRITERIA LEASE AGREEMENT This Lease Agreement ("Lease"), made on the day of June, 2007, ("Lease Date") by Coachline Shops, LLC, an Arizona Limited Liability Company, ("Landlord"), and the Town of Marana, a municipality, ("Tenant"). WITNESSETH: ARTICLE 1-FUNDAMENTAL LEASE PROVISIONS 1.1 Tenant & Address: 1.2 Landlord & Address: 1.3 Premises Address: 1.4 Size of Premises: 1.5 Rent Commencement Date: 1.6 Lease Termination Date: 1.7 Intentionally Deleted 1.8 Rental Rate & Increases: Town of Marana Phone: (520) Fax: (520) Email: Coachline Shops, LLC Attn: Justin W. Bassett 4012 N. Stone Peak Circle Mesa, Arizona 85207 Phone: (602) 723-9110 Fax: (602) 798-8298 Email: JBassett@HCIZDevelopment.com 9190 N. Coachline Blvd. Suite 130 Marana, Arizona 85743 Premises Phone: Premises Fax: (Article 2 & Exhibit "A") Approximately 1,197 Square Feet Width: + 20 feet Depth: ± 60 feet August 1, 2007 July 31, 2010 (Article 4) RENTAL TERM MINIMUM ANNUAL RENT MINIMUM ANNUAL RENT PER MONTH Year 1 $23,940.00 $1,995.00 Year 2 $24,958.20 $2,079.85 Year 3 $25,397.95 $2,116.50 4 1.9 Use of Premises: 1.10 Security Deposit: 1.11 Percentage Rent: 1.12 Estimated Turnover Date: 1.13 Pro Rata Share: 1.14 Addendums and Exhibits: Premises to be used for the sole use of Marana Parks and Recreation. (Article 9) $3,000.00 (Article 26) Zero Percent (0%) (Article 4) Lease execution date (Article 3) Currently 12.57 Percent (Article 4) The following Addendums and Exhibits are attached and incorporated into this Lease: Addendum Exhibit A SITE PLAN OF THE PREMISES & SHOPPING CENTER Exhibit B LANDLORD'S WORK Exhibit C SIGN CRITERIA LANDLORD'S INTIALS TENANT'S INTIALS 5 ARTICLE 2 -PREMISES FOR AND IN CONSIDERATION of the rent hereinafter reserved and upon the covenants and conditions hereof, Landlord does hereby lease to Tenant the Premises located at the address specified in Article 1.3. Subject to the further terms, covenants, condition of this lease, the commercial space referred to herein as the "Premises" is generally depicted in the cross-hatched portion of Exhibit "A" attached hereto and made a part hereof and shall be measured to the outside finished surface of all exterior walls and to the centerline of all interior demising walls. The "Shopping Center" of which the Premises is a part is also generally depicted on Exhibit "A". Tenant hereby acknowledges and agrees that the Premises shall not include, and Tenant shall have no rights with respect to, the land beneath or the air above the Premises or any improvements below floor slab level or above the interior surface of the ceiling of the Premises or outside the interior surface of the demising walls of the Premises, Landlord expressly reserving unto itself the sole and exclusive right to use and to determine the use of all roofs, exterior walls and all other surfaces and spaces not included within the Premises. Tenant hereby further acknowledges and agrees that Exhibit "A" is tentative and shall not be deemed 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 Exhibit. Tenant further acknowledges that the Shopping Center may be part of a larger development that includes adjacent properties owned and controlled by different entities. ARTICLE 3 -RENTAL TERM 3.1 Commencement of Rental Term. Although this Lease shall be effective and binding as of the Lease Date and shall continue unless sooner terminated or extended as provided in this Lease, the rental term of this Lease ("Rental Term") shall begin on the date set forth in Article 1.5 ("Rent Commencement Date") and shall continue through the time period set forth in Article 1.6 ("Lease Termination Date"). Unless otherwise specifically stated in this Lease, the Rental Term shall include the original Rental Term and any extension, renewal or holdover thereof. 3.2 Turnover. Landlord agrees to deliver to Tenant, and Tenant agrees to accept from Landlord, possession of the Premises ("Turnover") upon notice from Landlord that the Premises is substantially completed as set forth hereinbelow ("Landlord's Turnover Notice"). Such notice shall be deemed the equivalent of notice from Landlord that Landlord's Work, as defined in Exhibit "B", in the Premises has been substantially completed in accordance with said Exhibit "B" to the extent that Tenant's contractor may commence the construction of Tenant's Work, as defined in Article 12.3(a), and shall be conclusive and binding upon the parties hereto. It is expressly understood and agreed that some of Landlord's Work may not be completed until Tenant has commenced construction of Tenant's Work and completed portions thereof to the point where Landlord may reenter the Premises and complete any remaining items of Landlord's Work. Landlord estimates that Turnover will be the date set forth in Article 1.12 ("Estimated Turnover Date"). The Estimated Turnover Date may be extended by Landlord for a reasonable period of time provided Landlord is diligently pursuing the substantial completion of the Premises. If Turnover has not occurred within twelve (12) months after the Estimated Turnover Date hereof, then this Lease shall automatically terminate and become null and void without further notice and neither party shall have any liability or obligation to the other hereunder. 3.3 Commencement of Rent. Tenant's obligation to pay Minimum Annual Rent, Additional Rent and Percentage Rent shall begin on the Rent Commencement Date and continue through the end of the Rental Term. In the event that the Rent Commencement Date does not occur on the first of the month, then (a) the Tenant shall pay Minimum Annual Rent, Additional Rent and Percentage Rent for the fractional month on a per diem basis (calculated on the basis of the actual days in that month) until the first day of the next calendar month and (b) any increases in Minimum Annual Rent set forth in Article 1.8 shall be effective on the anniversary of the first day of the full calendar month following the Rent Commencement Date. 3.4 Tenant's WorWOpening for Business. Upon Turnover, Tenant agrees, at its sole cost and expense, to commence and complete Tenant's Work and open for business not later than 90 days thereafter, fully stocked, staffed, and fixtured. Tenant covenants that upon opening for business the Premises will be consistent with the image afirst-class retail development and all personal property therein will be consistent with the highest standards for similar retail establishments. ARTICLE 4 -RENTAL 4.1 Minimum Annual Rent. Tenant agrees to pay to Landlord for the use and occupancy of the Premises the Minimum Annual Rent as set forth in Article 1.8, together with any and all rental taxes, gross receipts taxes, transaction privilege taxes and sales taxes levied, currently and in the future, by any taxing authority whether assessed against Landlord or Tenant, or both, and as further adjusted elsewhere in this Lease. The Minimum Annual Rent shall be payable in advance in twelve (12) equal monthly installments on the first day of each calendar month, at the office of Landlord or at such other place designated by Landlord, without any prior demand or notice thereof, and without recoupment, setoff, or deduction of any kind, commencing upon the Rent Commencement Date. In the event that Tenant shall fail to pay the Minimum Annual Rent or any installment thereof, Percentage Rent payable pursuant to Article 1.11 and Article 4.6 or any other Additional Rent payable pursuant to Article 4.2, within five (5) days after the same has become due, both Tenant and Landlord agree that Landlord will incur additional expenses in the form of extra collection efforts, handling costs, and potential impairment of credit on loans for which this Lease is security. Both parties agree that should Tenant so fail to remit such rents, Landlord should be entitled to compensation for such detriment, but that it is extremely difficult and impractical to ascertain the extent of the detriment. The parties, therefore, agree that should Tenant fail to pay the rent due within five (5) days after the same becomes due, Landlord shall be entitled to recover as Additional Rent a late fee from Tenant equal to ten percent (10%) of the amount past due. In addition, such past due amounts shall bear interest at the rate of eighteen and percent (18%) per annum until paid. Tenant further agrees to pay Landlord any costs or fees incurred by Landlord for the collection of such past due rent, including but not limited to fees of an attorney or collection agency. Nothing herein contained shall limit any other remedy available to Landlord. Landlord shall have the right to require that Tenant pay monies due in the form of a cashier's check or money order or, at Landlord's request, by reoccurring monthly electronic funds transfer of immediately available funds pursuant to such transfer instructions as Landlord may, from time to time, furnish to Tenant. 4.2 Additional Rent. Tenant shall pay as "Additional Rent" all sums of money or charges required to be paid by Tenant under this Lease, including, without limitation, its pro rata share, as set forth in Article 1.13 and defined in Article 4.3, of the following: the total cost and expense of operating, managing, maintaining and repairing the Shopping Center, including without limitation, Common Area Expenses (Article 5); Property Taxes (Article 6); Insurance (Article 7); and Utilities (Article 8) (collectively referred to as "Operating Costs"). Additional Rent shall be paid to Landlord in the following manner: (a) As of the Rent Commencement Date, but subject to adjustment as hereinafter set forth in subsection (b), Tenant shall pay on the first day of each calendar month of the Rental Term an amount equal to one-twelfth (1/12') of the annual Additional Rent estimated by Landlord, which may be adjusted by Landlord at any time on the basis of Landlord's experience and reasonably anticipated costs. (b) By April 1 of the year following each "Calendar Year" (January 1 to December 31), Landlord shall furnish Tenant a statement covering the last Calendar Year, showing the total Additional Rent expenses, the amount of Tenant's pro rata share of such Additional Rent expenses for such Calendar Year and the payments made by Tenant during such Calendar Year as set forth in subsection (a). If Tenant's pro rata share of such Additional Rent expenses exceeds Tenant's payments so made, Tenant shall pay Landlord the deficiency within ten (10) days after receipt of such statement. If said payments exceed Tenant's pro rata share of such Additional Rent expenses, Tenant shall be entitled to a credit against the next such payment(s) coming due under subsection (a) of this Article (or to a refund if this Lease has expired) subject, however, to any offsets by Landlord for any and all past due amounts under this Lease. 4.3 Pro Rata Share. Tenant's pro rata share of the Operating Costs for the previous Calendar Year shall be that portion of all Operating Costs multiplied 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 total number of square feet of Floor Area in the Shopping Center. Tenant's current pro rata share is set forth in Article 1.13, but may be adjusted by Landlord from time to time according to changes in the size of the Premises or the Shopping Center. 4.4 Floor Area. The term "Floor Area" shall include all areas for the exclusive use and occupancy by Tenant measured from the exterior surface of exterior walls (and from the extensions thereof, in the case of openings) and from the center of walls dividing the Premises from other premises in the Shopping Center. No deduction or exclusion shall be made from Floor Area by reason of columns, stairs, elevators, escalators, or other interior structures, utility closets or equipment within the Premises, and in no event shall Tenant be permitted to construct any basements, second levels, mezzanines, lofts or other multilevel areas within the Premises, nor construct any exterior (whether attached or freestanding) equipment, patio, utility or loading areas, or the like, all such areas being strictly prohibited hereunder. 4.5 Place of Payment. The Minimum Annual Rent and Additional Rent shall be paid by Tenant to Landlord at the address specified for rental payments in Article 1.2 of this Lease, or at such other place as may from time to time be designated by Landlord in writing. 4.6 Percentage Rent. ear e€ the-1?~ental Terms, ranant ~1}-pa~ee~ • , 4.7 Definition of "Gross Receipts" The term "r*ra~~ D ~ ~~Y,* ~~ .~ t~ 1~ 1. ,a ~ ,~ t ~, , 4.8 Tenant's Records. T°r~„* ~~--~ ~ *~ ~a ~-~~~ ~~ +~~ D_~--,=~~~ -- - T.._---~~- _______ _rr _ _ b'~ Y~~Y~ ~ , i ~ ~ ~ ~ e , e ~ ~ > > > to r,+n o .. ~: o 4.9 Reports by Tenant. "~~r+'~~ ~, +,.e ~o„+.,, -ro ,;+,,,,,,+ ~,.+; ... F .. T _a,__a r-r~#1•aFYinv thn ~,•+:.,:+., ~ ,. +t.e ; o,~;.,+ol., ,., e a• +i. a ~ Tenant shall submit to the Landlord on or before the 30th day following the end of each Calendar Year during the Rental Term, without notice or request from Landlord, a written statement signed by Tenant, and certified by it to be true and correct, showing in reasonably accurate detail, the amount of Gross Receipts for each preceding Calendar Year and a financial statement which will include a balance sheet, and a profit and loss statement, reflecting the activity for the immediately preceding Calendar Year. 4.10 Right to Examine Books. The acceptance by the Landlord of payments of percentage rent shall be without prejudice to the Landlord's right to an examination of the Tenant's books and records of its Gross Receipts and inventories of merchandise at the Premises in order to verify the amount of Gross Receipts received by the Tenant. 4.11 Audit. At its option, Landlord may cause, at any reasonable time upon five (5) days prior written notice to Tenant, a complete audit to be made of Tenant's entire business affairs and records relating to the Premises for the period covered by any statement issued by the Tenant as above set forth. If such audit shall disclose that Tenant has under reported gross sales by more than one percent (1%) for such period, Tenant shall promptly pay to Landlord the cost of said audit in addition to any deficiency in percentage rent disclosed by said audit, which deficiency shall be payable in any event, and, in addition, Landlord, at its option, shall have the further remedy of terminating this Lease upon five (5) days notice to Tenant. ARTICLE 5 -COMMON AREAS/COMMON AREA EXPENSES 5.1 Common Areas Defined. The "Common Areas" shall consist of all areas and facilities in the Shopping Center which shall not be within the exterior walls of the premises of a tenant or occupant and which shall from time to time be available for the non-exclusive benefit in common with all tenants and occupants of the Shopping Center and their employees, customers, licensees and invitees, including without limitation all parking areas, parking structures, driveways, sidewalks, walkways, malls, service corridors, loading platforms, canopies, elevators, escalators, washrooms, lounges and shelters, if any. Landlord expressly reserves the right and privilege in its sole discretion to determine the nature, extent and use of the Common Areas, as the same may exist from time to time, and whether portions thereof shall be surface, underground or multiple-deck, and of making such changes, additions and/or deletions therein and thereto from time to time as provided elsewhere in this Lease or as in Landlord's opinion may otherwise be deemed desirable, including without limitation: (a) the designation, addition, location, relocation and/or elimination of driveways, entrances, exits, parking spaces, patio areas, walkways and/or sidewalks; (b) the placement of kiosks, carts, advertising, entertainment events, promotional events and/or any other displays and/or events; (c) the direction and flow of traffic; (d) the installation of prohibited areas, landscaped areas and/or any other areas, and any equipment and/or facilities relating thereto; (e) additions to and/or deletions from the land from time to time comprising the Common Areas; and (f) the modification and/or demolition of existing and/or the construction of additional buildings, retail areas, pads, pad areas, mall areas, parking (whether surface, subsurface and/or decked) and/or other structures and/or improvements. Landlord shall have the right to establish and, from time to time, to change, alter and amend, and to enforce, against Tenant and the other users of said Common Areas such rules and regulations (including the exclusion of employees' parking therefrom) as may be deemed necessary or advisable for the proper and efficient operation and maintenance of said Common Areas. 5.2 Use of Common Areas. Provided the Lease is not in default, Tenant and its employees, customers, licensees and invitees are, except as otherwise specifically provided in this Lease, privileged to use the parking and other Common Areas in common with other persons during the Rental Term while such employees, customers, licensees and invitees are shopping or otherwise conducting permitted business in the Shopping Center and shall have the benefit of all Landlord's rights to covenants, conditions, restrictions, declarations, association bylaws and easements of record benefiting the Premises, all amendments, modifications, extensions, expansions and renewals thereof; all of which shall be superior to this Lease and binding upon the Premises ("Declarations"). Tenant and all persons in possession or holding under Tenant shall conform to and shall not violate the terms of any Declarations or matters of record. This Lease is and shall remain subordinate to the Declarations and any amendments or modifications thereto; provided, however, if the Declarations are not of record as of the Lease Date, then this Lease shall automatically become subordinate to the Declarations upon recordation thereof. The provisions of this Article shall be binding upon the heirs and assigns and legal representatives of the parties hereto and all parties claiming interest in this Lease and/or the properties described herein. 5.3 Common Area Expenses. Landlord shall keep or cause to be kept said Common Areas in a clean condition, properly lighted and landscaped and shall repair any damage to the facilities thereof. All costs and expenses (including also, at Landlord's election, appropriate reserves) incurred in connection with said Common Areas (collectively hereinafter "Common Area Expenses") shall be charged and prorated in the manner set forth in Article 4.3. Common Area Expenses shall be deemed to include, but not be limited to, all sums expended or incurred in connection with said Common Areas for all general maintenance, repairs and replacements, including, without limitation,: (a) cleaning, sweeping, removing (snow, ice, trash, etc.) and repairing, resurfacing and restriping of the parking areas, sidewalks, curbs, service drives, driveways, and drainage areas; (b) maintenance, repair and upkeep of the planted or landscaped areas; (c) maintenance, repair and replacement of bulbs and light standards and the cost of electrical lighting; (d) trash collection and removal; (e) painting (including but not limited to the painting of exterior faces of exterior building walls); (f) maintaining, operating and repairing storm drains, storm drainage systems, sewers and above ground and underground utility lines and facilities, and any other utility systems; (g) building maintenance including, but not limited to, maintenance, repair, replacement and/or substitution of: sprinkler systems, doors, fire protection systems, lighting systems, fountains, canopies, tables, 10 benches, trash enclosures, roof and roof membrane, exterior walls and replacement thereof; (h) maintaining, operating and repairing any monument and/or directional signs; (i) upgrading of the Common Areas and reasonable reserves for replacements and repairs; (j) management and bookkeeping charges; (k) governmental or other surcharges, if any; (1) utilities, such as water, electricity, sewer fees, etc. and all costs and expenses associated with any change of company providing such utilities; (m) the cost of seasonal decorations of the Shopping Center; (n) the salaries and other costs of on-site and other management personnel deemed necessary by Landlord to implement the management and operation of the Common Areas as well as other personnel to implement services deemed necessary by Landlord in carrying out its obligations under this Article, including without limitation, the cost of security guards; (o) real and personal property taxes and assessments (including all costs and expenses associated with protesting and/or negotiating the same and/or any valuation associated with any such taxes or assessments) on the improvements and land comprising said Common Areas relating thereto; (p) public liability and property damage insurance and such other insurance and/or insurance programs as Landlord deems appropriate, together with any and all deductibles and self-insured retentions and expenses paid or incurred by Landlord in connection with any and all such insurance and/or insurance programs relating to any of the Common Areas; (q) at Landlord's election, amounts as and for appropriate reserves for the replacement and/or substitution of those items as provided herein; and (r) costs of any labor and all costs to supervise and administer Landlord's responsibilities relative to the Common Areas. Common Area Expenses shall include any costs incurred through any shared maintenance or Common Area Maintenance Agreements made with adjacent property owners or owners within the larger development of which the Shopping Center is a part. Landlord may cause any or all of services relating to the Common Areas to be provided by an independent contractor or contractors. Should Landlord make available additional land for parking or other Common Area purposes, then Common Area Expenses shall also include all expenses incurred in connection with said additional land. All costs and expenses associated with the maintenance and repair of exterior walls and roofs, including also, at Landlord's election, an annual reserve in an amount estimated by Landlord for the replacement of such items, and, also at Landlord's election, all costs and expenses associated with any maintenance agreement entered into by Landlord for the regular servicing and/or maintenance of any 1-1VAC, mechanical, plumbing electrical, sewer, and all other systems servicing the Common Areas in the Shopping Center shall be included in Common Area Expenses. Exterior walls shall not include store fronts, glass, window frames or cases, doors or door frames. 5.4 License. Landlord shall at all times during the Rental Term have the sole and exclusive control of the Common Areas. All Common Areas and facilities not within the Premises which Tenant may be permitted to use and occupy are to be used and occupied under a revocable license, and if any such license be revoked, or if the amount of such areas be diminished, Landlord shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation or diminution of such areas be deemed constructive or actual eviction. ARTICLE 6 -PROPERTY TAXES/PROPERTY TAXES EXPENSES 6.1 Property Taxes Expenses. Commencing upon the Rent Commencement Date, and for the balance of the Rental Term, Tenant shall pay to Landlord its pro rata share of real property taxes allocable to the Shopping Center as Additional Rent as specified in Article 4. Said amounts shall mean all real property taxes levied against the Shopping Center as provided in Article 6.2 hereinbelow. 6.2 Definition of Real Property Taxes. As used herein, the term "Real Property Taxes" shall include general real property and improvement taxes, any form of assessment, license fee, license tax, business license tax, commercial rental tax, in lieu tax, levy, charge, or similar imposition, imposed by any authority having the direct power to do so, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, or any agency or other public body, as against any legal or equitable interest of Landlord in the Shopping Center, and all costs, fees (including, without limitation, attorneys' fees and expert witness fees) and expenses reasonably incurred by Landlord in protesting and/or negotiating any or all of the foregoing including, but not limited to, a valuation protest on the assessed value of any portion of the Shopping Center and/or its improvements. The right to protest 11 any such valuation, tax and/or assessment shall remain exclusively with Landlord. All taxes for the year in which this Lease commences or terminates shall be apportioned and adjusted so that Tenant shall not be responsible for taxes and assessments occurring prior to or subsequent to the Rental Term of this Lease. If at any time during the Rental Term under the laws of the United States Government, or presiding State government, or any political subdivision thereof in which the Premises are situated, a tax or excise on rent or any other tax however described is levied or assessed by any such political body, against Landlord on account of rentals payable to Landlord hereunder or any tax based on or measured by expenditures made by Tenant on behalf of Landlord, such tax or excise shall be considered "Property Taxes". These charges will be billed to Tenant on a basis determined by the presiding governmental authority and Landlord, and are payable within ten (10) days after Tenant's receipt of billing. ARTICLE 7 - INSURANCE/INSURANCE EXPENSES, INDEMNITY, WAIVER OF SUBROGATION 7.1 Insurance Expenses. Commencing upon the Rent Commencement Date, and for the balance of the Rental Term, Tenant shall pay to Landlord its pro rata share of the costs and expenses to Landlord of its insurance relative to the Shopping Center as provided hereinbelow. For all purposes hereunder, the insurance costs and expenses allocable to said insurance programs shall be deemed to also include any and all deductibles as Additional Rent as specified in Article 4. 7.2 Tenant's Insurance. Before commencing any Tenant's Work, improvements or alterations in the Premises and during the entire Rental Term, which the failure of shall be a material breach of this Lease, Tenant shall keep in full force and effect the following types of insurance, in the amounts specified or in such higher amounts as requested by Landlord: (a) Liability Insurance. A policy of commercial general liability insurance which shall cover personal injuries, bodily injury (including wrongful death) and property damage insurance arising out of the maintenance, use or occupancy of the Premises, the sidewalks in front of the Premises, and the business operated by the Tenant and subtenants of Tenant in the Premises with coverage limits of not less than One Million and No/100 Dollars ($1,000,000.00) per occurrence and Two Million and No/100 Dollars ($2,000,000.00) aggregate per policy. (b) Property Insurance. "Causes of Loss-Special Form" property insurance, including coverage for sprinkler leakage, vandalism and malicious mischief covering all of Tenant's Work, Tenant's leasehold improvements, alterations, additions or improvements permitted by Landlord and personal property located in or on the Premises, in an amount not less than one hundred percent (100%) of their full replacement cost without depreciation. Any policy proceeds shall be used for the repair or replacement of the property damaged or destroyed. (c) Boiler and Machinery Insurance. Tenant shall maintain boiler and machinery insurance on all boilers, air-conditioning equipment, and other pressure vessels and systems located in, on, or about the Premises. If any of these items and the damage that may be caused by them are not covered by the insurance policy described in 7.2(b), then the boiler and machinery insurance shall have limits or not less than One Hundred Thousand ($100,000.00) per occurrence. (d) Dram Shop Liability Insurance. If the use of the Premises includes the sale of alcoholic beverages, the policy of commercial general liability insurance required pursuant to this Article shall include coverage for employer's liability, host liquor liability, liquor liability and so called "Dram Shop" liability coverage and a combined single limit of not less than Three Million and No/100 Dollars ($3,000,000.00), per occurrence. (e) Worker's Compensation Insurance. A policy or polices of workers' compensation insurance with an insurance carrier and in amounts approved by the Industrial Commission of the State of Arizona and a 12 policy of employer's liability insurance with limits of liability of not less than One Million and No/100 Dollars ($1,000,000.00). Both such policies shall contain waivers of subrogation in favor of the Landlord. Liability insurance policies shall name Landlord, Landlord's lender, Landlord's property manager, any person, firms, or corporations designated by Landlord and their respective representatives as "additional insured", and, with respect to property insurance policies, shall name Landlord, Landlord's lender and Landlord's property manager, and their respective representatives, as "loss payee." Landlord or Landlord's designated entities shall not by reason of their inclusion under said policy incur liability for payment of premiums. The policy shall contain an endorsement that insurer will not cancel or change insurance without first giving the Landlord twenty (20) days prior written notice. The insurance shall be issued by an insurance company, qualified to do business in Arizona, having not less than the most current Best's Key Rating Guide A+VII rating and a copy of the policy or certificate of insurance shall be delivered to Landlord prior to the commencement of Tenant's Work. All commercial general liability, property damage and other casualty policies shall be written as primary policies, and shall provide that any insurance which Landlord or Landlord's lender may carry is strictly excess, secondary and non-contributing with any insurance carried by Tenant. 7.3 Landlord's Insurance. Landlord, subject to reimbursement as provided herein, shall maintain fire and extended coverage insurance, rental loss insurance or any other insurance coverage deemed necessary by Landlord or Landlord's lender throughout the Rental Term in an amount equal to at least ninety percent (90%) of the replacement value (exclusive of foundation and excavation costs) of the Premises and/or building or Shopping Center of which the Premises are a part. Tenant agrees to reimburse Landlord for Tenant's pro rata share of any premiums for said insurance that may be incurred during the Rental Term. This reimbursement charge will be paid as Additional Rent as specified in Article 4. Tenant shall, at its own expense, comply with all the requirements of the insurance underwriters and any governmental authority having jurisdiction thereover necessary for the maintenance of reasonable fire and extended coverage insurance for the Premises, including the installation of fire extinguishers or automatic dry chemical extinguishing system. 7.4 Indemnification of Landlord. Tenant will indemnify, defend and hold Landlord harmless from and against any and all claims, demands, actions, damages, liability and expense (including reasonable attorneys' fees and costs of investigation with respect to any claim, demand or action) in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in, upon or at the Premises, or the occupancy or use by Tenant of the Premises or any part thereof, or occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, lessees or concessionaires. This indemnification shall not apply to damages resulting solely from the negligence of Landlord, unless covered by insurance required to be carried by Tenant. If Landlord shall be made a party to any litigation commenced by or against Tenant, then Tenant shall protect, defend and hold Landlord harmless and shall pay all costs, expenses and attorneys' fees incurred or paid by Landlord in connection with such litigation. Landlord may, at its option, require Tenant to assume Landlord's defense in any action covered by this Article through counsel satisfactory to Landlord. 7.5 Plate Glass. Tenant shall replace, at the expense of Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the Premises. Tenant shall have the option either to insure this risk or to self-insure. 7.6 Waiver. Tenant for itself its successors, assigns, and insurance companies insuring Tenant with respect to the Premises, hereby waives any right Tenant may have against Landlord on account of any loss, claim of loss or damage caused by Landlord and insured against under policies carried or required to be carried by Tenant hereunder. Tenant hereby waives on behalf of its carriers any right of subrogation it may have against Landlord and shall notify its carriers of the waiver contained herein. ARTICLE 8 -UTILITIES SERVICES/UTILITY SERVICES EXPENSES If any heat, water, gas, electricity, phone, cable or any other utility (cumulatively, "Utility") used, consumed or provided in or furnished or attributable to the Premises is separately metered, Tenant shall be solely responsible for and promptly pay all charges for the Utility. If any Utility is not separately metered then Tenant 13 shall pay its pro rata share as Additional Rent as specified in Article 4. In no event shall Landlord be liable for an interruption or failure in the supply of any such Utility to the Premises. ARTICLE 9 -USE AND OPERATION 9.1 Tenant's Use and Trade Name. Tenant shall use the Premises solely for the purpose specified in Article 1.9 and under the trade name specified in Article 1.1. Tenant agrees to advertise the business under the name specified in Article 1.1 and not to change the advertised name of the business operated in the Premises without the written consent of Landlord. Tenant shall not use nor permit the Premises to be used for any other purpose or purposes without the prior written consent of Landlord, which consent may be withheld in Landlord's sole discretion. Tenant shall not conduct any illegal, pornographic, sexually explicit, offensive, noisy or dangerous activities at the Premises or in the Common Areas, including, but not limited to, the sale or display of any illegal, pornographic or sexually explicit materials. Tenant further covenants and agrees that it will not use, nor suffer or permit any person or persons to use the Premises or any part thereof for any use or purpose in violation of the laws, ordinances, Declarations, covenants or restrictions, rules, regulations or requirements, whether private or under any governmental authority having jurisdiction, which are now or hereafter in effect or as may change from time to time. Tenant, at its sole cost and expense which Tenant shall promptly pay, shall promptly take all actions necessary to comply with all applicable statutes, ordinances, rules, regulations, orders, licenses, permits, approvals and requirements regulating the use by Tenant of the Premises, whether now or hereafter in effect. Landlord does not represent or warrant that it will obtain for Tenant (or that Tenant will be able to obtain) any license or permit. 9.2 Insurance Use Restrictions. Tenant agrees not to conduct and operate its business in any manner which could jeopardize or increase the rate of any fire or other insurance or so that the same shall constitute a nuisance to or interfere with the other property of Landlord or its business or the property or business of other tenants of the Shopping Center. Tenant may not display or sell merchandise, or allow carts, portable signs, devices or any other objects to be stored or to remain outside the defined exterior walls or roof and permanent doorways of the Premises. 9.3 Deliveries. Tenant shall use its best efforts to complete or cause to be completed all deliveries, loading, unloading and services to the Premises prior to 10:00 A.M. each day, and to prevent delivery trucks or other vehicles servicing the Premises from parking or standing in service areas for undue periods of time. All deliveries shall be made through the rear entrance of the Premises, provided there is one. Landlord reserves the right to further regulate Tenant's deliveries and servicing of the Premises, and Tenant agrees to abide by such further reasonable regulations of Landlord. 9.4 Operating Covenant. During the entire Rental Term, Tenant shall continuously operate one hundred percent (100%) of the Premises with due diligence and efficiency so as to produce all of the gross sales which may be produced by such manner of operation. Tenant shall carry at all times in said Premises a stock of merchandise of such size, character and quality as shall be reasonably designed to produce the maximum return to Landlord and Tenant. Tenant shall conduct its business in the Premises during the regular customary days and hours for such type of business in the City or trade area in which the Shopping Center is located, and will keep the Premises open for business during the same days, nights and hours as the majority of the retail tenants located in the Shopping Center. Tenant shall keep the display windows and signs, if any, in the Premises well lit during the hours from sundown to 10:00 P.M., unless prevented by causes beyond control of Tenant. In addition to any remedies available to Landlord at law or under this Lease, Tenant shall pay as Additional Rent, in excess of all other monetary requirements under the Lease, a monthly penalty equal to 50% of the then current monthly amount of Minimum Annual Rent throughout any period during which this Operating Covenant is violated. Tenant shall not remove any of its trade fixtures or other personal property, without the immediate replacement thereof with similar fixtures or property, so as to render the Premises suitable for the conduct of Tenant's business as set forth above. 14 9.5 Non-competition. Landlord and Tenant acknowledge that the Shopping Center is an interdependent enterprise and that the realization of the benefits of this Lease, both to Landlord and Tenant, are dependent upon Tenant creating and maintaining a successful and profitable retail operation in the Premises. Accordingly, Tenant and its shareholders, principals, members, managers or officers ("Affiliates") shall not, during the Rental Term directly or indirectly engage in as owner, operator, proprietor, manager, stockholder, officer, director, franchisor, franchisee, principal, agent, representative, lender, consultant or partner any business directly or indirectly competitive with the business to be conducted at the Premises (not so operated or owned on the Lease Date) within a radius of three (3) miles from the location of the Premises. 9.6 Certificate of Occupancy. Tenant will not use or occupy the Premises in violation of the certificate of occupancy issued for the Premises, and in the event that any governmental authority having jurisdiction thereof shall hereafter consent and/or declare by notice, violation or in any manner whatsoever that the Premises are being used for a purpose which is a violation of such certificate of occupancy, Tenant shall, within five (5) days after written notice from Landlord or any governmental agency, immediately discontinue such use of the Premises. 9.7 Other Use Restrictions. Tenant shall not permit the use of any part of the Premises for sleeping apartments or lodging. No auction, distress, going-out-of-business, fire or bankruptcy sales shall be conducted in the Premises without the advance written consent of Landlord. Tenant shall not, without prior written consent of Landlord, sell merchandise from vending machines or allow any coin-operated vending, gaming, arcade, or video game machines on the Premises. Tenant will not use or operate the Premises so as to emit therefrom any noise, litter, or odor which, in Landlord's sole opinion, is obnoxious or otherwise constitutes a public or private nuisance. Tenant shall keep the sidewalks abutting the Premises clear and clean, and shall not permit any business or display of merchandise to be operated or maintained in front of the Premises. Tenant shall not perform any acts or carry on any practices which may injure the building or be a nuisance or menace to other tenants in the Shopping Center. Tenant shall not offer within any part of the Premises any goods or services that Landlord determines, in its sole discretion, to be inconsistent with the image of a first-class shopping center. 9.8 Hazardous Materials. (a) Tenant shall not create, bring into or store in or on the Premises any "Hazardous Materials", as that term is defined below. Tenant shall comply with all laws and regulations, promulgated by any government, quasi-government or regulatory agency or authority, with regard to its handling, storage and disposal of Hazardous Materials. (b) Tenant hereby agrees that it will remediate, on a basis consistent with applicable laws, any release of Hazardous Materials which is required to be remediated under such laws. In those instances where Tenant has a duty to remediate pursuant to the immediately preceding sentence, Tenant shall commence the process necessary for such remediation with reasonable promptness, and thereafter shall pursue such remediation to completion with reasonable promptness. Tenant hereby agrees that any such remediation required under this Article shall be consistent with all laws and consistent with the requirements of commercially sound "risk"-based remediation analysis then adopted by major corporate institutions for remediation of similar contamination ("Remediation Standards"). In any case where Tenant as the responsible party is required or requested by Landlord or any other party to remediate (or bear the cost of remediating) any Hazardous Materials in, on, under, or about the Shopping Center: (i) Tenant shall be permitted, subject to reasonable participation by Landlord, to supervise the investigation of the extent of the release of Hazardous Materials in question; (ii) Tenant shall be permitted, subject to the reasonable approval of Landlord, to structure and negotiate the remediation plan to be submitted to and approved by the governmental authorities having jurisdiction; and (iii) Tenant shall be permitted, subject to reasonable participation by Landlord, to supervise the actual remediation. (c) As used herein, the term "Hazardous Materials" means any hazardous or toxic substance, material or waste that is or becomes regulated by any local governmental authority, the State of Arizona or the United States Government. The term "Hazardous Materials" includes, without limitation, any material or substance which is (i) defined as a "hazardous waste," or "hazardous substance" under (a) The Arizona Water Quality 15 Assurance Revolving Fund, A.R.S. § 49-281 et seq., (b) The Arizona Hazardous Waste Management Act, A.R.S. § 49-92 1 et seq., (c) The Arizona Environmental Quality Act, Laws 1986, Chapter 368, Laws 1987, Chapter 317; A.R.S. § 49-1001 et seq. (and all regulations promulgated thereunder), (ii) petroleum, (iii) asbestos or asbestos containing materials, (iv) designated as a "hazardous substance" pursuant to Article 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1317), (v) defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6902 et seq. (42 U.S.C. §6903), or (vi) defined as a "hazardous substance" pursuant to Section 101 of the Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (42 U.S.C. § 9601). ARTICLE 10 -MAINTENANCE AND SANITATION 10.1 Maintenance by Tenant. Tenant shall at all times keep the entire Premises in good order, condition and repair, well-maintained and make replacements and/or repairs as necessary. Tenant's responsibilities hereunder shall include, without limitation, store fronts, glass, window frames or cases, window moldings, doors or door frames, exterior entrances, all partitions, interior walls, doors, door jams, door closures, door hardware, fixtures, equipment and appurtenances thereof, electrical, lighting, heating, plumbing and plumbing fixtures, any air conditioning system (including leaks around ducts, pipes, vents, or other parts of the air conditioning, heating, or plumbing systems which protrude through the roof), and reasonable periodic painting as determined by Landlord. Tenant shall also repair any damage to the structural portions of the roof and Premises resulting from Tenant's negligent acts or omissions, or anyone acting or claiming under Tenant, as a result of the failure of Tenant, or anyone claiming under Tenant, to perform or observe the covenants or conditions in this Lease or resulting from alterations, additions or improvements to the Premises made by Tenant or anyone claiming under or acting through Tenant. Tenant shall contract with a service company for the quarterly maintenance of heating and air-conditioning equipment which exclusively serves the Premises, with a copy of the service contract to be furnished to the Landlord within ten (10) days after opening for business, and a copy of any subsequent contracts to be furnished from time to time during the Rental Term. Tenant shall contract with a service company for the quarterly maintenance and cleaning of Tenants grease trap equipment (if any) with a copy of the service contract to be furnished to the Landlord within ten (10) days after opening for business. Tenant shall also promptly provide Landlord with proof of payment for the services required above. 10.2 Maintenance By Landlord. If Tenant refuses or neglects to maintain or repair the Premises properly as required hereunder and to the satisfaction of the Landlord as soon as reasonably possible after written demand, Landlord may make such repairs without liability to Tenant for any loss or damage that may accrue to Tenant's merchandise, fixtures or other property or to Tenant's business thereof, and, upon completion thereof and presentation of a bill therefore, Tenant shall pay to Landlord as Additional Rent Landlord's cost for making such repairs, plus twenty (20%) percent for Landlord's administrative costs. ARTICLE 11-RULES AND REGULATIONS 11.1 Shopping Center Rules and Regulations. The Tenant agrees to comply with all current and future rules and regulations of the Shopping Center. The current rules are as follows: (a) All loading and unloading of goods shall be done only at such times, in the areas, and through the entrances, designated for such purposes by Landlord. The delivery or shipping of merchandise, supplies and fixtures to and from the Premises shall be subject to Article 9.3 and to such rules and regulations as in the judgment of the Landlord are necessary for the proper operation of the Premises or Shopping Center. (b) All garbage and refuse shall be kept in the kind of container specified by Landlord, and shall be placed outside of the Premises prepared for collection in the manner and at the times and places specified by Landlord. If Landlord shall provide or designate a service for picking up refuse and garbage, Tenant shall use such provider at Tenant's cost. Tenant shall pay the cost of removal of any of Tenant's refuse or rubbish. In the 16 event Landlord does not contract for trash service with Tenant reimbursing Landlord for same, Tenant shall contract with and pay for refuse and garbage service separately with a service provider approved by Landlord. (c) Landlord and Tenant hereby acknowledge and agree that, Landlord may provide trash and/or cigarettes ash/buds receptacles about the Shopping Center. Tenant shall be responsible and shall cause such trash, ash, and cigarette buds to be removed from the area as often as reasonably necessary if any receptacle is placed within the sidewalk of Tenant's store front. If Tenant fails to remove this trash Landlord may, at Landlord's sole discretion, take over the removal of trash and charge a removal fee as part of Common Area Expenses pursuant to Article 5. (d) No aerial, satellite dish or any other item requiring an exterior wall or roof penetration shall be visible from the Common Areas or shall be erected on the roof or exterior walls of the Premises, or on the grounds, without in each instance, the prior written consent of the Landlord. Any aerial so installed without such written consent shall be subject to removal without notice at any time. Tenant shall be responsible for the cost to remove and/or repair any roof penetrations caused by Tenant or Tenant's agents. (e) No loudspeakers, 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 the Landlord. (f) The outside areas immediately adjoining the Premises shall be kept clean and free from dirt and rubbish by the Tenant to the satisfaction of the Landlord, and Tenant shall not place or permit any obstructions or merchandise in such areas. It shall be the duty of Tenant to keep all Common Areas free and clear of any obstructions created or permitted by Tenant or resulting from Tenant's operation and to permit the use of any of said areas only for the purposes set forth in Article 5. (g) Tenant and Tenant's employees shall not be permitted to park their automobiles in the automobile parking areas, which may from time to time be designated by Landlord for customers of the Shopping Center. Tenant hereby authorizes Landlord to tow away from the Shopping Center any car or cars belonging to Tenant or Tenant's employees, and/or to attach violation stickers or notices to such cars that are parked in customer parking areas. Tenant and Tenant's employees shall park their cars only in those portions of the parking area designated for that purpose by Landlord. If Tenant or Tenant's employees park in an area not designated for employee parking then Tenant will be in default of this lease and, at Landlord's option, Landlord may cancel this lease. (h) 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 deposited therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by Tenant. Tenant shall be liable for all acts of its employees, agents or invitees relative to this rule. (i) Tenant shall use, at Tenant's cost, a reputable pest extermination contractor at reasonable intervals, but not less than once every three months, to prevent any infestation. (j) Tenant shall not have any open fires, or burn any trash or garbage of any kind in or about the Premises or the Shopping Center. (k) Tenant and Tenant's employees and agents shall not solicit business in the parking or other Common Areas, nor shall Tenant distribute any handbills or other advertising matter on automobiles in the Shopping Center. 11.2 Right to Amend Rules and ReEUlations. Landlord may from time to time to amend or supplement the foregoing rules and regulations, and to adopt and promulgate additional rules and regulations applicable to the Premises and/or the Shopping Center in Landlord's sole and absolute discretion. Notice of such rules and regulations and amendments and supplements thereto, if any, shall be given to Tenant. 17 11.3 Compliance. Should Tenant be in violation of any of the foregoing rules and regulations, Tenant agrees to immediately comply with same upon notice to Tenant from Landlord or Tenant shall be in material default of this Lease. ARTICLE 12 -CONSTRUCTION, ALTERATION, REPAIR AND LIENS 12.1 Consent Reauired. Tenant shall not make any alterations or additions to the Premises without the prior written consent of Landlord. The plans and specifications for any and all such work shall first receive the prior written approval of Landlord. In the event that Tenant shall make any permitted alterations or changes to the Premises under the terms and provisions of this Article, Tenant agrees to carry such additional property insurance as may be necessary to fully insure on a primary, non-contributory basis all such alterations and changes, it being expressly understood and agreed that none of such alterations or changes shall be insured by Landlord. All fixtures installed by Tenant shall be new or completely reconditioned. 12.2 Liens. Tenant shall pay or cause to be paid all costs for work done by it, or caused to be done by it, on, and for materials furnished to, the Premises, and Tenant shall keep the Premises free and clear of all mechanics' or materialmen's liens and other liens on account of work done by Tenant or persons claiming under it. Tenant agrees to and shall indemnify and save Landlord and any fee Landlord (if any) free and harmless against liability, loss, damage, costs, attorneys' fees, and all other expenses on account of claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished for Tenant or persons claiming under it. If any claim of lien should be perfected against the Premises or the Shopping Center or any interest in either, Tenant shall, within fifteen (15) days thereafter, cause the property which is subject to the lien to be discharged therefrom either by paying the same or by filing or recording a surety bond in accordance with the provisions of the laws of the State of Arizona. If Tenant shall be in default in paying any charge for which a mechanics' or materialmen's lien claim and suit to foreclose the lien have been filed and shall not have filed or recorded the surety bond referred to above, Landlord may (but shall not be required to) pay the said claim and any costs, and the amount so paid, together with reasonable attorneys' fees incurred in connection therewith, shall be immediately due and owing from Tenant to Landlord, and Tenant shall pay the same to Landlord with interest at one and one-half percent (1-1/2%) per month from the dates of Landlord's payments. Should any claims of lien be filed against the Premises or any action affecting the title to such property be commenced, the party receiving notice of such lien or action, whether Landlord or Tenant, shall forthwith give the other notice thereof. 12.3 Provisions Relating to Construction of Tenant's Store. (a) Landlord shall construct the Premises for Tenant's use and occupancy in accordance with plans and specifications prepared by Landlord or its agents, incorporating in such construction all items of work described in Exhibit "B". Any work in addition to any of the items specifically enumerated in said Exhibit "B" shall be performed by the Tenant at its own cost and expense and are referred to as "Tenant's Work". Any equipment or work other than those items specifically enumerated in Exhibit "B" which Landlord installs or constructs in the Premises on the Tenant's behalf shall be paid for by the Tenant within fifteen (15) days after receipt of a bill therefore at cost, plus overhead, supervision and architectural expense. (b) Landlord shall deliver a floor plan of the Premises to Tenant showing thereon the columns and other structural work in the Premises. Within thirty (30) days after receipt of said floor plan, Tenant agrees to submit to Landlord two (2) sets of fully dimensioned scale drawings at Tenant's expense, which drawings shall indicate the specific requirements of Tenant's space, clearly outlining the store in detail, including types of materials and colors, interior partitions, reflected ceiling plan, plumbing fixtures and electrical plans prepared by a licensed electrical engineer setting forth all electric requirements of Tenant, all in conformity with the description of Landlord's Work. The aforementioned drawings are subject to Landlord's approval. (c) The Tenant agrees that upon Turnover of the Premises that the Tenant will accept the building in the condition which it may then be and waives any right or claim against the Landlord for any cause directly or indirectly, arising out of the condition of the Premises, appurtenances thereto, the improvements thereon and the 18 equipment thereof; Tenant shall thereafter save and hold harmless the Landlord from liability as provided in this Lease. The Landlord shall not be liable for any latent or patent defects therein. (d) The fact that the Tenant may enter into possession prior to the actual completion of the building for the purpose of installing fixtures and equipment shall not be deemed an acceptance by the Tenant of completion by the Landlord until actual completion shall have taken place, but in such event Tenant shall hold Landlord harmless and indemnify Landlord for any loss or damage to Tenant's fixtures, equipment and merchandise and for injury to any persons, unless same be caused by the active negligence of Landlord or its agents. (e) Tenant shall require all contractors of Tenant performing Tenant's Work on the Premises to carry and maintain public liability and worker's compensation insurance adequate to fully protect Landlord as well as Tenant from and against any and all liability for death of or injury to person or damage to property caused in or about or by reason of the construction of Tenant's Work. (fl Tenant hereby releases Landlord from any claim whatsoever for damages against Landlord for any delay in the date on which the Premises shall be ready for occupancy by Tenant. (g) All work undertaken by Tenant shall be at Tenant's expense and shall not damage the building or any part thereof. The design of all work and installations undertaken by Tenant shall be subject to the approval of Landlord and be in compliance with all applicable governmental laws and regulations. 12.4 Tenant's Use of Its Own Contractor. Anything to the contrary notwithstanding in this Lease and subject to Landlord's reasonable approval, Tenant may secure bids from any bondable contractors for any of the work to be done by Tenant. Tenant's contractor shall commence the construction of Tenant's work promptly upon delivery to it of possession of the Premises and shall diligently pursue such construction to completion, and Tenant shall open the Premises for business within ninety (90) days after said delivery date. It is further understood and agreed that the items set forth below shall be incorporated as "Special Conditions" into the contract between Tenant and its contractor as follows (with a copy of the contract to be furnished Landlord prior to the commencement of Tenant's construction work): (a) Tenant's contractor shall perform said work in a manner and at times which do not impede or delay Landlord's contractor in the completion of the Premises as provided in this Lease. Any delays in the completion of the Premises and any damage to any work caused by Tenant's contractor shall be at the sole cost and expense of Tenant. (b) Tenant's contractor shall be responsible for the repair, replacement or clean-up of any damage done by him to other contractor's work which specifically includes accessways to the Premises which may be concurrently used by others. (c) Tenant's contractor shall accept the Premises prior to starting any trenching operations. Any rework or sub-base or compaction required after the contractor's initial acceptance of the Premises shall be done by Tenant's contractor, which shall include the removal from the project site of any excess dirt or debris. (d) Tenant's contractor shall contain his storage of materials and his operations within the Premises and such other space as he may be assigned by Landlord's contractor. Should he be assigned space outside of the Premises, he shall move to such other space as Landlord's contractor shall direct from time to time to avoid interference or delays with other work. (e) All trash and surplus construction materials shall be stored within the Premises and shall be promptly removed from the project site. 19 (f) Tenant's contractor shall provide temporary utilities, portable toilet facilities and portable drinking water as required for his work within the Premises and shall pay to Landlord's contractor the cost of any temporary utilities and facilities provided by Landlord's contractor at Tenant's contractor's request. (g) Tenant's contractor shall notify Landlord of any planned work to be done on weekends or other than normal job hours. (h) Tenant and Tenant's contractor are responsible for compliance with all applicable codes and regulations of duly constituted authorities having jurisdiction insofar as the performance of the work and completed improvements are concerned for all work performed by Tenant or Tenant's contractor and all applicable safety regulations established by the general contractor for the project, and Tenant further agrees to save and hold Landlord harmless for said work. Prior to commencement of construction, Tenant shall submit to Landlord evidence of proper insurance coverage as required in this Lease. (i) Tenant's contractor or subcontractors shall not post signs on any part of the construction project on the Tenant's Premises or anywhere in the Shopping Center except as required by applicable municipal ordinance. (j) Notwithstanding any other provisions of this Lease, Tenant shall be responsible for and shall obtain and record a Notice of Completion promptly following the completion of Tenant's Work. Tenant shall immediately mail a copy of the aforementioned Notice of Completion to Landlord after final recordation. (k) Prior to the commencement of construction and at Landlord's option, Tenant shall obtain or cause Tenant's contractor to obtain payment and performance bonds covering the faithful performance of the contract for the construction of Tenant's Work and the payment of all obligations arising thereunder. Such bonds shall be for the mutual benefit of both Landlord and Tenant and shall be issued in the names of both Landlord and Tenant as obliges and beneficiaries. Prior to the date Tenant commences construction of Tenant's Work, Tenant shall submit evidence satisfactory to Landlord that such bonds have been issued. (1) Upon completion of construction and prior to opening of business, Tenant shall provide Landlord with a complete set of "As-Built" building plans and a Certificate of Occupancy for the Premises. ARTICLE 13 -FIXTURES AND PERSONAL PROPERTY 13.1 Ownershiu. Any trade fixtures, signs and other personal property of Tenant not permanently affixed to the Premises shall remain the property of Tenant, and Landlord agrees that Tenant shall have the right, provided Tenant is not in default under the terms of this Lease, at any time, and from time to time, to remove any and all of its trade fixtures, signs and other personal property which it may have stored or installed in the Premises, including, without limitation, counters, shelving, showcases, mirrors and other movable personal property. Nothing contained in this Article shall be deemed or construed to permit or allow Tenant to remove such personal property, without the immediate replacement thereof with similar personal property of comparable or better quality. Tenant shall have no right, title, or interest at any time in or to any electric, telephone, satellite or other electronic or telecommunication systems, wiring, conduits, equipment or facilities of any kind or nature now or hereafter developed or any substitutes or replacements therefore located within the Shopping Center anywhere outside the Premises whether or not the same shall have been installed by or on behalf of Tenant or at Tenant's request and/or expense. 13.2 Personal Prouerty Taxes. Tenant shall pay before delinquency all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operation, as well as upon its trade fixtures, merchandise and other personal property in or upon the Premises. In the event any such items of property are assessed with the property of Landlord, such assessment shall be divided between Landlord and Tenant to the end that Tenant shall pay only its equitable portion of such assessment as determined by Landlord. No taxes, assessments, fees or charges referred to in this paragraph shall be considered as real property taxes under the provisions of Article 6.2. 20 13.3 Loss and Damage. Landlord shall not be liable for any damage to property of Tenant, or of others, located on or about the Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise. Landlord shall not be liable to Tenant, Tenant's employees or representatives for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or leaks from any part of the Premises or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature. Landlord shall not be liable to Tenant, Tenant's employees or representatives for any such damage caused by other tenants or persons in the Premises, occupants of adjacent property, of the Shopping Center, or the public, or caused by operations in construction of any private, public or quasi-public work. All property of Tenant kept or stored on the Premises shall be so kept or stored at the risk of Tenant only and Tenant shall hold Landlord harmless from any claims arising out of damage to the same, including subrogation claims by Tenant's insurance carriers, unless such damage shall be caused by the intentional acts or gross negligence of Landlord. Tenant shall give immediate notice to Landlord in case of fire or accidents in the Premises or in the building of which the Premises are a part or of completion of original construction of Premises of defects therein or in any fixtures or equipment. ARTICLE 14 -SURRENDER OF PREMISES 14.1 Condition of Premises. On or before the date this Lease and the Rental Term hereby created terminate (the "Termination Date"), or on or before the date Tenant's right of possession terminates, whether by lapse of time, abandonment, or at the option of Landlord, Tenant shall: (a) Remove from the Premises and the Building all of Tenant's personal property and repair and/or replace any damage to the Premises; (b) Surrender possession of the Premises to Landlord in a first class condition with all systems in good working condition and free of all rubbish and debris. Tenant shall promptly surrender all keys for the Premises at the place then fixed for payment of rent, unless otherwise notified by Landlord, and shall inform Landlord of combinations on any locks and safes on the Premises; and (c) All improvements to the Premises by Tenant, including but not limited to recessed lighting fixtures, floor coverings, carpeting, draperies, and partitions, but excluding movable trade fixtures, decorative lighting fixtures and signs, shall become the property of Landlord and remain in the Premises upon the Termination Date or earlier termination of this Lease, unless Landlord requests their removal in which event Tenant shall remove them in such a manner as to minimize the damage to the Premises. Tenant shall repair any damage to the Premises caused by the removal of any property from the Premises. At Landlord's election, upon the Termination date or earlier termination of this Lease, Tenant shall remove those alterations, improvements or additions installed for or during Tenant's occupancy, whether installed by Landlord or Tenant, or acquired by Tenant from former tenants and restore the Premises to its original condition as of the date of Turnover. 14.2 Landlord Rights. If Tenant shall fail or refuse to restore the Premises to the above-described condition on or before the Termination Date, Landlord may put the Premises in such condition and recover from Tenant Landlord's cost of so doing. Without limiting the generality of the foregoing, Tenant agrees to pay Landlord, upon demand, the cost of restoring the walls, ceilings and floors of the Premises to a first class condition. If Tenant shall fail or refuse to comply with Tenant's duty to remove all trade fixtures, furniture and personal property from the Premises and the building on or before the Termination Date, the parties hereto agree and stipulate that Landlord may, at its election: (a) Treat such failure or refusal as an offer by Tenant to transfer title to such trade fixtures, furniture and personal property to Landlord, in which event title thereto shall thereupon pass under this Lease as a bill of sale to and vest in Landlord absolutely without any cost either by setoff, credit allowance or otherwise, and Landlord may remove, sell, donate, destroy, store, discard or otherwise dispose of all or any part of said personal property in any manner that Landlord shall choose; or, 21 (b) Treat such failure or refusal as conclusive evidence on which Landlord shall be entitled absolutely to rely and act, that Tenant has forever abandoned such trade fixtures, furniture and personal property, and, without accepting title thereto, Landlord may, at Tenant's expense, remove, store, destroy, discard or otherwise dispose of all or any part thereof in any manner that Landlord shall choose without incumng liability to Tenant or to any other person. In no event shall Landlord ever become or accept to be charged with the duties of a bailee (either voluntary or involuntary) of any personal property, and the failure of Tenant to remove all personal property from the Premises shall forever bar Tenant from bringing any action or from asserting any liability against Landlord with respect to any such property Tenant fails to remove. If Tenant shall fail or refuse to surrender possession of the Premises to Landlord on or before the Termination Date, Landlord may forthwith re-enter the Premises and repossess itself thereof as of its former estate and remove all persons and effects thereon, using such force as may be necessary, without being guilty of any manner of trespass or forcible entry or detainer. 14.3 Documentation. At the Termination Date or earlier termination of the Rental Term, Tenant shall execute, acknowledge and deliver to Landlord, within five (5) days after written demand from Landlord to Tenant, any quit-claim deed or other document required by a reputable title company to remove the cloud of this Lease from the real properly upon which the Premises are situated. ARTICLE 15 -SIGNS 15.1 Sign Criteria. Tenant shall not display, affix or maintain upon the glass panes and supports of the show windows or any doors (and within 24 inches of any such window or door) or the exterior walls of the Premises, or anywhere within the Premises if the same is visible from outside the Premises, any sign, lettering, advertising placard or advertisement, decoration, name, notice, insignia, trademark, descriptive material or any other such like item or items (hereinafter any of the foregoing sometimes being referred to as a "Sign" or "Signs"), except such Signs as shall have first received the written approval of Landlord as to size, type, color, location, copy, nature and display qualities. All Signs shall conform to Landlord's Sign Criteria as set forth in Exhibit "C" and shall be in compliance with all applicable governmental laws and regulations. Full and complete specifications of all Signs, including without limitation materials, colors, design, size of panel, lettering, logo, and other design elements, manner of installation, illumination, and any other features, shall be submitted to Landlord for Landlord's review and prior written consent. Tenant shall be required to install a permanent exterior wall sign, according to the Sign Criteria in Exhibit "C", upon the building in which the Premises is located within ninety (90) days after opening for business. All costs whatsoever, including without limitation any applicable permits or ongoing maintenance, relating to any Signs, banners, posters, placards, nameplates or advertisements of any kind or nature shall be solely the responsibility of Tenant. If Tenant installs a sign that does not conform to the Sign Criteria without Landlord's prior written approval, Tenant, at Tenant's expense, shall immediately remove such sign and restore any damage from removal of the same. Tenant acknowledges that the Premises are a part of an integrated Shopping Center and that control of all Signs by Landlord is essential to the maintenance of uniformity, propriety and aesthetic values in said Shopping Center. Anything to the contrary in this Lease notwithstanding, Tenant shall not affix any Sign to the roof of the Premises and no advertising medium shall be utilized by Tenant in the Shopping Center which can be heard or experienced outside the Premises, including without limiting the generality of the foregoing, flashing lights, searchlights, musical instruments, loudspeakers, phonographs, radios, televisions, scents or odors. In addition, Tenant shall not display, paint or place or cause to be displayed, painted or placed, any handbills, bumper stickers or other advertising devices or Signs on any vehicle parked in the Shopping Center, whether belonging to Tenant, or to Tenant's agent, or to any other person; nor shall Tenant distribute, or cause to be distributed, in the Shopping Center any handbills or other advertising devices. 15.2 Sign Removal/Fines. Tenant shall, upon request of Landlord, immediately remove any exterior Sign (or interior Sign, if the same is visible from outside the Premises) which Tenant has placed or permitted to be placed in, upon, above or about the Premises and which Landlord reasonably deems objectionable or offensive; provided, however, in no event shall Tenant be permitted to display on or within its windows or storefront (or anywhere within the Premises if the same is visible from outside the Premises) any advertisement of its Internet or web site or any other computer, telephonic, video or other electronic or technology based communication or sales 22 system(s). If Tenant refuses or fails to remove any such Sign within twenty-four (24) hours following notice from Landlord to remove the same, then Landlord may remove the same and may, if necessary, enter upon the Premises to do so. Tenant shall be solely responsible for any and all fines, duties and liens whatsoever imposed upon Landlord or the Shopping Center by any governmental body or agency having jurisdiction thereover pertaining to any Sign which Tenant has placed or permitted to be placed in, upon, above or about the Premises which is in violation of any ordinance, rule, law, directive, regulation, requirement, guideline or order of such body or agency. ARTICLE 16 -ASSIGNMENT AND SUBLETTING All assignments and/or sub-leases of this Lease require the written consent of Landlord, which consent shall be granted or withheld in Landlord's sole and absolute discretion. Tenant shall submit to Landlord such information as requested in connection with Tenant's request for consent to a transfer, including financial statements and tax returns in order to evaluate the solvency, financial responsibility and the business acumen and experience of the proposed transferee. However, consent to an assignment, sublease or transfer of any kind shall not release Tenant or any Guarantors of Tenant's obligations from liability for the continued performance of the terms and provisions on the part of Tenant to be kept and performed. Should Landlord approve of an assignment or sub-lease, all monies paid by transferee in connection with such assignment or sub-lease in excess of those due under this Lease shall be directly remitted to Landlord in full. Whenever Landlord's consent is requested, Tenant shall pay to Landlord for Landlord's actual reasonable attorneys' fees, accounting fees and other costs incurred by Landlord in connection with the processing and documentation of any such requested transfer of this Lease. ARTICLE 17 -SALE OF PREMISES In the event Landlord shall sell, convey, transfer, assign or exchange the Shopping Center or the building of which the Premises are a part, Tenant agrees to recognize and attorn to the purchaser, or transferee, as the Landlord hereunder and Landlord shall be and is hereby relieved and released from any liability under any and all of its covenants and obligations hereunder arising out of any act, occurrence or event arising after such sale, conveyance, transfer or exchange or occurring after the consummation of such sale or exchange and assignment. ARTICLE 18 -DEFAULT OF THE TENANT; REMEDIES 18.1 Events of Default. The occurrence of any of the following shall constitute a default and material breach of this Lease by Tenant: (a) Any failure by Tenant to pay any Minimum Annual Rent, Percentage Rent, Additional Rent or any other monetary obligation or any other sum required to be paid under this Lease when due, or any part thereof, where such failure continues for a period of five (5) days; or (b) Any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for a period of ten (10) days after written notice thereof from Landlord to Tenant; provided that if the nature of such default is such that the same cannot reasonably be cured within a ten (10) day period, Tenant shall not be deemed to be in default if it shall commence such cure within such period and thereafter rectify and cure said default with due diligence; or (c) Abandonment of the Premises by Tenant, vacation of the Premises by Tenant, or the failure of Tenant to be open to the public for business in the Premises for a period of ten (10) consecutive days and/or Tenant's failure to take possession of the Premises at the time provided in this Lease; or (d) Tenant or any guarantor of Tenant's obligations under this Lease makes an assignment for the benefit of creditors, files a petition in bankruptcy, takes the benefit of any insolvency act, is dissolved, or adjudicated as bankrupt, or an involuntary petition in bankruptcy is filed by any party against Tenant or any 23 guarantor, a receiver is appointed for Tenant's business or its assets, or Tenant's assets are otherwise seized by process of law; or (e) Tenant, or any guarantor of Tenant's obligations under this Lease, falsifies any report or misrepresents other information required to be furnished to Landlord pursuant to this Lease; or (f) If within any twelve (12) month period during the Rental Term hereof, Tenant shall have failed to perform or been in default under the same Article more than two (2) times and Landlord, because of such failures or defaults, shall have served upon Tenant within said twelve (12) month period two (2) or more notices of any such failure or default, then any third or subsequent default under said Article within said twelve (12) month period shall be deemed a noncurable default and Landlord, in addition to all other rights and remedies it may have hereunder, shall be entitled to immediate possession of the Premises at Landlord's election. 18.2 Remedies. In the event of a default by Tenant, Landlord, in addition to all other rights and remedies available to it whether hereunder or at law or in equity, at its option, without further notice or demand of any kind to Tenant or any other person may: (a) Declare the Rental Term hereof ended and reenter the Premises and take possession thereof and remove all persons therefrom, and Tenant shall have no further claim thereon or hereunder; or (b) Without declaring the Rental Term hereof ended, reenter the Premises and occupy the whole or any part thereof for and on account of Tenant and collect any unpaid Minimum Annual Rent, Percentage Rent and Additional Rent, which have become payable, or which may thereafter become payable; or (c) Even though it may have initially reentered the Premises without termination of the Rental Term, thereafter elect to terminate the Rental Term and all of the rights of Tenant in or to the Premises. Should Landlord have reentered the Premises under the provisions of subsection (b) above, Landlord shall not be deemed to have terminated the Rental Term, or the obligation of Tenant to pay any Minimum Annual Rent, Percentage Rent, Additional Rent or other charges of Tenant thereafter accruing, or to have terminated Tenant's liability for damages under any of the provisions hereof, by any such reentry 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 the Rental Term, and Tenant further covenants that the service by Landlord of any notice pursuant to the unlawful detainer statutes of the State of Arizona 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 written notice to Tenant) be deemed to be a termination of the Rental Term. In the event of any entry or taking possession of the Premises as aforesaid, Landlord shall have the right, but not the obligation, to remove therefrom all or any part of the personal property located therein and may place the same in storage at a public warehouse at the expense and risk of Tenant. In addition, Tenant agrees to pay to Landlord as additional damages, whether or not this Lease is terminated by Landlord, the cost of repairs, alterations, redecorating, leasing commissions and all of Landlord's other expenses incurred in reletting the Premises to a new tenant. 18.3 Landlord's Lien/Security Interest. Tenant agrees that Landlord shall have a landlord's lien, and additionally hereby separately grants to Landlord a first and prior security interest, in, on and against all personal property of Tenant from time to time situated on the Premises, which lien and security interest shall secure the payment of all rental and additional charges payable by Tenant to Landlord under the terms hereof. Tenant expressly acknowledges and agrees that, in addition to all other rights and remedies Landlord may have hereunder or at law or in equity, in the event of any default of Tenant hereunder, Landlord shall have any and all rights and remedies granted to a secured party under the Uniform Commercial Code then in effect in the State of Arizona. 18.4 No Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent or other sum 24 hereunder by Landlord shall not be deemed to be a waiver of any preceding breach of Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rent or other sum so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent or other sum. No endorsement or statement on any check or any letter accompanying any check or payment of a lesser amount of any rent or other sum due hereunder shall be deemed an accord and satisfaction, and Landlord's acceptance of such check or lesser amount shall be on account only and without prejudice to Landlord's right to recover the balance of such rent or other sum, none of Landlord's rights and remedies being affected thereby. No covenant, term or condition of this Lease shall be deemed to have been waived by Landlord unless such waiver shall be in writing by Landlord. 18.5 Damages. In the event of Tenant's default as set forth above, Landlord may either terminate this Lease or may from time to time, without terminating this Lease, recover all Minimum Annual Rent, Percentage Rent, Additional Rent and all other charges becoming due hereunder or make such alterations and repairs as may be necessary in order to relet the Premises, and relet said Premises or any part thereof on Tenant's account (Tenant hereby appointing Landlord as its attorney-in-fact for such purpose) for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable. Upon each such reletting all rentals received by the 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 brokerage fees and attorneys' fees and costs of such alterations and repairs; third, 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. If such rentals received from such reletting during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of said Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter 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: (a) the worth at the time of any unpaid rent which had been earned at the time of such termination; plus (b) 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 could have been reasonably avoided, plus (c) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus (d) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform his obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including the cost of recovering the Premises and attorneys' fees incurred in connection with such termination, and (e) 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 State law. The term "rent" as used herein shall be deemed to be and to mean the Minimum Annual Rent, Additional Rent and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All such sums, other than the Minimum Annual Rent, shall be computed on the basis of the average monthly amount thereof accruing during the immediately preceding twelve (12) month period prior to default, except that if it becomes necessary to 25 compute such rental before such a twelve (12) month period has occurred, then on the basis of the average monthly amount accruing during such shorter period. As used in subparagraphs (a) and (b) above, the "worth at the time of award" is computed by allowing interest at the rate of ten percent (10%) per annum. 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 of San Francisco at the time of award plus one percent (1%). 18.6 Waiver of Rights of Redemption. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants or conditions of this Lease, or otherwise. 18.7 Calculation of Certain Sums. For all purposes of this Article 18, to the extent that actual amounts are not known or difficult to ascertain, Percentage Rent, Additional Rent and other charges shall be computed on the basis of the average monthly amount thereof accruing during the immediately preceding twelve (12) month period, except that if it becomes necessary to compute such amounts before such a twelve (12) month period has occurred then such amounts shall be computed on the basis of the average monthly amounts accruing during such shorter period. ARTICLE 19 -DEFAULT BY LANDLORD Landlord shall not be in default hereunder unless Landlord fails to perform the obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Tenant in writing specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion. In no event shall Tenant have the right to terminate this Lease as a result of Landlord's default and Tenant's remedies shall be limited to an injunction and/or damages limited to the amount of Minimum Annual Rent paid during the period of such default. Nothing herein contained shall be interpreted to mean that Tenant is excused from paying any rent due hereunder as a result of any default by Landlord. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary if within such thirty (30) days any mortgagee and/or trust deed holder has commenced and is diligently pursuing the remedies necessary to cure such default (including but not limited to commencement of foreclosure proceedings if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued. ARTICLE 20 -ATTORNEYS' FEES In the event that either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease, or any default hereunder or any right or remedy of either party, the prevailing party shall be entitled to recover as part of, or incident to, such action or proceeding, all attorneys' fees, expert witness fees and other costs and expenses incurred in the preparation and processing of such action or proceeding. In addition, Landlord shall be entitled to all attorneys' fees and all other costs and expenses incurred in the preparation and service of any notice or demand hereunder, whether or not a legal action is subsequently commenced, and further entitled to all attorneys' fees, expert witness fees and other costs and expenses incurred by reason of any and all proceedings under the Bankruptcy Code (as the same now exists or under any amendment thereof which may hereafter be enacted or under any other act relating to the subject of bankruptcy), whether or not such proceedings involve or are associated in any way with a breach by Tenant of any provision of 26 this Lease. All attorneys' fees, expert witness fees and other costs and expenses incurred by Landlord by reason of any action to which Landlord shall be made a defendant because of any action or omission of Tenant shall constitute Additional Rent under this Lease. ARTICLE 21-DAMAGE OR DESTRUCTION 21.1 Insured Casualty. If the Premises or the building containing the same is destroyed or damaged by fire or other casualty covered by Landlord's insurance to such an extent that they cannot be repaired and restored within one hundred eighty (180) days, Landlord shall have the option to terminate this Lease; otherwise Landlord shall forthwith and with due diligence, repair and restore said building and Premises to substantially their condition immediately prior to such damage or destruction. Landlord shall in no event be responsible for restoring Tenant's Work, Tenant's improvements, alterations or personal property in the Premises to its prior condition. 21.2 Damage Near End of Rental Term. If the damage or destruction referred to in the preceding paragraph amounts to at least 25% of the Premises and occurs during the last eighteen (18) months of the Rental Term, then Landlord shall have the option, at its sole election, to terminate this Lease effective as of the date of such damage or destruction, and any unearned rents paid in advance shall be refunded. Such election must be made and notice thereof given to Tenant within thirty (30) days from the date of such damage or destruction. If this Lease shall not be terminated as provided in this paragraph, the building and Premises shall be repaired and restored as hereinabove provided. 21.3 Damage to Shonning Center. If fifty percent (50%) or more of the total area of all the buildings in the Shopping Center shall be damaged or destroyed by fire or other casualty, Landlord shall have the option, notwithstanding anything to the contrary contained elsewhere in this Lease, at Landlord's election, to terminate this Lease by notice to Tenant at any time prior to the expiration of ninety (90) days after the date of such casualty. 21.4 Uninsured Casualty. In the event that the Premises are partially or totally destroyed as a result of any casualty or peril not covered by insurance required to be carried by Landlord hereunder, Landlord may within a period of one hundred-twenty (120) days after the occurrence of such destruction (a) commence reconstruction and restoration of the Premises and prosecute the same diligently to completion, in which event this Lease shall continue in full force and effect, or (b) notify Tenant in writing that it elects not to so reconstruct or restore the Premises, in which event this Lease shall cease and terminate as of the date of service of such notice, unless Tenant is unable to continue the operation of its business after the occurrence of such destruction, in which event this Lease shall cease and terminate as of the date of such destruction. 21.5 Mutual Release/No Statutory Termination. Upon any termination of this Lease under any of the provisions of this Article, each party shall be released thereby without further obligations to the other party coincident with the surrender of possession of the Premises to Landlord, except for items which have theretofore accrued and are then unpaid and for rights of indemnification for acts or omissions occurring prior to such termination and surrender. 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 Article, and further waives any rights it may have to construe any damage to the Premises as a constructive eviction. ARTICLE 22 -EMINENT DOMAIN 22.1 Total Condemnation. If the whole of the Premises shall be acquired for any public or quasi- public use or purpose or condemned by eminent domain, then the term of this Lease shall cease and terminate as of the date of title vesting in such condemning authority in such proceeding and all monetary obligations under 27 this Lease shall be paid up to that date, and Landlord and Tenant shall each thereupon be released from any liability thereafter accruing under this Lease. 22.2 Total Parking Area. If the whole of the common parking areas in the Shopping Center shall be acquired for any public or quasi-public use or purpose or condemned by eminent domain, then the Rental Term of this Lease shall cease and terminate as of the date of title vesting in such condemning authority in such proceeding unless Landlord shall provide other parking facilities with a parking ratio substantially equivalent to the original common parking area for the Premises, within ninety (90) days from the date of such taking. In the event that Landlord shall provide such other substantially equivalent parking facilities, then this Lease shall continue in full force and effect. 22.3 Partial Condemnation. If more than twenty-five percent (25%) of the Floor Area of the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, and in the event that such partial taking or condemnation shall render the Premises unsuitable for the business of the Tenant, then the term of this Lease shall cease and terminate as of the date of title vesting in such condemning authority in such proceeding, and Landlord and Tenant shall each thereupon be released from any liability thereafter accruing under this Lease. 22.4 Landlord's Damages. In the event of any condemnation or taking as hereinbefore provided, whether whole or partial, the Tenant shall not be entitled to any part of the award, as damages or otherwise, for such condemnation and Landlord is to receive the full amount of such award, the Tenant hereby expressly waiving any right or claim to any part thereof, including right or claim for the value of any unexpired term of this Lease or diminution in value of Tenant's leasehold interest, or for the value of any option to extend the term hereof or renew this Lease. 22.5 Tenant's Waiver and DamaEes. Tenant hereby waives any statutory and common law rights of termination which may arise by reason of any partial taking of the Premises under the power of Eminent Domain. Although all damages in the event of any condemnation are to belong to the Landlord, whether such damages are awarded as compensation for diminution in value of the leasehold or to the fee of the Premises, Tenant shall have the right to claim and recover from the condemning authority, but not from Landlord, such compensation as may be separately awarded or recoverable by Tenant in Tenant's own right on account of any and all damage to Tenant's business by reason of the condemnation and for or on account of any cost or loss which Tenant might incur in removing Tenant's merchandise, furniture, fixtures, leasehold improvements and equipment. Tenant shall have no recourse against Landlord for such damages that are not recovered from the condemning authority as provided for hereunder. ARTICLE 23 -OFFSET STATEMENT, ATTORNMENT, AND SUBORDINATION 23.1 Estoppel Certificate. Within ten (10) days after Landlord's written request, Tenant agrees to deliver in a form provided to Tenant a certificate to any proposed mortgagee, ground lessor or purchaser, or to Landlord, certifying that this Lease is in full force and effect, the essential terms of the Lease, and any other information that may be requested and is valid pertaining to the Lease. If Tenant fails to timely execute the estoppel certificate, Tenant shall pay Landlord on demand a late fee of $1,000.00 and such failure may, at Landlord's discretion, be considered a material default by Tenant under this Lease. 23.2 Subordination And Attornment. This Lease is immediately and without further action being required, subject and subordinate to all ground or underlying leases which may now or hereafter affect the real property of which the Premises form a part and to all mortgages or deeds of trust which may now or hereafter affect such leases or the real property which the Premises form a part and to all renewals, modifications, consolidations, replacements and extensions thereof. In confirmation of such subordination, Tenant shall execute promptly any certificate that Landlord or its lender or beneficiary may request. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure (or deed in lieu thereof) of any such mortgage, to attorn to the lien holder or purchaser or any successors thereto upon any such foreclosure sale (or deed in lieu thereof), if so requested to do so by such purchaser, and to recognize such purchaser as the Landlord under this Lease. 28 Tenant shall, within ten (10) business days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases, subject to the terms of this Article. 23.3 Attorney-in-Fact. The Tenant, upon request of any party in interest, shall execute promptly such instruments or certificates to carry out the intent of sub-paragraphs 23.1 and 23.2, above as shall be requested by the Landlord. The Tenant hereby irrevocably appoints the Landlord as attorney-in-fact for the Tenant with full power and authority to execute and deliver in the name of the Tenant any such instruments or certificates. If, fifteen (15) days after the date of a written request by Landlord to execute such instruments, the Tenant shall not have executed the same, the Landlord may, at its option, terminate this Lease without incurring any liability on account thereof, and the term hereby granted is expressly limited accordingly. ARTICLE 24 -HOLDING OVER 24.1 Holding Over. Any holding over after the expiration of the term hereof, with or without the consent of the Landlord, shall be construed to be a tenancy from month to month at a rent equal to one hundred and fifty percent (150%) of the rent paid in the last month of the Rental Term and shall otherwise be on the terms and conditions herein specified, so far as applicable. ARTICLE 25 -NOTICES Any notice, request, approval, demand, consent or other communication required or permitted under this Lease (including also any exhibits, addenda and riders attached hereto and made a part hereof) shall be in writing and shall be deemed sufficiently given or served by Landlord or Tenant to or on the other, as the case may be, at the time of mailing by certified or registered mail, postage prepaid (or upon deposit with a nationally recognized overnight courier service whose standard practice is to obtain a receipt upon delivery), addressed to the notice address of the addressee specified in Article 1 hereof. Either party may change such address (provided personal delivery is able to be effected at such new address) by written notice to the other party. Any notice to be given by Landlord maybe given by Landlord's legal counsel or authorized agent. Tenant agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served upon the Landlord, provided that prior to such notice Tenant has been notified in writing (by way of a notice of assignment of Lease, or otherwise) of the addresses of such mortgagees and/or trust deed holders. ARTICLE 26 -SECURITY DEPOSIT 26.1 Amount of Deposit. Tenant, contemporaneously with the execution of this Lease, will deposit with Landlord the sum as stated within Article 1.10. Said deposit shall be held by Landlord, without liability for interest, as security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease by Tenant to be kept and performed during the term hereof. 26.2 Use and Return of Deposit. In the event of the failure of Tenant to keep and perform any of the terms, covenants and conditions of this Lease to be kept and performed by Tenant, then Landlord, at its option, may appropriate, and apply said entire deposit, or so much thereof as may be necessary, to compensate the Landlord for all loss or damage sustained or suffered by Landlord due to such breach on the part of Tenant. The entire deposit, or any portion thereof, may be appropriated and applied by Landlord for the payment of overdue rent or other sums due and payable to Landlord by Tenant hereunder, and Tenant shall, upon the written demand of Landlord, thereafter forthwith remit to Landlord a sufficient amount in cash to restore said security to the original sum deposited, and Tenant's failure to do so within five (5) days after receipt of such demand shall constitute a breach of this Lease. Should Tenant comply with all of said terms, covenants and conditions and promptly pay all of the rental herein provided for as it becomes due, and all other sums payable by Tenant to Landlord hereunder, the said deposit shall be returned in full to Tenant at the end of the term of this Lease, or upon the earlier termination of this Lease. 29 26.3 Transfer of DeAOSit. Landlord may deliver the funds deposited hereunder by Tenant to the purchaser of Landlord's interest in the Premises, in the event that such interest be sold, and thereupon Landlord shall be discharged from any further liability with respect to such deposit. ARTICLE 27 -RIGHT TO RELOCATE 27.1 Substitute Premises. The purpose of the site plan attached hereto as Exhibit "A" is to show the approximate location of the Premises. Landlord reserves the right at any time to relocate, vary, and adjust the size of the various buildings, co-tenants, automobile parking areas, and other Common Areas as shown on said site plan. Landlord may, at any time, (including prior to the construction of Tenant's Work in the Premises) by delivering written notice to Tenant, elect to relocate Tenant to other premises within the Shopping Center (the "Substitute Premises"), so long as the Substitute Premises contains approximately the same Floor Area as the Premises. Landlord's notice shall be accompanied by a space plan of the Substitute Premises. Tenant shall vacate and surrender the Premises to Landlord and shall occupy the Substitute Premises and open for business therein within five (5) days after Landlord has substantially completed the work to be performed by Landlord in the Substitute Premises pursuant to Article 27.2 below. Minimum Annual Rent, Percentage Rent, Additional Rent, Common Area Expenses, and other charges shall be payable by Tenant at the same rate per square foot of Floor Area as payable by Tenant with respect to the Premises. From and after the relocation by Tenant to the Substitute Premises, the Substitute Premises shall be deemed to be the Premises for the purposes of this Lease. Tenant acknowledges that the covenants and agreements contained in this Article 27.1 are reasonable and necessary to protect the legitimate business interests of Landlord and that any violation of these covenants or provisions would result in irreparable injury and entitle Landlord to equitable relief. In the event Tenant disputes Landlord's notice to relocate Tenant to the Substitute Premises or in the event Tenant refuses to accept possession of the Substitute Premises, Landlord may, by delivering written notice to Tenant, elect to terminate this Lease. Notwithstanding any of the foregoing, Tenant acknowledges that if Landlord provides Tenant with Substitute Premises prior to the construction of Tenant's Work in the Premises, Landlord will not be liable for its responsibilities under Article 27.2. 27.2 Landlord's Obligations. In the event Landlord shall elect to relocate Tenant to the Substitute Premises, Tenant shall not be entitled to any compensation for any inconvenience for interference with Tenant's Business nor any abatement or reduction of Minimum Annual Rental, Percentage Rent, or Additional Rent, but Landlord shall, at Landlord's sole cost and expenses perform the following: (a) Furnish and install in the Substitute Premises, fixture, equipment, improvements, appurtenance and leasehold improvements at least equal in kind and quality to those contained in the Premises at the time of Landlord's election; (b) Provide personnel to perform the moving of Tenant's personal property, equipment and trade fixtures from the Premises to the Substitute Premises; (c) Reimburse Tenant for Tenant's actual and reasonable out of pocket costs incurred in connection with the relocation of any telephone or other communications equipment from the Premises to the Substitute Premises, provided, such costs are approved by Landlord in advance, which approval shall not be unreasonably withheld; and (d) Reimburse Tenant for any other actual and reasonable out of pocket cost incurred by Tenant in connection with Tenant's move from the Premises to the Substitute Premises, provided such cost are approved by Landlord in advance which approval shall not be unreasonably withheld. 27.3 Cooperation by Tenant. Tenant shall cooperate with Landlord so as to facilitate performance by Landlord of its obligations hereunder. Without limiting the generality of the foregoing, Tenant shall provide Landlord promptly any approvals or instructions and any plans or specifications or any other information 30 reasonably required by Landlord and Tenant shall perform promptly in the Substitute Premises any work to be performed therein by Tenant to prepare the Substitute Premises for occupancy and opening for business. ARTICLE 28 -ACCESS BY LANDLORD, RIGHT OF ENTRY Landlord or Landlord's agents shall have the right to enter the Premises at all times to examine the same and to show them to prospective purchasers or tenants of the Shopping Center, and to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable including repair, maintenance or alteration of adjoining areas having a common wall or common floor or ceiling with the Premises, and Landlord shall be allowed to take all material into and upon said Premises that may be required therefore without the same constituting an eviction of Tenant in whole or in part and the rent reserved shall in no way abate while said repairs, alterations, improvements or additions are being made, by reason of loss or interruption of business of Tenant or otherwise. During the six (6) months prior to the expiration of the Rental Term of this Lease or any renewal term, Landlord may exhibit the Premises to prospective tenants or purchasers, and place upon the Premises the usual notices "For Lease" or "For Sale", which notices Tenant shall permit to remain thereon without molestation. If Tenant shall not be personally present to open and permit an entry into said Premises, at any time, when for any reason an entry therein shall be necessary or permissible, Landlord or Landlord's agents may enter the same by a master key or may forcibly enter the same, without rendering Landlord or such agents liable therefore and without in any manner affecting the obligations and covenants of this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever for the care, maintenance or repair of the building or any part thereof, except as otherwise specifically provided for in this Lease. ARTICLE 29 -WASTE, GOVERNMENTAL REGULATIONS 29.1 Waste or Nuisance. Tenant shall not commit or suffer to be committed any waste upon the Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant in the building in which the Premises may be located, or in the Shopping Center, or which may disturb the quiet enjoyment of any person within the immediate vicinity of the Shopping Center. 29.2 Governmental Regulations. Tenant shall, at Tenant's sole cost and expense, comply with all of the requirements of all city, county, municipal, state, federal and other applicable governmental authorities, now in force, or which may hereafter be in force, pertaining to the Premises, including the installation of additional facilities and/or structures as required for the conduct and continuance of Tenant's business, and shall faithfully observe in the use of the Premises all municipal and county ordinances and state and federal statutes now in force or which may hereafter be in force. ARTICLE 30 -EXCULPATION Tenant shall look solely to Landlord's interest in the Premises and the Shopping Center of which the Premises are a part for the satisfaction of any judgment or decree requiring the payment of money by Landlord based upon any default under this Lease or upon any act or omission of any partner, member, shareholder or director of Landlord (including also any of the respective successors of any of the foregoing), as the case may be, arising out of this Lease or relating in any way thereto or to the Shopping Center, and no other property or assets of Landlord or of said partners, members, shareholders or directors of Landlord (including also any of the respective successors of any of the foregoing), as the case may be, shall be subject to levy, execution or other enforcement procedures for satisfaction of any such judgment or decree. ARTICLE 31-GRANT OF EASEMENTS Tenant hereby consents to any and all past, present, or future conveyances or grants of easements affecting the Premises or the Shopping Center which Landlord determines to be necessary in its sole discretion. 31 ARTICLE 32 -PARTIAL INVALIDITY If any term, covenant or condition 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, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law. If any provision of this Lease is determined to be void by any court of competent jurisdiction, such determination shall not affect any other provision of this Lease and such other provision shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one of which would render the provision void and one of which would render the provision valid, the provision shall be interpreted in the manner which would render it valid. It is the intention of the parties hereto that the covenants of this Lease be independent of each other. ARTICLE 33 -FINANCIAL STATEMENTS Tenant, upon Landlord's request and at any time during this Lease, will provide any financial statements or reports pertaining to the business or to the Guarantors of this Lease. Non-audited financial statements shall be certified to Landlord and Landlord's lender, if applicable, as being accurate and complete in all material respects ("Certified Statements"). The Certified Statements shall be signed by an officer, authorized agent, partner or managing member of the Tenant. The financial statements or reports referred to herein shall be in such form and style and contain such details and breakdown as the Landlord may reasonably determine. ARTICLE 34 -MISCELLANEOUS PROVISIONS 34.1 Warranty of Authority. If Tenant is other than a natural person, the persons executing this Lease on behalf of Tenant hereby covenant and warrant that: they are duly authorized to execute this Lease on behalf of Tenant, Tenant is duly qualified in all respects, Tenant is qualified to do business in the State of Arizona, all franchise and other taxes have been paid to date, and all forms, reports, fees and other documents necessary to comply with applicable laws will be filed when due. If Tenant is a married individual, then such marital status shall have been disclosed to Landlord and both spouses shall become a party to this Lease. The signature of one or all married individuals shall bind the marital community of the Tenant and Tenant's spouse to the obligations and liabilities contained in this Lease. 34.2 Joint and Several Liability. If more than one person, corporation or other entity is named as Tenant in this Lease and executes the same as such, then and in such event, the word "Tenant" wherever used in this Lease is intended to refer to all such persons, corporations or other entities, and the liability of such persons, corporations or other entities for compliance with and performance of all the terms, covenants and provisions of this Lease shall be joint and several. If Tenant shall be a partnership or limited liability company, the liability of each and every partner or member thereof for compliance with and performance of all the terms, covenants and provisions of this Lease shall be joint and several, and no withdrawing partner or member shall be relieved of any liability hereunder as the result of any such withdrawal. 34.3 Entire Agreement. It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease, and this Lease and Exhibits hereto, supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease is and shall be considered to be the only lease agreement relative to the Premises between the parties hereto and their respective representatives and agents as of the date hereof. All negotiations and oral agreements acceptable to both parties have been merged into and are included herein, and no modification of this Lease shall be effective unless the same shall be in writing and be signed by the parties hereto or, as the case maybe, their respective successors or assigns. 34.4 Intent -Triple Net Lease. Notwithstanding anything to the contrary contained in this Lease shall be deemed to be construed as a "triple net" lease and Tenant's pro rata share of any and all Operating Costs, 32 expenses and obligations of any type and nature whatsoever in connection with the Shopping Center and the operation thereof that are not included in Tenant's rent or Additional Rent hereunder, except where the same are expressly the obligation of Landlord, also will be the obligation of Tenant and Tenant will be liable and obligated for its proportionate share calculated and charged in the manner set forth in this Lease. 34.5 Right to Lease. Landlord reserves the absolute right to contract for or otherwise affect such other tenancies or businesses 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 store, business, or tenant, or type or number of stores, businesses or tenants shall or shall not occupy any space in the Shopping Center. 34.6 Governing Law/Waiver of Jury Trial/Interpretation. The laws of the State of Arizona shall govern the validity, construction, performance and enforcement of this Lease. Should either party institute legal action to enforce any obligation contained herein, it is agreed that the venue of such suit or action shall be in the County where the Shopping Center is located. Tenant expressly consents to Landlord designating the venue of any such suit or action, and EACH PARTY WANES THE RIGHT TO A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING UNDER THIS LEASE. All provisions of this Lease have been negotiated by both parties at arm's length and neither party shall be deemed the scrivener of this Lease. In addition, is either party has made a scrivener's error with regard to division, multiplication, addition, or subtraction of any numbers or arithmetic calculation in this Lease, this lease shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof. 34.7 Compliance with Laws, Rules & Regulations. Tenant shall, at Tenant's sole cost and expense which Tenant shall promptly pay, comply with all present and future laws, ordinances, orders, declarations of covenants and restrictions, rules, regulations and requirements of all federal, state and municipal governments, courts, departments and commissions relating to the Premises, including those related to the Americans with Disabilities Act of 1990, environmental conditions and hazardous substances. Landlord reserves the right to make such rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Premises and for the preservation and good order of the Premises and/or buildings located thereon. Tenant agrees to abide by all such rules and regulations that the Landlord may adopt at any time. 34.8 Landlord's Liability. Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Landlord, that (i) there shall be absolutely no personal liability on the part of Landlord, its successors or assigns and its officers, directors, employees and agents to Tenant with respect to any of the terms, covenants and conditions of this Lease, (ii) Tenant waives all claims, demands and causes of action against Landlord's officers, directors, employees and agents in the event of any breach by Landlord of any of the terms, covenants and conditions of this Lease to be performed by Landlord, and (iii) Tenant shall look solely to the Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms, covenants and conditions of this Lease to be performed by Landlord, or any other matter in connection with this Lease or the Premises, such exculpation of liability to be absolute and without any exception whatsoever. 34.9 Force Maieure. In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, 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 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. The provisions of this Article shall not operate to excuse Tenant from the prompt payment of rent, percentage rent, Additional Rent or any other payments required under the terms of this Lease. 34.10 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 33 the said parties; and if there shall be more than one 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 unless the assignment to such assignee has been approved by Landlord in writing as provided in Article 16 hereof. 34.11 Time. Time is of the essence with respect to the performance of each of the covenants and agreements contained in this Lease. 34.12 Ouiet Possession. Landlord agrees that Tenant, upon paying the rent and performing the covenants and conditions of this Lease, shall quietly have, hold and enjoy the Premises during the Rental Term and any extension thereof, subject to the provisions of this Lease and to all mortgages, deeds of trust, ground or underlying leases, agreements and encumbrances to which this Lease is or may become subordinate. 34.13 No Partnership. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third person to create the relationship of principal and agent or of partnership or of joint venture or of any association between Landlord and Tenant, and neither the method of computation of rent nor any other provision contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. 34.14 Consent of Landlord. Whenever under this Lease provision is made for Tenant to secure the consent or approval by Landlord, such consent or approval shall be in writing. 34.15 No Offer. The submission of this document to Tenant for examination does not constitute an offer to lease, or a reservation of or option to lease, and becomes effective only upon execution and delivery thereof by both Landlord and Tenant. 34.16 No Recording. The parties to this Lease hereby covenant and agree not to record or file for record (nor cause the same to be recorded or filed for record) this Lease or any copy or any memorandum thereof. 34.17 Captions and Article Numbers. The captions, section numbers, article numbers and indexes 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. 34.18 Tenant Defined. Use of Pronoun. The word "Tenant" shall be deemed and taken to mean each and every person or party mentioned as a Tenant herein, whether the same be one or more; and if there shall be more than one Tenant, any notice required or permitted by the terms of this Lease may be given by or to any one thereof and shall have the same force and effect as if given by or to all thereof. The use of the neuter singular pronoun to refer to Landlord or Tenant shall be deemed a proper reference even though Landlord or Tenant may be an individual, a partnership, a corporation or a group of two or more individuals or corporations. The necessary grammatical changes required to make the provisions of this Lease apply in the plural sense where there is more than one Landlord or Tenant and to either corporations, associations, partnerships, limited liability companies or individuals, males or females, shall in all instances be assumed as though in each case fully expressed. 34.19 No Brokerage. Except for Landlord's broker, Tenant covenants, warrants and represents to Landlord that Tenant did not engage in any conversation or negotiations with any broker, agent, subagent, salesperson or finder concerning the leasing of the Premises. Tenant hereby expressly acknowledges and agrees that (i) Landlord's broker shall, for all purposes hereunder or at law or in equity, be acting as the sole agent of landlord and (ii) no dual agency shall be deemed to exist or to have been created by any of Landlord's broker's actions, statements, warranties or representations (whether verbal or written), or by any omission thereof, so that under no circumstances shall Landlord's broker's ever be deemed in any way to be the agent of Tenant in connection with the leasing of the Premises to Tenant pursuant to the terms and provisions of this Lease. Tenant agrees to protect, indemnify, save and keep harmless Landlord, against and from all liabilities, claims, losses, costs, damages and expenses, including attorneys' fees, arising out of, resulting from or in connection with a breach of the foregoing covenant, warranty and representation. 34 34.20 Broker Disclosure. Tenant acknowledges that principals o-f Landlord are Arizona licensed real estate salespersons or brokers. 34.21 "As Is" and "Where Is. No representations, inducements, understanding or anything of any nature whatsoever, made, stated or represented by Landlord or anyone acting for or on Landlord's behalf, either orally or in writing, have induced Tenant to enter into this Lease, and Tenant acknowledges, represents and warrants that Tenant has entered into this Lease under and by virtue of Tenant's own independent investigation. Tenant hereby accepts the Premises in an "as is" and "where is" condition without warranty of any kind, express or implied, including, without limitation, any warranty as to title, physical condition or the presence or absence of Hazardous Materials, and if the Premises are not in all respects entirely suitable for the use or uses to which the Premises or any part thereof will be put, then it is the sole responsibility and obligation of Tenant (subject only to the obligations of Landlord set forth in Exhibit "B" to take such action as may be necessary to place the Premises in a condition entirely suitable for such use or uses. IN CONNECTION WITH THE ABOVE, TENANT HEREBY ACKNOWLEDGES AND REPRESENTS TO LANDLORD, THAT TENANT HAS HAD AMPLE OPPORTUNITY TO INSPECT AND EVALUATE THE PREMISES AND THE FEASIBILITY OF THE USES AND ACTIVITIES TENANT IS ENTITLED TO CONDUCT THEREON; THAT TENANT IS EXPERIENCED; THAT TENANT WI~.~, RELY ENTIRELY ON TENANT'S EXPERIENCE, EXPERTISE AND ITS OWN INSPECTION OF THE PREMISES IN ITS CURRENT STATE IN PROCEEDING WITH THIS LEASE; THAT, EXCEPT AS EXPRESSLY PROVIDED IN EXHIBIT B, TENANT ACCEPTS THE PREMISES IN ITS PRESENT CONDITION, AND THAT, TO THE EXTENT THAT TENANT'S OWN EXPERIENCE WITH RESPECT TO ANY OF THE FOREGOING IS INSUFFICIENT TO ENABLE TENANT TO REACH AND FORM A CONCLUSION, TENANT HAS ENGAGED THE SERVICES OF PERSONS QUALIFIED TO ADVISE TENANT WITH RESPECT TO SUCH MATTERS. TENANT IS NOT RELYING ON ANY EXPRESS OR IMPLIED, ORAL OR WRITTEN REPRESENTATIONS, OR WARRANTIES MADE BY LANDLORD OR ITS REPRESENTATIVES, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS LEASE. IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the Lease Date. LANDLORD: Coachline Shops, LLC An Arizona limited liability company By: Its: Managing Member TENANT: Town of Marana _.~ By: , Its: Approved as to Form 1 Attorney 35 _,., rut INEBLVD. G trJ Gd ~-, y ~--, y b N + ~` ~ , . _ _ ~ ~, _ . ,..n rntSBL~• EXHIBIT "B" DESCRIPTION OF LANDLORD'S WORK Landlord agrees, at its sole cost and expense, to furnish and install all of the following "Landlord's Work", limited to the quantities specified herein below, and specified by Landlord. LANDLORD SHALL DELIVER THE SPACE "AS IS." TENANT SHALL BE RESPONSIBLE FOR THE COST OF ALL IMPROVEMENTS NOT LISTED ABOVE AND FOR ANY CHARGES, FEES, PERMITS, OR UTILITY CHARGES NECESSITATED BY TENANT'S USE OF THE DEMISED PREMISES FOR OTHER THAN GENERAL RETAIL SALES. The above items represent the only improvement work to be done by the Landlord, and, unless specifically indicated otherwise, any items not included herein or any changes made to Landlord's Work will be paid by Tenant. Landlord's Work is designed for normal retail merchandising use. Any reference to construction by Landlord to code requirements shall be deemed to mean code requirements for normal retail merchandising use. All roof penetrations required by Tenant must be made by Landlord's original roofing contractor or such other contractor as Landlord may designate and said work shall be at Tenant's expense. If roof penetrations are made or caused to be made by Tenant or Tenant's contractor, Tenant shall be liable for all costs to restore the warranty issued for the original roof and for any costs to repair leaks in said roof caused in whole or in part by such roof penetrations. Tenant must contract with Landlord's Roofing Contractor to patch holes or perform any work or inspections after Tenant's contractor has penetrated the roof. Landlord's Initials Tenant's Initials EXHIBIT "C" SIGN CRITERIA A. Approvals: 1. Detailed drawings showing size, layout, colors, materials, and style of all letters must be submitted by each Tenant to the Landlord and the Continental Ranch Homeowners Association for approval prior to application for sign permit. 2. Each Tenant shall be responsible for obtaining all permits for signs and for providing and installing all signs. 3. In addition to approval by Landlord, all signs must be in conformance with local sign codes and applicable governmental laws and regulations. B. Allowable Sign Locations: 1. One (1) sign per Tenant (unless otherwise approved by Landlord), to be located on face of canopy. 2. All signs on face of canopy shall be centered horizontally and vertically above Tenant's storefront. C. Allowable Sign Sizes: 1. Maximum height of letters shall be three feet (3') or with Landlord approval. 2. Maximum length of sign area shall not exceed seventy five percent (75%) of leased storefront. 3. No sign shall exceed the maximum envelope depicted in any direction without Landlord approval, and, in no case, shall exceed that allowed by applicable sign codes. D. Design Requirements: 1. As set forth within the Continental Ranch Homeowners Sign Criteria. E. General: 1. No sign perpendicular to the face of the building shall be permitted. 2. No roof mounted signs of any kind shall be permitted. 3. No sign of any sort shall be mounted on the building face except as outlined in these requirements. 4. No flashing, moving or audible signs shall be permitted. 5. No exposed conduit, tubing, neon tubing, conductors, transformers, or other electrical appurtenances shall be used, unless approved by Landlord. 6. Design and location of all mounting devices shall be approved by Landlord. 7. All signs shall bear the Underwriter Laboratories label and must comply with all local building and electrical codes. 8. Tenant shall be responsible for repair of any damage to the building caused by the installation and removal of Tenant's sign. 9. Sign shall contain name of store only. 10. Any sign installed without the approval of the Landlord and not meeting the general requirements of this Standard Sign Criteria must be removed by the Tenant, at Tenant's expense, immediately upon notification by landlord. 11. Sign shall be illuminated only during hours set forth within the Continental Ranch Homeowners Sign Criteria. 12. All window signage must be a window cling medium. Temporary, seasonal and short term window advertisements must be of a professional quality and may not be made from cardboard bu h r paper, computer paper or poster board. No window paint shall be permitted. Landlord's initials Tenant' initials CONTINENTAL RANCH COMMUNITY ASSOCIATION STANDARD TENANT/COMMERCIAL SIGN CRITERIA Adopted S/31/04/Amended 9/28/04 A. Approvals: 1. Detailed drawings showing size, colors, materials, and style of all letters must be submitted by each tenant to the CRCA Architectural Review Committee (ARC). 2. Approval must be obtained prior to installation. B. Allowable Sign Locations: 1. One (1) building sign per tenant will be required on the face of the building. Signs must be in alignment from the base of the letters. 2. End unit tenants shall be permitted a second building sign, duplicate to the front sign, on the side to be located 5 ft. off the lip/edge of the building and to be of equal or lesser size as the primary building sign. 3. No hanging signs will be permitted under awnings. C. Allowable Building Sign Size: 1. Signs may not exceed 36" in height. 2. Maximum length of the sign can not exceed 75% of the store front. D. Building Sign Design Requirements: 1. Font to be selected by submittal. 2. Signs are to be made of cast metal including Bronze, Brass or Aluminum with a 3/8" to 2" thickness. 3. Building owner will select one color to be the theme for all building signs consistent with all tenants. Sign color to be of a southwest muted hue with a polished, oxidized or patina finish. 4. Halo back lighting or reverse channel lighting must be used. Color of the light shall be chosen by the building owner either white or gold, and be consistent for all tenants of that parcel. 5. Internal illumination hours for exterior and interior signage will be from 6 AM to 10 PM. E. General 1. No sign perpendicular to the face of the building shall be permitted. 2. No sign of any sort shall be mounted on the building face except as outlined in the above requirements. 3. No neon, flashing, moving or audible signs shall be permitted except one (1) neon open sign per store front with prior approval by the CRCA ARC. 4. No exposed conduit, tubing, conductors, transformer, or other electrical devices shall be visible. 5. No roof mounted signs of any kind shall be permitted. 6. Must follow all codes set forth by the Town of Marana. 7. Logos may be incorporated into signage as long as they follow the same criteria including color and size. 8. Window Coverings a. Standard business signage will be: Operating hours Emergency Contact Information Major Credit Cards accepted information b. Only non-reflective window tint permitted. Any other window material will be approved on a case by case basis. c. Vertical blinds of a neutral color maybe installed and must be maintained in good condition. d. No more then 25% of all window space may be used for temporary or permanent signage to reduce clutter. e. All long term window advertising and information signs must use a window cling medium. Temporary, seasonal and short term window advertisements must be of a professional quality and may not be made from cardboard, butcher paper, computer paper or poster board. 10. All directionaUlocation signs must be approved by the CRCA ARC before installation.