Real Estate Basics ABA–RPTE

REVIEWING AND NEGOTIATING A COMMERCIAL LEASE AGREEMENT ________________________________________________________________________

2015 Spring Symposia Section of Real Property, Trust and Estate Law American Bar Association Real Estate Basics ________________________________________________________________________

Presenters:

HAROLD A. LLOYD ASSOCIATE PROFESSOR WAKE FOREST UNIV. SCHOOL OF LAW WINSTON-SALEM, NC

MONICA OWENS ATLANTA, GA

Moderator:

SOO YEON LEE GORDON & CENTRACCHIO, L.L.C. CHICAGO, IL CONTENTS Introduction ....................................................................................................................... 2 Outline of Topics ............................................................................................................... 3 Related Resources and Guides ......................................................................................... 8 Sample Commercial Lease Agreement with Commentary* ........................................ A Sample Commercial Lease Agreement with Commentary* ......................................... B

* The forms are from “The Commercial Lease Formbook: Expert Tools for Drafting and Negotiation, Second Edition” by Dennis Horn and Ira Meislik, published by the Section of Real Property, Trust and Estate Law, ABA (2010).

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Real Estate Basics ABA–RPTE

INTRODUCTION _______________________________________________________ The purpose of this presentation is to provide guidance to lawyers who advise small businesses and non-profit entities in the most common real estate transaction, leasing a space for their intended purposes. Because of their relative size and financial position, these types of clients typically lack the significant bargaining power that a large corporation or other entity might enjoy. Generally speaking, the type of real property they are leasing will also be less complex in nature. With these considerations in mind, the speakers will discuss many of the lease provisions that, from the client’s perspective, are typically the most important to address during negotiations. The focus of this presentation will be the lease of a retail space in a shopping center, one of the most common types of leases that small businesses and non-profit entities face. We will follow the Outline beginning on page 4. Often, the Landlord's form lease provides the basis for the initial lease review and negotiations. Accordingly, a Landlord-oriented form shopping center lease has been included in the program materials to demonstrate the relevant lease provisions. From there, the tenant’s attorney will make various revisions and request a number of changes to the document. The speakers will discuss the lease agreement, explaining the provisions that tend to have greater impact upon business operations, as well as how those provisions should be addressed depending on the orientation of the client. We also included in the materials another form lease that is more Tenant-friendly. After the program, please review the commentary provided in these form leases. They will be helpful in understanding the parties’ core concerns and respective positions on various issues, and will serve as valuable practice tools. Lastly, a number of resources, guidebooks, law review articles, practice-oriented essays, and books are listed in order to provide additional material for attorneys practicing in this area.

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Real Estate Basics ABA–RPTE

OUTLINE OF TOPICS - ANALYTICAL TOOL IN REVIEWING AND NEGOTIATING A COMMERCIAL LEASE _______________________________________________________ I. The Role of a Tenant’s Lawyer in Reviewing and Negotiating the Lease Agreement.

II. Landlord and Tenant’s Basic Motivations and Core Concerns

III. Substantive Lease Provisions 1. Basic Business Terms A. Definitions: Article 1 B. Parties: Preamble; Signature Page, Notice Provision Guarantor: Exhibit E C. Premises: Article 2 - Definition of Premises: Article 1.1.32 - Square Footage of the Premises: Article 1.1.40 - Common Area: Article 4.4.2 - Tenant’s Construction: Article 7.2 - Exhibits A (Mall Plan); Exhibit B (Site Plan); Exhibit C (Construction of Premises) D. Term: Article 3 - Possession: Possession Date - Article 1.1.31, Possession – Article 3.2 - Rental Commencement Date: Article 1.1.38 - Confirmation of Lease Form: Exhibit H - Expiration Date: Article 1.1.13 cf. Distinguish: Date of Execution (in Preamble) Possession Date Rental Commencement Date cf. Termination v. Expiration - Tenant's Renewal Option: Article 3.1 - Surrender and Holding Over: Article 20

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Real Estate Basics ABA–RPTE

E. Rent: Article 4 (See below Section 2.) F. Use of Premises: Article 5 and 6 - Use: Article 5.1 - Open for Business: Article 6.1; Article 6.2 G. Security Deposit: Article 27

2. Monetary Aspect of Lease A. Rent: Article 4 Various Rent Structure and Terminology i. ii.

Rent Commencement Date: Article 1.1.38 Fixed Minimum Rent: Article 4.1, Article 1.1.14

iii.

Additional Rent: 1. Percentage Rent: Article 4.2 2. Real Estate Taxes and Assessment: Article 4.3 3. Common Area Costs: Article 4.4 a. Pro Rata Share: Article 1.1.35 b. Exclusion: Alternative Language in Article 4.4.1(a) 4. Interest: Article 4.10 5. Utilities provided by Landlord: Article 10.2, 10.3 6. Late fees: Article 15.2.3 7. Attorneys’ Fees: Article 25

B. Utilities: Article 10.1 C. Monetary Considerations of Assignment and Subletting: Article 14

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Real Estate Basics ABA–RPTE

3. Non-Monetary Aspect of Lease A. Construction of Premises: Article 7 1. Landlord’s Work: Article 7.1 2. Tenant’s Construction: Article 7.2 B. Repairs and Maintenance: Article 9 1. Landlord’s Obligation: Article 9.1 2. Tenant’s Obligation: Article 9.2 cf. Repairs v. Maintenance Repairs v. Replacement C. Compliance with Laws 1. Environmental Covenant: Article 5.8 2. Compliance with Laws: Article 6.7.2 D. Alterations and Improvements: Article 5.5 E. Operating Restrictions; Use; Exclusive Use: Article 5 F. Tenant’s Covenants: Article 6.7 G. Quiet Possession H. Assignment and Subletting: Article 14 I. Vacating the Premises: Article 20

4. Liability and Risk Management/ Allocation, Special Events A. Casualty: Article 11 B. Insurance: Article 12 Property Insurance Liability Insurance C. Indemnification: Article 13 D. Eminent Domain: Article 18 E. Force Majeure: Article 23

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Real Estate Basics ABA–RPTE

5. Enforcement of the Lease A. Default: Article 15 - Notice: Article 15.1.1; Article 15.1.7 B. Remedies: Article 15 - Termination of Tenant's right of possession without terminating the Lease and Rent payment obligations: Article 15.2.1 (a); Article 15.2.1 (b) - Landlord's recovery of reasonable expenses incurred for reletting and Rent deficiency: Article 15.2.1 (c) - Late fees: Article 15.2.4 - Attorneys’ Fees: Article 25 C. Guaranty: Exhibit E D. Liability of Landlord: Article 21 E. (Liquidated damages) F. (Right to cure & offset)

6. Important Boilerplate Provisions; Terms to Understand A. Waiver of Subrogation: Article 12.5 B. Attornment; Subordination; Estoppel Certificate: Article 16 C. Landlord’s Rules and Regulations: Article 6.7.3 D. Notices: Article 17

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Real Estate Basics ABA–RPTE

7. Other Considerations A. Relocation: Article 8 B. Parking C. Signage: Article 5.7; Exhibit D D. Early Termination E. No Change/ No Build Area F. Due Diligence (e.g. Title; Condition of Premises; Access; Availability of Utilities, etc.) G. Jurisdiction-Specific Considerations

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Real Estate Basics ABA–RPTE

RELATED RESOURCES AND GUIDES _______________________________________________________ ARTICLES • • • • • • • • • • • • • • • • • •

Marc E. Betesh & Nancy M. Davids, Negotiating Common Area Maintenance Costs, 23-JUN Prob. & Prop. 40 (2009) Ann Peldo Cargile, Implied Waivers of Subrogation in Leases, 12-JAN Prob. & Prop. 22 (1998) Ann Peldo Cargile, Assignments and Subleases, the Basics, 17-OCT Prob. & Prop. 40 (2003) Joshua Stein, Assignment and Subletting Restrictions in Leases and What They Mean in the Real World, 44 Real Prop. Tr. & Est. L.J. (2009) Angelia D. Wesch & Carmen R. Rowe, What Every Leasing Attorney Needs to Know about Insurance: Ask for What You Want, then Make Sure the Insurance Covers What You Need, 22-APR Prob. & Prop. 40 (2008) Jack Fersko & Ryan A. Schreiber, Repair Covenants: the Jekyll and Hyde of Leases, 12-JAN Prob. & Prop. 48 (1998) David Weisman, Destruction, Casualty, and Major Forces, 21-APR Prob. & Prop. 28 (2007) Scott W. Dibbs, Looking Down the Road, Estoppels, SNDAs, and Other Lease Provisions That Can Make or Break a Sale, 22-OCT Prob. & Prop. 49 (2008) Karen E. Abrams, “MEMORANDUM OF LEASE” Clause, More Than Just Boilerplate, 23-DEC Prob. & Prop. 58 (2009) Dennis L. Greenwald, Lease Termination Agreements, 14-OCT Prob. & Prop. 40 (2000) Patrick T. Sharkey, How Alligators Hidden in Leases Can Eat a Client’s Bottom Line – Damage and Destruction Provisions, 14-APR Prob. & Prop. 41 (2000) Marie A. Moore & Andrew R. Capitelli, Landlord Lease Remedies, What Are a Landlord’s Default Rights and What Can It Recover?, 23-DEC Prob. & Prop. 16 (2009) Robert J. Krapf, Ownership of Personal Property: Removal and Abandonment on Lease Termination, 13-OCT Prob. & Prop. 19 (1999) William E. Myers & Dawn M. Rawls, Food for Thought, Considerations in Negotiating and Drafting Food and Restaurant Leases, 25-FEB Prob. & Prop. 42 (2011) Marie A. Moore, Indemnification Provisions in Leases, What We Ask for and What Really Matters, 22-OCT Prob. & Prop. 33 (2008) Gary A. Kravitz, Three’s Company, Lease Negotiations Involving Franchisors, 24-AUG Prob. & Prop. 60 (2010) Richard M. Frome & Marcy C. Helfand & Kerry L. Iris & Orlando Lucero, Tenant Remedies: an Oxymoron, 12-JAN Prob. & Prop. 39 (1998) Roseleen P. Rick, All About Parking: Behind the Wheel with the Tenant, 14-OCT Prob. & Prop. 34 (2000)

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Real Estate Basics ABA–RPTE

•

Ruth A. Schoenmeyer & Arthur J. Menor & Lawrence S. Delaney, Is a Burrito a Sandwich? Recent Cases Yield Restrictive Covenant Practice Pointers, 28-FEB Prob. & Prop. 12 (2014)

PERIODICALS • • •

Probate and Property magazine The Real Property Trust and Estate Law Journal The Practical Real Estate Lawyer

BOOKS •

Dennis M Horn & Ira Meislik, The Commercial Lease Formbook: Expert Tools for Drafting and Negotiation, Second Edition (2010) o This formbook contains over 27 sample lease agreements and related forms, with commentary and alternative languages as options. The detailed commentary and optional languages are very helpful in getting a good understanding of landlord and tenant’s respective perspectives. It will also help practitioners become comfortable and confident with all provisions in reviewing and negotiating various commercial leases.

•

The Sublease and Assignment Deskbook: Legal Issues, Forms, and Drafting Techniques for Commercial Lease Transfers, Second Edition (2013)

•

Sidney G Saltz, From Handshake to Closing: The Role of the Commercial Real Estate Lawyer, Second Edition (2010) o While this book is not limited to leasing, this book provides a very good overview of what a commercial real estate lawyer does and contains practical advice, as well as valuable insights from the author.

•

Sidney G Saltz, The Lawyer's Uncommon Guide to Commercial Leasing (2014) o This book discusses different types of lease agreements, and examines lease provisions common to most leases and lease provisions specific to certain types of leases. This is a very good practical and insightful book for any young lawyers or lawyers who want to expand their practices into commercial leasing.

E-CLE (AUDIO AND MATERIALS DOWNLOADABLE FROM ABA WEB STORE) • •

Fundamentals of Real Estate: Next Steps in Leasing for Real Estate Lawyers (2014) Fundamentals of Real Estate: Commercial Real Estate Leasing (2015)

LEASING GROUP OF THE SECTION OF REAL ESTATE, TRUST AND ESTATE LAW, ABA The Leasing Group of the Section of Real Estate, Trust and Estate Law is a dynamic, active and enthusiastic ensemble of six substantive leasing Committees, i.e. Retail Leasing, Office Leasing, Industrial and Warehouse Leasing, Ground Leasing, 9

Real Estate Basics ABA–RPTE

Emerging Issues and Specialty Leases, and Assignment and Subletting. Although each Committee is substantively independent, there is significant interaction between the Committees and their respective members. Throughout the year, each Leasing Group Committee conducts a one hour substantive telephonic program on a leasing "hot topic" germane to the Committee's focus. These calls are free and open to all members of the Leasing Group. In addition to the Group calls, the Leasing Group presents the "Nuts and Bolts of Leases." “The Nuts and Bolts of Leases” is a bi-monthly conference call series designed to provide newly practicing lawyers, as well as those new to the leasing field, with a basic understanding of lease provisions and their sometimes unique application to various types of leases. Over the course of the series, the speakers will fully negotiate a commercial lease, from a landlord’s and tenant’s perspective, so that attendees may gain an understanding of the relevant issues. Please visit the Leasing Group Webpage for more information. http://apps.americanbar.org/dch/committee.cfm?com=RP259000

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Real Estate Basics ABA–RPTE

PRESENTERS’ BIOGRAPHICAL INFORMATION _______________________________________________________ Prof. Harold A. Lloyd Professor Lloyd is a graduate of Duke University School of Law and Davidson College. He was Vice President and General Counsel of The Fresh Market, Inc. for approximately ten years. Before that, he was a partner with the firm of Tuggle, Duggins & Meschan, P.A. where he had a general commercial practice. That practice included representing clients in the areas of commercial leasing, commercial contracts, commercial lending, intellectual property, and commercial bankruptcy law. Professor Lloyd has also served as the Ethics Chair for the Corporate Counsel Section of the North Carolina Bar Association.

Monica R. Owens Monica R. Owens has been practicing law in Atlanta, Georgia for nearly 18 years. Monica began her legal career as a corporate and real estate transactions attorney with the law firm Johnson, Freeman & Perkins-Hooker, P.C. Thereafter, she focused her practice on civil litigation. Since 2013, Monica has specialized in commercial real estate litigation, representing real estate owners, property managers, investors, developers, lenders, landlords and tenants in business related matters nationwide. In lease enforcement actions, Monica has successfully obtained evictions and multi-million dollar judgments against defaulting tenants and guarantors. Monica most recently served as a Roundtable Leader at the International Council of Shopping Centers (ICSC) Law Conference in Orlando, Florida, where she addressed the topic of "Managing Problem Tenants". She also presented the topic "Evaluation: Georgia’s Safe Carry Protection Act and Premises Liability Against Commercial Property Owners" at the Gate City Bar Association (GCBA) Annual CLE Program in San Juan, Puerto Rico on September 25, 2014. Monica is a former judicial staff attorney at the Georgia Court of Appeals, where she served in the chambers of Judge M. Yvette Miller (November 2010-February 2013) and the late Judge Debra Halpern Bernes (January 2005-July 2010). She also previously served as judicial law clerk to former Chief Judge Thelma Wyatt Cummings Moore of Fulton County Superior Court and was a law clerk exchange to former Chief Justice Robert Benham of the Georgia Supreme Court. Monica's vast experience further includes her service as an attorney in the Office of the Regional Counsel (Southern Region) for the Federal Aviation Administration.

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Real Estate Basics ABA–RPTE

In 1994, Monica graduated with honors from Spelman College in Atlanta, receiving her Bachelor of Arts degree in English Literature. She received her law degree from Georgia State University College of Law and became licensed to practice law in Georgia in 1997.

Soo Yeon Lee Soo Yeon Lee is an attorney with the law firm of Gordon & Centracchio, L.L.C. in Chicago, concentrating her practice in the areas of real estate law and commercial litigation. Ms. Lee has extensive experience representing commercial landlords and tenants in leasing, negotiating retail, restaurant, office, and industrial leases. She regularly counsels on various property ownership and management issues. She can be reached at [email protected].

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FORM 2-4

Regional Shopping Center Lease

1

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THE COMMERCIAL LEASE FORMBOOK

FORM 2-4 REGIONAL SHOPPING CENTER LEASE

Lease Type:

Regional, Shopping Center Lease

Orientation:

Landlord Form with tenant provisions provided as options

Premises Size:

Any (except anchor tenants)

Special Features:

Shopping mall or regional shopping center

Form 2-4: Regional Shopping Center Lease

LEASE AGREEMENT

BETWEEN

____________________________________ as Landlord

AND

____________________________________ as Tenant

3

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THE COMMERCIAL LEASE FORMBOOK

FORM 2-4 REGIONAL SHOPPING CENTER LEASE TABLE OF CONTENTS

ARTICLE 1. DEFINITIONS ARTICLE 2. PREMISES ARTICLE 3. TERM ARTICLE 4. RENT ARTICLE 5. USE OF PREMISES ARTICLE 6. OPERATION OF BUSINESS ARTICLE 7. CONSTRUCTION OF PREMISES ARTICLE 8. RELOCATION ARTICLE 9. REPAIRS AND MAINTENANCE ARTICLE 10. UTILITIES ARTICLE 11. DAMAGE TO PREMISES ARTICLE 12. INSURANCE ARTICLE 13. INDEMNIFICATION ARTICLE 14. ASSIGNMENT, SUBLETTING, OWNERSHIP ARTICLE 15. EVENTS OF DEFAULT/REMEDIES ARTICLE 16. SUCCESSION TO LANDLORD’S INTEREST ARTICLE 17. NOTICES ARTICLE 18. EMINENT DOMAIN ARTICLE 19. BROKER’S COMMISSION ARTICLE 20. SURRENDER AND HOLDING OVER ARTICLE 21. LIABILITY OF LANDLORD ARTICLE 22. SALE OF PREMISES BY LANDLORD ARTICLE 23. FORCE MAJEURE

Form 2-4: Regional Shopping Center Lease

ARTICLE 24. TENANT’S AUTHORITY ARTICLE 25. ATTORNEYS’ FEES ARTICLE 26. MISCELLANEOUS ARTICLE 27. SECURITY DEPOSIT/SECURITY INTEREST IN PERSONAL PROPERTY ARTICLE 28. WAIVER ARTICLE 29. REPRESENTATIONS Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F Exhibit G Exhibit H Exhibit I

Mall Plan Site Plan Construction of Premises Sign Requirements Guaranty of Lease Tenant’s Estoppel Certificate Utility Rate Schedule: HVAC Confirmation of Lease Food Court Rider to Lease Agreement

5

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THE COMMERCIAL LEASE FORMBOOK

FORM 2-4 REGIONAL SHOPPING CENTER LEASE LEASE

Commentary: Preamble This Preamble and the Notice provision (Article 17) are set up to insert the parties’ addresses once; the notice provision refers back to this preamble. This Indenture of Lease, made and entered into this _______________ day of______________, _____, by and between ____________________________(“Landlord”), having a mailing address of ___________________ and, a ____________________________ (“Tenant”), having a mailing address of ___________________________.

W I T N E S S E T H:

ARTICLE 1 DEFINITIONS Commentary: Article 1 Definitions: All capitalized terms are defined within this Article, some by cross reference to other Sections within the lease. The lease itself is always referred to as “this Lease.” Section 1.1.12 contemplates using Landlord’s bank or a successor thereof. Section 1.1.13 contemplates establishing a fixed date for the Expiration Date. Administratively, this is easier for Landlord and less subject to subsequent questions in the event the parties fail to enter into the confirmation of lease (Exhibit H) establishing the Rental Commencement Date, but where a landlord is inducing a tenant with an improvement allowance, it generally prefers to ensure a return over a set period, and this can be done by filling in the blank in Section 1.1.13 with “________ Lease Years following the Rental Commencement Date.” Section 1.1.30 provides that the parties will execute a Confirmation of Lease in the form of Exhibit H to memorialize the Rental Commencement Date, and other terms that are flexible or to be ascertained can be added to the Confirmation of Lease. Neglecting this minor detail at the time when all parties are in agreement can cause problems. 1.1 Landlord and Tenant agree that the following definitions shall apply to the various provisions of this Lease that refer to them.

Form 2-4: Regional Shopping Center Lease

1.1.1

7

“ADA”: defined in Section 6.7.2.

1.1.2 “Additional Rent”: all sums, other than Fixed Minimum Rent, payable by Tenant to Landlord pursuant to the terms of this Lease. 1.1.3

“Adjustment Date”: January 1 of each calendar year.

1.1.4

“Applicable Environmental Law”: defined in Section 5.8.

1.1.5

“CAM Charge”: defined in Section 4.4

1.1.6 “ CAM Year”: any fiscal or calendar year, as reasonably determined by Landlord, or, in the event Landlord shall change from a fiscal to a calendar year, or vice versa, such shorter period as may be reasonably required by such change. 1.1.7

“Casualty”: defined in Section 11.1.

1.1.8

“Common Areas”: defined in Section 4.4.2.

1.1.9

“Common Area Costs”: defined in Section 4.4.1.

1.1.10

“Claims and Costs”: defined in Section 13.1.

1.1.11 “CPI”: the Consumer Price Index (or such other similar index as may be selected by Landlord), All Urban Consumers, All Items, U.S. City Average, (1982-1984=100). 1.1.12 “Default Rate”: the lesser of: (i) the maximum interest rate allowed by applicable law; or (ii) a variable rate of interest equal to three percent (3%) in excess of the Prime Interest Rate. For purposes hereof, “Prime Interest Rate” shall mean the per annum rate of interest periodically quoted or announced by ____________Bank, N.A., or its successor, as its “prime” or “base” rate of interest, or a comparable rate reasonably designated by Landlord if such rate is no longer published. The Prime Interest Rate is not necessarily the lowest rate charged by _____________________ Bank, N.A. The Default Rate shall change on any day the Prime Interest Rate changes. 1.1.13 “Expiration Date”: ________________; provided, however, that if this Lease is canceled or terminated prior to such date, or if this Lease is terminated after such date (as a result of Tenant remaining in possession of the Premises after the originally fixed Expiration Date on a month to month basis in accordance with the provisions of Article 20 of this Lease), then the Expiration Date shall be the date upon which this Lease is so canceled or terminated; provided, further, however, that if this Lease is canceled or terminated prior to the originally fixed Expiration Date by reason of Tenant’s default under this Lease, Tenant’s liability under the provisions of this Lease shall continue until the date this Lease would have expired had the cancellation or termination not occurred. 1.1.14

“Fixed Minimum Rent”: DATES Rental Commencement Date - __________

ANNUALLY

MONTHLY

$

1.1.15 “Free Standing Store”: any retail store or building in the Shopping Center, apart from the Mall Building, designated from time to time by Landlord as a Free Standing Store. 1.1.16

“Full Replacement Value”: defined in Section 12.4.1.

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THE COMMERCIAL LEASE FORMBOOK

1.1.17

“Gross Sales”: defined in Section 4.2.3.

1.1.18

“Hazardous Substance”: defined in Section 5.8.

1.1.19

“HVAC Charge”: defined in Section 10.2.

1.1.20

“Impositions”: defined in Section 4.3.1.

1.1.21

“Indemnified Parties”: defined in Section 5.8.5.

1.1.22

“Landlord”: defined in the preamble.

1.1.23

“Work”: defined in Exhibit C.

1.1.24 “Lease Year”: the first Lease Year shall mean a period of twelve (12) consecutive months measured from the first day of the first full calendar month following the Rental Commencement Date, plus the partial month, if any, following the Rental Commencement Date; each subsequent Lease Year shall begin on the date next following the expiration of the previous Lease Year and shall continue for a period of twelve (12) consecutive months therefrom except the last Lease Year, which shall end on the Expiration Date. 1.1.25 “Major Tenant”: a retail business in the Shopping Center that occupies at least fifty-five thousand (55,000) square feet of [contiguous] retail space. 1.1.26 “Mall Building”: that certain building complex shown on Exhibit B as it may be changed from time to time in accordance with this Lease. 1.1.27 “Media Fund Amount”: an amount, per annum, initially equal to ___________ Dollars [($_________), (Dollars ($________) per month)]. This amount shall be increased, but not decreased, as of the Adjustment Date, by the same ratio as the CPI for October of the year prior to the Adjustment Date has increased, if it has, compared to the CPI for the October two (2) years prior to the Adjustment Date.[provided, however, that in no event shall any increase exceed _____ percent ( _____ %) of the prior Lease Year’s Media Fund Amount, nor shall any increase occur before the first day of the _____ Lease Year.] 1.1.28

“Merchants Association”: defined in Section 4.5.

1.1.29 “Percentage of Gross Sales”: ___ percent ( ___ %) of the total amount of Gross Sales during any measured period. 1.1.30 “Percentage Rent”: an amount equal to the extent to which the Percentage of Gross Sales for any measured period exceeds the Fixed Minimum Rent payable with respect to such measured period. 1.1.31

“Possession Date”: _________________.

1.1.32 “Premises”: that certain space located in the Mall Building (without basement, balcony, or mezzanine) shown on Exhibit A, and known as SPACE ___. 1.1.33 “Promotion Amount”: an amount, per annum, initially equal to ___________ Dollars [($_____) (Dollars ($ _____) per month)], which amount shall be increased, but not decreased, as of the Adjustment Date, by the same ratio as the CPI for October of the year prior to the Adjustment Date has increased, if it has, compared to the CPI for the October two (2) years prior to the Adjustment Date. [provided, however, that in no event shall any increase exceed _____ percent (_____ %) of the prior Lease Year’s Promotion Amount, nor shall any increase occur before the first day of the _____ Lease Year.]

Form 2-4: Regional Shopping Center Lease

1.1.34

9

“Promotional Service”: defined in Section 4.5.

1.1.35 “Pro Rata Share”: an amount computed as follows: (i) deduct from the Impositions, or the Common Area Costs, as the case may require, any contributions to such Impositions or Common Area Costs made by any Major Tenant and any Free Standing Store; (ii) multiply the remainder obtained thereby by a fraction, the numerator of which shall be the number equal to the Square Footage of the Premises, and the denominator of which shall be the gross number of square feet of all retail space in the Shopping Center that is occupied and open for business, including the Premises, but excluding the floor area of all Major Tenant space and all Free Standing Store space and any kiosk or cart space. For the purposes of this calculation, the denominator shall not be less than the number that is equal to seventy-five percent (75%) [eighty percent (80%), or any other higher number Tenant can negotiate] of the gross number of square feet of all retail space in the Shopping Center from time to time, including the Premises, but excluding the floor area of all Major Tenant space and all Free Standing Store space and any kiosk or cart space. 1.1.36

“release”: defined in Section 5.8.

1.1.37 “Rent”: collectively, all sums of whatever nature due under this Lease from Tenant to Landlord. 1.1.38 “Rental Commencement Date”: the earlier of: (i) the date Tenant opens for business; or (ii) The parties shall, within ten (10) days of the Rental Commencement Date, execute a Confirmation of Lease in the form of Exhibit H setting forth the Rental Commencement Date. 1.1.39 “Shopping Center”: that certain shopping center site presently known as _____________ located in the City of _____________, County of ______________, State of_____________, as shown on the site plan attached hereto, made a part hereof, and marked Exhibit B. 1.1.40 “Square Footage of the Premises”: deemed to be, for all purposes of this Lease, _____ square feet. [In the event field measuring of the Premises indicates a different square footage, all calculations in this lease that are based upon the Square Footage of the Premises shall be altered respectively. Such measurements shall occur no later that thirty (30) days after Tenant’s opening for business and no alterations in Square Footage of the Premises shall occur after that date.] 1.1.41

“Tenant”: defined in the preamble.

1.1.42 “Tenant Design Criteria”: that certain separately provided booklet of specifications prepared by Landlord governing Tenant’s Work and incorporated herein by reference. 1.1.43

“Tenant’s Work”: defined in Exhibit C.

1.1.44

“Tax Charge”: defined in Section 4.3.

1.1.45 “Tax Year”: Each twelve (12) month (or shorter period, if applicable) established as the tax year by the applicable taxing authorities. 1.1.46

“Utility Charge”: defined in Section 10.3.

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THE COMMERCIAL LEASE FORMBOOK

ARTICLE 2 PREMISES Commentary: Article 2 Premises: This lease clause is given effect using the defined terms. As such, “Rent” includes all sums of due under the lease. The definition of “Premises” is limited in Section 2.3 to limit Tenant’s right to use the area above the ceiling and beneath the floor. Tenant’s rights to the Common Areas are pursuant to a license rather than an easement. 2.1 For the term, at the Rent, and upon the provisions and conditions herein contained, Landlord does hereby lease to Tenant the Premises and Tenant rents same. 2.2 Landlord covenants that it has full right, power, and authority to make this Lease and that Tenant, upon the payment of the Rent and performance of the covenants and obligations upon Tenant’s part to be performed hereunder, shall and may peaceably and quietly have, hold, and enjoy the Premises and improvements thereon during the term hereof. 2.3 It is expressly agreed that the Premises do not include the land beneath the demised space nor any space above a height of twelve (12) feet from the finished floor level of such unit; provided that Tenant shall have the non- exclusive right to use a portion of such space for the location of Tenant’s mechanical equipment serving the Premises, subject to the approval of Landlord as to the location and installation of such equipment, such right to be in common with Landlord and all others to whom Landlord has granted or may hereafter grant such rights. This Lease is subject to utility easements, both recorded and unrecorded, all applicable zoning ordinances, and all other encumbrances of record. 2.4 Landlord expressly reserves the exterior face of exterior walls, the roof, and the use thereof, together with the right to install, maintain, use, repair, and replace such pipes, duct work, conduits, utility lines, wires, vents, and the like through the area above the ceiling, the columns and the space surrounding the columns, partitions, in or beneath floor slabs, on, above, or below the Premises, or other locations as may be reasonably necessary for the servicing of the Premises or other portions of the Shopping Center. [provided that no such pipes, ductwork, conduits, utility lines, wires, vents, or the like shall be located within the sales area of the Premises]. Tenant agrees that Landlord, its agents, employees, or servants, or any person authorized by Landlord, may enter the Premises for the purpose of inspecting the condition of same; making such repairs, additions, or improvements thereto, or to the Mall Building, as Landlord may elect or be required to make; and exhibiting the same to prospective purchasers, management, or Tenants of the Mall Building. Landlord agrees that except in cases of emergency, any such entry and all work done by Landlord in the Premises shall be performed in a manner that shall not unreasonably interfere with the normal business operations of Tenant. [Notwithstanding anything to the contrary contained herein, if Landlord enters the Premises for the purpose of performing work permitted under the terms of this lease, Landlord agrees to the following: (1) To indemnify Tenant from any and all damages or injuries arising out of the construction activities of Landlord, Landlord’s agents, employees, or servant, or any Person authorized by Landlord; (2) To schedule the work (to the extent it does not arise out of an emergency), if commercially reasonable to do so, at a time that is reasonable and

Form 2-4: Regional Shopping Center Lease

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mutually convenient for Landlord and Tenant and to pay the cost of Tenant’s ordinary security practices, if such work is to be performed after hours; (3) To abate Fixed Minimum Rent if such construction should prohibit Tenant from conducting business in the Premises for more than fortyeight (48) hours; (4) To use commercially reasonable efforts to minimize interference with Tenant’s conduct of business.] 2.5 Tenant, in conjunction with the use of the Premises, is hereby granted a non-exclusive license to the use of the Common Areas for pedestrian access of Tenant’s retail customers, employees, and suppliers to the Premises. This non-exclusive license shall not interfere with nor hinder the use of Common Areas by Landlord and/or the other tenants of the Shopping Center. Commentary: The optional renewal provision contemplates that Fixed Minimum Rent for the renewal period, if any, will have been set forth in Section 1.1.14. Section 3.2 contains a provision to allow cancellation of the lease if possession is not timely delivered, but otherwise limits damages. It also contains a drop dead date of one year after the Possession Date to avoid any rule against perpetuities issues.

ARTICLE 3 TERM 3.1 The term of this Lease shall commence on the Rental Commencement Date and shall continue through the Expiration Date. [Tenant shall have the right and option to renew and extend the term of this lease for successive additional periods of _____ (___) years each, by giving notice to Landlord of the exercise of such option not later than two hundred seventy (270) days before the expiration of the term or renewal thereof. If any such option is duly exercised, the term of this Lease shall be automatically extended for such renewal period without the execution of any other or further document, and all terms, covenants, and conditions of this Lease shall continue in full force and effect during such renewal term.] 3.2 Landlord agrees to give possession of the Premises to Tenant on or before the Possession Date. If delivery of possession shall not have occurred on or before the Possession Date, either party shall have the option to cancel this Lease by giving sixty (60) days’ notice of cancellation to the other party. If delivery of possession shall occur prior to the giving of notice, the foregoing option to cancel shall no longer be available. If delivery of possession shall occur after the giving of notice, but prior to the expiration of the sixty (60) day period, such notice shall be nullified, and the validity of this Lease shall be reinstated. Tenant’s right to cancel this Lease shall be Tenant’s sole remedy with respect to any failure of Landlord to deliver possession of the Premises on or before the Possession Date. If delivery of possession shall not have occurred on the date that is one year after the Possession Date, this lease shall be null and void. Under no circumstances shall Landlord be liable to Tenant for damages for any delay in commencing or completing Landlord’s Base Work or for a total failure to complete same.

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ARTICLE 4 RENT Commentary: Article 4 Rent: All payments due under the lease are designated as “Rent” in an attempt to give Landlord statutory and common law remedies for “rent” collection. Time for payment of all amounts due is set forth once, in Section 4.10, to ensure that due dates do not conflict. This lease contemplates both a co-op ad fund and a Merchants Association or Promotional Fund. The co-op fund is primarily for ads, while the Merchants Association or Promotional Fund provisions are more widely defined. This lease was specifically designed for a center where a merchants association was in existence, and gives Landlord the flexibility to convert to a promotional fund as leases having merchants association provisions expire. The Landlord- oriented audit concession below should be limited to only those accounts that Tenant specifically asks to audit (i.e., Landlord should not gratuitously give away the right to audit the HVAC Charge or the Tax Charge if Tenant asks for right to audit the CAM Charge; tenants should seek to audit all such accounts). A center with lower occupancy rates may be forced into a concession along the lines of Section 4.1.2. Because each tenant has its own laundry list of items to be excluded from gross sales, the author has made no attempt to list the usual suspects, but recommends that the percentage set forth in Section 4.2.3(b)(vi)be adjusted upward and any such items be added to the end of that section. The blank in Section 4.2.4(c) is typically filled in with the percentage rent break point. 4.1 Fixed Minimum Rent. Effective upon the Rental Commencement Date, Tenant covenants and agrees to pay Landlord, without demand, the Fixed Minimum Rent in the amounts set forth in Section 1.1.14, and in accordance with the schedule set forth in Section 4.10 hereinbelow. 4.1.1 If at any time during the term of this Lease, the Shopping Center shall be expanded by the addition of one or more Major Tenants so that the number of Major Tenants shall exceed four (4), Tenant agrees that the Fixed Minimum Rent described above shall automatically be increased by five percent (5%) upon the date that each such additional Major Tenant first opens for business and that such automatic increases will apply both to the Fixed Minimum Rent in effect at the time as well as to all future Fixed Minimum Rent rates throughout the remaining term of this Lease. [4.1.2 For the purposes of this clause, the term “Required Tenants” shall mean: (i) at least two (2) Major Tenants; plus (ii) non-Major Tenants occupying at least sixty-five percent (65%) of the gross number of square feet of the non-Major Tenant retail space in the Mall Building, including that space occupied by Tenant. If at any time there shall be less than the “Required Tenants” operating and open for business, and such condition continues for six (6) consecutive months, then effective with the payment of Fixed Minimum Rent due on the first day of the seventh month following the beginning of such condition, Tenant’s Fixed Minimum Rent shall be adjusted so that Tenant pays an amount equal to one-half Fixed Minimum Rent, but all other provisions of this lease shall remain unchanged. On the date that the Required Tenants are again operating and open for business, Tenant shall again commence to pay the full amount of Fixed Minimum Rent.]

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4.2 Percentage Rent. In addition to Fixed Minimum Rent, and as Additional Rent hereunder, Tenant covenants and agrees to pay to Landlord, without demand, for each Lease Year, Percentage Rent in accordance with the schedule set forth hereinbelow. 4.2.1 Percentage Rent shall be payable by Tenant beginning in the month of any Lease Year in which the Percentage of Gross Sales first exceeds the Fixed Minimum Rent due for such Lease Year. Tenant shall then continue to pay said Percentage Rent, on a monthly basis, through the end of that Lease Year. Monthly Percentage Rent payments shall be due for each month, without demand, by the fifteenth (15) day of the following month until the end of that Lease Year. 4.2.2 Upon receipt of Tenant’s annual certified statement of aggregate sales for any Lease Year, Landlord will compare any monthly Percentage Rent payments made by Tenant throughout that Lease Year against the Percentage of Gross Sales that would otherwise have been due had such period been measured as a whole. Should the aggregate monthly Percentage Rent payments made by Tenant during such period exceed the amount that otherwise would have been due based on the full Lease Year’s Gross Sales, Landlord shall promptly credit the amount of overpayment against the next monthly Rent payments owed by Tenant. If such monthly payments made by Tenant should be less than the amount that otherwise would have been due based on the full Lease Year’s Gross Sales, Tenant agrees to remit the unpaid balance, without demand, to Landlord at the time the certified statement of annual sales is submitted. 4.2.3

Definition of Gross Sales.

4.2.3(a) The term “Gross Sales,” as used in this Lease, shall be defined to include, but shall not necessarily be limited to, the following items: (i) The sale price, as of the date of the transaction, of all merchandise sold, rented, leased, or licensed, whether wholesale or retail, from the Premises, whether for cash, by installment, or for credit; (ii) the sale or issuance of gift or merchandise certificates from the Premises; (iii) charges for miscellaneous services related to the sale of the primary product such as alteration charges, delivery charges, assembly charges, etc.; (iv) mail or telephone orders received at the Premises; (v) any and all deposits not refunded to purchasers; (vi) any and all merchandise orders accepted at the Premises, even though such orders may be filled elsewhere; and (vii) all moneys and/or things of value received by Tenant (such as trade-ins) from its operations that are neither specifically included in, nor excluded from, Gross Sales by other provisions of this definition (excepting proceeds from any insurance for business interruption, fire, or casualty losses); provided, however, that in the event Tenant is required to report its gross sales on any federal, state, or local sales tax return and the amount of gross sales so reported on any such return shall exceed the Gross Sales as reported by Tenant under this Lease, then “Gross Sales” shall be the higher figure so reported. 4.2.3(b) The following items may be excluded from Gross Sales: (i) refunds granted to customers for items of merchandise originally sold from the Premises, provided that the original sale of merchandise was recorded as part of the sales activity from the Premises; (ii) the amount of sales, luxury, or excise taxes actually paid to any governmental body on sales revenues generated from the Premises; (iii) the amount of sales, not in the ordinary course of Tenant’s business, of fixtures, machinery, or equipment that Tenant has the right to remove from the Premises. However, it is expressly understood that Tenant may not use any portion of the selling area of the Premises to offer such fixtures, machinery, or equipment for sale to the public; (iv) the value of any exchange or transfer of merchandise between stores where such exchange or transfer is made solely for the convenient operation of Tenant’s

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business and not for the purpose of consummating a sale from the Premises; (v) the value of returns to shippers and manufacturers, provided the return of goods involves items of merchandise previously sold from the Premises and recorded as a sale as herein provided; and (vi) the following described items, to the extent they do not exceed, in the aggregate, one percent (1%) of Gross Sales: (x) charges for miscellaneous services related to the sale of the primary product such as alteration charges, delivery charges, assembly charges, etc.; and (y) sales to Tenant’s employees if sold to the Tenant’s employees at a discount below that offered to the general public. 4.2.4 Sales Records/Reporting of Sales/Audits. Tenant agrees to keep accurate books of account and to record all sales in accordance with generally accepted accounting principles and to record each individual sales transaction by use, of a cash register machine with sales totaling capability. All records together with all federal, state, or local sales, use, and income tax reports, shall be preserved by Tenant for three (3) years either at the Premises or at the home or regional offices of Tenant and made available to Landlord for inspection and copying at the Premises or such offices upon demand. Tenant agrees to deliver to Landlord a statement of each month’s sales on or before the fifteenth (15th) day of the following month and, by the thirtieth (30th) day following the end of each Lease Year, a statement, certified by a financial officer, owner, or partner of Tenant, of the Gross Sales made during such year. 4.2.4(a) In the event Tenant shall be delinquent in furnishing Landlord with any monthly or annual sales statements required hereunder, in order to cover Landlord’s additional costs associated with processing such untimely report, Tenant agrees to pay a late reporting charge equal to Twenty-Five Dollars ($25.00) for the first day of delinquency and Five Dollars ($5.00) for each remaining day that such required reports remain delinquent. Tenant covenants and agrees to pay Landlord such late reporting charge(s), as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor. 4.2.4(b) Landlord, at Landlord’s expense, shall be entitled to audit Tenant’s records of the Gross Sales made during any period either by Landlord or a certified public accountant or other representative designated by Landlord, and to recalculate the rentals payable for such period. If it shall be determined as a result of such audit that there has been a deficiency in the payment of Percentage Rent, then such deficiency shall become immediately due and payable with interest thereon at the Default Rate. In addition, if Gross Sales have been understated by more than three percent (3%), or if Tenant shall be delinquent in furnishing any sales statements required hereunder and Landlord shall have chosen to have an audit and accounting made of such annual sales statements, then Tenant shall pay the cost of such audit and accounting. If Gross Sales have been understated by five percent (5%) or more, then Tenant shall also pay an administrative charge equal to fifteen percent (15%) of the cost of such audit, which charge shall be deemed Additional Rent and paid to Landlord within ten (10) days after demand therefor. 4.2.4(c) Recognizing that production of maximum sales volume is a material consideration to Landlord, Tenant agrees that, if Tenant has not reached a reported and certified annual Gross Sales volume of $___________ by the end of the third full Lease Year, Landlord may, at its sole option, terminate this Lease. Landlord will notify Tenant within ninety (90) days of receipt of Tenant’s year-end sales report, at which time Tenant will have ninety (90) days to vacate the Premises. 4.3 Real Estate Taxes and Assessments. Effective upon the Rental Commencement Date, and as Additional Rent hereunder, Tenant covenants and agrees to pay Landlord, without

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demand, Tenant’s Pro Rata Share of all Impositions imposed on the Shopping Center (the “Tax Charge”). The Tax Charge shall be paid in equal monthly installments in accordance with the schedule set forth in Section 4.10, in an amount reasonably estimated from time to time by Landlord. Prior to the Rental Commencement Date, and from time to time throughout the term hereof, Landlord shall notify Tenant in writing of Landlord’s estimate of Tenant’s monthly installments due hereunder. 4.3.1 “Impositions” shall mean all taxes and assessments on the Shopping Center (including, without limitation, all assessments for public improvements, services, or benefits, whether or not commenced or completed during the term), impact fees, rates and charges, excises, levies, license fees, inspection fees and other authorization fees, transit development fees, assessments or charges for housing funds, fees for services provided to the Shopping Center by any public utility, and other governmental charges whether federal, state, regional, county, municipal, or otherwise and whether they be by taxing districts or authorities presently taxing the Shopping Center or by others, subsequently created or otherwise, which at any time during or in respect of the term may be levied or assessed against, or be a lien upon, or may be confirmed or imposed on or in respect of: (aa) the Shopping Center or any portion thereof or the interest of Landlord or Tenant therein, or any person claiming thereunder, or in respect thereof, or of the use and occupancy thereof or the Square Footage of the Premises; (bb) Rent, rent adjustment, or any of all other amounts payable by Tenant thereunder, including but not limited to any applicable sales tax imposed thereon; (cc) this Lease or the interest of Tenant or Landlord hereunder; (dd) the possession, use, occupancy, maintenance, or repair of the Shopping Center or any portion thereof; (ee) gross receipts from the Premises or any portion thereof; (ff) the earnings arising from the possession, use, or occupancy thereof; (gg) the right to do business if Landlord’s collection of Rent under this Lease should be defined as doing business; and (xx) any other tax, fee, or excise, however described, as a direct substitution in whole or in part for, or in addition to, or as the substantial equivalent of, any real estate taxes; (yy) any new tax that is more closely akin to that of an ad valorem or use tax than to an income or franchise tax on Landlord’s income; and (zz) the cost of engaging tax consultants who work to keep the Impositions at the lowest possible level, but only to the extent that such consultants’ fees are less than or equal to the savings resulting from their work. “Impositions” shall not include any income, estate, gift, or excess profit tax of Landlord determined on the basis of Landlord’s general income or revenues. [Notwithstanding anything contained in this lease to the contrary: (1) Tenant shall not be required to pay as any share of Impositions under this Lease any bond repayment relating to the initial construction of any part of the Shopping Center or any subsequent alteration, expansion, or addition; (2) Impositions as defined herein shall not include interest or penalties imposed for Landlord’s failure to timely pay Impositions nor any real estate transfer tax, documentary stamp tax, recording fees, or the like. (3) If any special assessments may be paid in installments by Landlord over a period of years, then only the installments coming due during the term hereof will be included in Tenant’s share of Impositions. In no event shall Tenant have any liability with respect to such installments that fall due either before the Rental Commencement Date or after the expiration or sooner termination of the term of this Lease.] 4.3.2 After receipt of all tax bills and assessment bills attributed to any Tax Year during the term hereof, Landlord shall furnish Tenant with a copy of such bills and a written

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statement of the actual amount of Tenant’s Pro Rata Share of the Impositions for such year. If the total amount paid by Tenant under this Article for any Tax Year during the term of this Lease shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, such deficiency. If the total amount paid by Tenant hereunder for any such Tax Year shall exceed such amount due from Tenant for such Tax Year, Landlord shall credit the amount of overpayment against the next payment of monthly Rent owed by Tenant, except in the last year of the lease term when any overpayment by Tenant shall be used first to offset any outstanding balance, if any, due under this Lease, with the remainder, if any, reimbursed to Tenant by Landlord, provided Tenant is not in default of this Lease. If Landlord should receive a refund of any such taxes, Tenant will share in same, to the extent of Tenant’s Pro Rata Share, after deduction for all of Landlord’s expenses in obtaining such refund. 4.3.3 A copy of a tax bill or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of taxes and/or assessments levied or assessed against the property to which such bill relates. Landlord’s and Tenant’s obligations under this Article shall survive the Expiration Date. No taxes, assessments, fees, or charges referred to in this Section shall be considered as taxes under the provisions of Section 6.10 hereof. 4.4 Common Area Costs. Effective upon the Rental Commencement Date, and as Additional Rent hereunder, Tenant covenants and agrees to pay Landlord, without demand, Tenant’s Pro Rata Share of all Common Area Costs (the “CAM Charge”). The CAM Charge shall be paid in equal monthly installments in accordance with the schedule set forth in Section 4.10 hereinbelow, in an amount reasonably estimated from time to time by Landlord. Prior to the Rental Commencement Date, and from time to time throughout the term hereof, Landlord shall notify Tenant in writing of Landlord’s reasonable estimate of Tenant’s monthly installments due hereunder. 4.4.1 As used in this Lease, the term “Common Area Costs” means the total costs of all services provided by Landlord for the common or joint use and benefit of the Tenants of the Shopping Center and all items of expense relating to operating, managing, supervising, equipping, policing and protecting, lighting, repairing, replacing, and maintaining the appearance, safety, and utility of the Common Areas in the same condition as when originally installed including: (i) depreciation of all capital items that Landlord depreciates as an expense to the Common Area Cost account in accordance with the provisions of the Internal Revenue Code of 1986, as amended, and any such regulations or rules promulgated thereunder (but excluding the initial investment cost of such items); and (ii) rental payments for leasing equipment used in the maintenance of the Common Areas. 4.4.1(a) Such costs and expense shall include, but expressly are not to be limited to, the costs, if any, of the following: pest extermination; removal of trash, snow, ice, sewage, rubbish, trash, garbage, dirt, and debris; planting, replanting, and replacing flowers and landscaping and supplies required therefor; maintaining elevators, speed ramps, and escalators, lighting facilities, and storm drainage systems; replacing and/or repairing miscellaneous items in the Common Areas; all premiums for insurance coverages if and as purchased by Landlord, such as, but not necessarily limited to, liability and property damage coverage, sprinkler leakage, fire, and extended coverage, including vandalism and malicious mischief, and worker’s compensation insurance; wages, salaries, seminar, education, and training expenses of all employees who perform work “on site” in relation to the Common Areas and Shopping

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Center including, but not necessarily limited to unemployment taxes, premiums for life, health, and welfare insurance, pension plan contributions, and social security taxes for those employees; personal property taxes; ADT or other master type supervised security and/or fire alarm; guard services and security; Muzak; audit expenses relating to Common Area Costs; janitors, landscaping, gardening, decoration, and line painting; maintenance and repair of common utility lines, water pipes, and systems, sanitary, and storm control pipes and systems, and sewage treatment facilities; removal of Hazardous Substances normally used in the course of Common Area maintenance (e.g., paint cans); periodic routine asphalt, concrete, roof, and plate glass repairs; fees for required licenses and permits; complying with all laws, ordinances, and orders affecting the use and occupancy of the Common Areas and/or the cleanliness, safety, or operation thereof, including, without limitation, complying with all Applicable Environmental Laws and with the ADA; heating, ventilating, and cooling the Common Areas; utilities relating to the Common Areas; together with administrative costs equal to fifteen percent (15%) of the total of all such aforesaid items of expense. [It is the intent of the parties that the following items shall not be included as part of the Common Area Costs: (i) Direct costs attributed to seeking and obtaining new tenants as well as retaining existing tenants, such as leasing specific advertising, brokerage commissions, and professional fees directly attributable to leasing of space or directly attributable to a specific tenant; (ii) Repairs and other work occasioned by fire, windstorm, or other casualty to the extent Landlord is reimbursed by insurance; [can add, as additional concession: that was carried, or required to be carried under this Lease]; (iii) Interest and/or amortization of any mortgages on the Shopping Center or rent under a master ground lease of the Shopping Center; (v) Costs incurred due to violations by the Landlord of any of the terms and conditions of any leases in the Shopping Center; (vi) All items and services for which tenants reimburse the Landlord; (vii) Any costs of media advertising; (viii) Costs related to any refinancing of debt; (ix) Mortgage payments payable by Landlord; or (x) Costs of compliance with Applicable Environmental Laws, other than routine and normal costs of compliance that are normally incurred at comparable facilities in connection with day to day operations, or that are less than two percent (2%) of the total of all components of the CAM Charge.] 4.4.1(b) After the end of each CAM Year, Landlord shall furnish to Tenant a statement, verified by an independent certified public accountant, showing the total Common Area Costs for the CAM Year just expired, with costs calculated in accordance with generally accepted accounting principles, the amount of Tenant’s share of such Common Area Costs, and payments made by Tenant during such CAM Year under the preceding section. If the total amount paid by Tenant under this Article for any such CAM Year during the term of this Lease shall be less than the actual amount due from Tenant for such period, as shown on such statement, Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, such

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deficiency. If the total amount paid by Tenant hereunder for any such CAM Year shall exceed such amount due from Tenant for such CAM Year, Landlord shall credit the amount of overpayment against the next payment of monthly Rent owed by Tenant, except in the last year of the Lease term when any overpayment by Tenant shall be used first to offset any outstanding balance, if any, due under this Lease, with the remainder, if any, reimbursed to Tenant by Landlord, provided Tenant is not in default of this Lease. [Tenant reserves the right, upon thirty (30) days’ notice to Landlord, to make an audit of all records directly pertaining to the CAM Charge, Tenant’s Pro Rata Share of all Impositions, the HVAC Charge, and the Utility Charge, under the following conditions: (i) Tenant may conduct only one such audit in any year with respect to any such charge. (ii) Tenant may conduct an audit only if the charge Tenant seeks to audit increased by ten percent (10%) or more over the charge for the immediately preceding year. (iii) Such audit may be conducted only within four (4) months after Landlord notifies Tenant of such increase, and only with respect to records for the year of the increased charge. (iv) No such audit may be conducted during the months of November, December, January, or February. (v) Such inspections will be conducted only during regular business hours at Landlord’s office and only after Tenant gives Landlord reasonable prior written notice. (vi) Such audit shall be conducted by no more than two (2) people. (vii) If such audit shall disclose an overcharge, Landlord shall immediately refund such overcharge to Tenant. [NOT PREFERRED: If such audit shall disclose an overcharge of more than five percent (5%), Landlord shall reimburse Tenant for the cost of such audit within thirty (30) days after Tenant’s written demand therefor.]] 4.4.2 The “Common Areas,” as herein referred to, but subject to Landlord’s right to reconfigure same and construct additional improvements as set forth in this Lease, shall consist of any and all interior or exterior areas of the Shopping Center property not specifically demised and leased as tenant space. Common Areas may include, but are not necessarily limited to, mall walkways; sidewalks; access roads; parking lots; public rest rooms; loading platforms; driveways; roof areas; lounges and shelters; storage and office areas used by Landlord to operate, maintain, and manage the Shopping Center; Mall Building amenities; trash removal facilities; delivery and service corridors; elevators and escalators; and any and all other areas of the Shopping Center that are not demised and leased to individual tenants of the Shopping Center. 4.4.2(a) All Common Areas shall at all times be subject to the exclusive control and management of Landlord. Landlord will operate and maintain the Common Areas in such manner as Landlord, in its sole discretion, shall determine from time to time. Anything in this Lease to the contrary notwithstanding, with respect to the Common Areas, Landlord shall have the right, at any time and from time to time, and without notice to or consent

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from Tenant, and without in any manner diminishing Tenant’s obligations under this Lease, to: (i) reconfigure the Common Areas; (ii) periodically close off all or a portion of the Common Areas for repairs, maintenance, or construction work; (iii) construct, maintain, and operate lighting and other facilities in and on all Common Areas; (iv) police the Common Areas; (v) from time to time, close or otherwise change the area, level, location, use, and arrangement of parking areas and other facilities located in the Common Areas; (vi) restrict parking by Tenant, its officers, agents, and employees from customer only parking areas; (vii) enforce parking charges (by operation of meters or otherwise); (viii) close all or any portion of the Common Areas to such extent as may, in the opinion of Landlord’s counsel, be legally sufficient to prevent a dedication thereof or the accrual of any rights to any person or the public therein; (ix) close temporarily all or any portion of the parking areas or parking facilities to discourage non-customer parking; (x) add onto or otherwise alter, and build additional stories onto, any existing buildings, or erect additional buildings or improvements, including elevated or multiple-deck parking, or change the locations of buildings or other structures anywhere in the Shopping Center; (xi) approve the use of the Common Areas for promotional, retail, or other activities; (xii) erect permanent or temporary kiosks, stands, or similar structures anywhere in the Shopping Center; (xii) enlarge the Shopping Center; and (xiv) otherwise do and perform such other acts in and to the Common Areas as, in the use of good business judgment, Landlord shall determine to be advisable with a view to the improvement of the convenience and use thereof by tenants, their officers, agents, employees, and customers, so long as same do not materially, negatively affect visibility of or access to the Premises. Landlord agrees to use commercially reasonable efforts to avoid interfering with the conduct of Tenant’s business during any periods of construction. 4.5 Shopping Center Promotion. It being agreed between Tenant and Landlord that the conduct of ongoing advertising and sales promotional activities is important to the general business success of the Shopping Center and the various Tenants located therein, Landlord shall have the option of either: (i) establishing a merchants association (the “Merchants Association”) as a vehicle for providing promotional services for the Shopping Center; or (ii) establishing a promotional service (the “Promotional Service”) for the Shopping Center. Landlord agrees to contribute annually to the Merchants Association, or to the Promotional Service, as the case may require, an amount not less than twenty-five percent (25%) of either: (i) the total amount of annual Merchants Association dues paid by Tenants of the Shopping Center; or (ii) the total amount of annual Promotional Service charges paid by Tenants of the Shopping Center; provided, however, Landlord’scontribution need in no event exceed Twenty-five Thousand Dollars ($25,000) in any calendar year. Landlord’s contribution shall be the total of inkind (the fair market value to be reasonably determined by Landlord) and cash contributions. Tenant agrees to pay, as provided hereinbelow, the Promotion Amount, either to Landlord or to the Merchants Association, as the case may require, and to otherwise participate, as hereinafter provided, in either the Promotional Service or the Merchants Association, whichever Landlord may elect to establish. 4.5.1 The Promotion Amount funds shall be used by Landlord to provide the types of professional advertising and promotional activities generally utilized in regional shopping centers, which may include, but will not be limited to, institutional advertising of the Shopping Center, entertainment events, special merchandise displays, musical programs, seasonal and holiday decorations, direct mail campaigns, coordination of group advertising efforts, public relations programs, and any other public activities that Landlord may deem to be in the best interest of the Shopping Center, and any and all support functions necessary to the providing of those activities. The preceding list is by way of example only and does not

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obligate Landlord to engage in any particular activities. Support functions shall include, but are not limited to, salaries; the cost of all necessary office supplies, equipment, and furnishings; any and all federal, state, and local payroll taxes for employees; income taxes, personal property taxes; training and seminar costs; advertising agency fees; advertising production costs; costs of market research studies; maintenance and/or security services specifically required for the activity; postage expense; any and all insurance costs that Landlord incurs that are specifically related to such activities or the employees hired to carry out those activities; Landlord’s cost of providing office space for the marketing director and clerical staff; and the cost of conducting periodic meetings of Shopping Center tenants to review present or past promotion activities. Landlord may appoint a committee, chaired by Landlord’s representative, to periodically review promotional activity plans. Such a committee shall be advisory in nature only and shall not impede Landlord’s ability to conduct programs that are, in Landlord’s sole judgment, in the best interest of the Shopping Center. 4.5.1(a) Merchants Association. Landlord has established the Merchants Association, which is charged with the responsibility of providing the above described promotional services. Tenant agrees to become a dues paying member of the Merchants Association and retain such membership throughout the term of this Lease. Tenant covenants and agrees to pay, as its sole dues to the Merchants Association, without demand, the Promotion Amount. The Promotion Amount shall be paid in equal monthly installments in accordance with the schedule set forth in Section 4.10 hereinbelow. Landlord retains the right to hereafter install a Promotional Service as described hereinbelow, and discontinue using the Merchants Association for such purposes. 4.5.1(b) Promotional Service. Landlord may, as an alternative to the Merchants Association, establish a Promotional Service to furnish and maintain advertising and sales promotion activities that, in Landlord’s sole judgment, will benefit the Shopping Center. In such event, Landlord shall so notify Tenant, and Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, without demand, the Promotion Amount. The Promotion Amount shall be paid in equal monthly installments in accordance with the schedule set forth in Section 4.10 herein below. The Promotional Service, if established, will provide the types of professional advertising and promotional activities previously provided by the Merchants Association. Should Landlord establish a Promotional Service, Landlord shall retain the right to thereafter install a Merchants Association as previously described, and discontinue using the Promotional Service for such purposes. 4.6 Advertising. Landlord has established a separate advertising fund (the “Media Fund”) for the Shopping Center. Landlord shall administer the Media Fund for the benefit of all the participants and shall develop such programs for use of the monies as Landlord deems necessary and appropriate to better generate customer traffic for the benefit of Tenant and the other Tenants of the Shopping Center. The monies shall be used solely for the purchase of electronic media, and/or print media, and/or billboards, and for no other purposes. Any monies not spent in any calendar year shall be carried over to the next year. Tenant agrees to allow Landlord to use Tenant’s trade name and/or logo and/or a brief description of Tenant’s business in Media Fund purchased media. 4.6.1 Effective upon the Rental Commencement Date, and as Additional Rent hereunder, Tenant covenants and agrees to pay Landlord, without demand, the Media Fund Amount. The Media Fund Amount shall be paid in equal monthly installments in accordance with the schedule set forth in Section 4.10. This contribution to the Media Fund shall be in addition to the Promotion Amount.

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4.6.2 Tenant further agrees to conduct additional advertising and sales promotional programs, independent of the Promotional Service or Merchants Association programs and the Media Fund, in each calendar year in a minimum amount equal to at least three percent (3%) of the Gross Sales reported by Tenant. Further, Tenant agrees, upon demand, to supply Landlord with copies of media invoices, affidavits of performance, etc., as substantiation of this minimum advertising effort. Tenant further agrees that all forms of advertising conducted within the ______________ metropolitan area shall identify the Shopping Center, by name, as a location of Tenant’s business. 4.7 Sales or Use Tax on Rent. Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, any sales or use tax imposed on Rent. Such tax shall be payable to Landlord at the same time as any such component of Rent shall be due under this Lease. 4.8 Utility Charges. Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, Utility Charges as more specifically set forth in Article 10 of this Lease. 4.9 Interest. Tenant covenants and agrees to pay, as Additional Rent hereunder, interest on all delinquent Rent, at a rate equal to the Default Rate. Such interest shall accrue from the original due date of such Rent (subject to applicable grace periods) to the date of actual receipt by Landlord. Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, such interest. 4.10 Due Dates for Payments. For both Tenant’s and Landlord’s accounting purposes, it is agreed that rental charges of every kind herein set forth shall begin to accrue on the Rental Commencement Date and continue through the Expiration Date. With regard to payments of Fixed Minimum Rent, the Tax Charge, the CAM Charge, the Promotion Amount, the Media Fund Amount, and the HVAC Charge, the first installment shall be due, in advance, on the Rental Commencement Date. Each subsequent installment shall be due, in advance, on the first day of each month next ensuing after the Rental Commencement Date. For any partial month, Tenant shall pay a per diem amount equal to one thirtieth (1/30th) of the monthly amount for each day of such partial month. 4.11 Place of Payment. All Rent payable by Tenant hereunder to Landlord shall be paid, in lawful money of the United States of America, to Landlord at the notice address or to such other payee or address as Landlord may designate in writing to Tenant.

ARTICLE 5 USE OF PREMISES Commentary: Article 5 Use of Premises: The use provision begins with a prohibition against selling certain items (fill in the blanks), which are any items subject to an exclusive use arrangement. Landlord’s exposure in granting an exclusive use arrangement to its tenants should be limited to a covenant that in leases which Landlord enters prospectively, it will prohibit sales of the article in question. For example, if the tenant sought an exclusive for the sale of stuffed rattlesnakes, the most Landlord should be willing to offer is that all future leases Landlord enters into during the term of the lease will prohibit the sale of stuffed rattlesnakes; thereafter,

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THE COMMERCIAL LEASE FORMBOOK

Landlord would modify the first sentence of Section 5.1 to add “stuffed rattlesnakes” to the list of prohibited items. The lease contemplates that Landlord will have an established document containing design criteria for Tenant’s Premises. 5.1 Use. In order to comply with Landlord’s commitments to other tenants of the Shopping Center, anything in this Lease to the contrary notwithstanding, Tenant is expressly prohibited from selling the following: __________________________________. Tenant shall operate its business in the Premises during the term of this Lease under the name ___________________________, and shall use the Premises only for the following purposes: ______________________ Tenant agrees that it will not use, or permit or suffer the use of the Premises or any part thereof, for any other business or purpose. 5.2 Nature of Use. Tenant shall use and occupy the Premises in a careful, safe, and proper manner and shall keep the Premises in a clean and safe condition in accordance with this Lease and local ordinances and the lawful directions of proper public officers. Tenant shall use and maintain the Premises consistent with present reasonable standards of good shopping center operations and shall not permit solicitations, demonstrations, itinerant vending, or any other activities inconsistent with such standards. Tenant shall not conduct catalog sales in or from the Premises except of merchandise that Tenant is permitted to sell “over the counter” pursuant to the provisions of this Lease. Tenant shall not maintain neither permit to be maintained, within the Premises, any vending machines of any nature. [except solely for use by Tenant’s employees and located in non-sales areas]. 5.3 Reputation of Shopping Center. Tenant shall not use or permit the Premises to be used for any purpose other than as specified herein, and shall not use or permit the Premises to be used for any unlawful, disreputable, or immoral purpose or in any way that will injure the reputation of the Shopping Center, nor shall Tenant permit the Premises to be occupied in whole or in part by any other person or entity, except as otherwise provided herein. Tenant agrees that the name of the Shopping Center is not to be used in the trade name of Tenant’s business. 5.4 Extra Hazardous Activity. Tenant agrees that it will not do or keep anything in or about the Premises that will contravene Landlord’s policies insuring against loss or damage by fire or other hazards, or that will prevent Landlord from procuring such policies in companies acceptable to Landlord. If any act or omission by Tenant shall cause the rate of fire or other insurance on any portion of the Shopping Center to be increased beyond the minimum rate that would be applicable to the Premises for the use or purposes herein described, Tenant will pay the amount of such increase, as Additional Rent, within thirty (30) days after demand therefor by Landlord. 5.5 Remodeling, Painting, and Decorating. Following completion of the construction of the Premises, Tenant will not change the color or type of paint, stain, wall covering, carpet, or other materials on any part of the Premises, or otherwise change the architectural treatment thereof, without first obtaining Landlord’s written approval therefor; and Tenant will remove promptly upon notice from Landlord any paint or any such decoration or alteration of the architectural treatment that has been applied or installed without Landlord’s prior written approval, or will take such other action with reference thereto as Landlord may direct; provided, however, that anything hereinabove to the contrary notwithstanding, Tenant shall be allowed to make interior, non-structural, non-utility alterations that are in compliance with Landlord’s then existing Tenant Design Criteria without Landlord’s prior approval so long as

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such alterations do not exceed Ten Thousand Dollars ($10,000) in cost and Tenant notifies Landlord at least ten (10) days before commencing any such alterations. Tenant further agrees to refurbish the physical Premises at the end of every fifth (5th) full Lease Year to keep the appearance of the Premises in a first class condition. Such work shall include such items as new wall coverings or new paint, new floor covering, and new ceilings (if necessary), and the storefront shall be treated cosmetically to retain a first class appearance. Prior to commencing such work, Tenant shall obtain Landlord’s prior written approval of materials to be used. 5.6 Rubbish and Trash. Tenant shall not permit the accumulation of rubbish, trash, garbage, or other refuse in and around the Premises. Tenant agrees to keep all refuse in proper containers, and out of public sight, within the interior of the Premises. Tenant agrees to contract, at Tenant’s expense, for the removal of such rubbish, trash, garbage, or other refuse. If Landlord shall install compactors within the Shopping Center, Tenant agrees to enter into a separate contract with Landlord’s rubbish removal service, pay for such service directly, and use the compactor designated by Landlord at such times and in such manner as Landlord shall direct by notice to Tenant. [In all events, the rates for garbage removal shall be competitively priced compared with outside contractor’s prices at other similarly situated regional retail malls in the area.] In the event Tenant fails to remove any accumulation of rubbish, trash, garbage, or other refuse from the Common Areas immediately after Landlord notifies Tenant’s manager to remove the same, Landlord shall have the right, but not the obligation, to remove the same, in which event Tenant agrees to reimburse Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, for Landlord’s cost to remove such rubbish, trash, garbage, or other refuse. 5.7 Signs. Prior to opening the Premises for business, Tenant shall furnish and install a storefront sign in accordance with Exhibit D and the Tenant Design Criteria, attached hereto and made a part hereof. Tenant shall not place, erect, or maintain on the doors, or on any exterior surface of the Premises, or in any vestibule, or anywhere outside of the Premises, any sign, lettering, decoration, or advertising, except such sign(s) as may be permitted or required by Exhibit D. Tenant shall, at its expense, maintain such permitted or required sign(s) in good state of repair and, upon vacating the Premises, Tenant agrees to remove all signs and to repair all damage caused by such removal. Except as specifically provided hereinabove: (i) Tenant shall not place or install or suffer to be placed or installed or maintained any sign upon or outside the Premises or in the Shopping Center; (ii) Tenant shall not place or install or suffer to be placed or installed on the exterior of the Premises any awning, canopy, banner, flag, pennant, aerial, antenna, or the like, nor shall Tenant place or maintain on the glass of any window or door of the Premises any sign, decoration, lettering, advertising matter, shade, blind, or other thing of any kind. Tenant further agrees that Landlord shall have the right to disapprove and require the removal of any sign, graphics, lettering, or advertising readily visible from outside the Premises or located inside the front one-fourth of the Premises. Landlord shall have the right, without liability and with or without notice to Tenant, to remove any item installed by Tenant in violation of this paragraph and to charge Tenant for the cost of such removal and/or any repairs necessitated thereby. 5.8 Environmental Covenant. As used herein the term “Applicable Environmental Law” shall be defined as any statutory law, regulation, or case law pertaining to health or the environment, or oil, or petroleum products, or “Hazardous Substances” (as herein defined), including, without limitation: (i) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) as codified at 42 U.S.C. Sections 9601 et seq., as

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THE COMMERCIAL LEASE FORMBOOK

amended; and (ii) [___________________ insert any applicable state laws]. As used herein, the terms “Hazardous Substance” and “release” shall have the meanings specified for those terms in CERCLA; provided however, that in the event CERCLA is amended to broaden the meaning of any term defined thereby, such broadened meaning shall apply subsequent to the effective date of such amendment; and provided further, that to the extent that the laws of the state where the Premises are located establish a meaning for “Hazardous Substance” or “release” that is broader than that specified in CERCLA, such broader meaning shall apply; and provided further, that “Hazardous Substance” shall also be defined to include oil, petroleum products, extremely flammable substances, explosives, and radioactive materials, and “release” shall also be defined to include any disturbance or release of asbestos that would call for abatement or removal procedures under any Applicable Environmental Law. 5.8.1

Tenant shall not suffer, allow, permit, or cause:

5.8.1(a) the accumulation of tires, spent batteries, debris, or other solid waste either on the Premises or any other part of the Shopping Center property except rubbish placed in designated containers scheduled for normal, scheduled disposal in compliance with all applicable laws; 5.8.1(b) the generation, accumulation, storage, possession, release, or threat of release of Hazardous Substances; provided, however, the foregoing prohibition shall not be applicable to: (i) Hazardous Substances that are present on the Premises prior to the date Tenant first took possession of the Premises; (ii) normal and reasonable amounts of cleaning and pest control supplies necessary for normal maintenance of the Premises as a retail store so long as such materials are properly, safely, and lawfully stored and used by Tenant and the quantity of same does not exceed a “reportable quantity” as defined under 40 C.F.R. 302, as amended; or (iii) de minimis amounts of leaked or spilled petroleum products from the normal operation of motor vehicles. 5.8.2 Tenant acknowledges that the use, maintenance, or storage of chlorofluorocarbons (including but not limited to freon and other so-called CFCs) may hereafter be prohibited or limited by law. In the event use, maintenance, or storage of chlorofluorocarbons is hereafter prohibited or limited: 5.8.2(a) After the use or maintenance of chlorofluorocarbons is prohibited or limited, Tenant shall not thereafter allow, cause, suffer, or permit any chlorofluorocarbons to be either placed, stored, maintained, used, or kept within the Premises or at any other part of the Shopping Center that is within or subject to Tenant’s right to control or use, except in compliance with all Applicable Environmental Laws; 5.8.2(b) Tenant shall forthwith contain or otherwise abate (as required by Applicable Environmental Law) all chlorofluorocarbons placed in the Premises after the date on which Tenant first took possession of the Premises provided same were not placed in the Premises by Landlord; 5.8.2(c) Landlord shall have the right to abate any chlorofluorocarbons placed in the Premises prior to the date on which Tenant first took possession of the Premises. Landlord shall have no obligation to so abate unless required by Applicable Environmental Law. In conjunction therewith, Landlord shall be entitled to access to the Premises for the purposes of performing any necessary containment or abatement in accordance with Applicable Environmental Law. Furthermore, Tenant shall not be entitled to terminate this Lease or to receive any abatement of Rent or to hold Landlord liable for any incidental or consequential

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damages (such as, but not limited to, damages for business interruption) arising by reason of the fact that any chlorofluorocarbons are present in the Premises at the date of this Lease so long as Landlord performs its obligations under this Subsection 5.8.2(c) within a reasonable time after the effective date of any Applicable Environmental Law that prohibits further use storage, or maintenance of chlorofluorocarbons within the Premises; 5.8.2(d) In addition to the foregoing, Tenant agrees that Tenant, on or before the Expiration Date, shall remove all chlorofluorocarbons that were not placed in the Premises by Landlord and that were placed in the Premises after the date Tenant first took possession of the Premises (regardless of whether the use, storage, or maintenance of chlorofluorocarbons is prohibited within the Premises at the Expiration Date) unless required not to do so by Landlord. 5.8.3 Tenant shall notify Landlord immediately upon learning: (i) that any duty described in this Section 5.8 of this Lease has been violated; (ii) that there has been a release, discharge, or disposal of any Hazardous Substance on a part of the Premises or the Shopping Center; (iii) that radon gas or urea formaldehyde has been detected on or in the Premises; or (iv) that the Premises or improvements thereto are subject to any third-party claim or action, or threat thereof, because of any environmental condition at the Shopping Center or in or originating from the Premises or arising in connection with the operation of the Premises. Tenant shall promptly provide Landlord with copies of all correspondence to or from third parties regarding such claims or actions or regarding environmental conditions in or originating from the Premises. 5.8.4 In the event of a release of any Hazardous Substance on, in, or from the Premises that was not caused by Landlord, Tenant shall immediately cause complete remediation of such release and restore the Premises to the condition that existed prior to the date Tenant first took possession of the Premises. Landlord shall have the right, but not the obligation, to enter the Premises and remediate any environmental condition on the Premises to comply with all Applicable Environmental Laws during which time Tenant shall not be entitled to any abatement of Rent. 5.8.5 Tenant hereby agrees to pay any judgments, fines, charges, fees, damages, losses, penalties, demands, actions, costs and expenses (including without limitation legal fees and expenses), remedial and response costs, remediation plan preparation costs, and any continuing monitoring or closure costs arising from or pertaining to the application of any Applicable Environmental Law to the Premises due to a breach of Tenant’s obligations pursuant to this Section 5.8. Further, Tenant hereby covenants and agrees to indemnify and forever hold harmless Landlord, together with its partners (including any officers, directors, stockholders, employees, partners, servants, and agents of Landlord’s partners), officers, directors, members, stockholders, employees, servants, and agents (collectively, the “Indemnified Parties”) of and from any and all liabilities (including strict liability), judgments, fines, charges, fees, damages, losses, penalties, demands, actions, costs and expenses (including, without limitation, legal fees and expenses), remedial and response costs, remediation plan preparation costs, and any continuing monitoring or closure costs incurred or suffered by the Indemnified Parties, or asserted by any third party against the Indemnified Parties, due to the breach of Tenant’s obligations set forth in this Section 5.8. This indemnification shall survive the expiration or earlier termination of this Lease.

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5.8.6 At the Expiration Date, Tenant shall return the Premises to Landlord free of any Hazardous Substances in, on or from the Premises that were not placed on the Premises by Landlord or present in the Premises prior to the date Tenant first took possession of the Premises.

ARTICLE 6 OPERATION OF BUSINESS Commentary: Article 6 Operation of Business: This Article sets out the operating covenant requiring Tenant to be open continuously during established hours, sets forth signage and merchandising rules, and contains a prohibition against going-out-of-business sales. It also delegates ADA compliance responsibility for the Premises to Tenant, and contains a radius clause restricting Tenant from opening a business within an area that would affect Tenant’s sales from the Premises (and accordingly, reduce the amount of Percentage Rent). 6.1 Open for Business. Tenant agrees to occupy the Premises and open its store for business fully fixtured, stocked, and staffed and thereafter to continuously conduct, in one hundred percent (100%) of the space within the Premises, the business permitted on all business days as described herein, under the name designated in Section 5.1. Tenant recognizes that the covenants of Tenant in this Article are a material consideration to Landlord hereunder in order that Tenant might produce the maximum profitable Gross Sales possible from the Premises during the lease term and the continued operation of a full service regional retail development be assured. 6.2 Business Hours. Tenant agrees to keep the Premises open for business from 10:00 a.m. to 9:00 p.m., Monday through Saturday, and from 1:00 p.m. until 6:00 p.m. on Sundays. Tenant agrees that Landlord shall have the right to periodically alter the Shopping Center’s hours of business to allow for an earlier opening or later closing to maximize productivity of specific selling periods during the year or to adjust the Shopping Center’s hours to those generally used by retailers in the market area; [provided, however, Tenant shall not be required, at any time, to open if fifty percent (50%) of the space occupied by Major Tenants is not also open or obligated to be open.] If Tenant shall fail to operate during all hours determined by Landlord, in addition to constituting an event of default hereunder, Tenant agrees to pay to Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, damages equal to Fifty Dollars ($50.00) per hour for each hour that Tenant should fail to be open. 6.3 Illumination of Signs and Displays. Tenant will keep any electric signs and the front ten feet (10’) within the interior of the Premises, including show or display windows, if any, electrically lighted until a time thirty (30) minutes after the close of business. Tenant shall also maintain a night light within the Premises at all times at which the same are not open for business. 6.4 Tenant’s Advertising & Merchandising. Except for signs specifically permitted by the provisions of this Lease, Tenant covenants and agrees that it shall not place any fixtures, merchandise, signs, placards, banners, or any other material of any kind: (i) beyond the retail entrance side of the Premises; (ii) on the surface of or within one foot (1’) of any display

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window or on the surface of, or within, three feet (3’) of any customer door or of the retail entrance side of the Premises; (iii) in the vestibule or entry of the Premises or on the walls or walkways adjacent thereto; (iv) anywhere on or about the exterior of the Premises; (v) in the Common Areas or anywhere else outside of the Premises. Tenant shall not place on or suspend from the ceiling and/or walls of the Premises any pennants, advertising matter, banners, or other material; provided, however, that Tenant may suspend signs from the ceiling or walls if they are professionally prepared and part of a national or regional promotion effort being conducted at Tenant’s store, but under no circumstances may signs suspended from the ceiling or walls interfere with sprinkler head locations. Tenant covenants and agrees that it shall not solicit business in the Common Areas, or distribute handbills or other matter to customers or place the same in or on automobiles in the Common Areas. Landlord, without notice and without any liability therefor, may enter the Premises and remove any items installed or maintained by Tenant in violation of the provisions stipulated herein. 6.5 Use of Space. Tenant agrees to carry sufficient merchandise in the Premises at all times, but to warehouse, store, and/or stock only such quantities of goods, wares, and merchandise as are reasonably required by Tenant for sale at retail at, in, on, or from the Premises. Tenant agrees to fully and adequately staff the Premises with sufficient employees for the purpose of selling such merchandise and to use for office, clerical, or other non-selling purposes only such space in the Premises as is reasonably required for Tenant’s business therein, not including any other business of Tenant in locations other than the Premises. 6.6 Character of Operations. In order to establish and preserve the character of the Shopping Center as a high- quality regional retail development, Tenant will not advertise or conduct: (i) any “distress merchandise sale,” “going out of business sale,” moving sale, or closeout sale; or (ii) any auction; or (iii) its business in the manner that is commonly known and accepted in the retail trade as a “wholesale store,” “discount store,” or “surplus store”; provided, however, that this provision shall not preclude the conduct of periodic seasonal, promotional, or clearance sales nor be deemed to give Landlord a right to approve or disapprove the price at which Tenant shall offer its merchandise for sale. Tenant agrees to fixture the Premises with new sales fixtures and furnishings and, at no time, shall place unfinished wooden or metal tables (unless covered by skirting) or racks in the Premises or utilize, even on a temporary basis, used fixtures. Tenant will not utilize any unethical method of business operation. Tenant will not use or permit the use of any equipment or apparatus producing, reproducing, or transmitting sound that is audible or pulsating light that is visible beyond the exterior boundary lines of the Premises; will not cause or permit objectionable odors to emanate or be unreasonably dispelled from the Premises; will neither load or unload nor permit the loading or unloading of merchandise, supplies, or other property through any of the doors of the Premises except at the rear of the Premises and from the area that Landlord may designate from time to time as a “Service Area” either on Exhibit A or by written notice to Tenant; and will use its best efforts to prevent the parking or standing, outside of or within any such “Service Area,” of trucks, trailers, or other vehicles or equipment except when actually engaged in such loading or unloading activities. Landlord, without notice and without any liability therefor, may enter the Premises and remove any items installed or maintained by Tenant in violation of the provisions stipulated herein. 6.7

General Covenants of Tenant.

6.7.1 Tenant, at its sole cost, shall: (i) keep the inside and outside of all glass in the doors and windows of the Premises clean; (ii) maintain the Premises in a clean, orderly, and sanitary condition and free of insects, rodents, cats, vermin, and other pests; and (iii) regularly clean

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THE COMMERCIAL LEASE FORMBOOK

and, when necessary, replace all floor treatments (including carpets) that adjoins any mall area. Tenant covenants and agrees that it will: (i) refrain, and require its employees to refrain, from parking any vehicles on any Shopping Center land that may be designated, from time to time by Landlord, for customers only; and (ii) furnish to Landlord or its agent or designee, within five (5) days after request therefor, the license numbers of its own and its employees’ automobiles, and if Landlord shall have so requested such numbers, will notify Landlord of any changes within five (5) days after such changes occur. Tenant authorizes Landlord to attach violation stickers or notices to all such cars that are improperly parked and Tenant agrees to pay to Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, a charge at the rate of Fifty Dollars ($50.00) per day for each such illegally parked vehicle. 6.7.2 Tenant agrees to comply with all laws, ordinances, orders, regulations, and requirements of all county, municipal, state, federal, and other governmental authorities affecting the construction, use, or occupancy of the Premises and the cleanliness, safety, or operation thereof. Tenant agrees to be the responsible entity for instituting a plan of compliance to ensure that the Premises are in compliance with the Americans with Disabilities Act of 1990 (the “ADA”) and Tenant shall make, at its sole cost, any and all alterations that may be required to bring the Premises into compliance with the ADA. Tenant agrees, at its sole expense, to comply with all recommendations, regulations, and requirements of any public or private agency having authority over insurance rates with respect to the construction, use, or occupancy of the Premises by Tenant, including, without limitation, installation and maintenance of any fire extinguishing apparatus required by local regulations or the requirements of insurance underwriters. Anything hereinabove to the contrary notwithstanding, Tenant shall not be required to so comply with respect to those items listed as Landlord’s Base Work, but Tenant agrees to allow Landlord to comply with such recommendations and requirements with respect to Landlord’s Base Work. 6.7.3 Tenant agrees to comply with all reasonable rules and regulations that Landlord may from time to time establish for the use and care of the Premises, Common Areas, and other facilities and building areas, to cause its concessionaires and suppliers, officers, agents, employees, and independent contractors to so comply, and to use its best efforts to cause its customers, invitees, and licensees to so comply, provided such rules and regulations apply to similarly sized and situated tenants of the Shopping Center. 6.8 Competition. Tenant agrees that so long as this Lease shall remain in effect, Tenant (or any officer, director, or shareholder owning capital stock of Tenant if Tenant be a corporation) shall not, within a radius of five (5) miles of the perimeter of the Shopping Center, or within the Shopping Center (except under lease from Landlord), either directly or indirectly, own, operate, or be financially interested in, either by itself or with others, a business like, or similar to, the business permitted to be conducted under Article 5 hereof. Due to the difficulty in determining the extent to which Landlord would be damaged by reason of loss of Percentage Rent or otherwise in the event that Tenant should breach the foregoing covenant, it is agreed that in the event of such a breach, Landlord, in addition to any other remedies otherwise available, shall be entitled to receive the greater of: (i) ten percent (10%) of the Gross Sales from any such location established in violation of the foregoing covenant; or (ii) the amount resulting from the addition of the Gross Sales from such location to the Gross Sales of the Premises for the determination of Percentage Rent due.

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6.9 Liens. Tenant shall not permit to be created nor to remain undischarged any lien, encumbrance, or charge that might be, or become, a lien or encumbrance or charge upon the Premises or any part thereof or the income therefrom, and Tenant will not suffer any other matter or thing whereby the estate, right, or interest of Landlord in the Premises, or any part thereof, might be impaired. If any lien or notice of lien on account of an alleged debt of Tenant or any notice of contract by a party engaged by Tenant or any Tenant’s contractors shall be filed against the Premises or any part thereof, Tenant, within thirty (30) days after notice of the filing thereof, cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise. If Tenant shall fail to cause such lien to be discharged within the period aforesaid, then, in addition to any other right or remedy, Landlord may discharge the same, but shall not be obligated to so, either by paying the amounts claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings, and in any such event Landlord shall be entitled, if Landlord so elects, to compel the prosecution of an action for the foreclosure of such lien by the lienor and to pay the amount of the judgment in favor of the lienor with interest, costs, and allowances. Tenant agrees to pay to Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, any amount so paid by Landlord together with all costs and expenses, including attorneys’ fees, incurred by Landlord in connection therewith, together with interest thereon at the Default Rate from the respective dates of Landlord’s making of the payment or incurring of the cost and expense. 6.10 Tenant’s Taxes. Tenant shall pay, before delinquency, all taxes, assessments, license fees, and public charges levied, assessed, or imposed upon its business operation in the Premises as well as upon its trade fixtures, leasehold improvements (including, but not limited to, the payments Tenant is required to make in accordance with the provisions of Article 7 hereof ), merchandise, and other personal property in or upon the Premises.

ARTICLE 7 CONSTRUCTION OF PREMISES Commentary: Article 7 Construction of Premises: Landlord’s Base Work and Tenant’s Work are both defined in Exhibit C, but the general idea is that Landlord is providing the basic structure (i.e., a vanilla box”) and Tenant will do whatever is necessary to make the store ready for business, using new or like-new fixtures and equipment. 7.1 Landlord’s Base Work. Tenant acknowledges that Landlord has performed the work described in Exhibit C as Landlord’s Base Work. Tenant agrees to accept possession of the Premises “as is.” 7.2 Tenant’s Construction. Tenant, at its own cost and expense, shall perform all work and complete all installations described as Tenant’s Work and fully equip the Premises with all trade fixtures, lighting fixtures, furniture, furnishings, floor coverings, storefront signs, any special equipment, and other items of construction and personal property necessary for the completion of the Premises and the proper operation of Tenant’s business. All such items installed by Tenant shall be new or in “like-new” condition. Tenant shall not do any construction work or make any alterations, nor shall Tenant install any equipment, without first obtaining Landlord’s written approval of the plans and specifications therefor. The approval by Landlord of such plans and specifications shall not constitute the assumption of any liability on the part of

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THE COMMERCIAL LEASE FORMBOOK

Landlord for their accuracy or conformity with any building code or other governmental requirements, and Tenant shall be solely responsible for such plans and obtaining all permits and approvals from local governmental bodies. In the event Tenant shall fail to complete any portion of its construction of the Premises or the installation of any equipment or other items to be installed therein as required by this Lease within the time periods set forth, Landlord, in addition to any other rights and remedies it may then have, may complete such construction or make such installations on behalf of and for the account of Tenant, after ten (10) days’ notice to Tenant of its intention to do so and Tenant’s failure to cure, and Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, the cost incurred by Landlord in completing such construction or making such installations. 7.3 All alterations, additions, improvements, and Tenant’s Work provided for herein, shall become, upon the Expiration Date, the property of Landlord, subject to the terms of this Lease. Any trade fixtures, signs, and other personal property of Tenant not permanently affixed to the Premises shall remain the property of Tenant.

ARTICLE 8 RELOCATION Commentary: Article 8 Relocation: The ability to relocate tenants is extraordinarily valuable to landlords because it allows landlords the ability to reconfigure their centers to keep up with changing times. This ability also protects tenants, and should be so recognized, but no tenant will be so altruistic as to volunteer to be relocated for the common good. Nevertheless, landlords should not summarily delete the relocation provision, but should be willing to modify it to the extent tenants request changes that keep them in the same position; i.e., the thrust of the following relocation provision is that the Landlord is willing to accommodate anything the tenant needs within reason to keep it in the same or better position during and after the relocation, but the Landlord must maintain the ability to relocate the Tenant. This one should not be given up by Landlord without a major fight. 8.1 In the event Landlord elects to cause an expansion or substantial renovation of the Shopping Center, Landlord shall have the right to relocate Tenant into a space comparable to, or better than, Tenant’s present location and reasonably satisfactory to Tenant. Any such relocation shall be under the following terms and conditions: 8.1.1 The new location offered Tenant must be reasonably comparable to Tenant’s existing location with respect to size, configuration, exposure, traffic flow, and proximity to Major Tenants and Mall Building entrances. 8.1.2 relocation.

Tenant shall be given at least sixty (60) days advance notice of the date of

8.1.3 Landlord, at its expense, shall refixture Tenant’s new location to a condition at least equal to the then existing condition in the Premises, with the understanding that Tenant’s existing fixtures may be reused if they are in reasonably good condition. If Tenant’s

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store design has changed at that time and Tenant desires to build its new store design in the new premises, Tenant shall pay for the costs of building the new store design that are in excess of the costs of building the original store design in the new premises. 8.1.4 Landlord shall use reasonable efforts to avoid a period of cessation of Tenant’s business operations in the Shopping Center, including, if necessary, providing Tenant with a temporary location in which to conduct its business. The temporary location may or may not conform with the requirements of the permanent new location. 8.1.5 If there is a cessation of Tenant’s business, all Rent shall fully abate during the period of cessation of business. 8.1.6 If the new premises are smaller or larger than the Premises, Fixed Minimum Rent and all other charges based on Square Footage of the Premises area shall be proportionately decreased or increased, as the case may be. 8.1.7 Landlord shall reimburse Tenant for its documented reasonable out-ofpocket moving expenses, and agrees to contribute an additional $1,000.00 for undocumented miscellaneous costs and expenses. 8.1.8 Tenant may refuse to relocate by notifying Landlord in writing within thirty (30) days of being offered the new location. In the event Tenant refuses to relocate, Landlord shall have the option of: (i) allowing Tenant to remain in the Premises, in which case this Lease shall continue in full force and effect; or (ii) canceling and terminating this Lease, in which case Tenant agrees to deliver possession of the Premises to Landlord within thirty (30) days after Landlord notifies Tenant that it is exercising this option. In the event Landlord chooses to cancel and terminate this Lease, Landlord agrees to pay Tenant an amount equal to the unamortized cost of Tenant’s leasehold improvements not removable then in the existing Premises, depreciated on a straight line basis over the original lease term; for the purposes of this calculation, Tenant agrees to submit an itemized verification, satisfactory to Landlord, documenting the cost of such leasehold improvements; provided, however, that Landlord and Tenant agree that the amount Landlord is obligated to pay pursuant to this provision shall be based on an initial improvement cost of $___________ or less. Landlord shall then be entitled to ownership of all leasehold improvements.

ARTICLE 9 REPAIRS AND MAINTENANCE Commentary: Article 9 Repairs and Maintenance: Allocation of repair responsibilities is based on the concept that Landlord will maintain the Shopping Center structure and that Tenant will maintain every other aspect of the Premises. Because the terms “structure” and “structural elements” are subject to interpretation, the lease specifically lists the elements Landlord agrees to maintain. 9.1 Landlord agrees, at its expense, to use commercially reasonable efforts to keep the footings, foundation, load bearing walls, roof-deck, floor slabs, non-load bearing exterior walls, and columns and beams that support the roof, of the Mall Building in structurally sound condition and repair. Landlord agrees to replace the roof, at its expense, when Landlord deems such replacement necessary. If Landlord is required to make repairs to any such items

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or areas by reason of Tenant’s negligent acts or omission, Tenant agrees to pay to Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement for the full cost of any such repair. 9.2 Tenant agrees at its expense, to keep all other parts of the Premises in good order and repair, and in a clean, sanitary and safe condition, and shall permit no waste, damage, or injury to the Premises. Tenant agrees to initiate and carry out a program of regular maintenance and repair of the Premises, so as to impede, to the greatest extent possible, deterioration by ordinary wear and tear and to keep the same in a first class condition, including without limitation, the immediate repair of any damage to the Premises caused by the removal or replacement of any trade fixtures, signs, or other leasehold improvements or personal property; the replacement of equipment and fixtures; painting or replacement of materials on the interior when necessary in order to maintain at all times a clean and attractive appearance; exterior and interior portion of all doors; door checks; windows; plate glass; storefront; all plumbing and sewage facilities within the Premises and free flow up to first common sewer line; fixtures; heating, ventilating, and air conditioning systems and electrical systems from the point such systems begin to exclusively serve the Premises up to and including the Premises; sprinklers; walls, floors, and ceilings; and any other Tenant’s Work. Tenant shall not make any repairs outside its Premises without first obtaining Landlord’s written approval of the plans and specifications therefor and coordinating timing of same with Landlord. If Tenant refuses or neglects to make repairs and/or maintain the Premises or any part thereof, in a manner reasonably satisfactory to Landlord, Landlord shall have the right, but not the obligation, upon giving Tenant (and the opportunity to cure in accordance with Section 15.1.7) notice of its election to do so, to make such repairs or perform such maintenance on behalf of and for the account of Tenant. In such event, Tenant agrees to pay to Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, the costs incurred by Landlord in performing such work.

ARTICLE 10 UTILITIES Commentary: Article 10 Utilities: The utility provisions contemplate Tenant contracting for electrical service directly, but give Landlord flexibility to deliver any utilities to Tenant. The HVAC Charge is based on Exhibit G, to be drawn by Landlord’s engineer and adapted to the idiosyncrasies of the specific shopping center. The penalty of terminating utility service for non-payment of rent should be considered more of a threat than a remedy. The author recommends going through the usual default and unlawful detainer remedies rather than set Landlord up for a counterclaim. 10.1 Tenant will be billed directly by the utility provider for its electrical consumption and will remit directly to the utility provider. Landlord shall not be responsible for providing any electrical panels, meters, or other devices for the furnishing or measurement of utilities supplied to the Premises. Tenant shall make application and arrange for the installation of all such meters and other devices. Tenant shall make application and arrange for the provision of telephone service to the Premises.

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10.2 Heating, Ventilating, and Cooling. The Premises are heated and cooled via either hot air and chilled air or hot water and chilled water delivered to the perimeter of the Premises, at a location determined by Landlord, by Landlord’s central plant facility. Tenant, at Tenant’s expense, shall connect to Landlord’s delivery systems, and provide and install the necessary electronic and thermostat controls. Tenant shall operate the heating and cooling facilities within the Premises so that the temperature and humidity prevail therein as set forth in the Tenant Design Criteria. Tenant shall utilize the heated and cooled air or heated and cooled water supplied by Landlord to the Premises in such manner as shall not waste heating or cooling effect and in accordance with the design criteria set forth in the Tenant Design Criteria. Tenant agrees to pay a charge (the “HVAC Charge”), calculated pursuant to the provisions of Exhibit G, for such heated and cooled air or heated and cooled water. Effective upon the Rental Commencement Date, and as Additional Rent hereunder, Tenant shall pay to Landlord, without demand, the HVAC Charge. The HVAC Charge shall be paid in monthly installments in accordance with the provisions of Section 4.10. Prior to the Rental Commencement Date, and from time to time throughout the term hereof, Landlord shall notify Tenant of the amount of the HVAC Charge, which shall be determined and adjusted in accordance with the provisions of Exhibit G. 10.3 Other Landlord Supplied Utility. In addition to heating, ventilating and cooling, which is discussed hereinabove, Landlord is currently supplying cold water to the Premises. Landlord shall have the option to supply, either itself, by an agent employed by Landlord, or by an independent contractor, one or more utilities to the Premises. Tenant agrees to provide a meter, and pay for water and sewer service, and for any other utility that Landlord may supply to Tenant, (collectively, the “Utility Charge”) in the following manner: Tenant will purchase its requirements for such service(s) tendered by Landlord. Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, the Utility Charge. The Utility Charge shall be at the applicable rates determined by Landlord from time to time, which Landlord agrees shall not be in excess of prevailing public utility rates for the same service, if applicable. If Landlord elects to supply any utilities in addition to water and sewer service (and the heating, ventilating, and cooling service), Tenant shall execute and deliver to Landlord, within ten (10) days after request therefor, any documentation required by Landlord to effect such change in the method of furnishing such utilities. 10.4 Landlord’s Liability. Landlord shall not be liable to Tenant for any interruption of any utility service to the Premises except that Landlord will diligently pursue available remedies to restore the interrupted service in a timely manner; provided, however, that if any utility service delivered by Landlord: (i) should be disrupted for more than seventy-two (72) hours, and such disruption makes it impossible for Tenant to reasonably operate its business; and (ii) the disruption was caused by the gross negligence or willful misconduct of Landlord, then Rent, other than payments of the Promotion Amount and Tenant’s Pro Rata Share of the Impositions, shall abate until such time as service is restored. In the event Tenant should fail to pay the HVAC Charge or other Utility Charge within the time periods herein specified (subject to applicable grace periods), Landlord reserves the right to cut off and discontinue, upon notice to Tenant, any utility service furnished by Landlord to Tenant, without liability for damages arising from any discontinuance thereof, and such act shall not constitute a termination of this Lease or constructive eviction of Tenant.

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ARTICLE 11 DAMAGE TO PREMISES Commentary: Article 11 Damage to Premises: The parties also allocate responsibility for repair or reconstruction in the event of a casualty based upon the concepts of Landlord’s Work and Tenant’s Work, and Landlord is obligated to rebuild in the event of a minor casualty. If the damage is more serious, Landlord has the option to terminate the lease. Tenant also has an option to terminate in the last two years of the lease term, but must pay to Landlord a fee to compensate Landlord for the fact that Landlord will not receive the benefit of Tenant’s improvements at the end of the term. This provision will likely be criticized by the Tenant. There is a rent abatement provision during reconstruction. 11.1 In the event the Premises are damaged or rendered partially untenantable, by fire, explosion, or any other casualty covered by Landlord’s insurance obligations pursuant to this Lease (“Casualty”), to an extent that is less than fifty percent (50%) of the cost of replacement of Landlord’s Base Work, Landlord agrees to promptly repair the damage to Landlord’s Base Work at Landlord’s expense; provided, however, Landlord shall not be obligated to repair such damage if: (i) the insurance proceeds recovered or recoverable as a result of such damage are less than eighty percent (80%) of the cost of such damage; or (ii) the insurance proceeds are taken by Landlord’s mortgagee; or (iii) the Mall Building is damaged to the extent of twenty-five percent (25%) or more of the full replacement value thereof; or (iv) the total cost of repair to the Shopping Center shall be more than twenty-five percent (25%) of the full replacement value thereof. If Landlord is not required to repair such damage, Landlord may elect either to: (i) repair or rebuild Landlord’s Base Work or the building or buildings, or (ii) terminate this Lease. Landlord shall notify Tenant of its election within ninety (90) days after any such Casualty. In the event that the Premises shall be destroyed or damaged to the extent of fifty percent (50%) or more of the cost of replacement of Tenant’s Work during the last two (2) Lease Years prior to the Expiration Date, Tenant may elect to terminate this Lease upon giving written notice of such election to Landlord within sixty (60) days after such Casualty; in the event Tenant so terminates, Tenant shall pay to Landlord an amount equal to twenty percent (20%) of the cost of replacing Tenant’s Work. [Notwithstanding anything to the contrary contained in this Lease, (i) if Landlord has not begun and is not diligently and continuously pursuing reconstruction of the Shopping Center within six (6) months after the date on which such damage or destruction occurs, (ii) if reconstruction is not substantially complete within one year after the date of which such damage or destruction occurs, or (iii) if Landlord does not reconstruct the Shopping Center, including Landlord’s Base Work in the Premises, to the same condition in which it existed on the date the damage or destruction occurred, then Tenant upon thirty (30) days’ written notice to Landlord, may elect to terminate this Lease, provided such notice is given to Landlord within three hundred and ninety five (395) days after the date on which such damage or destruction occurs.] 11.1.1 If the Casualty, repairing, or rebuilding shall render the Premises untenantable, in whole or in part, then a proportionate abatement of Rent, other than payments of the Promotion Amount and Tenant’s Pro Rata Share of the Impositions, shall be allowed from the date of the Casualty until the earlier of the date Tenant reopens for business or the date sixty (60) days after the date Landlord shall have completed its work, such proportion to be computed on the basis of the relation that the gross square footage of the space

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rendered untenantable bears to the Square Footage of the Premises; provided, however, there shall be no such abatement in the event the Casualty was caused by the default or neglect of Tenant. 11.1.2 The provisions of this Article with respect to repair by Landlord shall be limited to such repair as is necessary to complete Landlord’s Base Work, and when placed in such condition the Premises shall be deemed restored and rendered Tenantable, promptly following which time Tenant, at Tenant’s expense, shall perform the work required to place the Premises in the condition in which Tenant first opened for business and Tenant shall also repair or replace its stock in trade, fixtures, furnishings, carpeting, draperies, floor coverings, and equipment, and if Tenant has closed, Tenant, on or before the date that is sixty (60) days after the date Landlord shall have completed its work, shall promptly reopen for business.

ARTICLE 12 INSURANCE Commentary: Article 12 Insurance: Books have been written about lease insurance provisions, but this is an area where the average practitioner (and the average lease) are not up to date or up to speed. It is a good idea to have these provisions reviewed by the tenant’s insurance broker, agent, or consultant. The remedy set out in Section 12.3 is tied to the default provision in Section 15.1.6, in that no additional time is given to cure the failure to carry insurance. Generally, creditworthy tenants can have the joint payment provisions of Section 12.1.1 deleted. 12.1 Tenant’s Insurance Obligations. Tenant, at all times during the term of this Lease, shall maintain in full force and effect a policy of commercial general liability insurance at least equivalent to the most current standard Insurance Service Offices standard CGL form with a combined single limit of at least One Million Dollars ($1,000,000) per occurrence with umbrella coverage above the primary amount in the amount of Five Million Dollars ($5,000,000), protecting Tenant and Landlord (as an additional insured) against claims based upon, involving, or arising out of the ownership, use, occupancy, or maintenance of the Premises. 12.1.1 Tenant further agrees to carry a policy of property insurance covering all of Tenant’s Work and the merchandise, trade fixtures, furnishings, wall covering, carpeting, drapes, equipment, and all other items of personal property of Tenant located on or within the Premises to the extent of one hundred percent (100%) of the full replacement value of the same against fire and other perils commonly included in “Special Form Coverage.” Each such policy shall name Landlord and Tenant as joint payees and the proceeds from any such policy shall first be used for the replacement or restoration of Tenant’s Work, and second be used for the replacement or restoration of the merchandise, trade fixtures, furnishings, wall covering, carpeting, drapes, equipment, and other items of personal property of Tenant. 12.1.2 Each policy evidencing the insurance to be carried by Tenant under this Lease shall contain a clause that such policy and the coverage evidenced thereby shall be primary and that any coverage carried by Landlord shall be excess insurance. Each such policy shall contain an endorsement that names Landlord as an additional insured, and if Landlord elects, Landlord’s managing or leasing agent and any mortgagee of Landlord.

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12.1.3 If Tenant owns, uses, operates, or controls any vessel or piping under pressure, including but not limited to boilers, heating or air conditioning apparatus, and steam machinery, equipment, or pressure vessels of any kind, then Tenant shall also procure and maintain in full force and effect standard boiler and machinery insurance on all such boilers, heating and air conditioning equipment, and other pressure vessels and systems, whether fired or unfired, located in the Premises; and if those objects and the damage that may be caused by them or result from them are not covered by extended coverage insurance, then such boiler insurance shall be in an amount not less than Five Hundred Thousand Dollars ($500,000). Such policy shall insure damage to property of both Landlord and Tenant on a replacement cost basis arising out of the ownership, use, operation, or control of any such above- described pressure objects. 12.1.4 Tenant’s insurance coverage shall include coverage for liability assumed under this Lease as an “insured contract” for the performance of Tenant’s indemnity obligations under this Lease. 12.1.5 Tenant may satisfy its insurance obligations hereunder by including the Premises in a master policy. Such master policy shall contain an endorsement that names Landlord as an additional insured, references the Premises, and guarantees a minimum limit available for the Premises equal to the amounts required in this Lease. So long as Tenant maintains a net worth, as verified to Landlord by certified financial statements delivered to Landlord, of greater than One Hundred Million Dollars ($100,000,000), Tenant may satisfy its insurance obligations under a formal self-insurance (as opposed to no insurance) program. 12.2 Approval of Insurance Underwriters. All policies obtained by Tenant and required herein shall be procured from insurance companies licensed to do business in the state where the Shopping Center is located and from companies rated no less than A, VIII in the current edition of Best’s Rating Guide. All such policies shall name Landlord and any persons or entities designated by Landlord as additional insureds and shall contain a clause that the insurer shall not cancel or change the insurance without first giving Landlord, or such other persons or entities, at least thirty (30) days prior notice in writing. 12.3 Tenant Failure to Provide Insurance. On or before the date Tenant first enters the Premises for any reason and at least thirty (30) days before any insurance policy required herein shall expire, Tenant shall deliver to Landlord certificates of such insurance or renewals thereof, as the case may be, together with evidence of payment of applicable premiums. If Tenant fails to furnish Landlord with such certificates of insurance, Landlord may (but shall not be obligated), after fifteen (15) days’ written notice to Tenant and Tenant’s failure to furnish such certificates, obtain such insurance coverages and Tenant agrees to pay to Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, the costs of obtaining such coverages. This remedy is in addition to any other remedy Landlord may have under this Lease. 12.4 Landlord’s Obligations. Landlord shall keep the Shopping Center insured throughout the term of this Lease against the loss or damage by fire and extended coverage, including vandalism and malicious mischief in an amount not less than eighty percent (80%) of the then full replacement value; and against such other hazards and in such amounts as the holders of any mortgage or deed of trust to which the Lease is subordinated may reasonably require from time to time. It is understood that Landlord’s insurance obligation hereunder does not extend to Tenant’s Work.

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12.4.1 The term “full replacement value” shall mean the actual replacement cost, not deducting depreciation, excluding foundation and excavation costs and excluding all Tenant improvements. Any insurance policy may be subordinated as the interest of such holders may appear, pursuant to a standard clause for holders of mortgages or deeds of trust providing that any such mortgage or deed of trust shall contain provisions wherein proceeds of loss by reason of casualty shall be made available to Landlord for the purpose of fulfilling its obligations under any Article of this Lease. 12.5 Waiver of Subrogation. Landlord and Tenant hereby release the other from any and all liability to the other or anyone claiming through or under the other by way of subrogation or otherwise for any loss or damage to property caused by fire or any of the extended coverage casualties, even if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, this release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as the releasor’s policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair such policies or prejudice the right of the releasor to recover thereunder. Landlord and Tenant each agree that it will cause its insurance carriers to include in its policies such a clause or endorsement.

ARTICLE 13 INDEMNIFICATION Commentary: Article 13 Indemnification: The usual dance on indemnification concerns whether the standard will be negligence or gross negligence. The author is of the opinion that this distinction matters more to real estate attorneys and clients than to juries. 13.1 Effective upon the date Tenant first takes possession of the Premises, and continuing through the Expiration Date, Tenant hereby covenants and agrees to indemnify the Indemnified Parties and defend and save them harmless from and against any and all costs, claims, actions, demands, damages, liabilities, losses, judgments, and expenses (including, without limitation, reasonable attorneys’ fees and expenses, investigative and discovery costs, and court costs), and any repair, restoration, and compliance costs, and any and all other sums that the Indemnified Parties may pay or become obligated to pay (collectively, “Claims and Costs”) arising from, or in connection with, loss of life, bodily injury, death, and property damage liability, personal and advertising injury liability, and medical payments arising from or out of any occurrence in, upon or at the Premises, or the occupancy or use by Tenant of the Premises, the Common Areas or any part thereof, or occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, invitees, lessees, or concessionaires. [, provided such Claims and Costs are not caused by the gross negligence or willful misconduct of Landlord or others within Landlord’s direct control.] Further, Tenant hereby covenants and agrees to indemnify the Indemnified Parties and defend and save each of them harmless from and against any and all Claims and Costs arising out of or in connection with the compliance with laws, ordinances, etc., provisions of Section 6.7.2 of this Lease, including, without limitation, all compliance requirements set forth in the ADA including, without limitation, those relating to the use, renovation, and/or alteration of the Premises, including, without limitation, any changes necessary because of the specific needs of Tenant’s employees. This indemnity of the Indemnified Parties is required in addition to the insurance required under this Lease. If any action or proceeding is

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brought against the Indemnified Parties by reason of any such Claims and Costs, Landlord may choose the attorney(s) and direct the litigation, and Tenant agrees to pay all costs and expenses of the defense. This paragraph shall survive the termination or earlier expiration of this Lease. [13.2 Likewise, Landlord hereby covenants and agrees to indemnify Tenant (such reference to include its officers, agents, and employees) and defend and save Tenant harmless from and against any and all Claims and Costs arising from or in connection with loss of life, bodily injury, death, and property damage liability, personal and advertising injury liability, and medical payments arising from or out of any occurrence in, upon, or at the Common Areas, when such Costs and Claims are not a result of any act or omission of Tenant, its agents, contractors, employees, servants, invitees, lessees, or concessionaires.]

ARTICLE 14 ASSIGNMENT, SUBLETTING, OWNERSHIP Commentary: Article 14 Assignment, Subletting, Ownership: The assignment provision starts with the proposition that Landlord will allow assignment, but seeks to control it and set out the circumstances under which it would be appropriate. The change of control language of Section 14.4 includes situations such as sale of the stock of the parent that most landlords are concerned about, but many leases do not cover. It certainly brings the issue to the forefront, and forces the parties to consider mergers or sales that would be acceptable. One of the most important criteria for Landlord is to continue to maintain privity of contract with the occupant of the Premises no matter what change occurs. The leasehold mortgage language of Section 14.5 is more appropriate for an outparcel. 14.1 Tenant shall not assign this Lease or any interest herein or sublet the Premises or any portion thereof without the prior written consent of Landlord, which may be withheld for the reasons enumerated in Section 14.1.1 hereof. Tenant shall not hypothecate this Lease or any interest herein or permit the use of the Premises by any other party other than Tenant without the prior written consent of Landlord, which consent may be withheld by Landlord for the reasons enumerated in Section 14.1.1 hereof. Neither this Lease nor any interest herein, shall be assignable as to the interest of Tenant by operation of law without the consent of Landlord. Any attempted transfer, assignment, subletting, license or concession agreement, or hypothecation without Landlord’s prior written consent shall be void and, at the option of Landlord, shall result in termination of this Lease. With each consent request, Tenant shall submit to Landlord the terms of the proposed transaction; the identity of the parties to the transaction; the proposed documentation for the transaction; a certified statement of all economic considerations being given or received with respect to the transaction; all information reasonably necessary for Landlord to investigate the credit standing of the proposed transferee; the specific business plan of the proposed transferee, which shall include, but not be limited to, a detailed written description of the proposed operation, sales projections for the remaining term of the Lease, and description of the previous applicable experience of the proposed transferee; and all other information reasonably requested by Landlord concerning the proposed transaction and the parties involved therein.

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14.1.1 Without limiting the other instances in which it may be reasonable for Landlord to withhold its consent to any assignments or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold its consent in the following instances: 14.1.1(a) If the proposed transaction would entail a subletting or other transfer of less than the entire Premises; or 14.1.1(b) If, in Landlord’s reasonable judgment, the proposed use of the Premises by the proposed transferee would not be in strict conformity with the provisions of Article 5 of this Lease; or 14.1.1(c) If, in Landlord’s reasonable judgment, the prior operating experience of the proposed transferee does not meet the standards that would be applied by Landlord in considering other Tenants in similar lease situations; or 14.1.1(d) If, in Landlord’s reasonable judgment, the financial worth of the proposed transferee does not meet the credit standards applied by Landlord in considering other tenants under leases with comparable terms; or 14.1.1(e) If, in Landlord’s reasonable judgment, the operation of the proposed transferee, as evidenced by the type of business or such other evidence as may be reasonably available to Landlord, indicates that the operation would in any way detract from the reputation of the Shopping Center as a quality regional shopping center; or 14.1.1(f) If Tenant is unable to deliver the consent of any guarantor (if any) of this Lease to the proposed transfer and a reaffirmation of the continued effectiveness of such guarantee. 14.2 Tenant agrees to reimburse Landlord for Landlord’s reasonable attorneys’ fees incurred in connection with the processing and documentation of any transfer, assignment, subletting, licensing, concession agreement, or hypothecation of this Lease or Tenant’s interest in and to the Premises. The consent by Landlord to any transfer, assignment, subletting, license or concession agreement, change of ownership, or hypothecation shall not constitute a waiver of the necessity for such consent to any subsequent attempted transfer, assignment, subletting, license or concession agreement, change of ownership, or hypothecation. 14.3 Each transfer, assignment, subletting, license or concession agreement, and hypothecation to which there has been consent shall be by instrument in writing, in a form satisfactory to Landlord, and shall be executed by the transferor, assignor, sublessor, licensor, assignee, sublessee, licensee, concessionaire, or mortgagee, in which such assignee, sublessee, licensee, concessionaire, or mortgagee shall agree in writing for the benefit of Landlord to assume, to be bound by, and to perform the terms, covenants, and conditions of this Lease to be done, kept and performed by Tenant. One executed copy of such written instrument shall be delivered to Landlord. Failure to first obtain Landlord’s written consent or failure to comply with the provision of this Article shall operate to prevent any such transfer, assignment, subletting, license, concession agreement, or hypothecation from becoming effective. 14.4 If Tenant is a corporation, trust, or entity other than an individual and if the control thereof changes at any time during the term hereof, Tenant shall promptly notify Landlord of such change. Landlord, at its option, by giving thirty (30) days prior written notice to Tenant, may declare such a change a breach of this Lease, subject to the remedies provided for breach in Article 15 hereof. The provisions of the preceding sentence, however, shall not be applicable if

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control of the corporation, trust, or other entity changes as the result of a public stock offering, or as a result of public trading of Tenant’s stock. [Anything in the foregoing provisions to the contrary notwithstanding, provided Tenant is not in default, Tenant, without the prior consent of Landlord, may: (i) assign this lease or sublease the Premises to: (a) any affiliated corporation of Tenant, (b) the parent corporation of Tenant, or (c) any corporation with which Tenant may be merged or consolidated; or (ii) transfer its capital stock to the parent corporation of Tenant, or to an affiliated corporation of Tenant; provided, however, that: (x) in the case of merger or consolidation, all of the assets then held by Tenant remain or become assets of the continuing corporation and the continuing corporation has a net worth at least equal to $_______________________________; and (y) in the case of an assignment or sublease, any assignee or sublessee shall assume, in writing, the performance and observance of all the terms, covenants, and conditions of this Lease in an assignment, assumption, and consent agreement reasonably satisfactory to Landlord, which assignment, assumption, and consent agreement shall be between Landlord, Tenant, and the assignee, and shall be executed within thirty (30) days of such assignment or sublease and which agreement expressly provides that Tenant shall continue to remain liable for the performance of all of the terms, covenants, and conditions of this lease; and (z) in any such event, Tenant must notify Landlord within thirty (30) days after its occurrence.] [14.5 Limited Assignment to Secure Tenant’s Financing. Tenant may secure financing or general credit lines, and grant to any single lender as security therefor a leasehold mortgage, and a collateral assignment of Tenant’s leasehold interest in the Premises with rights of reassignment. In connection with such financing, Landlord agrees to cooperate with Tenant and enter into a non-disturbance agreement satisfactory to Landlord that will provide that: (i) Landlord shall give prompt written notice to such lender of all defaults by Tenant of those obligations under this Lease that are of such a nature as to give Landlord a right to terminate this lease, and such lender shall have a reasonable opportunity (but shall not be required) to cure the same; and (ii) if the interest of Tenant shall be acquired by such lender by reason of foreclosure of its leasehold mortgage or other proceedings, and such lender succeeds to the interest of Tenant under this Lease, Landlord agrees that so long as any and all defaults of Tenant have been cured, and there exists no default under this Lease, then, at such lender’s option: (x) this Lease shall continue in full force and effect and shall not be terminated or disturbed except in accordance with the terms of this Lease, and Landlord shall thereupon be bound to such lender under all of the terms, covenants, and conditions of this Lease for the balance of the term thereof remaining, and any extensions or renewals thereof that may be effected in accordance with any option therefor contained in this Lease, with the same force and effect as if lender were the Tenant under this Lease; or (y) Landlord shall enter into a

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new lease with such lender or, provided lender has identified an assignee reasonably satisfactory to Landlord, lender’s assignee, effective as of the date of foreclosure, but otherwise upon the identical terms and conditions of this Lease.]

ARTICLE 15 EVENTS OF DEFAULT/REMEDIES Commentary: Article 15 Events of Default/Remedies: Grace periods for late payment are given, but such grace is limited to once per year. The death of a sole proprietor or primary shareholder of a small corporation is often added as an event of default. As noted earlier, no further time period beyond that set forth in Article 12 is allowed for curing Tenant’s failure to provide insurance. The bankruptcy language is crafted in an attempt to hold any debtor tenant or its successor to the basic lease covenants, especially the radius, location, use, and exclusivity provisions. Remedies for default are wide ranging and include acceleration of Rent. 15.1 Events of Default by Tenant. This Lease is made upon the condition that Tenant shall punctually and faithfully perform all covenants and agreements as herein set forth. The happening of any one or more of the following listed events of default shall constitute a breach of this Lease by Tenant: 15.1.1 The failure of Tenant to pay any part, portion, or component of any Rent payable by Tenant within ten (10) days of the date the same shall become due; provided, however, for any one occasion in any calendar year such failure shall not be an event of default and Landlord agrees to waive any late charge or interest that would otherwise be due pursuant to Sections 15.2.4 and 4.10 unless Tenant shall fail to pay any such payment or charge within ten (10) days after Landlord has given Tenant written notice of such delinquency; 15.1.2 The taking of the leasehold on execution or other process of law in any action against Tenant; 15.1.3 The failure of Tenant to take possession of, construct, and thereafter open the Premises for business, fully fixtured, stocked, and staffed on the Commencement Date, or the abandonment of the Premises, or cessation of Tenant’s business within the Premises; 15.1.4 The filing by Tenant of any petition or answer seeking any reorganization, liquidation, arrangement, readjustment, or similar relief for itself under any present or future federal, state, or other statute and the failure of Tenant to secure a dismissal thereof within ninety (90) days; provided, however, that in the event Landlord shall not be permitted to terminate this Lease because of the provisions of Title 11 of the United States Code (the “Bankruptcy Code”), then Tenant, as debtor-in-possession, or any trustee, receiver, or liquidator appointed for Tenant’s benefit, must provide adequate assurance of performance of the terms this Lease, which shall include, without limitation, adequate assurance: (i) of the source of Rent reserved hereunder; (ii) that any Percentage Rent due hereunder will not decline from the levels established previously; (iii) that the assumption of this Lease will not breach any provision hereunder; (iv) that any assumption or assignment of this Lease will not breach any provision such as the radius, location, use, or exclusivity provisions in this or any other lease, finance agreement, or master agreement relating to the Shopping Center under any circumstances, as the use provision this

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Lease is the equivalent of a covenant running with the land and as such, may not be changed by the state of bankruptcy of Tenant; and (v) that the assumption or assignment of this Lease will not unreasonably disrupt any Tenant mix or balance in the Shopping Center, and if the trustee does not cure such defaults and provide such adequate assurances under the Bankruptcy Code within the applicable time periods provided by the Bankruptcy Code, then this Lease shall be deemed rejected and Landlord shall have the right to immediate possession of the Premises and shall be entitled to all remedies provided by the Bankruptcy Code for damages for breach and/or termination of this Lease; 15.1.5 The commission of waste by Tenant with respect to the Premises or the removal by Tenant of any leasehold improvements therefrom without replacement thereof; 15.1.6 The The failure of Tenant to secure the insurance coverages and provide evidence thereof to Landlord as required by the provisions of this Lease in accordance with the time periods set forth herein; 15.1.7 The failure of Tenant, within fifteen (15) days after receipt of written notice from Landlord, to comply with any of the other provisions of this Lease (that is, other than those provided in Sections 15.1.1 through 15.1.6) or any other agreement between Landlord and Tenant, including all Exhibits and Schedules attached hereto and incorporated herein by reference, all of which terms, provisions, and covenants shall be deemed material; provided, however, that if any such default shall be a default that cannot be cured by the payment of money and cannot with diligence be cured within such fifteen (15) day period, and if the cure of such default shall be promptly commenced and prosecuted with diligence, the period within which such default may be cured shall be extended for an additional period of time, not to exceed an additional thirty (30) days, as may be reasonably necessary to cure such default as long as Tenant prosecutes such cure with diligence and continuity and provided Landlord receives periodic reports with respect thereto; 15.2

Landlord’s Remedies for Tenant Default.

15.2.1 Upon the occurrence of any event or events of default by Tenant, whether enumerated in this Article or not, Landlord shall have the option, at Landlord’s election, to pursue any one or more of the following in addition to, and not in limitation of, any other remedy or right permitted Landlord by law or by this Lease: 15.2.1(a) Landlord may cancel and terminate this Lease and dispossess Tenant; 15.2.1(b) Landlord, without terminating this Lease, may declare all amounts and Rent due under this Lease for the remainder of the existing term (or any applicable extension or renewal thereof ) to be immediately due and payable; and thereupon all Rent and other charges due hereunder to the end of the initial term or any renewal term, if applicable, shall be accelerated; 15.2.1(c) Landlord may elect to enter and repossess the Premises and relet the Premises for Tenant’s account, holding Tenant liable for any damages for all reasonable expenses incurred in any such reletting and for any difference between the amount of Rent received from such reletting and the amount due and payable under the terms of this Lease; 15.2.1(d) Landlord may enter upon the Premises and do whatever Tenant is obligated to do under the terms of this Lease (and Tenant shall reimburse Landlord on demand for any reasonable expenses that Landlord may incur in effecting compliance with

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Tenant’s obligations under this Lease); provided, however, Landlord shall not operate Tenant’s business. 15.2.2 Should Landlord, as a result of any Tenant default, elect to terminate this Lease, Landlord shall be entitled to collect from Tenant as damages: (i) the worth at the time of award of the unpaid Rent and other charges that may be due and unpaid by Tenant at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid Rent and other charges that would have come due after termination until the time of award exceeds the amount of rental loss that Tenant proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid Rent and other charges for the balance of the term after the time of award exceeds the amount of rental loss that Tenant proves could have been reasonably avoided; (iv) all other reasonable amounts necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform or that are likely to result therefrom, including but not limited to attorneys’ fees, costs of repossession, costs of removing persons or property from the Premises, costs of repairs to the Premises, cost of reasonable alterations to the Premises to make the space tenantable to prospective replacement tenants, costs of re-leasing the space, brokerage fees, etc. All computations of the worth at the time of award of amounts recoverable by Landlord as stipulated herein shall be computed by allowing interest at the Default Rate. The worth at the time of award shall be computed by discounting the amount otherwise recoverable by Landlord at the discount rate equal to the Long Term Federal Applicable Rate at the time of the award. 15.2.3 If, as previously provided, Landlord shall elect to reenter the Premises, it is agreed that Landlord shall conduct itself in a reasonable manner and Landlord shall not be liable for damages by reason of such entry. 15.2.4 Tenant acknowledges that late payment by Tenant to Landlord of any part, portion, or component of any rental payment or any other charge due to Landlord hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impractical to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and note secured by any encumbrance covering the Premises. Therefore, if any rental payment or any other charge due to Landlord hereunder shall not be received by Landlord within ten (10) days of the date when due, Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails Tenant a statement therefor, an additional sum of five percent (5%) of the amount of any such part, portion, or component of any such overdue rental payment or any such overdue charge as a late charge, this charge is in addition to payment of interest at the Default Rate. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. Acceptance of any late charge shall not constitute waiver of Tenant’s default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord. 15.3 All rights, options, and remedies of Landlord contained in this Lease shall be construed and held to be cumulative and the exercise of one or more rights, remedies, or options shall not be taken to exclude or waive the right to the exercise of any other. All such rights, remedies, and options may be exercised and enforced concurrently and whenever and as often as deemed desirable. Landlord shall have the right to pursue any one or all of such remedies that may be provided herein or by law or in equity. For the purpose of any suit by Landlord brought or based on this Lease, this Lease shall be construed to be a divisible contract, to the end that successive actions may be maintained as successive periodic sums shall mature under

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this Lease. It is further agreed that failure to include in any suit or action any sum or sums then matured shall not be a bar to the maintenance of any suit or action for the recovery of said sum or sums so omitted.

ARTICLE 16 SUCCESSION TO LANDLORD’S INTEREST 16.1 Attornment. Tenant shall attorn and be bound to any of Landlord’s successors under all of the terms, covenants, and conditions of this Lease, provided such successors recognize Tenant’s rights under this Lease. 16.2 Subordination. Upon written request of Landlord, or any mortgagee or beneficiary of Landlord, Tenant, in writing, shall subordinate its rights hereunder to the interest of any ground lessor of the Shopping Center and to the lien of any mortgage, now or hereafter in force against the Shopping Center and to all advances made or hereafter to be made upon the security thereof; providing, however, that the ground lessor, or the mortgagee or trustee named in such lease or mortgage shall agree that so long as Tenant is not in default hereunder, Tenant’s peaceable possession of the Premises will not be disturbed on account thereof. 16.3 Estoppel Certificate. At any time and from time to time, Tenant, upon request in writing from Landlord, agrees to execute, acknowledge and deliver to Landlord, or to the holder of any mortgage that is a lien on the Shopping Center, or to any prospective mortgagee or purchaser of the Shopping Center, a statement in writing, essentially in the form of the “Statement of Tenant Re: Lease” attached hereto as Exhibit F and made a part hereof, or such other form and substance satisfactory to Landlord certifying to all or any part of the information contained thereon, or such other information as such mortgagee, prospective mortgagee, or prospective purchaser may reasonably request, or stating the appropriate deficiencies, as the case may be. In the event Tenant fails to provide such letter as above-described within ten (10) days after Landlord’s written request therefor, Landlord may make a second request that specifies that Landlord shall be appointed Tenant’s attorney-in-fact pursuant to this paragraph if Tenant does not provide such letter, and in the event Tenant fails to provide the above described letter within ten (10) days after Landlord’s second request, Tenant does hereby make, constitute, and irrevocably appoint Landlord as its attorney-in-fact, solely for the purposes of executing such letter.

ARTICLE 17 NOTICES Any and all notices, elections, or demands permitted or required to be made under this Lease shall be in writing, and shall be delivered personally or sent by overnight courier service by a company regularly engaged in the business of delivering business packages (such as Federal Express or Airborne), or sent by registered or certified mail to the other party at the address set forth in the preamble hereinabove, or at such other address as may be specified in writing from time to time by either party to the other. The date of personal delivery or, if sent by mail or overnight courier, then the date of delivery or refusal thereof as evidenced by the carrier’s or courier’s receipt, shall be the effective date of such notice, election, or demand.

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ARTICLE 18 EMINENT DOMAIN 18.1 In the event the Shopping Center or any part thereof shall be taken or condemned either permanently or temporarily for any public or quasi-public use or purpose by any competent authority in appropriation proceedings or by any right of eminent domain, the entire compensation award therefor, including, but not limited to, all damages as compensation for diminution in value of the leasehold, reversion, and fee, shall belong to Landlord without any deduction therefrom for any present or future estate of Tenant. Tenant hereby assigns to Landlord all its right, title, and interest to any such award. 18.2 Although all damages in the event of any condemnation are to belong to Landlord, whether such damages are awarded as compensation for diminution in value of the leasehold, reversion, or fee of the Premises, Tenant shall, in the event this Lease is terminated by reason thereof, 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 that Tenant might incur in removing Tenant’s merchandise, furniture, fixtures, leasehold improvements, and equipment, provided Landlord’s award is not reduced thereby. 18.3 If the whole of the Premises shall be taken by any public authority under the power of eminent domain, this Lease shall terminate as of the day possession shall be taken by such public authority, and Tenant shall pay Rent up to that date with an appropriate refund by Landlord of such amounts thereof as shall have been paid in advance for a period subsequent to the date of the taking. 18.4 If less than twenty-five percent (25%) of the Square Footage of the Premises shall be so taken, and Tenant is able to conduct its normal business operations in such diminished area, this Lease shall terminate only with respect to the parts so taken as of the day possession shall be taken by public authority, and Tenant shall pay Rent up to that day with an appropriate refund by Landlord of such Rent as may have been paid in advance for a period subsequent to the date of the taking and, thereafter, the Rent shall be appropriately adjusted on a per square foot basis, and Landlord shall at its expense make all necessary repairs or alterations to Landlord’s Base Work that are required to constitute the remainder of the Premises a complete architectural unit. 18.5 If more than twenty-five percent (25%) of the Square Footage of the Premises shall be so taken, then this Lease shall terminate with respect to the part so taken from the date possession shall be so taken by such public authority, and Tenant shall pay Rent up to that date with an appropriate refund by Landlord of such amounts thereof as may have been paid in advance for a period subsequent to the date of the taking, and either party shall have the right to terminate this Lease upon notice in writing, which notice must be given no later than sixty (60) days after such taking of possession. 18.6 In the event that Tenant remains in possession, and if Landlord does not so terminate, all of the terms herein provided shall continue in effect except that the Rent shall be adjusted as previously described, and Landlord shall make all necessary repairs or alterations to Landlord’s Base Work that are required to constitute the remainder of the Premises a complete architectural unit. If more than twenty five percent (25%) of the land area of the Shopping Center shall be so taken, Landlord, by notice in writing to Tenant delivered on or before

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the day of surrendering possession to the public authority, may terminate this Lease, and Rent shall be paid or refunded as of the date of termination. 18.7 In the event Landlord is obligated to restore the Premises to a complete architectural unit, as above provided, such work shall not exceed the scope of Landlord’s Base Work. 18.8 Any provisions herein to the contrary notwithstanding, Landlord shall have no duty to repair as described herein if: (i) the proceeds of any such award are taken by Landlord’s mortgagee; or (ii) the proceeds of such award are insufficient to pay for such repairs. If Landlord is not required to so repair, Landlord may elect either to: (i) repair or rebuild Landlord’s Base Work or the Mall Building or the other buildings at the Shopping Center, or (ii) terminate this Lease. Landlord shall notify Tenant of its election within ninety (90) days after any such taking.

ARTICLE 19 BROKER’S COMMISSION Tenant and Landlord each agree to assume full responsibility for any claim to broker’s commissions or finder’s fees in connection with their respective execution of this Lease and each agrees to indemnify the other and save the other harmless from any and all liability that may arise from such claim, including reasonable attorneys’ fees.

ARTICLE 20 SURRENDER AND HOLDING OVER In the event: (i) Landlord does not send Tenant a notice to vacate at least thirty (30) days prior to the originally fixed Expiration Date; and (ii) Tenant remains in possession of the Premises after the originally fixed Expiration Date, then, in such event, the term of this Lease shall be amended to provide that Tenant shall hold the Premises for one month after the originally fixed Expiration Date, and so on from month to month until one of the parties shall give to the other notice in writing of its intention to terminate this Lease effective at midnight on the last day of the following month, but in no event shall such term extend for more than one (1) year beyond the Expiration Date. Tenant shall deliver and surrender to Landlord possession of the Premises upon the termination of this Lease, in as good condition and repair as the same shall be at the Rental Commencement Date (ordinary wear and tear and damage by fire and other perils covered by standard fire and extended coverage insurance only excepted) free of debris and litter and in suitable condition to be effectively shown by Landlord to prospective replacement tenants, and shall deliver the keys to the Shopping Center manager or other representative designated by Landlord. Should Tenant or any party claiming under Tenant remain in possession of the Premises, or any part thereof, after any termination of this Lease, no tenancy or interest in the Premises shall result therefrom but such holding over shall be an unlawful detainer and all such parties shall be subject to immediate eviction and removal, and Tenant covenants and agrees to pay Landlord, without demand, a sum equal to double the Rent as specified herein, for any period during which Tenant shall hold the Premises after such termination.

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Commentary: Article 20 Surrender and Holding Over: This provision provides for an automatic month to month lease extension (but limited to one year to avoid rule against perpetuities issues) if the parties simply neglect to enter into a new lease, are still in negotiations, or otherwise fail to deal with the Expiration Date. The usual double rent for a holdover can be implemented by thirty days’ notice, which can be given prior to the expiration of the lease.

ARTICLE 21 LIABILITY OF LANDLORD If Landlord shall fail to perform any covenant, term, or condition of this Lease upon Landlord’s part to be performed and, as a consequence of such default, Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levy thereon against the right, title, and interest of Landlord in the Shopping Center as the same may then be encumbered and neither Landlord, nor any of the partners comprising Landlord shall be liable for any deficiency. It is understood that in no event shall Tenant have the right to levy execution against any property of Landlord other than its interest in the Shopping Center parcel as hereinbefore expressly provided. In the event of the sale or other transfer of Landlord’s right, title, and interest in the Premises or the portion of the Shopping Center parcel that includes the Premises, Landlord shall be released from all subsequent liability and obligations hereunder. Commentary: Article 21 Liability of Landlord: Landlord’s favorite: the exculpation clause. This limits Landlord’s liability to its equity in the property.

ARTICLE 22 SALE OF PREMISES BY LANDLORD In the event of any sale or exchange of the Premises by Landlord and/or assignment of this Lease, Landlord shall be and is hereby entirely freed and relieved of all liability under any and all of its covenants and obligations contained in, or derived from, this Lease arising out of any act, occurrence, or omission relating to the Premises or this Lease occurring after the consummation of such sale, exchange, or assignment.

ARTICLE 23 FORCE MAJEURE In the event that either party hereto shall be delayed, hindered in, or prevented from the performance of any act required hereunder by reason of acts of God, strikes, lockouts, 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 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.

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ARTICLE 24 TENANT’S AUTHORITY/GUARANTY Tenant represents that it has full right and authority to enter into this lease and by doing so does not violate any existing agreement or indenture to which it is a party or by which it is bound or affected, and if Tenant is a corporation, any provisions of its articles of incorporation, by-laws, or other governing or enabling documents or regulations, and that the execution and delivery of this lease has been duly authorized by Tenant’s board of directors; and upon request of Landlord, Tenant will deliver to Landlord a true, correct, and certified copy of the enabling resolutions adopted by Tenant’s board of directors. As a material inducement to Landlord, without which Landlord would not enter into this lease, Tenant agrees to deliver to Landlord, together with Tenant’s delivery of this lease to Landlord, a fully executed Guaranty of Lease in the form of Exhibit E. Commentary: Article 24 Surrender and Holding Over: Tenant represents to Landlord that it has the due authority to enter into the lease. The guaranty language recites that Landlord was induced to enter the lease by Tenant’s promise to deliver a separate guaranty agreement from the party named in the form attached.

ARTICLE 25 ATTORNEYS’ FEES Tenant agrees to pay Landlord, or to pay on Landlord’s behalf, as Additional Rent, within ten (10) days after the date Landlord mails to Tenant a statement therefor, a reasonable attorney or other professional fee and all reasonable expenses related thereto in the event Landlord employs an attorney or other professional for any of the following purposes: (i) to collect any Rent due hereunder by Tenant; or (ii) to protect the interest of Landlord in the event that Tenant is adjudicated or adjudged bankrupt; or (iii) to protect Landlord’s rights in the event legal process is levied upon the goods, furniture, effects or personal property of Tenant upon the Premises or upon the interest of Tenant in this Lease or in the Premises; or (iv) to prevent Tenant from violating, or to rectify the violation of, any of the terms, conditions, or covenants on the part of Tenant herein contained. Tenant further agrees to pay all other reasonable costs incurred by Landlord in securing the performance by Tenant of all said terms, conditions, or covenants of this Lease. The billing and collection of said professional fees and other costs shall not require Landlord filing suit against Tenant for the performance of the terms, conditions, and obligations of this Lease, nor shall Landlord have to notify Tenant of default or move to terminate this Lease before Landlord is entitled to be reimbursed or have Tenant pay directly such reasonable professional fees and other costs. In the event of litigation, the losing party shall pay to the prevailing party the prevailing party’s reasonable attorneys’ fees and costs of suit, and all reasonable expenses related thereto, including fees, costs, and expenses of any appeal(s). Commentary: Article 25 Attorneys’ Fees: This provision allows Landlord to collect attorneys’ fees without filing suit or declaring a default in several instances where Landlord has engaged an attorney, but it shifts attorneys’ fees to a prevailing party in the event of litigation.

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ARTICLE 26 MISCELLANEOUS 26.1 Exhibits. All Exhibits attached hereto are deemed incorporated herein by reference as though made an integral part hereof. 26.2 Interpretation. Whenever either the word “Landlord” or “Tenant” is used in this Lease, it shall be considered as meaning “Landlords” or “Tenants” respectively, wherever the context permits or requires, and when the singular and/or neuter pronouns are used herein, the same shall be construed as including all persons and entities designated respectively as Landlord or Tenant in the heading of this instrument wherever the context requires. 26.3 Severability. If any covenant, agreement, or condition of this Lease or the application thereof to any person, or entities or to any circumstances, shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such covenant, agreement, or condition to persons or entities or to circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Each covenant, agreement, or condition of this Lease shall be valid and enforceable to the fullest extent permitted by law. 26.4 Headings. Each Article, Section, and other heading is inserted only as a matter of convenience and for reference and in no way define, limit, or describe the scope or intent of this Lease nor in any way affect this Lease. 26.5 Counterparts. This Lease has been executed in several counterparts, but the counterparts shall constitute but one and the same document. 26.6 No Partnership. Landlord does not, in any way or for any purpose, become a partner of Tenant in the conduct of its business, or otherwise, or joint venturer or a member of a joint enterprise with Tenant as a result of execution of this Lease. 26.7

Construction of Terms.

26.7.1 None of the covenants, terms, or conditions of this Lease to be kept and performed by either party shall in any manner be altered, waived, modified, changed, or abandoned, except by a written instrument, duly signed, acknowledged and delivered by the other party. 26.7.2 Printed parts of this Lease shall be as binding upon the parties hereto as other parts hereof. Parts of this Lease that are written or typewritten shall have no greater force or effect than, and shall not control, parts that are printed, but all parts shall be given equal effect. Tenant declares that Tenant has read and understands all parts of this Lease, including all printed parts thereof. 26.7.3 Landlord and Tenant agree that in construing this Lease all provisions shall be construed to give them effect. Landlord and Tenant agree that the rule construing language most strongly against the party who prepared the language shall not be enforced as to this Lease and both the parties hereby expressly waive the right to claim the application and result of the above rule. 26.8 No Recording. Tenant shall not record this Lease without the prior written consent of Landlord, which may be withheld at Landlord’s sole, absolute, and unfettered discretion, and any such recording without Landlord’s consent shall constitute an event of default hereunder.

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26.9 Governing Law. This Lease shall be construed and enforced in accordance with the laws of the state where the Premises are located. 26.10 Lease Inures to Benefit of Assignees. This Lease and all the covenants, provisions, and conditions herein contained shall inure to the benefit of, and be binding upon, the heirs, personal representatives, successors, and assigns, respectively, of the parties hereto, provided, however, that no assignments by, from, through, or under Tenant not in strict compliance with the provisions hereof shall vest in the assignee any right, title, or interest whatever in this Lease or in the Premises. 26.11 No Option. The submission of this Lease for examination does not constitute a reservation of, or option for, the Premises or any other space within the Shopping Center and shall vest no right in either party. This Lease becomes effective as a lease only upon execution and delivery thereof by both of the parties hereto.

ARTICLE 27 SECURITY DEPOSIT/SECURITY INTEREST IN PERSONAL PROPERTY Commentary: Article 27 Security Deposit/Security Interest in Personal Property: Most states give a landlord a statutory landlord’s lien for rent against its tenant’s personalty and fixtures in the premises. Section 27.2 additionally gives Landlord a security interest in the deposit, which should allow Landlord to retain it against a trustee in bankruptcy, and is designed to allow Landlord to take advantage of Article 9 of the UCC with regard to a security interest in Tenant’s personalty and fixtures in the Premises. 27.1 Security Deposit. Upon execution of this Lease, Tenant shall deposit with Landlord the sum of ______________________________ Dollars ($__________________). Such sum shall be held by Landlord as security for the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of Rent, Landlord may (but shall not be required to) use, apply, or retain all or any part of the security deposit to the payment of any Rent or any other sum in default, or for the payment of any amount that Landlord may spend or become obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason of Tenant’s default. If any portion of the deposit is so used or applied, Tenant, within ten (10) days after written demand therefor, shall deposit cash with Landlord in an amount sufficient to restore the security deposit to its original amount and Tenant’s failure to do so shall be a default under this Lease. Landlord shall not be required to keep this security deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the security deposit or any balance thereof shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within thirty (30) days following the Expiration Date. In the event of termination of Landlord’s interest in this Lease, Landlord shall transfer the deposit to Landlord’s successor-in-interest. 27.2 Security Interest In Personalty Of Tenant. In addition to the Landlord’s liens provided by the law of the state in which the Premises are located, Tenant grants Landlord a

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security interest in, and lien upon, the security deposit held by Landlord pursuant to Section 27.1 and Tenant’s interest in the Premises and in the furniture, inventory, trade fixtures, and equipment therein as security for the payment of Rent and performance of other obligations undertaken by Tenant in this Lease. Such lien shall be prior and superior to any and all other liens thereupon whatsoever. Tenant agrees to execute any and all documents necessary for perfecting such security interest.

ARTICLE 28 WAIVER 28.1 No Waiver. No waiver of any covenant, condition, or legal right or remedy shall be implied by the failure of Landlord to declare a default, or for any other reason, and no waiver of any condition or covenant shall be valid unless it be in writing signed by Landlord. No waiver by Landlord in respect to one or more Tenants or occupants of the Shopping Center in which the Premises are located shall constitute a waiver in favor of any other Tenant, nor shall the waiver of a breach of any condition or covenant be claimed or pleaded to excuse a future breach of the same condition or covenant. No waiver of any default by Tenant shall be implied from any acceptance by Landlord of any Rent or other payments due or by any omission by Landlord to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect any other default other than as specified in such waiver. 28.2 No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Rent nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided for in this Lease or available at law or in equity. 28.3 Rent Demand. No demand for Rent shall constitute a waiver of any of Landlord’s rights. Every demand for Rent due wherever and whenever made shall have the same effect as if made at the time it falls due and at the place of payment. After the service of any notice or commencement of any suit or final judgment therein, Landlord may receive and collect any Rent due, and such collection shall not operate as a waiver nor affect such notice, suit, or judgment. Other provisions of this Lease notwithstanding, all Rents of all types shall be payable by Tenant without demand from Landlord, and upon the dates specified in this Lease. 28.4 Tenant’s Waiver for Loss or Damage to Property and as to Security. Tenant waives all claims against Landlord, its partners, officers, members, agents, and employees for any Claims and Costs that Tenant may pay or become obligated to pay with respect to: (i) any damage to merchandise, trade fixtures, or personal property of Tenant in the Premises caused by water leakage from water lines, sprinkler or heating or air conditioning equipment, or roof membrane; (ii) any loss of profits or other consequential or speculative damages because of any disrepair or failure to repair any of the items that are primarily the responsibility of Landlord; (iii) any damage to persons or property located on the Premises sustained by Tenant or any person claiming through Tenant; (iv) the loss of, or damage to, any property of tenant or of others by theft or otherwise; and (v) any security service provided by Landlord or Landlord’s agents. This waiver shall be effective whether such damage or loss is caused by other Tenants, or persons in the Shopping Center or in the Premises, or occupants of adjacent property, or the public or operations in construction of any private, public, or quasi-public work, or the

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THE COMMERCIAL LEASE FORMBOOK

storage or of failure to store, Tenant’s property after Tenant’s default hereunder. All property of Tenant kept or stored on the Premises shall be so kept or stored at the risk of Tenant only. Any personal property left in the Premises by Tenant after the Expiration Date, shall, at Landlord’s sole option and without notice to Tenant, become the property of Landlord. 28.5 Tenant’s Waiver 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 and conditions of this Lease or otherwise. The rights given to Landlord herein are in addition to any rights that may be given to Landlord by any statute or otherwise. 28.6 Tenant’s Waiver Regarding Billings. Tenant’s failure to object to any statement, invoice, or billing rendered by Landlord within a period of thirty (30) days after receipt thereof shall constitute Tenant’s acquiescence with respect thereto and shall render such statement, invoice, or billing an account stated between Landlord and Tenant. 28.7 Waiver of Jury Trial by Both Parties. Tenant and Landlord hereby waive any right to a trial by jury on any claim, counterclaim, setoff, demand, action, or cause of action brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way pertaining or relating to: (i) this Lease; (ii) the relationship of Landlord and Tenant; (iii) the use and occupancy of the Premises; or (iv) in any way connected with or pertaining or relating to or incidental to any dealings of the parties hereto with respect to this Lease, or any other matter or controversy whatsoever between the parties; in all of the foregoing cases whether now existing or hereafter arising. Tenant and Landlord agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary, and bargained agreement between the parties irrevocably to waive trial by jury, and that any dispute or controversy whatsoever between them shall instead be tried in a court of competent jurisdiction by a judge sitting without a jury. Tenant hereby certifies that no representative or agent of Landlord, including Landlord’s counsel, has represented, expressly or otherwise, that Landlord, in the event of such dispute or controversy, would not seek to enforce the provisions of this paragraph, and Tenant acknowledges that Landlord has, in part, been induced to enter into this Lease and let the Premises to Tenant in reliance on the provisions of this paragraph.

ARTICLE 29 REPRESENTATIONS Tenant hereby represents to Landlord and Landlord hereby represents to Tenant that this Lease, with its exhibits, sets forth the entire agreement between the parties. Each party further represents to the other that it has not been induced, persuaded, or motivated by any promise or representation that is not contained in this Lease. Any prior conversations, understandings, and oral agreements not herein reduced to writing, prior writings, and any other item not contained herein are hereby merged herein and extinguished. Tenant represents to Landlord that it is entering into this Lease based solely on the writing contained herein and that Tenant has not relied, and is not relying, on any representation, whether written or oral, not contained in writing in this Lease. Tenant acknowledges that Landlord and its agents have made no representations or promises with respect to the Premises or the Shopping Center except as herein expressly set forth. Tenant further represents that Tenant will not assert in any way any claim

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53

that Landlord, its agents, or employees, in any way represented, misrepresented, promised, agreed, or had any understanding regarding the lease of the Premises not contained herein. Tenant represents that it has completely read and fully understands all the provisions of this Lease or that Tenant was represented by competent counsel who read and/or explained all provisions to Tenant. IN WITNESS WHEREOF, the parties hereto have caused this Lease agreement to be executed, under seal, as of the day and year first above mentioned. LANDLORD: ATTEST:

By:___________________________ its:___________________________

By:_____________________________ its:_____________________________ TENANT: ATTEST:

By:___________________________ its:___________________________

By:_____________________________ its:_____________________________ [ADD ACKNOWLEDGMENTS]

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THE COMMERCIAL LEASE FORMBOOK

EXHIBIT A MALL PLAN INSERT A SCHEMATIC SHOWING THE PREMISES LOCATION IN THE SHOPPING CENTER 1.

This Exhibit is diagrammatic and is intended only for the purpose of indicating the approximate location of the Premises. It does not purport to show the exact or final locations of columns, division walls, or other required architectural, structural, mechanical, or electrical elements. Landlord reserves the right to eliminate or add and to make changes in size or location of such elements as may be required from time to time.

2.

Dimensions indicated for the Premises are measured from the center of demising walls between tenant spaces and from the front of the Tenant lease line to the outside or exterior of the rear demising wall(s).

3.

Retail kiosks may be located in the Common Areas.

4.

Reference to department stores and other stores is for orientation purposes only, and no representation is made as to the identity of the occupants of any such spaces during any period of time.

Form 2-4: Regional Shopping Center Lease

EXHIBIT B SITE PLAN (Client Specific)

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THE COMMERCIAL LEASE FORMBOOK

EXHIBIT C CONSTRUCTION OF PREMISES I.

Landlord’s Base Work shall be defined to include only the following: A.

STRUCTURE 1. Frame: Structural steel with a floor and a roof design to carry the following

live loads: (a) Floor — 75 pounds per square foot; (b) Roof — 20 pounds per square foot. 2. Neutral Strips: A horizontal neutral strip occurs on the Mall Building elevation above, limiting the height of the storefront and sign background of the Premises. 3. Partitions Separating Premises: metal studs. B.

UTILITIES 1. Electric Service: Provided to a common bus in the service core a location determined by Landlord. Tenant’s Work begins at this point. Size and capacity of electrical service is 15 watts for each square foot of floor area. Additional electric service, if available, or variance from predetermined service location is provided by Landlord at Tenant’s expense. 2. Water and Sanitary Sewer Service: The sanitary sewer outlet is brought to a point beneath the floor of the Premises. A common vent stack for minimum toilet facilities as required by code is provided through roof by Landlord. A 3/4” water service is brought to a point within Tenant’s space at a location determined by Landlord. Tenant provides and installs water meter. 3. Heating, Ventilating and Cooling (Air Conditioning) Service: Chilled/hot water or cool/heated air services to the Premises as specified herein and in the Tenant Design Criteria, as Landlord may determine. 4. Gas: This Center is designed as “all electric.” Should Tenant require gas service, it shall arrange for and pay for the gas service to be brought to its Leased Premise. If Landlord is penalized in any manner on the electrical service cost due to a Tenant gas requirement, Tenant shall pay such penalty or extra cost.

C.

FIRE PROTECTION An automatic wet sprinkler supply main is brought to the Premises at a location determined by Landlord. Landlord provides sprinkler rooms and a standard grid for all Common Areas.

II.

TENANT’S WORK IN PREMISES Tenant’s Work shall be defined to include all work required to make the Premises suitable for retail occupancy, including: (i) all work set forth in this Exhibit C that is not specifically designated as Landlord’s Base Work; (ii) all work set forth in the

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Tenant Design Criteria that is not specifically designated as Landlord’s Base Work; and (iii) all work set forth on Exhibit D to this Lease. III.

SUBMISSION OF PLANS AND SPECIFICATIONS

A. Tenant agrees to follow plans for Landlord approval as set forth in the Tenant Design Criteria. B.

Tenant shall not submit plans that have been prepared by contractors, subcontractors, or suppliers. All drawings and specifications must be prepared by a licensed architect and/or engineer.

C.

In the event Tenant fails to submit such drawing within the thirty (30) day period, Landlord, at its sole option, and in addition to any other remedies Landlord may have under this Lease, may cancel this Lease by giving written notice of such election to Tenant.

D. Once approved by Landlord, no changes shall be made in Tenant’s plans except with the written consent of Landlord.

IV.

E.

Landlord will review plans and specifications submitted by Tenant in a timely manner but shall not be liable for delays in Tenant construction or costs incurred by Tenant as a result of such delays, related to the review process.

F.

Tenant agrees to make the revisions or changes in plans and specifications that may be requested by Landlord that are necessary to bring the plan into compliance with the Tenant Design Criteria.

COMMENCEMENT OF CONSTRUCTION A.

Prior to commencement of Tenant’s Work, Tenant shall cause its general contractor to furnish to Landlord: (i) a Commercial General Liability Insurance policy, naming Landlord as an additional insured, with single limit coverage for bodily injury, death, and property damage at a minimum of Two Million Dollars ($2,000,000) and a Worker’s Compensation Insurance Policy; (ii) a Performance, Labor, and Material Payment Bond in an amount equal to the total cost of Tenant’s Work, which bond shall name Landlord as an additional beneficiary; and (iii) a refundable deposit in the amount of Two Thousand Five Hundred Dollars ($2,500), which deposit shall be held by Landlord until the last to occur of the following: (a) appropriate lien waivers and releases satisfactory to Landlord have been delivered to Landlord from the general contractor and any materialmen that may have worked on the Premises; (b) such general contractor has provided “as built” drawings to Landlord; (c) such general contractor has completed all items on Landlord’s punch list; and (d) a certificate of occupancy or its equivalent shall have been issued by the appropriate governmental authority permitting use of the Premises.

B.

Prior to commencement of Tenant’s Work, Tenant’s general contractor will meet with Landlord’s on-site representative to review the nature of the work to be done as well as to review restrictions that Landlord may place on the use of the Shopping Center property by the contractor and contractor’s employees.

C.

When the preceding requirements have been met and if Landlord has approved Tenant drawings and specifications, construction work may commence.

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V.

PROGRESS OF CONSTRUCTION A.

Tenant understands that Landlord’s representative will regularly and routinely monitor the construction of the Premises to insure conformity to approved drawings and specifications and to insure continuous progress toward completion of Tenant’s Work.

B.

If, during the course of work, Tenant’s Work varies from approved drawings and specifications, Tenant agrees that such variances will be immediately corrected whether requested by Landlord or a duly designated representative of a governmental agency.

C.

Tenant’s Work will not be considered completed until all local inspections and approvals by governmental agencies have been secured.

D. Tenant agrees that the retail store will not be opened for business to the public until Tenant’s Work is completed and evidence of such completion is provided to Landlord. VI.

VII.

VIII.

BASIC PROVISIONS GOVERNING CONSTRUCTION A.

All construction activity will be confined to the Premises itself and will not involve, unless otherwise noted, the Common Areas.

B.

Understanding that construction work cannot impede the ability of other tenants in the Shopping Center to conduct business, Tenant agrees to instruct its general contractor to comply with all reasonable regulations established by Landlord governing Contractor’s use of the Shopping Center property.

BASIC SPECIFICATIONS FOR STORE DESIGN A.

All storefront signs are to conform to the specifications set forth in Landlord’s separately provided Tenant Design Criteria document.

B.

There shall be no penetrations of the roof or installation of radios or television antennas without the prior written consent of Landlord.

C.

Landlord shall provide to Tenant, under separate cover, a Tenant Design Criteria document that provides the details of the aesthetic design of Premises: type and size of storefront signing, configuration of the retail storefront, types of lighting systems required of Tenant, etc. Tenant agrees to abide by this criteria when formulating store designs.

WORK BY LANDLORD IN SHOPPING CENTER AT TENANT’S EXPENSE A.

Effective upon the Rental Commencement Date, and as Additional Rent hereunder, Tenant shall pay to Landlord, without demand, the sum of Two Thousand Dollars ($2,000) to reimburse Landlord for its costs associated with changes to the Shopping Center directory board, signs for Tenant’s construction barricade, architect’s review, Tenant’s rear door sign, electricity, and utilities provided prior to occupancy, and other similar pre-occupancy expenses.

B.

Tenant is required to have a storefront barricade wall to prevent unauthorized personnel from entering the Premises, prevent dust and debris from entering the Common Area, and serve as a safety barrier in compliance with Landlord’s insurance underwriter and general construction safety precautions. Landlord

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shall place the construction barricade (at Tenant’s expense per this Lease) at a maximum distance of three (3) feet from the lease line or as determined by Landlord. The barricade shall extend past all points of construction. All points of attachment to the Mall Building bulkhead or neutral strips are to be repaired and painted by Tenant to the satisfaction of Landlord upon the removal of the barricade. Tenant at Tenant’s expense shall attach gypsum board or plastic to the top of the barricade and extend horizontally to the underside of the Mall Building bulkhead that shall serve as a dust barrier. If the barricade requires moving after its initial installation, this shall be done by Tenant at Tenant’s expense, after approval by Landlord’s construction coordinator. The barricade is to be left in place until 24 hours prior to actual store opening. NO DOORWAY IS ALLOWED IN THE BARRICADE WALL UNLESS THE STORE IS WITHOUT A REAR ENTRY. IX.

LANDLORD’S REMEDY FOR TENANT’S FAILURE TO OPEN ON RENTAL COMMENCEMENT DATE A.

In the event Tenant fails to take possession of the Premises, construct the Premises, perform all Tenant’s Work, and thereafter open the Premises for business, fully fixtured, stocked, and staffed on or before the Rental Commencement Date (but subject to force majeure), Tenant covenants and agrees to pay Landlord, without demand, a sum equal to double the Rent as specified herein, on a per diem basis for each day after the Rental Commencement Date that Tenant shall fail to be opened for business, fully fixtured, stocked, and staffed, with all Tenant’s Work completed. Landlord’s acceptance of any such double rent pursuant to this covenant shall not cure any other default under this Lease, and Landlord may elect at any time to enforce any other remedy it may have under this Lease for Tenant’s failure to open.

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THE COMMERCIAL LEASE FORMBOOK

EXHIBIT D SIGN REQUIREMENTS Tenant agrees to follow plans for Landlord’s approval of all signs set forth in the separately provided Tenant Design Criteria booklet. Tenant shall not erect nor maintain, nor suffer to remain, any sign on the exterior of the Premises except the signs required or permitted by this Exhibit D and the Tenant’s Design Criteria, which signs shall be in strict conformity with the requirements set forth in the Tenant Design Criteria. Tenant, prior to the commencement of the Rental Commencement Date and at its sole cost and expense, shall furnish and install a “Storefront Sign” on the front of its store unit facing the mall. Such Storefront Sign shall be strictly in accordance with the sign criteria set forth herein or in the Tenant Design Criteria.

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EXHIBIT E GUARANTY OF LEASE THIS GUARANTY OF LEASE (this “Guaranty”) made as of the_________ day of __________, ___________ by * (“Guarantor”) in favor of ________________________, a ______________(“Landlord”).

RECITALS: Landlord has entered into that certain Lease (the “Lease”) of even date herewith with _________________________________, a ______________________ (“Tenant”), covering a Tenant unit located at____________, in the County of __________________, State of ________________ and more particularly described in the Lease. Tenant is a wholly owned subsidiary of Guarantor, and as a condition to its execution of the Lease, and as a material inducement to Landlord, without which Landlord would not have agreed to enter into the Lease, Landlord required that Guarantor guarantee the full performance of the obligations of Tenant under the Lease. Guarantor is desirous that Landlord enter into the Lease with Tenant.

AGREEMENT NOW, THEREFORE, in consideration of the foregoing Recitals, and in consideration of the execution of the Lease by Landlord, Guarantor hereby unconditionally guarantees the full performance of each and all the terms, covenants and conditions of the Lease to be kept and performed by Tenant, including the payment of all rentals and other charges to accrue thereunder. Guarantor further agrees as follows: 1. This covenant and agreement on Guarantor’s part shall continue in favor of Landlord notwithstanding any extension, modification, or alteration of the Lease entered into by and between the parties thereto, or their successors or assigns, or notwithstanding any assignment of the Lease, with or without the consent of Landlord, and no extension, modification, alteration, or assignment of the Lease shall in any manner release or discharge Guarantor and Guarantor does hereby consent thereto. 2. This Guaranty will continue unchanged by any bankruptcy, reorganization, or insolvency of Tenant or any successor assignee thereof or by any disaffirmance or abandonment by a trustee of Tenant. 3. Landlord may, without notice, assign this Guaranty of Lease in whole or in part and no assignment or transfer of the Lease shall operate to extinguish or diminish the liability of Guarantor hereunder. 4. The liability of Guarantor under this Guaranty of Lease shall be primary and in any right of action that shall accrue to Landlord under the Lease, Landlord may, at its option, proceed against Guarantor without having commenced any action, or having obtained any judgment against Tenant. 5. Guarantor shall pay Landlord’s reasonable attorneys’ fees and all costs and other expenses incurred in any collection or attempted collection or in any negotiations relative to the obligations hereby guaranteed or enforcing this Guaranty of Lease against Guarantor.

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6. Guarantor does hereby waive notice of any demand by Landlord, as well as any notice of default in the payment of rent or any other amounts contained or reserved in the Lease. 7. The use of the singular herein shall include the plural. Use of masculine, feminine, or neuter genders shall include each. The obligation of two or more parties shall be joint and several. The terms and provisions of this Guaranty of Lease shall be binding upon and inure to the benefit of the respective successors and assigns of the parties herein named. IN WITNESS WHEREOF, the undersigned Guarantor has caused this Guaranty of Lease to be executed as of the date set forth in the Lease.

Guarantor: XYZ PARENT COMPANY, a Delachusetts corporation By:___________________________________ ATTEST:

its:___________________________________

By:________________________________ its:________________________________

[ADD ACKNOWLEDGMENTS]

Form 2-4: Regional Shopping Center Lease

EXHIBIT F TENANT’S ESTOPPEL CERTIFICATE (Client Specific)

63

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EXHIBIT G UTILITY RATE SCHEDULE: HVAC (Client Specific)

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65

EXHIBIT H CONFIRMATION OF LEASE THIS CONFIRMATION OF LEASE, made and entered into this ________ day of __________, ________, by and between ___________________ (“Landlord”), having a mailing address of ______________________ and , a _______________________ corporation (“Tenant”), having a mailing address of ____________________________________.

W I T N E S S E T H: WHEREAS, by Lease dated as of the ____________day of _____________, _____________, between the parties hereto (the “Lease”), Landlord leased to Tenant and Tenant leased and took from Landlord, for the term and upon the terms and conditions therein set forth, certain premises known as SPACE ________ located at ________________________, and more particularly described in the Lease; and WHEREAS, the Lease provides that the parties shall execute a confirmation of the actual Rental Commencement Date, when such date has been determined. NOW THEREFORE, the parties hereto, intending to be legally bound hereby, agree that the Rental Commencement Date occurred on the __________ day of _________________, _______________. IN WITNESS WHEREOF, the parties hereto have executed this Confirmation of Lease under seal as of the day and year first above written. Landlord: ATTEST:

By:_______________________________ its:_______________________________

By:________________________________ its:________________________________ Tenant: ATTEST:

By:_______________________________ its:_______________________________

By:________________________________ its:________________________________

[ADD ACKNOWLEDGMENTS]

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EXHIBIT I FOOD COURT RIDER TO LEASE AGREEMENT THIS FOOD COURT RIDER TO LEASE AGREEMENT, dated the _________ day of____________, ___________, by and between ________________________ (“Landlord”) and ________________, a _______________, having an office at _____________________________ (“Tenant”), is an addendum to the lease agreement of even date herewith between Landlord and Tenant (the “Lease”) for SPACE ________________, as more particularly described in the Lease (the “Premises”). The provisions of this Rider and the Lease are to be construed to give effect to all clauses of both. In the event the provisions of this Rider conflict with or are inconsistent with the provisions of the Lease, the provisions of this Rider shall govern and control. All capitalized terms herein shall have the meaning assigned to them in the Lease unless otherwise defined. 30.1

The Food Court.

30.1.1 The __________________ Shopping Center food court (the “Food Court”) is an area of the ___________ Shopping Center that is presently located on two (2) sides of a Common Area and contains an indefinite number of eating establishments and currently configured as shown on Exhibit “A” attached hereto and incorporated herein by reference. The Food Court area has non-exclusive common seating containing an unspecified number of tables and chairs (the “Food Court Common Area”). 30.1.2 Landlord reserves the right to alter the Food Court Common Area, to modify the Food Court Tenant mix, to add, delete, or consolidate tenant spaces and to make any other changes that, in Landlord’s sole discretion, are necessary and beneficial to the success of the Shopping Center. 30.2

Tenant’s Food Court Common Area Maintenance Costs.

30.2.1 Landlord shall be responsible for the operation, cleaning, repair, and maintenance of the Food Court Common Area. Effective upon the Rental Commencement Date, and as Additional Rent under the Lease, Tenant covenants and agrees to pay Landlord, without demand, Tenant’s Proportionate Food Court Share (defined below) of all costs of operating, maintaining, and repairing the Food Court Common Area (the “Food Court CAM Charges”). Tenant’s Proportionate Food Court Share of Food Court Cam Charges shall be paid in equal monthly installments in an amount reasonably estimated from time to time by Landlord and shall be due at the same time as payments of Fixed Minimum Rent are due under the Lease. 30.2.2 The Food Court CAM Charges shall include items for the exclusive use of the Food Court Common Area (and any related restrooms), such exclusive use to be determined solely by Landlord, and shall include, but not be limited to, the costs and expenses of: (i) protecting, operating, repairing, lighting, decorating, cleaning, painting, and insuring the Food Court Common Area; (ii) providing police and fire protection for the Food Court; (iii) providing pest control services, both to the Food Court Common Area and to the individual premises located within the Food Court; (iv) providing and maintaining restroom facilities; (v) providing uniforms and paying salaries of Food Court managers and staff (selected by Landlord); (vi) acquiring, maintaining, and replacing Food Court Common Area items such as chairs, tables,

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forks, knives, spoons, trays, napkins, plates, condiments and condiment holders, and garbage containers; (vii) providing additional lighting of the Shopping Center Common Areas (other than the Food Court Common Area) that are directly attributable to the operation of the Food Court; (viii) providing utilities directly attributable to the Food Court; (ix) providing janitorial services to the Food Court Common Area and any related restrooms; (x) providing heating, ventilation, air conditioning, and electrical and water to the Food Court Common Area; and (xi) administration and overhead costs in an amount equal to fifteen percent (15%) of the total costs of the foregoing listed items. It is expressly understood that no item will be “doublebilled,” that is, if an item is billed as a Food Court CAM Charge in a given year it will not also be billed as a CAM Charge under Section 4.4 of the Lease in the same period. 30.2.3 Tenant’s Proportionate Food Court Share shall be a fraction, the numerator of which shall be the number equal to the Square Footage of the Premises and the denominator of which shall be the total number of square feet of leased space of all Food Court tenants. 30.2.4 After the end of each Food Court CAM Year (defined below), Landlord shall furnish to Tenant a statement, verified by an independent certified public accountant, showing the total Food Court CAM Charges for the Food Court CAM Year just expired, with costs calculated in accordance with generally accepted accounting principles, the amount of Tenant’s Proportionate Food Court Share, and payments made by Tenant during such Food Court CAM Year under Section 30.2.1. If the total amount paid by Tenant under Section 30.2.1 for any such Food Court CAM Year during the term of the Lease shall be less than the actual amount due from Tenant for such period, as shown on such statement, Tenant covenants and agrees to pay Landlord, as Additional Rent hereunder, within ten (10) days after the date Landlord mails to Tenant a statement therefor, such deficiency. If the total amount paid by Tenant under Section 30.2.1 for any such Food Court CAM Year shall exceed such amount due from Tenant for such Food Court CAM Year, Landlord shall credit the amount of overpayment against the next payment of monthly Rent owed by Tenant, except in the last year of the lease term when any overpayment by Tenant shall be used first to offset any outstanding balance, if any, due under the Lease, with the remainder, if any, reimbursed to Tenant by Landlord, provided Tenant is not in default of the Lease. “Food Court CAM Year” shall mean any fiscal or calendar year, as reasonably determined by Landlord, or, in the event Landlord shall change from a fiscal year to a calendar year, or vice versa, such shorter period as may be reasonably required by such change. 30.3

Food Court Rules.

30.3.1 In addition to all other rules Tenant agrees to observe under the Lease, Tenant further agrees to abide by the following rules of operation for the Food Court: 30.3.1(a) All plates, cups, eating utensils, wrap materials, bags, napkins, stir sticks, and similar items used to hold, carry, transport, or consume food products shall be of a disposable nature and shall be of a type, size, and color approved by Landlord. 30.3.1(b) on or about the Premises.

Tenant shall not install stereo or broadcasting equipment in,

30.3.1(c) passersby outside the Premises.

Tenant shall not distribute promotional materials to

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30.3.1(d) Tenant shall not feature or promote vendor brand names on, for example, menu boards, clocks, or other decorative fixtures, in or about the Premises, without the prior written consent of Landlord. 30.3.1(e) ceiling of the Premises.

Tenant shall not hang signs of any type or nature from the

30.3.1(f ) Tenant’s service employees shall present a clean, wellgroomed appearance and shall be attired in clean, professional uniforms, and under no circumstances shall such employees work in “street clothes.” Uniforms chosen by Tenant are subject to Landlord’s reasonable approval. 30.3.1(g) If the HVAC services supplied to the Premises are insufficient for Tenant’s needs, then, subject to Landlord’s prior review and consent, Tenant shall install additional HVAC facilities in the Premises, at Tenant’s sole cost and expense. Such additional HVAC services shall be billed as specified in Exhibit G. 30.3.1(h) Tenant, at Tenant’s sole cost and expense, shall be responsible for the refrigeration of Tenant’s products. 30.3.1(i) Tenant shall install and maintain in the Premises a makeup air and an exhaust system sufficient to prevent food odors from migrating into the Food Court Common Area.

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IN WITNESS WHEREOF, the parties hereto have caused this Food Court Rider to Lease Agreement to be executed, under seal, as of the day and year first above written.

Landlord: ____________________________, INC., a______________________ corporation ATTEST:

By:_______________________________ its:_______________________________

By:________________________________________ its:________________________________________ Tenant: ____________________________, INC., a ______________________ corporation ATTEST:

By:_______________________________ its:_______________________________

By:________________________________________ its:________________________________________

[ADD ACKNOWLEDGMENTS]

FOR M 2-5

Tenant Retail Lease

357

mei29466_02_c02_p205-444.indd 357

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FOR M 2-5 T E N A N T R E TA I L L E A S E L E A S E DE S C R I P T I ON Lease Type:

Tenant Retail Lease Form

Orientation:

Chain store tenant form, focusing on a tenant’s perspective with reasonable consideration for its landlord’s needs

Premises Size:

Although this lease is prepared for premises measuring 1,000 to 10,000 square feet in size, it is usable and easily adaptable to larger spaces, short of anchor tenant spaces

Building Location:

The lease was designed for in-line or satellite space

Special Features:

The tenant-oriented provisions within this lease are suitable for a tenant with strong to very strong bargaining power. As such, they provide a good outline of a tenant’s requirements. These are rarely offered in a landlord’s form of lease. The comments discuss the lease form from both a tenant’s and a landlord’s point of view

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Lease Agreement

BY AND BETWEEN

[NAME OF LANDLORD] [Entity type and jurisdiction] (“Landlord”)

and

[NAME OF TENANT] [Entity type and jurisdiction] (“Tenant”)

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T E N A N T R E TA I L L E A S E TA B L E O F C O N T E N T S 1.

TERM

2.

RENT

3.

DELIVERY AND POSSESSION

4.

IMPROVEMENTS

5.

TENANT’S USE

6.

TAXES, INSURANCE; CAM CHARGES; ADDITIONAL RENT

7.

SIGNAGE/TRADE NAMES

8.

PARKING

9.

USE OF ROOF

10. TENANT’S COVENANTS 11. SURRENDER OF PREMISES; REMOVAL OF TENANT’S PROPERTY 12. QUIET POSSESSION 13. LANDLORD’S REPAIRS 14. HAZARDOUS MATERIALS 15. ADA COMPLIANCE 16. LANDLORD’S SERVICES 17. PERFORMANCE BY TENANT 18. DEFAULT AND REMEDIES 19. BANKRUPTCY OR INSOLVENCY OF TENANT 20. FORCE MAJEURE 21. ESTOPPEL CERTIFICATE 22. ATTORNMENT 23. SUBORDINATION 24. CONDEMNATION 25. FIRE OR OTHER CASUALTY 26. LANDLORD’S SEPARATE INSURANCE 27. NOTICES 28. INDEMNITY 29. CO-TENANCY

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30. RIGHT OF FIRST REFUSAL 31. NOT A JOINT VENTURE 32. SUCCESSORS AND ASSIGNS 33. WAIVER 34. MEMORANDUM OF LEASE 35. HOLDING OVER 36. INTERPRETATION OF AGREEMENT 37. ATTORNEYS FEES 38. BROKER’S COMMISSIONS 39. LEASE SUBJECT TO CC&RS 40. CONFIDENTIALITY 41. ENTIRE AGREEMENT SIGNATURES EXHIBITS A

SITE PLAN

B

LEGAL DESCRIPTION

C-1 LANDLORD’S SCOPE OF WORK C-2 TENANT’S WORK D

COMMENCEMENT MEMORANDUM

E

IMPROVEMENT ALLOWANCE

F

PRE-EXISTING EXCLUSIVE USES

G

TENANT’S SIGNAGE

H

PARKING PLAN

I

LANDLORD’S RULES & REGULATIONS

J

COVENANTS, CONDITIONS & RESTRICTIONS

K

SUBORDINATION & NON-DISTURBANCE AGREEMENT

COMMENTS

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LEASE AGREEMENT This LEASE AGREEMENT (“Lease”) is made as of (“Effective Date”) by and between [Name of Landlord], an [entity type and jurisdiction], (“Landlord”) and [Name of Tenant], an [entity type and jurisdiction] (“Tenant”).

WITNESSETH: Commentary: Section 1a. Commencement. Even though color copiers are increasingly being found in offices, a lot of business and law offices, and most government recording offices, do not commonly use them. Therefore, it may be advisable to avoid the use of red or other colored outlining and to indentify highlighted areas by the use of crosshatching or some other key. In consideration of the rents and covenants, and subject to the terms herein set forth, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, those certain premises, located at [address], containing approximately square feet of Floor Area [subject to Section 2(c), and defined in Section 2(d), below] (“Premises”), as more particularly designated and outlined in red on a plat labeled “Exhibit A” (“Site Plan”) and described on Exhibit B (“Legal Description”), each attached hereto and incorporated herein by reference. The Premises are located in the Shopping Center commonly known as the _______________________, consisting of approximately ____________________ (_______) rentable square feet of Center Area (as defined below) including supporting improvements (“Center”). 1.

Term: Commentary: Section 1a. Commencement. In normal times, many lenders will provide financing based on a five-year lease. For new construction, however, lenders may find a ten-year term more appealing in that it offers sufficient time within which to amortize construction costs. If the term of a lease is scheduled to begin before the rent commencement date, the landlord will often want the expiration of the term to be measured from the rent commencement date. In that way, the landlord receives the bargained-for rent for the agreed-upon term. For example, if the rent commencement date is 90 days after the commencement date, then ending the initial term five years after the commencement date will deprive the landlord of 90 days’ rent. Regardless of the drafting approach taken, a lease should be drafted to provide that the parties are contractually obligated to each other upon execution of the agreement, even though its term does not begin upon execution. On the other hand, many tenants prefer to start the term when taking takes possession, rather than at a later rent commencement date (which date can be up to several months later), so that there is no question that the lease terms are in effect and tenant is entitled to possession at the time of delivery.

(a) Commencement. The Term (“Term”) shall be a period of ( ) years commencing on the last to occur of the following events (“Commencement Date”):

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Execution of this Lease by both parties; or

Commentary: Section iia. Commencement. In this particular lease form, the implication exists that the tenant is entitled to possession of the leased premises prior to the execution of the lease. This, however, can be risky for both parties. If due to exigencies caused by the particular circumstances this risk cannot be avoided, the parties should consider mitigating it by having an agreement in place that outlines the methodology by which they can untangle themselves in the event the parties never execute the lease. In addition, the parties should consider those lease provisions that are to take effect before a tenant ever enters the leased premises, such as the obligation to provide insurance coverage. Wherever an event is dependent upon mutual agreement, there needs to be a procedure in place for resolving disputes, and there must be time limits within which the parties must give their approval. Without such provisions, either party, as its particular self-interest dictates, can frustrate the expectations of the other party. (ii) Delivery of the Premises for Tenant’s exclusive possession with Landlord’s Work completed as certified by Tenant’s project manager and Landlord’s project architect in accordance with Exhibit C-1 [Landlord’s Work, as described in Section 4(a)]; or Commentary: Section iiia. Commencement. This provision was drafted by the tenant to ensure that the commencement date does not occur until the tenant is ready to submit its improvement plans for permits. (iii) Approval of Tenant’s construction drawings by Landlord as provided in Exhibit C-2 [“Tenant’s Work,” as described in Section 4(e)]. Commentary: Section iiib. Lease Year. For ease of operations where a landlord or its tenant administers a large number of leases, this provision serves to adjust the Term (and, consequently, subsequent renewal notice and expiration dates) for all leases to the beginning of a calendar month. (b) Lease Year. As used in this Lease, the term “Lease Year” means a period of twelve (12) consecutive calendar months. The first (1st) Lease Year shall begin on the Commencement Date if the Commencement Date is the first (1st) day of a calendar month; otherwise, the first (1st) Lease Year shall begin on the first (1st) day of the calendar month next following the Commencement Date. Each succeeding Lease Year shall commence upon the anniversary date of the first day of the first (1st) Lease Year. (c) Expiration. The Term shall end and this Lease expire on the last day of the ________ ( ) Lease Year, subject to Tenant’s renewal option(s) as provided in Subsection (d) below. Commentary: Section iiid. Option to Renew. Options to renew are often critical to tenants in order to provide them with sufficient time within which to amortize the costs of tenant’s improvements. In general, tenants prefer a shorter lease term renewal with multiple renewal options over having

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a longer initial term; this is particularly so in dynamic real estate markets where the demographics or desirability of a location for a particular tenant may change dramatically over, say, five years. From a landlord’s point of view, an option to renew only aids the tenant. If the renewal rent turns out to be below the then-current market rate, the tenant will have gotten a benefit. If the renewal rent, however, turns out to be above the then-current renewal rate, a tenant will be able to negotiate for the lower rental rate at time of renewal. Generally, a tenant’s exercise of renewal options saves a landlord the time and expense of reletting the premises to a new tenant, and the corresponding interruption in rental revenue (often including a build-out period for the new tenant’s improvements). The provision in this form allocates to the tenant a portion of the savings realized when renewal options are exercised. On the other hand, a landlord might argue that the agreed-upon renewal rate already contemplates such savings, as well as the savings resulting from the landlord not paying a brokerage commission and avoiding the risk of vacancy. (d) Option to Renew. Provided Tenant is not in default beyond any applicable cure period at the time Tenant delivers a Renewal Notice (as defined below) and as of the beginning date of the respective renewal period, Tenant shall have ________ (___) options to renew this Lease for a term of ________ (___) years for each option, upon all the terms, covenants, and conditions set forth herein (“Renewed Term”). The right to exercise such options shall be conditioned upon Tenant giving Landlord written notice of its election to renew (“Renewal Notice”) not less than six (6) months nor more than twelve (12) months prior to the expiration of the initial Term or Renewed Term as the case may be. After the exercise of a renewal option, all references to the Term shall be deemed to mean the Term as extended pursuant to this Section. With the exercise of each renewal option, Tenant shall have the first month of each Renewed Term rent-free. 2.

Rent: Tenant covenants and agrees to pay Rent, without offset or deduction, except as expressly authorized elsewhere in this Lease, to the Landlord, its successors, and assigns at the following rates and times: Commentary: Section 2a. Minimum Monthly Rent. There is nothing magical about having rent being due on the first day of each month. A landlord should expect that it will need to make its own mortgage payments on the first day of each month without expecting to have already received rents for that particular month. Where the agreed-upon rent is a fixed amount, and is not dependent on the size of the leased premises, there is no need to state a rent-per-square- foot amount within the lease. In this way, landlords can avoid potential disputes that may arise from remeasurement of the leased premises at a later date. Note, however, that some jurisdictions statutorily require that a lease specify the amount of annual rent in order to be enforceable. As always, check your particular state’s laws. The need for specifying the rental rate or, alternatively, clearly expressing the formula needed to determine the certain rent rate at the time of the renewal option cannot

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be over-stressed. Without a specified rental rate, a renewal option becomes merely an agreement to negotiate a revised lease at a future date. (a) Minimum Monthly Rent. Tenant shall pay the following Minimum Monthly Rent in advance on or before the fifth (5th) day of each calendar month during the Term and Renewed Term(s), if any: Lease Year(s) Annual Rent Per Square Foot 1 - _____$ $ _____-_____ Renewed Terms: _____-_____ _____-_____

Minimum Monthly Rent

All Rent [as defined in Section 2(e)] shall be paid and delivered to the Landlord at the place designated by the Landlord for notices under this Lease, or such other place as Landlord may subsequently designate in writing. Commentary: Section 2b: Rent Commencement Date. Here, the tenant’s obligation to pay rent commences on a negotiated date after the tenant takes possession of the leased premises. Tenants prefer this to accommodate a build-out period for their improvements and to build in a lead-time before their store opens its doors and begins generating revenue. With the rental obligation beginning when the store opens, but no later than “xx” days after the Commencement Date, this approach attempts to balance the tenant’s need for this lead time, on the one hand, and the landlord’s legitimate interest in receiving rent as soon as possible after the store commences operations, on the other hand. This way, a landlord knows that rent will start by a given date, and even sooner if its tenant opens for business before that date. This is typically in both a landlord’s and a tenant’s interest. The building permit contingency attempts to avoid those situations where, through no fault of its own, a tenant has been unable to obtain the requisite building permits to construct its improvements, even though the specified date for rent commencement has arrived. Absent this provision, the tenant would be in the undesirable position of incurring the obligation to pay rent without the benefit of receiving income from an operating business. On the other hand, a landlord needs to be concerned about the fact that the “trigger” for the obligation to pay rent rests solely in the hands of its tenant. Consequently, it might be appropriate to require the tenant to diligently prosecute its application for building permits, and to set a maximum time within which such permits must be obtained. Under such an arrangement, the tenant would be deemed to have received its building permits at the end of the allotted period, and the obligation to pay rent to landlord would begin based on that date. Tenants often need the landlord’s “as-built” plans or other construction drawings on which to base the design of their improvements and to prepare their own permitting plans. If, early in the process, a tenant knows such plans or drawings are not available, it can take into consideration the extra time and expense it will incur in creating such as-built plans when it negotiates the Lease (such as when negotiating for an Improvement Allowance or over the Rent Commencement Date). If, however, it expects those

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plans to be provided, the landlord’s failure to supply these materials can significantly delay tenant’s critical path to opening for business at the leased premises. The penalty for failure to supply these materials is intentionally made severe in this tenant form of lease. This is because of the potentially severe economic consequences of missing an anticipated store opening date. (b) Rent Commencement Date. Rent payments shall commence on the earlier of: (i) ninety (90) days after the Commencement Date; or (ii) thirty (30) days after Tenant opens for business at the Premises (“Rent Commencement Date”), but in no event shall the Rent Commencement Date be earlier than sixty (60) days after Tenant has received the required building permit for Tenant’s improvements at the Premises, provided Tenant timely applied for same. The first (1st) such payment shall include any prorated Rent from the Rent Commencement Date until the first (1st) full calendar month following the Rent Commencement Date. Notwithstanding any provision of this Lease to the contrary, the above calculation of the Rent Commencement Date is conditioned upon Tenant’s timely receipt of as-built plans, if applicable, and Landlord’s final construction drawings in accordance with both Section 4 below and Exhibit C-1. In the event Landlord has not satisfied its obligation to provide such as-built plans, if applicable, and construction drawings in accordance with Section 4 and Exhibit C-1, the Rent Commencement Date shall not occur earlier than one hundred fifty (150) days following satisfaction of these requirements. Commentary: Section 2c. Commencement Memorandum. The commencement memorandum confirms the agreement between a landlord and its tenant as to the key dates under the lease. If the rent is based upon a measurement of the leased space after the lease has been executed, the commencement memorandum also serves to memorialize the rent calculation. It should not include, however, terms relating to a landlord’s or a tenant’s performance; these terms are more appropriately handled in an estoppel certificate. Including the form of commencement memorandum as an exhibit to the lease serves to avoid this problem. For existing premises, the landlord should have already measured the space. For new construction, however, a right to measure the finished space should be mutual. The right to remeasure should always be treated as a two-edged sword for either party. Some leases specify that the exercise of the right to remeasure should occur early in the lease term, but such a restriction might prevent later adjustment (by either party) if it is later determined that the initial measurement was incorrect. Some landlords negotiate out any provision for remeasurement; but when that happens, a tenant might be justified in refusing to agree to any subsequent readjustment to the square footage floor area specified in the lease. Some leases incorporate a more detailed process for resolving disputes as to floor area, while others prefer to negotiate the issue to their mutual satisfaction when the issue arises. As a practical matter, though, there should be a reasonable tolerance applied to any measurement, but if a substantial disparity exists, an error probably occurred in one of the measurements. There may be no good substitute in place of measuring the leased premises at the outset of the lease or doing so as soon as the space has been constructed, thereby reaching agreement on the size of the space at that time. No one likes the prospect of discovering an error after budgets have been set, and certainly, no landlord or tenant likes to refund or pay, as the case may be, a large accumulated over- or underpaid rent. The parties, but especially tenants,

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should consider measuring the floor area of the entire project (or at least verifying the reasonableness of the landlord’s stated measurement) to avoid later dispute over calculations that depend on a tenant’s pro rata share of space within the project. (c) Commencement Memorandum. Following delivery of the Premises, Landlord and Tenant shall execute a Commencement Memorandum confirming the Commencement Date, Rent Commencement Date, Expiration Date, and total square footage of the Floor Area of the Premises upon the commencement of this Lease in substantially the same form as Exhibit D (“Commencement Memorandum,” attached hereto and incorporated by reference). Rent and all amounts due hereunder that are calculated by reference to the Floor Area shall be adjusted to reflect the total square footage of the Floor Area of the Premises. Landlord and Tenant hereby acknowledge and agree that all Rent payable by Tenant pursuant to this Lease is calculated on the assumption that the Floor Area of the Premises measures square feet in size. Tenant shall have the right to have the measurement of the Premises verified by a licensed architect prior to execution of the Commencement Memorandum, and in the event that Tenant discovers that the square footage of the Floor Area of the Premises is more or less than the amount set forth above, all Rent payable by Tenant pursuant to this Lease shall be adjusted accordingly. Commentary: Section 2d. Floor Area; Proportionate Share Defined. This method of measuring floor area is typical. It favors the landlord by including the space occupied by walls (both interior and exterior) in the area on which rent is paid. This approach is intentionally used here to achieve a more “balanced” lease. Tenants, however, would certainly favor measurements taken from the interior surface of each demising wall, as this constitutes the “usable area” of the leased premises. Whatever measurement methodology is used should be consistent with the method employed to calculate the size of the common areas, which measurement is needed to determine the tenant’s proportionate share of common area maintenance charges and other expenses. The distinction between “leasable” and “leased” area for calculating the tenant’s portion of common area maintenance charges is an extremely important one. Tenants do not want to pay common area maintenance (and other) charges otherwise allocable to unoccupied leasable area. For example, if in later years, occupancy at the overall property drops from fully leased to 75% leased, the tenant’s share of common area maintenance charges increases by nearly 50%; if it drops further to 50% occupancy, the tenant’s share of common area maintenance charges almost doubles. Because keeping the entire property fully leased is a landlord’s business and a lack of success should be the landlord’s burden, tenants will want to allocate the expenses resulting from unoccupied space back to landlord. Otherwise, a landlord has less incentive to keep its rental rates and other economic leasing terms near market levels if it knows that existing tenants will fully cover the cost of carrying a less-than-fully-occupied project. Generally, tenants are concerned that their landlord will collect more common area maintenance charges from its tenants at the property than it has actually expended in a given accounting period. For this reason, a tenant should be comfortable that its proportionate share of common area maintenance and similar charges has been fairly and properly calculated. In some cases, however, landlords may have leased portions of the project with the expectation that the rent paid by some tenants, such as kiosk or

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food court tenants, is in large part intended to include “excess” recovery of common area charges. From a landlord’s perspective, an appropriate response to this tenantoriented provision is that so long as the tenant in this particular lease pays only its proportionate share of the various lease pass-through charges, the landlord is free to charge its other tenants for the same charges in accordance with their respective agreements, even if not on a pro rata basis. (d) Floor Area; Proportionate Share Defined. The term “Floor Area” as used in this Lease means and includes all areas for the exclusive use and occupancy by Tenant, measured from the exterior surface of the Premises’ exterior walls (and from the extensions thereof, in the case of openings) and from the center of interior demising partitions, and shall include, but not be limited to, restrooms; mezzanines; warehousing or storage areas; clerical or office areas; and employee areas within the Premises. Floor Area shall not include areas within the Premises for mechanical systems or for similar uses that do not exclusively serve the Premises. As used in this Lease, the term “Center Area” means and includes all areas for the exclusive use and occupancy by a tenant of Landlord, or by any other occupant of the Center, whether actually occupied or not, measured from the exterior surface of exterior walls (and from the extensions thereof, in the case of openings) and from the center of interior demising partitions, and shall include, but not be limited to: specialty store areas; areas devoted to mobile and seasonal merchants; restrooms; mezzanines; warehousing or storage areas; clerical or office areas; and employee areas within the Center and within any outparcels benefiting from the common maintenance, operation or repair of the Center. As used in this Lease, the term “Proportionate Share” means a fraction (converted to a percentage figure), the numerator of which is the number of rentable square feet in the Floor Area and the denominator of which shall be the number of rentable square feet of Center Area, whether occupied or not. Landlord covenants that the aggregate Proportionate Shares of all tenants at the Center (including Tenant) shall not exceed one hundred percent (100%). Subject to later verification by measurement and subsequent modification due to changes in the leasable square footage composing the Center, Tenant’s Proportionate Share for the purposes of this Lease shall be composing percent (__%). Commentary: Section 2e. Definition of Rent. A landlord will want to define all sums due from a tenant as “rent” in order to maximize its ability to recover these amounts through legal process. Often, there are streamlined procedures to evict a tenant for non-payment of rent whereas evictions based on other grounds involve a more elaborate procedural process and substantive proofs. Some statutes define what a landlord is entitled to recover in terms of “rent.” In many leases, payments due to a landlord, other than on account of basic rent, are referred to as “additional rent” (a defined term) and such leases state that failure to pay additional rent bears the same consequences to the tenant as its failure to pay basic rent. (e) Definition of Rent. Any and all payments of Minimum Monthly Rent and Tenant’s Proportionate Share of CAM charges (as hereinafter defined), taxes, fees, charges, costs, expenses, insurance obligations, late charges, interest, assessments, operating expense adjustments, and all other payments, disbursements or reimbursements which are attributable to, payable by or the responsibility of Tenant under this Lease shall constitute “Rent” for purposes of this Lease. Any Rent payable to Landlord by Tenant for any fractional month shall

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be prorated based on a three hundred sixty-five (365) day year. All Rent payments shall commence on the Rent Commencement Date. 3.

Delivery and Possession: Commentary: Section 3a: Delivery of Premises. For a tenant’s business planning purposes, a specified date for delivery is better than stating “xx days after execution.” Frequently, execution of a lease is delayed for one reason or another; often, the parties do not sign a lease by the date anticipated at the outset of their negotiations. By specifying a delivery date, neither party gains an advantage over the other by delaying execution of the lease. On the other hand, most landlords will not commence the design and construction of landlord’s work until after a lease has been signed, and even then, not until after all contingencies to the effectiveness of the lease have been satisfied. In such cases, it would be prudent for a landlord to insert the required date only after the lease has been fully negotiated, and then to give the tenant a fixed period of time, such as ten days, within which to sign the lease. Tenants can protect themselves with liquidated damages provisions. As these amounts tend not to be readily ascertainable by the parties during negotiations, they could agree to a specific dollar amount per day that the delay continues. The use of such provisions are primarily intended to keep the tenant “whole” in the event of delays not caused by the tenant by covering those unanticipated expenses (or at least a portion thereof) that tenant incurs for such items as idle equipment and staff, damage to the business plan, and the like. These provisions discourage late delivery. At the outset, a landlord should be encouraged to pick a realistic delivery date, and, upon lease execution, its tenant should be entitled to plan upon that date. Economists would say that the damages suffered by a tenant are not related to any profit the tenant expects to earn from its business at the leased premises. Rather, they would suggest that what a tenant “loses” due to late delivery is the “contribution to overhead” generated by the store. There is no direct relationship between a tenant’s damages and the rent reserved under the lease. Landlords that agree to payment of liquidated damages are advised to avoid agreeing to other lease provisions that work to give the tenant control over the timing and manner of a landlord proceeding with its preparation of the leased premises for occupancy. For example, a landlord would not want to pay a penalty for delay in a case where delivery is delayed by reasons of force majeure or when its tenant, in part, caused the delay by refusing to approve the landlord’s plans.

(a) Delivery of Premises. Delivery shall occur when Tenant has received exclusive possession of the Premises with Landlord’s Work completed in accordance with Exhibit C-1 and as outlined in Section 4 below. Landlord agrees to deliver the Premises on or before ___________ (“Delivery Date”). Landlord acknowledges and agrees that Tenant shall have complete access to the Premises for delivery and installation of all equipment, fixtures, and other personal property upon delivery of possession to Tenant in accordance with this Lease. In the event Landlord fails to deliver possession to Tenant by the Delivery Date, Landlord shall pay to Tenant a ($  ) per day penalty for every day after the Delivery Date until delivery of the Premises in accordance with this Lease. In addition, the Rent Commencement Date shall be

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extended by two (2) days for every day after the Delivery Date until Landlord delivers possession to Tenant. Commentary: Section 3b. Tenant Access Before Commencement. Early access is intended to facilitate an early store opening to the mutual benefit of both landlord and tenant. A landlord should negotiate for a provision whereby the tenant agrees not to interfere with its landlord’s contractors and to assume all risk of damage or loss to the tenant’s property. If early entry is to be permitted, the lease’s insurance provisions should require the tenant’s insurance to be in place prior to first entry. Even if the lease will not provide for early entry for the purpose of starting the tenant’s work, it might allow entry so that the tenant could make inspections or take measurements. If a tenant needs to mobilize equipment or supplies in advance of delivery, the lease could provide for a storage area within the leased premises or elsewhere at the property. (b) Tenant Access Before Commencement. Notwithstanding the Commencement Date, Landlord agrees to provide Tenant with complete access to the Premises upon completion of Landlord’s Work (Exhibit C-1), in order to allow Tenant to commence and complete Tenant’s Work (Exhibit C-2), provided it has supplied Landlord with satisfactory evidence of all insurance required to be supplied by Tenant hereunder. Commentary: Section 3c. Termination Before Delivery. For planning purposes, a tenant may want to specify the date by which, if delivery has not occurred, it has the right to terminate the lease without penalty. Having such a termination right allows a tenant to cleanly end any obligation under the lease, and redirect its efforts toward finding another site when it reaches a point where for any reason, such as a permitting problem or the failure of the prior tenant to leave, the premises will not be delivered on or before an agreed-upon outside date. From a tenant’s perspective, because a landlord is responsible for delivery of the leased premises, this should not be a reciprocal right—i.e., landlord should not be allowed to terminate the lease by reason of its own failure to deliver the premises by the agreed-upon date. From a landlord’s perspective, there are conditions that are not under its control, such as the need to obtain governmental approvals. Although a landlord can negotiate for contingency provisions that would allow it to terminate the lease, it might not want to commit all of its resources to obtain those approvals beyond using its diligent efforts. For example, a landlord may not want to be required to exhaust its judicial appeal rights before having the right to terminate the lease. In addition, the aggregate delay caused by third parties or by the tenant could result in an extended delivery date, sometimes beyond one that would make the lease economically viable for a landlord. For those reasons, a landlord might insist on an “outside” or a “drop dead” date beyond which either party can terminate the lease upon notice to the other. In practicality, there are many situations where the outside date has been reached, but both landlord and tenant believe the delivery date is within reach and where neither will want to abandon the project (or have wasted the monies spent to that point) only to start anew with another location or another tenant. Similarly, if at some point early in the process, it becomes reasonably certain that the leased premises cannot be delivered when originally anticipated (as is most often the

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case where new construction or major renovation of the space is required prior to delivery), a tenant will want to terminate the lease without waiting until the “outside” delivery date set forth in the lease. This desire can be accomplished by including a provision whereby the tenant can ask the landlord for written further assurances the delivery date will be met. If the landlord cannot or does not provide such written assurance, the tenant then would have the right to terminate the lease without penalty. (c) Termination Before Delivery. Notwithstanding any provision of this Lease to the contrary, if for any reason Landlord cannot deliver possession of the Premises with Landlord’s Work completed to Tenant by _____________, Tenant may terminate this Lease upon written notice to Landlord hereunder. If for any reason Landlord has not commenced construction of the Landlord’s Work required under Exhibit C-1 by __________, then Tenant may elect to terminate this Lease upon written notice to Landlord. Commentary: Section 3d. Tenant’s Acceptance. Even when accepting premises in an “as-is” condition, tenants should not accept premises “upon execution of the lease.” Acceptance should occur only after the tenant has had an opportunity to inspect the premises and then receives exclusive possession of the premises, broom clean, and free of tenancies and occupants. Even if a tenant accepts possession on the premises, it will want to have the right to prepare a “punch list” of items it subsequently discovers to be incomplete or defective and the landlord’s obligation to complete Landlord’s Work should survive acceptance of the leased premises. Section 4(d) contains a “Punch list” provision. Although a Landlord may object to a tenant’s report that some item was received in damaged condition, fearing that the tenant itself caused the damage, that shouldn’t relieve the landlord of its obligations with respect to incomplete work or items that were obviously damaged when delivered. (d) Tenant’s Acceptance. Tenant shall accept the Premises upon satisfactory completion of Landlord’s Work as certified by Tenant’s project manager and Landlord’s project architect in accordance with Exhibit C-1, and ready for commencement of Tenant’s Work to be performed pursuant to Exhibit C-2. Tenant’s acceptance of the Premises shall be evidenced by the executed Commencement Memorandum (Exhibit D). 4.

Improvements: Commentary: Section 4a. Landlord’s Work. Allocating responsibility between the parties for the condition of the premises, both at and after the possession date is critically important. As with most lease provisions, the primary objective should be to avoid uncertainty and surprise, so that each party can estimate its own costs, conduct its lease negotiation based upon that estimate, and ultimately evaluate the feasibility of the proposed tenancy based on a full understanding of the lease’s resulting economics. In allocating responsibility for improvements, the parties should consider who is in the best position to perform the work, keeping in mind that whoever does the work should be held responsible for the quality of the work performed and, as is usually the case, have ongoing responsibility for the improvements during the lease term. Typically, landlords will not want their tenants to make improvements outside the leased premises or to common areas or services shared with other tenants. This is because a landlord is in a better position than any one tenant

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would be to handle improvements that affect more than that tenant. If a tenant is given permission to make improvements outside of its own leased premises, the lease should provide that those improvements be made in a manner that would minimize interruptions or inconvenience to others. A tenant may have specifications or equipment standards needed for its proper or economical operations in the leased premises and (if it has construction or contracting capabilities) may want to control the quality and expense of work and materials used to improve the premises. However the lease allocates responsibilities for the making of improvements, most tenants strive for three preliminary conditions—that the leased premises be: (1) vacant; (2) fully demised; and (3) broom clean—even where the leased premises are to be delivered “as-is.” Landlords should insist upon a procedure for approval of plans and specifications with time limits and objective standards for tenant approval. (a) Landlord’s Work. Landlord shall deliver the Premises vacant, fully demised, and in “broom clean” condition with the improvements specified in Exhibit C-1 fully completed in accordance with construction and architectural drawings approved by Tenant. Landlord covenants and warrants to Tenant that as of the date of delivery of possession: (i) Landlord’s Work shall be performed in a good and workerlike manner, utilizing first quality new materials in compliance with all applicable laws, ordinances, rules, and statutes; (ii) the fire suppression system (which shall be installed by Landlord at its sole cost and expense if required by applicable codes) and any other systems installed by Landlord or otherwise existing at the Premises, shall be in good operating condition; (iii) the Premises complies with all laws, ordinances, and statutes applicable to commercial retail use; and (iv) the Premises’ roof, structure exterior, and foundation have been constructed in a workerlike manner free of defects as to materials, workmanship and design. If a noncompliance with such covenant or warranty exists at any time during the Term, Landlord shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Tenant setting forth with specificity the nature and extent of such noncompliance, repair same at Landlord’s expense. In the event such noncompliance occurs prior to the Rent Commencement Date, the Rent Commencement Date shall be extended by the number of days necessary for Landlord to repair any noncompliance under this Section. Landlord shall assign, to Tenant, any and all warranties arising from new construction to the extent that Tenant is responsible for the repair, replacement or maintenance of same and Landlord shall cooperate with Tenant in pursuing any claims regarding such warranties. Commentary: Section 4b. As-Built Plans. This provision is important for both new construction and for major renovations. Landlords should avoid representing that the “as-is” plans are correct. A tenant should verify their accuracy if intending to rely upon them. Often, “as-built” plans for existing space is not available, but in any case, tenants may want to obtain or create a written or photographic record of the condition of the leased premises as of the date possession is delivered. This can be helpful to both the landlord and tenant at the time the leased premises are surrendered to the landlord. (b) As-Built Plans. Concurrently with or before delivery of the Premises, Landlord shall submit to Tenant a full set of as-built plans depicting the construction of the shell and exte-

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rior of the Premises in accordance with Exhibit C-1, such period to be extended if the parties agree in writing. Commentary: Section 4c. Punchlist for Landlord’s Work. Certain deficiencies or omissions in “Landlord’s Work” will not interfere with delivery of the premises or with tenant’s taking possession of the premises or commencing to adapt those premises for its business. This provision is designed to allow delivery of the leased premises to take place so that the tenant can get started with the work it needs to do, but assure that deficiencies in Landlord’s Work are promptly and timely rectified. Following delivery of the leased premises, absent a contractual consequence for noncompletion of punchlist items, they can sometimes languish for weeks or months. Often tenants end up completing this work themselves so as not to delay their store opening. By their very nature, “punchlist” items should consist of only minor deficiencies that will not interfere with a tenant’s ability to effectively utilize the leased premises. Therefore, as the tenant has proposed Section 4(c), its concept that punch list items might delay delivery of the premises would be inconsistent with the very definition of “punchlist” items and it might be unwarranted to provide for a “deemed” delay on account of such items. While it is understandable that a tenant will want to set a time limit for completion of “Punchlist” items, by their very nature this may not make sense. Often, the reason that an item is left undone at the time possession is delivered to a tenant is the unavailability of materials or the need for a special craft to complete or repair a particular item. As a matter of drafting style, it may be desirable to place all of a tenant’s remedies in a single lease provision rather than within each triggering provision. For example, if a tenant has “self-help” rights, followed by a right of “offset,” a landlord may insist upon a more formal procedure for the exercise of such rights. In addition, a landlord may not want its tenant to commence its own repair of punch list items if the landlord already has commenced repair of those items within the agreed-upon period and is continuing to diligently prosecute their repair. This situation may also arise in the context of other landlord obligations (such as for maintenance or repairs). Generally, landlords do not object to a tenant’s right to self-help if it is triggered only after landlord fails to perform an obligation under the lease, the tenant has provided it with reasonable notice of the deficiency, and the lease gives the landlord an opportunity to cure. More problematic to a landlord, however, is a tenant’s right of offset, i.e., the tenant’s ability to deduct the cost of repairs from subsequent rent payments [see, discussion of landlord’s repairs, Section 13, below]. Some tenants believe that because “punchlist items,” by definition, are minor in scope and yet important to the timely opening of their store (and benefiting both landlord and tenant), the right of offset should be less objectionable in this context. Even where a landlord might agree to the concept of such an offset, it might be concerned about the unreasonableness of a tenant’s deduction and the limited, practical remedies that it has against a tenant that acts unreasonably in making a particular repair (or in curing some other alleged landlord default) or that makes what the landlord believes to be an unnecessary or unreasonable expenditure. Sometimes this can be handled by providing that if the parties do not agree on the validity of a particular claim, the appropriateness of tenant’s cure of an alleged landlord breach and the amount of offset can be determined by arbitration. This should

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also satisfy any mortgagees that are concerned with maintaining a predictable cash flow from the project. (c) Punchlist for Landlord’s Work. Tenant shall have a period of thirty (30) days following delivery of the Premises to provide Landlord with a list of items of which Landlord’s Work is incomplete or unsatisfactory (“Punchlist Items”). Landlord shall cure the Punchlist Items within a reasonable amount of time not to exceed thirty (30) days. In the event the Punchlist Items (individually or collectively) are sufficient to either: (i) demonstrate less than substantial completion of Landlord’s Work; or (ii) prevent Tenant from obtaining the necessary governmental approvals and permits to perform Tenant’s Work or occupy the Premises, then delivery of the Premises shall be deemed to occur on the date those Punchlist Items are fully corrected. If Landlord fails to complete the Punchlist Items within the thirty (30) day cure period, Tenant shall have the right, but not the obligation, to perform completion of such Punchlist Items to complete Landlord’s Work and deduct such expense from the Rent or other charges next coming due under the Lease. Commentary: Section 4d. Latent Deficiencies. This Section makes the landlord responsible for the building’s latent defects. A latent defect is one that was not reasonably discoverable at the time of delivery and which the tenant did know about anyway. Given the nature of a latent defect, a thirty-day cure period may not be reasonable. Landlords may want to limit their obligation to cure latent defects only to those that would reasonably affect this particular tenant. (d) Latent Deficiencies. The time provisions stated above for identifying Punchlist Items shall not apply to latent deficiencies or defects, and during the Term Tenant shall have the right to report to Landlord such deficiencies or defects which are in need of repair or correction based upon Landlord’s Work. In connection therewith, the provisions set forth above shall otherwise apply with respect to Landlord’s obligation to cure such deficiencies or defects. Commentary: Section 4e. Tenant’s Work. Landlord’s representative should determine if the jurisdiction where the leased premises are located provides for the filing of Notices of Non-Responsibility or similar documents to protect a landlord’s property against mechanic’s or construction liens for work done by its tenants. Not all jurisdictions make such protection available to property owners. A less attractive alternative to this protection would be to have the tenant covenant to remove any liens placed on the property by reason of tenant’s work, either through satisfaction of the lien, bonding to remove the lien (where permitted), or expungement of the lien through legal process. As a practical matter, although disputes with contractors or subcontractors should be infrequent, it may be unreasonable to require a tenant to keep its premises “lien free” as such a covenant only serves to create a default where a tenant may have no control over the underlying circumstances. After all, any person or entity performing work or supplying materials can file a lien, legitimately or not. A tenant, however, can covenant to cause removal of any such lien within an agreed-upon time after it has notice of its filing. In this type of provision, the removal obligation should be triggered by written notice, rather than by the filing of the lien, because a tenant will not necessarily receive notice of the lien when filed. By law, the property owner (usually the landlord) must be given written notice of the lien and therefore should agree to give notice of such a lien to its tenant.

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(e) Tenant’s Work. Following delivery of the Premises, Tenant shall commence Tenant’s Work described in Exhibit C-2, and shall diligently pursue such installation and work to completion. To the extent law allows, Landlord shall be permitted to post Notices of NonResponsibility in connection with completion of Tenant’s Work by Tenant’s contractor and subcontractors at the Premises. Commentary: Section 4f. Remodeling and Alterations. A tenant will want to require its consent to any alteration to the shopping center if the changes would materially interfere with access to, or visibility of, the leased premises or with tenant’s business at the shopping center. As drafted by the tenant, this provision is intended to create a process for prompt communication and negotiation between a landlord and its tenant aimed at developing an alteration plan that gives the landlord what it needs without taking away any material rights or benefits from the tenant. As a remedy for work or changes that materially interferes with the tenant’s business, this tenant-drafted form of lease grants a rent abatement until the condition creating the material interference ends. (f ) Remodeling and Alterations. Landlord shall have the exclusive right to remodel, expand, contract or otherwise alter or change any portion or portions of the Center; and to erect scaffolding in connection with the construction on the exterior of the Premises or Center, provided that such activities shall not materially interfere with Tenant’s use, access, ingress or egress to and from, visibility or parking at the Center or the Premises. If the exercise by Landlord of its rights under this Section materially and adversely affects Tenant’s business, Rent shall abate until completion of the activities in question and Tenant is able to resume unimpaired operation of its business at the Premises. Commentary: Section 4g. Improvement Allowance. Improvement allowances should be considered in two contexts. First, when evaluating how a transaction compares to the prevailing market for that area, both parties must keep in mind that annual rent and the improvement allowance must be viewed together in determining the aggregate market rate. A market return for commercial real estate suggests that when an improvement allowance is paid, annual rent should be higher. This is to allow the landlord to amortize the improvement allowance over the duration of the lease term. When no allowance is paid, annual rent should be lower to allow the tenant to amortize the cost of its improvements over the lease term. Second, an improvement allowance may be appropriate where a tenant plans to install or upgrade equipment or structures at the shopping center that are reasonably expected to benefit the property beyond the term of the lease. If an improvement allowance is to be paid to the tenant for specified work, then the allowance should be stated as a sum certain, and preferably broken down by work item in the event responsibility for one or more components changes during the course of construction. Conversely, if the allowance is a negotiated amount based upon the area leased, the allowance should be stated in an amount per square foot (and based thereon, a total amount), to accommodate subsequent changes in the measurement of the final floor area. Before making a final payment to its tenant, a landlord will want to be sure that its tenant’s work has been completed according to the approved plans and either that (1) lien releases have been obtained or (2) the lien period has expired for the

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improvements. Exhibit E to this Lease provides an example of a two-step payout which may be easier for both landlord and tenant (depending on their respective cash flow), but often one lump sum will be paid. There is room for considerable creativity in structuring improvement allowances, depending on the parties’ circumstances. For example, where there is no mortgage or where a mortgage so allows, a landlord may prefer to give a rent credit rather than make a lump sum payment. Circumstances should dictate how the parties structure this provision. Separate and apart from the business considerations that need to be taken into account are the tax considerations. Depending on how the Improvement allowance is structured, the tenant might be charged with receipt of the improvement allowance as current income or might not need to account for the money at all. Similarly, the landlord might be required to expense the allowance over the term of the lease up to the depreciation period required for real property items (currently 39 years). Exhibit E has an alternative provision that is designed to treat the improvements made by the tenant as if they were made by the landlord for tax purposes, essentially allowing the tenant to control the work and have the work funded by its landlord. (g) Improvement Allowance. Pursuant to the terms of Exhibit E (“Improvement Allowance,” attached hereto and herein incorporated by reference), Landlord shall pay to Tenant an Improvement Allowance of ____________ Dollars ($______) per square foot of Floor Area for a total Improvement Allowance of $ . Landlord represents and warrants that it has the current funds available or a firm commitment for the Improvement Allowance moneys. Such moneys shall be paid to Tenant as outlined in the attached Exhibit E. Commentary: Section 5. Tenant’s Use. This is a key provision of a retail lease. Landlords want to make the permitted use as narrow as possible. Tenants want to preserve flexibility to accommodate changing business conditions. A wide-open permitted use clause, such as “for any legal use,” not only would allow a tenant to change its own business, but would also leave “elbow” room for a potential subtenant or assignee. The final agreed-upon provision depends more on the bargaining power of the parties than on any overriding principle. Whatever turn out to be the tenant’s “permitted uses,” it is essential to list the exclusive uses already granted to other tenants and bar the tenant from engaging in any of them. There is room to argue about whether the prohibition to engage in those other exclusive uses will be “lifted” once the tenant for whose benefit the exclusive use right was granted in the first place is no longer entitled to protection under that tenant’s own lease or whether the prohibition should continue so that the landlord can offer the same protection to a like-kind replacement tenant. By raising these issues early in the lease negotiation process, the parties can explore potential conflicts and avoid instances where a landlord (either inadvertently or intentionally) concurrently negotiates overlapping exclusive use clauses with different tenants. If a tenant successfully negotiates for a broad permitted use clause, a landlord will still want to avoid a situation where its tenant opens its store with one primary activity and at a later date decides to change its use to one that would destroy the business of another tenant at the center. For that reason, a landlord might insist that this lease bar the tenant from changing its use to one that conflicts with the primary or exclusive use of another tenant at the time that the change is made.

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Often, a landlord will have a list of prohibited uses. Those are either “obnoxious” uses, such a mortuary or a bingo parlor, or uses that, in the landlord’s or another tenant’s opinion, are incompatible with the project as a whole, such as a theater. Regardless of the final structure of the permitted use clause of the lease, a landlord will want to bar its tenant from engaging in any prohibited uses. Here is a typical list of “obnoxious” or “prohibited” uses:

[SAMPLE LIST OF PROHIBITED USES] Notwithstanding anything to the contrary contained in this Lease, Tenant shall not use or occupy the Premises nor permit or suffer the Premises to be used or occupied for any one or more of the following activities or uses: 1.

Any non-retail use

2.

Auditorium, meeting hall, church or other place of public assembly other than the Intended Use

3.

Bingo, lotto, or off-track betting hall

4.

Repair, sale, leasing or display of used or new cars, trucks, boats, recreational vehicles, trailers or mobile homes

5.

Funeral parlor

6.

Animal clinic

7.

Medical clinic

8.

Restaurant

9.

So called “head shop”

10. Hotel, motel, apartments, or other lodging or living quarters 11. Any business or use that emits offensive odors, fumes, due or vapors 12. Massage parlor 13. Adult book store or store selling or exhibiting pornographic materials 14. Pornographic adult theater 15. Display of male or female dancers or so-called “strip-tease” establishment 16. Bar or tavern 17. Bowling alley 18. Arcade, amusement center, game room or other entertainment facility 19. Skating rink 20. Billiard room or pool room 21. Ballroom, dance hall or discotheque 22. Warehouse for storage of goods not intended to be sold on or from the Demised Premises

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23. Bail bond business 24. Tattoo parlor 25. Central laundry, dry cleaning plant or Laundromat 26. Lumber yard 27. Blood bank 28. Mortuary 29. Theater (live or movie) 30. Reading room 31. Beauty school or barber college 32. For auction, liquidation, going out of business, fire or bankruptcy sales 33. Flea market 34. “Second hand” store or army, navy or governmental surplus store 5.

Tenant’s Use: Tenant may engage in any lawful retail use of the Premises not in conflict with: (i) any applicable zoning ordinance or conditional use restriction; or (ii) any other existing tenant’s exclusive use, copies of which are attached as Exhibit F (“Pre-Existing Exclusive Uses,” attached hereto and herein incorporated by reference). Commentary: Section 5a. Exclusive Uses. This is an example of an exclusive use clause drafted with only the tenant’s needs in mind. Assuming that the parties agree that the tenant will have certain exclusive rights, as is often the case where a tenant has decent bargaining power, a landlord must be sure not to cripple its ability to lease other space in the center. On the other hand, a tenant will not want to invest in its leased premises and strive to build goodwill in those premises with the risk that another, possibly more powerful, competitor can move “next door” and steal the tenant’s business. In that regard, in most situations, a landlord sensitive to its tenant mix at the center, and looking for stable, long-term leasing relationships, will not want its tenants directly competing with each other. As result, the parties often focus on protecting the primary business or the businesses of the tenant. For example, if this lease were with a photocopying, photofinishing, and office services business, the parties would need to agree whether a candy store could offer photocopying services (perhaps on an incidental basis) or whether a book store could sell computer learning books. In addition, a landlord must be aware that agreeing to the proposed clause, unchanged, would bar a drugstore or a supermarket from providing photofinishing services. It also would preclude leasing to computer stores, office supply stores, and other major tenant categories. For that reason, a landlord would want the tenant to define its core business, and then provide only that it would lease to no other tenant, not already at the shopping center, whose primary business is the same as the defined primary business of this tenant. It might also want to carve out a blanket exception for large users such as supermarkets, drug stores, and department stores. Overall, this is a crucial provision for both landlord and tenant, and each

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should exercise care in crafting its language. Landlords and tenants, and those negotiating on their behalf, especially inexperienced ones, should tread carefully in these waters, making sure to be thoroughly versed in the common and uncommon tricks and traps that can be buried in what may appear to be a simple exclusive use rights clause. (a) Exclusive Uses. During the Term and any extension thereof, Tenant shall have the exclusive right to operate a [type of business] and to sell related goods and services to the public, including [list of specific uses that Tenant desires to protect]. Commentary: Section 5b. Non-Exclusive Uses. If the permitted use provision were broad enough to allow the specifically listed uses, there would be no need to list them here. Consequently, a landlord should carefully consider if allowing these “potential” uses would keep another tenant, for whom these uses are “primary,” out of the shopping center. For example, if a landlord wants a card shop at the center to enhance the tenant mix, the mere inclusion of the right to sell cards in this lease could keep a card shop out of the center, leaving it without any seller of greeting cards. A reasonable compromise would be to allow certain delineated uses if the tenant is otherwise conducting its principal use and to allow other ancillary uses, but limiting the amount of floor area or shelf space devoted to such uses. (b) Non-Exclusive Uses. During the Term and any extension thereof, Tenant shall have the non-exclusive right to the following uses: [list of auxiliary uses desired by Tenant]; and such other related sales and service as may be offered by comparable locations operated by Tenant. Commentary: Section 5c. 24-Hour Operation. This provision is important to a limited number of tenants whose marketing approach stresses around-the-clock availability. It illustrates the kind of special needs that a landlord must accommodate when running a shopping center. In reviewing a provision of this type, a landlord may want to distinguish between those factors that are under a landlord’s control, such as lighting and snow plowing, and those that typically are not, such as changes in local ordinances. Consequently, a landlord must be careful that it does not become a guarantor to the tenant by indemnifying the tenant from losses suffered due to conditions outside of the landlord’s control. It is one thing to let a tenant out of its lease if it reasonably cannot operate its contemplated business, but it is quite a different matter to compensate the tenant for its losses. In addition, a landlord might agree that the tenant should be able to operate around the clock for a particular use, but it is a wholly different matter to provide that a tenant can operate for “any legal use” around the clock. In some states, “best efforts” may require a party to exhaust all of its resources, even, potentially, to the point of bankruptcy. Consequently, a party may prefer to use “reasonable efforts” or “prudent efforts” or other similar standard of conduct instead. This tends to be a commonly negotiated matter between parties, with results depending on the particular circumstances of the transaction. (c) 24-Hour Operation. Landlord represents, warrants, and covenants that Tenant shall have the right to operate its retail business twenty-four (24) hours per day, seven (7) days

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per week. Landlord agrees to indemnify Tenant for any and all damages, costs, expenses or liabilities associated with any breach or default of the above warranty or covenant. If at any time during the Term or any extension thereof, through no fault of Landlord, Tenant is unable to operate twenty-four (24) hours a day seven (7) days a week or to provide the uses permitted herein, Landlord and Tenant shall use best efforts to obtain an exclusion or variance for Tenant’s operations. In the event the parties are unable to obtain such exclusion or variance within a reasonable time, Tenant shall have the right to terminate this Lease upon thirty (30) days advance written notice to Landlord hereunder (“Termination Notice”). Tenant shall provide the Termination Notice within six (6) months of Tenant’s receipt of written notification of the inability to operate in accordance with this Section or Tenant’s right to terminate shall be null and void. Commentary: Section 5d. Title Review. Here, a tenant should make sure that there are no recorded restrictions that will interfere with its use and enjoyment of the premises. Unless the shopping center has been recently acquired or financed, a landlord may not have this material readily available, and may suggest that the tenant obtain a title report for the property. Even if such a report is available, it would be prudent for a tenant to order its own title search or an update to whatever the landlord makes available. (d) Title Review. Prior to delivery of the Premises, Landlord shall provide Tenant with its most recent report on title covering the Premises and the Center, together with copies of all underlying documents shown as exceptions thereon and a copy of Landlord’s most recent survey of the Center. Landlord shall also provide Tenant with copies of all exclusive or prohibited use provisions contained in the leases of all other tenants in the Center which affect the Premises, whether recorded or unrecorded, certified to be true and correct by Landlord. If any title matter, or any exclusive or prohibited use provision from other leases in the Center which affect the Premises, would prohibit or restrict Tenant’s use of the Premises for a retail [Tenant’s principal and critical uses], or otherwise materially affect Tenant’s rights under this Lease, then Tenant may terminate this Lease by written notice to Landlord, provided the notice is delivered within thirty (30) days of receipt of the title report, survey, and use provisions. 6.

Taxes, Insurance, CAM Charges, and Additional Rent: (a) Personal Property. Tenant shall pay, before delinquency, all taxes, assessments, license fees, and other charges that are levied and assessed on Tenant’s personal property, alterations, and trade fixtures. Commentary: Section 6b. Real Property Taxes. A tenant should get copies of the tax bills for recent years, and, in particular, for any special assessments imposed within the prior three years. In the alternative, a tenant may want its landlord to make a representation within the lease about the amount of current taxes. Some jurisdictions offer bond-based financing to a developer for infrastructure and improvements primarily benefiting the developed property, such as underground utilities, sidewalks, landscaping, and the like. Funds raised through bond sales for these improvements are made available to the developer (usually phased on a completion basis), and then the expense of servicing and ultimately repaying the bonds is collected from property owners in the form of special tax assessments imposed by the local taxing authority over the life of the bond. The amount of these assessments

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can be significant, and in some areas where this financing mechanism is often used, certain properties may be subject to more than one assessment, each originating from a different improvement district for different purposes. Some tenants object to paying these assessments since they are essentially an alternative method of financing some of a developer’s improvement costs. Of necessity, the provision that defines the type of taxes that fall within the definition of Real Estate Taxes should reflect local law. Similarly, a property may be the beneficiary of tax waivers, tax incentives, or a tax assessment scheme, any of which would artificially understate the “full” tax burden borne by the property. Most tenants expect to pay their share of taxes or of the increase of taxes over those in a designated base year, but only to be surprised to find that the base year taxes were below those that would have been charged had the landlord not been enjoying a temporary tax “break.” Where local law employs the concept of a “BID,” i.e., a “business improvement district,” or similar arrangement, it would be appropriate for a landlord to insist that all tenants within the shopping center share the associated assessment. For example, if the BID provides neighborhood security guards, special trash services, or even holiday lighting, all of these special services provide a benefit to the “shopping center” community. Similarly, special tax assessments for traffic lights, public sidewalks, sewer lines, and the like provide a direct benefit to the tenant and a landlord may not want to absorb the entirety of such expenses. Tenants, on the other hand, might argue that such amenities were already “in the rent” and were an inducement in the first place to lease the premises. In some jurisdictions, the sale of a commercial property triggers reappraisal, often resulting in a property tax increase. In other jurisdictions, assessments are based solely on market value of comparable properties and reassessments are only done on an area-wide basis. Where the former is the case, tenants that estimate a proportionate tax expense based upon historical data may see their tax expense increase dramatically and unexpectedly when their landlord decides to sell the shopping center. Under this logic, because such a sale would be solely for the benefit of landlord, this tenantoriented provision serves to stabilize the property tax component of tenant’s additional rent by keeping the tenant in the same position as if the owner who originally leased the space held the property for the full term of the lease. On the other hand, landlords may argue that tax assessments are intended to value properties at their true value, tenants should expect that shopping centers are bought and sold in the ordinary course of business, and that tenants have no right to believe that the effect of a tax “freeze” will last forever. (b) Real Property Taxes. Landlord shall pay annually all Real Property Taxes that may be levied or assessed by any lawful authority against the Center (including, land and improvements). Tenant shall pay to Landlord, as Additional Rent, one-twelfth (1/12) of its Proportionate Share of such Real Property Taxes with each Minimum Monthly Rent installment. A tax bill submitted by Landlord to Tenant shall be sufficient evidence of the amount of taxes assessed or levied against the parcel or real property to which such bill relates. The term “Real Property Taxes” means and includes all taxes, assessments (amortized over the longest period available to the Landlord and paid by Tenant in relation to the Term), and other governmental charges, general and special, including, without limitation, assessments for public improvements or benefits, which shall, during the Term, be assessed, levied or imposed by any governmental authority upon the land or improvements that compose the Center. Real Property

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Taxes exclude any late fees or penalties, any assessments for infrastructure or improvement districts, any municipal, county, state or federal income or franchise taxes of Landlord or documentary transfer taxes or tax increases of any kind in connection with the transfer, sale or change in ownership of all or part of the Center. Commentary: Section 6c. Insurance Premiums. Although commonly called for, even in “modern” leases, “All Risk” insurance coverage is, in fact, an obsolete term. The Insurance Services Office (ISO) standard property insurance form that replaced “All Risk” coverage is called “Special Form,” and that is why this form of lease does not call for “All Risk” coverage. Flood and earthquake coverage is not universally available. Landlords should not agree to this provision without first ascertaining its availability for any particular shopping center. Subrogation waivers are almost always available at no extra cost. In fact, it is a standard provision within the current ISO form of insurance policy and that policy is used for almost 95% of property insurance in the United States. Landlords should also insist that all insurance carried by its tenant contain, in each instance, a waiver of subrogation in favor of the landlord. A subrogation waiver covers loss to property; it does not apply to injuries to persons. This reimbursement provision may not be acceptable to a landlord. Landlords, applying good business judgment, may want to carry greater property insurance coverage (having, for instance,” rent loss” coverage) and will want their tenants to pay a proportionate share of such enhanced coverage. In addition, a landlord’s mortgagee will often dictate the minimum insurance coverages that its borrower, in this case the landlord, must carry. This provision, as drafted, would not obligate the tenant to pay a share of those additional premiums. (c) Insurance Premiums. Landlord shall maintain and pay annually all insurance premiums for All Risk Property Insurance covering all structures and improvements in the Center, with coverage for perils as set forth on the Causes of Loss-Special Form, with a coverage extension for the perils of flood and earthquake, in an amount equal to full replacement cost (“Property Insurance”). Such insurance shall contain an agreed valuation provision in lieu of any co-insurance clause, an increased cost of construction endorsement, debris removal coverage, and a waiver of subrogation endorsement in favor of Tenant. Tenant shall pay to Landlord, as additional Rent, one-twelfth (1/12th) of its Proportionate Share of such Property Insurance with each Minimum Monthly Rent installment. Landlord’s records relating to the insurance premiums shall be made available to Tenant, upon Tenant’s request. Commentary: Section 6d. Direct Utilities. It may be wise to list the available utilities. For example, this subsection does not address the question of a tenant that needs gas service, but where no such service is currently installed. Who pays for such installation? Properly drafted, this section may resolve uncertainty for such issues. Not all projects lend themselves to separate metering and, in some situations, a building can not be served by more than one incoming line. Therefore, on a case-by-case basis, landlords will need to know whether separate metering is obtainable or, if it is, economically feasible. Submetering is an alternative.

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If submetering is employed, the parties need to know the basis upon which each utility service is priced. For example, electricity is often billed based upon two characteristics, peak demand during the billing period (often in kilowatts) and consumption during the billing period (billed in kilowatt-hours). Water service, especially where fire sprinkler systems are involved, can be billed based on capacity and consumption. Another issue to be considered is whether, when billed on a submetered basis, the tenant will be paying for the incremental cost of the utility service to the landlord, the landlord’s average cost, or as if the tenant were paying the utility provider’s rates for just what the submeter reads. Often, there is a reduced rate for incremental utility consumption, and that is what makes the three foregoing billing methods reach different results. Lastly, not all utility services are metered or meterable, such as sewer service, and some are not accurately measured, such as steam or chilled water. (d) Direct Utilities. Tenant shall directly pay the respective provider for all utilities directly procured and consumed by Tenant at the Premises. Landlord, at its sole cost and expense, shall provide separate meters for all utilities supplied to the Premises. Commentary: Section 6e. Maintenance and Repair Expenses. This section takes the common-area-maintenance-charges approach and “caps” the amount due each year with a maximum allowable annual percentage increase. There are a myriad of ways to place a limit on tenant’s annual expense, such as basing the limit on changes in the Consumer Price Index. Most commonly, however, a retail shopping center lease has no “cap” or limit on annual costs. Refer to the other model retail leases for appropriate provisions. Whenever a cap on common area maintenance charges is used, the parties may choose to adopt broad language in describing what items should be included as part of common area maintenance charges. This is more palatable to a tenant because the agreed-upon “cap” assures the tenant that its share of common area maintenance charges will not total more than a certain amount each year. Particularly with respect to common area maintenance charges, where a tenant’s share is usually a fraction of the total expense for each item, lease negotiators should keep in mind the relative value of the item they are negotiating: i.e., whether the position taken or amount of time spent negotiating a particular common area maintenance charge item is justified by the amount of money at issue. For example, if the tenant has a 2.4% proportionate share of the entire Center, and the total bill for an item is $10,000 per year, tenant’s annual share of that item is $240, or twenty dollars a month. How will this compare to the amount of rent lost by a landlord or tenant’s lost revenue from a delayed store opening due to a delay in lease execution? Also, some landlords, otherwise willing to agree to a “cap,” will want to place certain common area maintenance costs, such as for snow removal, utilities or insurance premiums, outside of the cap because of the potentially large annual swings in the cost of such an item. Often, a shopping center lease will contain a comprehensive list of the items of expense that will permissibly fall within common area maintenance charges. Such a list serves the purpose of answering whether frequently contentious items, such as the cost for promotional advertising, gutters and downspout repair, parking lot repairs, sprinkler maintenance, and capital expense items, are properly included within common area maintenance charges. Here, with a cap on annual charges and the tenant’s initial

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review of historical common area maintenance charges, this tenant has elected to forgo such a detailed list of inclusions and exclusions. Where there is no cap, the traditional approach taken in other shopping center form leases contained in this book may be more appropriate. Please note that the references in this section to “taxes and insurance premiums” seems to be misplaced; insurance premiums and real estate taxes have their own recovery provisions in this form, and would not be part of common area maintenance costs anyway. If this were a landlord form of lease, it would be common to find an administrative charge of 15% to 20% of the total of all common area maintenance costs added to “common area charges.” This is fundamentally a business issue with a landlord seeking to cover undocumented “administrative” costs, and the tenant seeking to minimize its costs by characterizing such charges, rightly or wrongly, as a “landlord” expense. Landlords often pay management fees as a percentage of gross rental income. Keep in mind, even a management fee of 3% can easily amount to more than 15% of common area maintenance charges. From time to time, it becomes “in vogue” to do away with the entire concept of categorizing common area maintenance costs and calculating a tenant’s share of those costs. Instead, a lease will provide for what has come to be called “fixed CAM,” and the amount called for in the lease is to be paid in lieu of having the tenant pay a share of the landlord’s actually incurred common area maintenance costs. A typical approach would be to set an initial annual charge and have it increase each year by a fixed percentage or as a function of some defined consumer price index. Even where this approach is followed, it might behoove a landlord to charge for snow removal cost, utility costs, or insurance premiums, outside of “fixed CAM.” (e) Maintenance and Repair Expenses. Tenant shall pay to Landlord, as Additional Rent, its Proportionate Share of: (i) all actual costs and expenses incurred by Landlord to perform those items of maintenance and repair of the Premises to be performed by Landlord under the terms of this Lease with the exclusion of all structural components such as roof, walls, and foundations as defined in Section 13; and (ii) all actual costs and expenses incurred by Landlord to maintain and repair all common areas, parking lots, sidewalks, driveways, landscaped areas, and other areas of the Center that are used in common by the tenants or occupants of the Center (collectively “CAM charges”). Landlord represents, warrants, and covenants that the CAM charges outlined above shall in no event exceed _____________ ($____) per square foot per year for the first (1st) Lease Year. Thereafter, Landlord acknowledges and agrees that the CAM charges shall not increase more than five percent (5%) in any year, excluding taxes and insurance premiums. Tenant shall pay one-twelfth (1/12th) of the annual estimated CAM charges with each Minimum Monthly Rent installment, such amount to be adjusted annually by Landlord on the basis of Landlord’s actual cost. The aggregate amount of management and administrative fees that may be included within CAM charges for any given Lease Year shall be equal to five percent (5%) of the total CAM charges after first having subtracted administrative expenses, taxes, and insurance premiums from those CAM charges.

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Commentary: Section 6f. Accounting. The annual accounting or reconciliation should detail charges on a line-item basis, rather than in a lump-sum format. To avoid unnecessary disputes over the form of report, the parties may want to add a schedule showing the form of report, using the most current annual report available. While it is understandable that a tenant may not want to be surprised about charges that it thought, rightly or wrongly, were “old and cold,” it is unfair to deny a landlord its due reimbursement. Landlords feel that the tenant benefits from use of the money during any delay in billing, and that should be enough of a “penalty” for an administrative error. Although some jurisdictions recognize a tenant’s right to audit even though no such right is provided in the lease [e.g., Newmark & Company Real Estate, Inc. v. C&A Trimming Corp., 511 N.Y.S.2d 205, 134 Misc. 2d 371 (N.Y. City Civ. Ct. 1987)], the right should be expressly included in the Lease. Landlords typically will want to impose restrictions on audit rights, such as limiting time periods and insisting on confidentiality requirements. The parties should keep in mind that “use-it-or-lose-it” provisions often tend to increase the frequency by which audits are conducted. If a tenant must audit by a certain date or lose the right to do so, it may be more prone to initiate the audit process before the time period expires than if audits are permitted at any time. Some landlords will want to bar use of contingency auditors. This is a controversial topic, with contingency auditors arguing that a landlord benefits from a professional audit by not having to deal with nonsensical demands from inexperienced tenants. When percentage rents are paid under a lease, landlords generally expect tenants to report their gross sale within a one to three percent accuracy rate. Therefore, a tenant may feel it reasonable to insist on the same level of accuracy when a landlord bills for common area maintenance charges or other pass-through charges. In response, landlords will argue that reporting sales figures requires less judgment in allocating items as “includable” or “excludable,” and errors are more likely to be intentional than those to be found in reporting common area maintenance charges, especially where any given shopping center may require several or more common area maintenance expense calculations because different tenant leases may call for different methods for determining those charges. It is difficult to argue against a tenant’s right to audit these items, and, as noted in the preceding comment, the law in many states gives tenants this right anyway. On the other hand, it is not unreasonable to negotiate for finality of billing. Consequently, it is common to find a time limit within which a tenant can initiate an audit, such as within one to three years after receipt of the landlord’s statement. A landlord will want the audit to take place in its own offices, during normal business hours, and upon reasonable notice. It will want the results of tenant audits to be held confidential so that other tenants do not get a “free” ride. Lastly, the threshold at which a landlord will pay audit costs is often after overbillings of 5% or more, and there is a trend to place a cap on the cost of an audit, either as a fixed amount or as some multiple of the “overbilling.” (f ) Accounting. On or before March 1 of each calendar year during the Term (and any renewal thereof), Landlord shall provide an accounting of all CAM charges and other Additional Rent charges under this Section which accounting shall be in the form of a statement (“Accounting”) which Accounting shall be certified by either an officer of Landlord, Land-

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lord’s accountant or Landlord’s property manager. The Accounting shall be in line-item form and shall state all charges incurred or accrued under this Section for the preceding calendar year. Any overpayment or deficiency in Tenant’s payments for Additional Rent for each calendar year shall be adjusted between Landlord and Tenant, and Landlord and Tenant hereby agree that Tenant shall pay Landlord or Landlord shall credit Tenant’s account(s) [or if such adjustment is at the end of the Term, Landlord shall pay Tenant], as the case may be, within fifteen (15) days of the Accounting, such amounts as may be necessary to effect such adjustment. The failure of Landlord to furnish the Accounting for any calendar year within one (1) year after the end of the calendar year shall result in a waiver of Landlord’s right to require Tenant to pay any deficiency with respect to that calendar year. Tenant shall have the right to audit Landlord’s books at any reasonable time, which audit shall be conducted at Tenant’s expense, except as otherwise provided below. In the event that such audit discloses an understatement by Landlord, Tenant shall pay such underage to Landlord within thirty (30) days. In the event that such audit discloses an overstatement by Landlord, Landlord shall immediately refund such overage to Tenant within thirty (30) days. In addition, in the event that such audit discloses an overstatement by Landlord of three percent (3%) or more of Tenant’s proportionate share of such Additional Rent for an accounting period, Landlord shall also pay the cost of the audit. Commentary: Section 6g. Estimate Statement. The estimate statement is an important tool for a tenant to plan and budget for additional rent expenses before those expenses are actually incurred. Landlords may want the right to revise the estimate statement over the course of the year. Tenants often resist this approach because: (1) it defeats the statement’s usefulness as a planning/ budgeting tool; (2) the year-end reconciliation of undercharges/overcharges provided in the preceding paragraph will balance any discrepancies arising during the year; and (3) landlords should devote their best efforts to preparing an accurate initial estimate. As a practical matter, unanticipated changes in the estimate statement throughout the year can create severe hardship for a tenant’s lease administration staff, particularly when that tenant administers a large number of leases. (g) Estimate Statement. In addition, Landlord shall give Tenant a yearly Additional Rent estimate statement (“Estimate Statement”), which Estimate Statement shall set forth Landlord’s reasonable estimate of what the total amount of CAM charges and other Additional Rent charges for the then current calendar year shall be. Landlord shall furnish the first (1st) such Estimate Statement on or before the Rent Commencement Date and thereafter on or before March 1 of each year during the Term (or any renewal thereof). Until a new Estimate Statement is provided for a given calendar year, Tenant shall continue to pay monthly, with each installment of its Minimum Monthly Rent, an amount equal to one-twelfth (1/12) of its Proportionate Share of the total estimated Additional Rental charges outlined on the previous Estimate Statement delivered by Landlord to Tenant. Commentary: Section 6h. Maintenance Standards. This tenant’s form of lease begins with the assumption that the shopping center is a “first-class” one and that everyone understands what that means. Very often, the parties negotiate some sort of definition, usually making reference to a particular type of shopping center (such as a “regional enclosed mall” or a “supermarket-anchored community center”) and call out a geographic area (such as in the county and the

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adjoining counties). Be aware that courts are reluctant to enforce “quality standards” unless there is a very firm reference standard in the lease. Consequently, one should not expect a court to enforce this type of provision. Any form of what is called “site plan control” given to a tenant is a controversial provision. In its broadest sense, it gives the tenant, even if only a “minor” tenant, a “veto” over any rearrangement of the shopping center. At a minimum, landlords will insist that the tenant’s consent would be needed only if the change would “materially adversely affect” the tenant’s business at the leased premises or access to the premises or visibility of the premises or of the tenant’s signs, not merely conditions that “affect” or “adversely affect” the tenant. A common alternative approach used where a tenant has sufficient bargaining power to enjoy this type of protection, but not enough to earn protection as broad as that included in this tenant form of lease, is for the parties to agree on “no-build” areas or “protected parking” or “critical access” areas or identifying other “sacred” features and marking them on the shopping center’s site plan. Wherever a lease gives a tenant certain rights or remedies following events that interrupt its business (whether because of the landlord’s actions or not), the period involved and the remedies are matters subject to negotiation. These are in a class of “risk allocation” lease provisions, along with many other clauses in a lease. As to saying “24 hours,” it might be clearer if the lease used the concept of “consecutive hours.” In addition, abatement is an anathema to landlords and their mortgagees. Consequently, a landlord, otherwise willing to accept the “abatement” for “interference” concept, may insist on adjudication by a court or an arbitrator before the tenant can exercise this “self-help” remedy. Further, it is not uncommon to limit the length of time that such a remedy is available, after which a tenant might begin paying rent on a percentage basis, and following which, a tenant might need to decide whether to terminate the lease or return to full rent. (h) Maintenance Standards. Landlord covenants that it shall operate and maintain the Center in the same or similar fashion as is reasonable and customary for the operation of a first-class shopping center in the same county in which the Center is located and the adjoining counties. With respect to Landlord’s ability to alter the common areas, Landlord covenants not to make any changes, additions or alterations to the common areas which materially affect the Premises, Tenant’s business, access to the Premises, visibility of the Premises, visibility of Tenant’s signs, the proximity of and convenient access between the delivery facilities and the Premises or the proximity or convenient access between the parking areas and the Premises; without first obtaining Tenant’s written consent, which consent may be withheld if any such changes, alterations or additions materially affect Tenant’s business, otherwise such consent shall not be unreasonably withheld or delayed. Except in the case of an emergency, if the exercise by Landlord of its rights under this Section materially and adversely affects Tenant’s business for more than twenty-four (24) hours, Rent shall abate until completion of the activities in question and Tenant is able to resume unimpaired operation of its business at the Premises. In the case of an emergency, Landlord shall use its best efforts to remedy the problem within seventy-two (72) hours. In the event such emergency is caused by the Landlord or its agents or employees or is not remedied within seventy-two (72) hours, Tenant shall receive a Rent abatement as outlined above.

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Commentary: Section 6(i). Excluded Expenses. Particularly where broad language is used to describe the costs to be passed through to tenants as common area maintenance charges, tenants will want to expressly list those items that should not be included within common area maintenance charges. See the comment to lease section 6(e) regarding the common practice of including a comprehensive list of typical “includable” charges. (i) Excluded Expenses. Notwithstanding any provision of this Lease to the contrary, Land lord and Tenant acknowledge and agree that the following items shall be excluded from CAM charges and other Additional Rent to be reimbursed or paid by Tenant: Commentary: Section 6(i). Tenants frequently object to such charges even though their landlords assert that advertising the entire shopping center or erecting holiday decorations is a benefit to all tenants at the center, and for which all tenants should pay a pro rata share. (i) All fees and costs associated with promotion, advertising or marketing funds, a merchant’s association or any similar association, and any charitable contributions; Commentary: Section 6(ii). A tenant may want to include “or required to be covered by insurance.” (ii) Repairs or other work occasioned by fire, windstorm or other casualty covered by insurance, warranty or by the exercise of eminent domain, or any expenditures for which Landlord is entitled to reimbursement from any source including, without limitation, insurance, warranty and condemnation proceeds; (iii) All costs and expenses associated with leasing to other tenants, including, without limitation, tenant improvement allowances, attorney’s fees, brokerage commissions, and architectural fees, if any; (iv) Renovating or otherwise improving, decorating, painting or redecorating space for other tenants; (v) Landlord’s cost of electricity and any other services that are sold to other tenants and for which Landlord is entitled to reimbursement by such other tenants as an additional charge or rental over and above the base rent payable under the leases with such other tenants, if any; Commentary: Section 6(vi). Capital improvements or replacements are potentially the largest single component of the costs that landlords try to pass on to their tenants, and not surprisingly, perhaps the single most negotiated item of common area maintenance charges. Landlords understandably seek to pass through all expenses associated with their shopping center, including the cost of structural or other capital improvements. Their reasoning is that such improvements benefit all tenants at the shopping center. In addition, landlords have strong arguments supporting the argument that some capital expenses do serve,

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in fact, to reduce operating expenses. Conversely, tenants view capital expenditures as a cost of ownership or the cost of creating the structures that they rent in the first place. The agreements or compromises as to this issue are myriad, but frequently, where items of a capital nature are included at all, the parties tend to agree to include a portion of capital expenditures in each year’s common area maintenance charges by amortizing them over an agreed number of years, the term of the lease, the useful life of the improvement, or 39 years (currently, the depreciation rate applicable to commercial leasehold improvements under the Internal Revenue Code). Even where a landlord agrees that the cost of capital items is not part of common area maintenance charges, it is not unusual for there to be some allowance for parking lot paving. A typical compromise in that regard is that the cost of paving done within seven (or so) years after the prior paving won’t be included and when paving is done, its cost will be amortized over that same period (in this example, seven years). The cost of ordinary patching would be includable in the year incurred. (vi) Costs incurred by Landlord for alterations, repairs, replacements or improvements which are considered capital improvements or replacements under generally accepted accounting principles; (vii) Expenses in connection with services or other benefits of a type which are not provided to Tenant but which are provided to another tenant or occupant, if any; (viii) Costs, fines or penalties incurred due to violation by Landlord or any other tenant of the terms and conditions of any lease, law or regulation, if any; (ix) Amounts for services paid to entities affiliated with Landlord which exceed the prevailing market amount that would have been paid to unaffiliated entities; (x) All items and services for which Tenant reimburses Landlord or directly pays third party providers; Commentary: Section 6(xii). This item implicates the same considerations as are discussed in the comment to Section 6(vi). (xi) Depreciation, reserves, and amortization; (xii) Landlord’s interest expense and all costs related to Landlord’s ground lease, loans or financing, if any; (xiii) Management or administrative costs not otherwise expressly provided for in this Lease, including wages, salaries, and expenses of any off-site office or employees of Landlord; Commentary: Section 6(xiv). Food court tenants frequently pay more than their proportionate share of common area maintenance charges on the rationale that their operations, use, and customers

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place a disproportionate burden on the common areas and require higher maintenance expense per square foot in the food court area. Where this is the case, other tenants at a shopping center will want to make sure that their proportionate share of common area maintenance charges takes this into account. This concept isn’t universally accepted by landlords who argue that their tenants are not necessarily entitled, in effect, to pay less than their strictly proportionate share of common area maintenance charges just because the landlord’s economic arrangement with one or other tenants involves attributing some of those tenants’ rents from common area maintenance charges instead of directly from minimum rent. Essentially, they are asking: “Why should one tenant get a ‘discount’ on common area maintenance charges just because one or more other tenants are paying an enhanced common area expense charge?”

7.

(xiv)

Any portion of CAM charges or other Additional Rent charges which are not proportionately borne by each of the other tenants at the Center, except that in the event “food court” or other tenants are obligated to pay more than their proportionate share (based upon the floor area of their premises) such additional amounts due from other tenants shall be deducted from the total CAM charges before Tenant’s proportionate share is calculated;

(xv)

Any expenses arising in connection with a parking facility or area where Landlord or other operator charges a fee for parking; and

(xvi)

Capital taxes, income taxes, corporate taxes, corporation capital taxes, excise taxes, profits taxes or other taxes personal to the Landlord.

Signage/Trade Names: Commentary: Section 7a. Tenant Signage. A tenant’s standard form of lease is not tailored to any particular shopping center. For example, local law or a landlord’s covenants in other leases may require uniform exterior signage, and the tenant will need to adapt its prototype signage to fit such a scheme. Where a particular tenant warrants a position on a pylon sign, it is typical for its lease to assign a particular pylon sign position or positions, thereby avoiding use of the general style of language used by this tenant in its form lease. The right to place signs on future pylons or monument signs is rarely granted to other than major tenants, and in the context of a given shopping center, this particular tenant may or not qualify as such. Lastly, permission to place window signs will vary from shopping center to shopping center, but it is not uncommon to limit such signs in total coverage area and to require that they be professionally manufactured. Landlords, in all cases, should be careful about acceding to the kind of language in this tenant form of lease. For one, “maximum signage” might mean the entire area of all new signs and monuments. If local laws limit the total signage area available for any single property, giving extensive rights to a particular tenant can exhaust all of those rights, leaving no signage opportunities for anyone else. If a tenant’s sign drawings are available, a tenant should have its landlord approve the intended signage and include its features as an exhibit to the lease. This will serve to

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flag signage issues early in the negotiations when both parties have the greatest motivation to resolve potential signage issues. (a) Tenant Signage. Tenant, for its signs, shall have the right to utilize the maximum building signage available under local law and specifically, to the maximum signage permitted by law consisting of individual channel letters as is typical for Tenant’s typical store in the state where the Premises are located. Tenant shall also have the right to maximum signage on any pylon or monument signage now available or which may become available at any time during the Term or any extension thereof. Landlord hereby approves Tenant’s standard window signs, temporary promotional window signs, banners, and displays depicted in Tenant’s Standard Corporate Identity Packet attached hereto as Exhibit G (“Tenant’s Signage,” incorporated herein by reference). Tenant shall have the right to operate its business and install signage under any of its authorized trade names including, but not limited to, [list of tenant’s trade names and styles]. Commentary: Section 7b. Landlord Signage. Many landlords have no interest in posting “For Rent” signs on the premises. The time period usually corresponds with the renewal notice period. (b) Landlord Signage. During the last three (3) months of the Term or any extension or renewal thereof, Landlord shall have the right to post a “For Rent” sign on the exterior of the Premises, but not larger than six (6) square feet in size, and to show the Premises at reasonable hours to prospective tenants, it being understood and agreed that this Lease and the tenancy hereby created shall cease and terminate at the end of the Term without the necessity of any notice from either the Landlord or the Tenant to terminate the same.

Commentary: Section 7c. Pylon Sign. This paragraph may be omitted when pylon or monument signage is not available at a location. To avoid disagreement, the tenant’s particular sign position should be specified and if there are special requirements, such as internal lighting, these should be specified. All such signs should comply with applicable governmental requirements. Landlords will want to clarify that the installation and repair of such signs is to be done by tenant, at tenant’s cost, and that the cost of operating and maintaining pylon signs is part of common area maintenance costs. (c) Pylon Sign. In addition, Tenant shall have signage on the free-standing Pylon sign at the entrance of the Center, as depicted in Exhibit G-2 (“Pylon Signage,” attached hereto and incorporated by reference), as may be subsequently modified or changed from time to time by the mutual agreement of Tenant and Landlord. Commentary: Section 8. Parking. This is an unusual provision, the inclusion of which may conflict with existing tenants’ leases and make it more difficult to make future leases with other tenants. In addition, giving a particular tenant its own, exclusive parking area in not entirely compat-

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ible with the concept of shared use of a shopping center and the cross-fertilization of prospective customers that is the hallmark of one. It may benefit both the landlord and its tenant to designate parking spaces for tenant delivery vehicles, when not in use, to keep them out of prime customer parking areas and away from the front of other tenants’ premises. A landlord should be cautious in giving any particular tenant its own delivery vehicle spots because shopping center schemes, other tenant leases, and the expectations of other tenants all contemplate that “common area” is just that, “common” and usable by all tenants. If a tenant has an “exclusive” loading area, it may be possible to place this special parking in that area. Landlords and tenants should think carefully about including a specific mechanism for notice, ticketing, and towing of vehicles. In practice, neither tenants nor landlords want to devote their time or incur expenses associated with administering such a program. They also need to face the issues arising out of complaints from ticketed or towed customer vehicles, and the effect of such schemes on their relationships with other tenants whose customers’ vehicles have been ticketed or towed. 8.

Parking: Landlord shall designate, for Tenant’s exclusive use (and at no additional cost to Tenant), _______ (____) parking spaces in front of or adjacent to the Premises as outlined in red on Exhibit H (“Parking Plan,” attached hereto and incorporated by reference), and Tenant shall have the non-exclusive use of all remaining common area parking. Additionally, as indicated on Exhibit H, Landlord shall designate two (2) parking spaces dedicated exclusively for use by Tenant’s delivery vehicles. Commentary: Section 9. Use of Roof. Roofs are expensive to maintain and repair. In addition, a roof warranty can be voided by cutting the roofing membrane or allowing persons to walk on the roof. Therefore, a landlord may want to require use of a designated roofing contractor and make it a condition of any roof installation done by the tenant that the roof warranty not be invalidated. Antennae and parabolic dishes keep getting smaller and smaller. Therefore, tenants may want to include the right to attach antennae and parabolic dishes to the exterior of the building as an alternative to a roof installation. On the other hand, with the flexibility of Internet communications, there may no longer be a need for antennae rights and, if a tenant’s antennae are really an issue, it may be able to use the Internet instead. 9.

Use of Roof: Notwithstanding any provision of this Lease to the contrary, Tenant shall have the right to install a satellite dish or other transmission or reception device on the roof of the Premises for its business operations provided that Tenant shall seek prior approval from Landlord therefor, which approval shall not be unreasonably withheld. In the event Tenant exercises its right to install such a satellite dish or device, Tenant shall use best efforts to assure that the installation: (a) does not interfere with the business operations of other tenants at the Center; and (b) is in compliance with all applicable codes, regulations, laws, and statutes. Tenant shall be solely responsible for obtaining all required permits and the maintenance of such equipment, and any repairs to the roof required by reason of the equipment and its installation or removal.

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10. Tenant’s Covenants: Tenant covenants and agrees as follows: Commentary: Section 10a. Prompt Payment. Late fees and administrative charges are often analyzed by courts as a form of damages. Thus, a ten percent late fee coupled may not be enforceable as an unreasonable penalty. Each jurisdiction will vary as to its tolerance for large “late fees” or “administrative” cost reimbursements. In addition, tenants with bargaining power resist high late fees and often negotiate for “grace” for the first two late payments either in a calendar year or in a twelve consecutive month period. Further, many tenants insist on receiving a notice that rent has not yet been received before starting the ten day period after which the late fee would be imposed. The term “other charges hereunder” could be construed to mean payments owed by the tenant to persons other than the landlord, and to impose a late charge on the tenant with respect to such obligations seems to make little sense. (a) Prompt Payment. Tenant shall pay all Rent, other charges herein described, and all utility bills attributable to the Premises on or before the same shall become due. If Tenant fails to pay any Rent or other charges hereunder within ten (10) days after the due date thereof, such unpaid amount shall accrue a late charge in the amount of ten percent (10%) of the unpaid amount, and shall in addition thereto bear interest from the eleventh (11th) day following the due date until the date of payment at the rate of ten percent (10%) per annum, which equals .8333 percent per month. If Landlord shall pay any money or incur any expenses in correction of violations of the Tenant’s covenants herein set forth, the amounts so paid or incurred, at the Landlord’s option, shall bear interest at the rate set forth above. (b) No Disorderly or Unlawful Purpose. Tenant shall not use or permit the Premises, or any part thereof, to be used for any disorderly or unlawful purpose. Commentary: Section 10c. Assignments or Subletting. Very few landlords will freely agree to release a tenant from its obligations under the lease upon an assignment. Where this is done, the lease often contains a minimum net worth requirement for the assignee. In addition, as this is a tenant form of lease, one will not find provisions such as a landlord’s right to recapture the premises, a shared “profit” provision, advance notice of assignment provisions, subtenant attornment language or other similar requirements. Landlords should review the other form shopping center leases in this book for such provisions and others like them. It should be noted that tenants that are public companies, or that are anticipating a public offering, should be sensitive to the lease definition of “assignment.” Often, the definition in a lease would require a landlord’s consent when a tenant issues stock. (c) Assignments or Subletting. Tenant shall not transfer or assign this Lease nor let or sublet the whole or any part of the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment or subletting. Notwithstanding any provision of this Lease to the contrary, Tenant

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may assign this Lease or sublease the Premises without Landlord’s consent to a corporation controlling, controlled by, or under common control with Tenant, to the surviving corporation in a merger or other corporate reorganization in which Tenant is involved, or to a purchaser of all or substantially all of the assets of Tenant (collectively “Tenant Affiliate”). In the event of such an assignment or sublease to a Tenant Affiliate, Tenant shall be released of all obligations under this Lease effective the date of the assignment or sublease. A public offering, issuance or distribution of Tenant’s stock (including distributions pursuant to an employee benefit program), in any amount, shall not constitute an assignment for the purposes of this Lease. Except for an assignment or sublease to a Tenant Affiliate in accordance with this Section, Tenant, at all times, shall remain liable for the payment of Rent herein and for compliance with all of its other obligations under this Lease. Notwithstanding any provision of this Lease to the contrary, without the need for Landlord’s consent, Tenant may sublease up to thirty-three percent (33%) of Floor Area of the Premises to licensees or concessionaires provided such subtenant appears as an integrated part of Tenant’s store and otherwise complies with the provisions of this Lease. Commentary: Section 10d. Repairs and Maintenance. This should not be treated as a “boilerplate” provision in the lease. When read together with Section 13 of the lease, every element of the leased premises and the building must be covered. The common law is that no one has responsibility for the property if the lease is silent. Case law and some state’s statutes have changed that principle, but there is no substitute for spelling out each party’s responsibility for maintenance, repairs, and replacements. In reviewing the various repair and maintenance provisions in a lease, one should keep asking: “who is responsible for doing the work” and “who pays for the work.” The answer may be the same in every case, but there are cases where one party does the work at the other’s expense. An example of this is where a tenant’s truck smashes an exterior wall. Here, one would expect the landlord to fix its own building, but at its tenant’s expense. The obligation to maintain, to repair, and to replace are three different, loosely related, concepts. To keep a building component in good condition, when it isn’t broken, is to repair it. For example, heating, ventilating, and air-conditioning (HVAC) equipment needs to be lubricated, belts may need changing, and filters need to be regularly replaced. That is all “maintenance.” For a retail location, this type of obligation is usually placed on the tenant. If the landlord has offered a “warranty period,” such as the first three years for an escalator, it wouldn’t be uncommon to see the landlord taking care of its maintenance during that period. HVAC equipment is so expensive and sensitive to poor maintenance that landlords often include a lease provision requiring their tenants to obtain and maintain outside HVAC service contracts calling for a minimum schedule of maintenance visits each year and request that copies of those contracts be furnished to them for verification purposes. To “repair” means to fix something that is broken. Here, each party is normally expected to pay for what it breaks. As to who does what kind of repair, that should depend on who has access to and control of the area, and who bears the greatest risk of an improper repair. Otherwise, the general allocation is, as this tenant form of lease suggests, between the interior of the leased premises and what is outside of the leased premises. Even at that, there are some items within the leased premises that

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might remain a landlord’s responsibility. Some examples are: utility lines that merely run through the premises; shared utility lines; major agreed-upon equipment, such as HVAC equipment; and components of a complicated master system for more space than just the leased premises. In each such case, thought needs to be given as to who pays for such repairs or if the cost of such repairs is to be included as part of common area maintenance charges. As to what is outside of the leased premises, most often the landlord will be responsible for the repairs and pay for them, but some may be includable as part of common area maintenance charges. Examples of items outside of the leased premises for which the tenant may be responsible for repairing or paying for repairs include: exterior facades constructed by the tenant; tenant signage and mounting structures; pipes and utility lines under the floor slab; and loading dock and areas. Replacement obligations are the most difficult to allocate. Obviously, if the need for replacement arises because of the tenant’s abuse of an item, the responsibility should fall on the tenant. Otherwise, the allocation of responsibility is a matter of negotiation and thus the outcome will be based, in large measure, on the relative bargaining power of the parties. Some common guidelines, however, are: (a) the length of the lease term; (b) the remaining useful life of an item at the time of delivery; (c) the useful life of the replacement; (d) the cost of the replacement; and (e) whether the item is passive to the leased premises or the tenant actively uses and controls the item itself. It is not uncommon, even where a tenant agrees to assume responsibility for replacing a capital item, that for there to be an allocation of cost the item must be replaced with only a short time remaining in the term of the lease. The tax and accounting consequences of a tenant replacing a capital building element should be left to the appropriate professionals to explain to a client. If warranted, the lease should address the allocation of those consequences (and, sometimes, benefits). (d) Repairs and Maintenance. Except to the extent the same is required to be maintained or repaired by Landlord pursuant to Section 13 below, Tenant shall operate, maintain, repair, and keep the interior of the Premises, together with: all interior electrical, plumbing, and any other utilities which exclusively serve the Premises up to the point of departure from the Premises; all interior doors; and heating, air-conditioning, and other mechanical installations therein which exclusively serve the Premises, in good order and condition, and make necessary repairs, replacements, alterations, and additions thereto whether or not required by Tenant’s particular use. Commentary: Section 10e. No Trash or Refuse. If the landlord has instituted or contemplates instituting a voluntary or government mandated recycling program, the lease should provide for such a program here or elsewhere in Section 10. (e) No Trash or Refuse. Tenant shall not permit trash or refuse to accumulate on the Premises, but shall remove same and shall keep such refuse in proper appropriate containers as provided by Landlord until so removed and it shall keep the sidewalks and alleys contiguous to the Premises free of rubbish, refuse, empty boxes, and the like.

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Commentary: Section 10f. Tenant Insurance. Refer to the comments for Article 26, below. Tenants should also furnish certificates whenever there is any change in coverage. See, also, the comments to subpart (e) of Article 26. (f ) Tenant Insurance. Tenant shall maintain the following policies of insurance: (i)

Property Insurance, with a Causes of Loss – Special Form coverage part (or the then insurance industry replacement therefor) upon all building improvements owned by Tenant, with a coverage extension for the perils of flood and earthquake, in an amount equal to full replacement cost. Such insurance shall contain an agreed valuation provision in lieu of any co-insurance clause, an increased cost of construction endorsement, debris removal coverage, and a waiver of subrogation endorsement in favor of Landlord.

(ii) Commercial General Liability Insurance, including Contractual Liability Insurance coverage, covering Tenant’s operations in the Premises, with combined single limits of not less than two million dollars ($2,000,000.00) per occurrence for bodily injury or property damage, naming Landlord as an additional insured. Such insurance shall be endorsed to provide that the insurance shall be primary to, and not contributory to, any similar insurance carried by Landlord, and shall contain a severability of interest clause. (iii) Workers’ Compensation Insurance providing statutory benefits to employees of Tenant in the state where the Premises are located with a waiver of subrogation in favor of Landlord and Employer’s Liability Insurance with limits of not less than $100,000 per accident or disease and $500,000 aggregate by disease. Tenant further shall not do or suffer to be done, or keep or suffer to be kept, anything in the Premises that would contravene Landlord’s policies insuring against loss or damage by fire or other hazards. Tenant shall annually furnish Landlord with a certificate of all insurance required in this provision of the Lease, showing same to be in full force and effect, and naming Landlord as an additional insured as to liability coverage. If Tenant shall not comply with its covenants to maintain insurance as provided herein, Landlord, at its option, may cause such insurance to be issued and, in such event, Tenant agrees to pay the premiums for such insurance promptly upon Landlord’s demand therefor. Commentary: Section 10g. Compliance with Laws. See Section 15 for a discussion of Americans with Disabilities Act compliance and the allocation of responsibility between a landlord and its tenant. (g) Compliance with Laws. Tenant, at its own expense, shall promptly comply with all lawful statutes, ordinances, rules, orders, regulations, and requirements of the federal, state, county or municipal governments now in force or hereafter enacted pertaining to the conduct of its business in the Premises. In particular, Tenant shall maintain the interior of the Premises and construct and maintain its improvements thereto in compliance with the Americans with Disabilities Act (“ADA”).

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(h) Inspections by Landlord. Tenant or its agent, upon forty-eight (48) hours’ prior written notice and accompanied by the Store Manager, shall permit Landlord to enter the Premises at any reasonable time during the Term for the purpose of inspecting the Premises and Tenant’s improvements, and the maintenance thereof, provided that in the case of an emergency, where there is an immediate threat of significant injury to persons or damage to property, such notice shall not be required. Commentary: Section 10i. Vacation of Premises. Tenants may wish to preserve a right to “go dark” at a particular location, and therefore will not want to covenant to continuously operate at the premises. Landlord, and derivatively, each other tenant, has a legitimate interest in keeping the shopping center populated with open and operating businesses. One method of addressing this concern is to give the landlord the option to terminate the lease and “recapture” the premises in the event a tenant ceases operations for a period of time. On the other hand, it is one thing to allow a tenant with an unsuccessful store to close its operations, and another to allow a tenant to move a very successful unit to a nearby competing shopping center. Therefore, a landlord may find it useful to add a provision prohibiting its tenant from opening another store within a given distance from the shopping center, since if a tenant did so, it would cannibalize the existing property. (i) Vacation of Premises. Notwithstanding anything contained or set forth in this Lease to the contrary, nothing set forth in this Lease shall be construed, in any manner whatsoever, as an express or implied covenant of continuous operation on the part of Tenant, and Landlord acknowledges that there is no covenant of continuous operation with respect to the Premises arising hereunder or otherwise, express or implied, on the part of Tenant. If, in Tenant’s sole discretion, Tenant elects to cease business operations at the Premises, such cessation of business shall not be deemed a breach or default of this Lease and Tenant shall remain liable for the performance of its obligations hereunder. However, in the event Tenant ceases operations at the Premises for more than one hundred twenty (120) consecutive days for any reason other than for repairs, remodeling or force majeure, Landlord may elect to terminate this Lease and recover possession of the Premises by giving Tenant thirty (30) days’ prior written notice of such election to terminate, and upon such termination, Tenant and Landlord shall have no continuing obligation to the other under this Lease. Commentary: Section 10j. Exterior and Structural Changes. (j) Exterior and Structural Changes. Tenant shall not alter the exterior of the Premises and shall not make any changes of a structural nature without first obtaining the Landlord’s written approval and such approval may be withheld in Landlord’s sole discretion. Tenant agrees that, except for the equipment installed pursuant to Section 9, any permanent exterior or structural improvements made by it shall immediately become the property of the Landlord and shall remain upon the Premises at the termination of this Lease in the absence of an agreement to the contrary. Commentary: Section 10k. Compliance with Landlord’s Rules and Regulations. Another way to arrange this provision is to require the tenant to abide by the set of Rules and Regulations appended to the lease without regard to the list of conditions

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in the first sentence of this paragraph, and then make the first sentence effective only with regard to subsequently promulgated rules and regulations. (k) Compliance with Landlord’s Rules and Regulations. Tenant shall comply with all reasonable rules and regulations as may be established by Landlord from time to time pertaining to the appearance and operation of the Premises, provided such rules and regulations do not conflict with the terms of this Lease, are reasonable and customary for the operation of a first-class shopping center in the [relevant trading area], are uniformly enforced among all tenants, do not require the expenditure of more than nominal sums by Tenant, and do not otherwise materially and adversely interfere with Tenant’s use, access, visibility or parking. Tenant shall conduct its business in the Premises in all respects in a dignified manner and in accordance with high standards of retail store operation. Subject to the foregoing, Tenant agrees to abide by the Rules and Regulations attached hereto as Exhibit I (“Landlord’s Rules & Regulations,” attached hereto and herein incorporated by reference). Commentary: Section 11. Surrender of Premises, Removal of Tenant’s Property. In this form the tenant’s obligation to remove any particular alteration or improvement arises only if the landlord notifies the tenant to do so at least 30 days before the lease ends, even if the landlord doesn’t know when the lease might be terminated ahead of its expected time. From a landlord’s perspective, this provision was drafted with the intent of shifting the financial burden of removing alterations to the end of the lease term. In that regard, a landlord may want to require its tenant to remove all personal property, at the tenant’s expense, unless landlord elects otherwise. Landlords may want to insist that their tenants remove all alterations and improvements made by or on behalf of tenant, and repair all damages caused by their initial installation, presence or removal, at tenant’s sole expense. In response, a tenant may want to add a provision that requires its landlord to identify those items that will require removal when the landlord responds to a request from the tenant to make that choice or in connection with the approval process for the improvements, if the lease contains such a process for interior alterations. If a tenant anticipates any uncertainly as to its right to remove certain equipment, items or improvements at the end of the lease, it should include an express provision authorizing such removal. Again, a landlord might want to say that its tenant must remove such items, at the tenant’s expense, and must repair all damage caused by the initial installation of, presence of, or removal of such items. Often, tenants will be required to return the premises in “broom clean” condition, reasonable wear and tear and damage by insured peril and condemnation excepted. 11. Surrender of Premises, Removal of Tenant’s Property: At expiration or other termination of this Lease, Tenant agrees to: (a) surrender possession of the Premises to Landlord; (b) remove, at Tenant’s expense, Tenant’s trade fixtures and those interior and other improvements made by Tenant which Landlord designates by written notice delivered not less than thirty (30) days prior to such expiration; and (c) otherwise return the Premises to Landlord in good condition, ordinary wear and tear, damage by casualty, condemnation, act of God, and Landlord’s failure to make repairs excepted. In no event shall Landlord’s notice require Tenant to remove any improvements or alterations attached to the real property of which the Premises are a part (“Property”). Notwithstanding the foregoing,

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Landlord agrees that although affixed to the Premises, Tenant’s trade fixtures which include without limitation all machinery and equipment used in the operation of Tenant’s business, telephone alarm systems, attached and unattached showcases and shelving and display units, which are placed on the Premises by Tenant from time to time during the Term shall be the property of Tenant and at the expiration of termination of this Lease may be removed from the Premises by Tenant. Tenant, at Tenant’s sole cost and expense, shall perform repairs occasioned by the removal of Tenant’s trade fixtures and equipment from the Premises in accordance with the provisions of this Section. Commentary: Section 12. Quiet Possession. A landlord may want to limit its tenant’s remedies with respect to one or more of these representations. For example, if any representations are made about pre-signing conditions or conditions that are to be in effect on the date of delivery of possession, a landlord may insist that, as its sole remedy, the tenant elect to terminate the lease, by notice given within thirty (30) days after delivery of possession. 12. Quiet Possession: Landlord represents to and covenants with Tenant that: (a) Landlord has obtained or will obtain all consents or approvals that Landlord may require from other tenants or mortgagees of the Property to permit Landlord to enter into this Lease; Commentary: Section 12b. Quiet Possession. This protects tenants from undisclosed or unknown use restrictions and from exclusive use rights granted to other tenants. This provision might end, “proposed use of the Premises in accordance with the terms of this Lease.” (b) There are no agreements or restrictive covenants other than those described in Exhibit J (“Covenants, Conditions & Restrictions,” attached hereto and incorporated by reference) to which Landlord is a party or affecting the Premises which in any way prohibit or restrict Tenant’s proposed use of the Premises; Commentary: Section 12c. This protects a tenant lacking the time or resources to thoroughly review all of a local agency’s improvement plans for a given area prior to entering into a lease. Particularly for new stores, nearby construction might interfere with access to the shopping center, a condition that might be devastating to the tenant’s conduct of its business at the premises. This provision is intended to highlight potential or new construction in the area so that a tenant can anticipate and plan for the effect of such work, and even defer or avoid executing the lease. This information may be the basis for some rent accommodation during the anticipated construction period, or at the very least, provide the tenant with a remedy or negotiating leverage in the event it is later discovered that the landlord knew of contemplated construction, but failed to communicate that fact prior to lease execution. There is always a concern with use of the phrase “has no knowledge,” especially where a party is a large entity. Commonly, where a party agrees to make a representation based upon its knowledge, it will limit such knowledge to that

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of a particular person or group of persons, eliminate any duty of investigation, and sometimes limit its knowledge to its cognitive awareness. (c) Landlord has no knowledge and has received no written notice of any planned or contemplated construction or improvements to any street, highway or driveway providing access to the Center or Premises or any property abutting the Center or Premises by any governmental entity or adjoining landholder; and Commentary: Section 12d. It is not clear what this section adds to a tenant’s rights under the lease. By reason of this provision or for any other reason, a landlord must honor the lease and cannot take away any of its tenant’s rights unless the right to do so is expressly reserved in the lease. (d) Landlord shall not enter into any covenants, easements or other agreements after the date of this Lease which prohibit or restrict Tenant’s proposed use of the Premises or otherwise change the terms of this Lease without Tenant’s prior written consent which may be withheld in Tenant’s sole discretion; and (e) Tenant’s proposed use of the Premises is currently permitted under all applicable land use laws and governmental and association regulations, including Tenant’s ability to operate its business twenty-four (24) hours per day, seven (7) days per week; and Commentary: Section 12f. In a tenant’s view, the covenant of quiet enjoyment should not be conditioned upon the absence of default, nor should it be limited only to those claiming under landlord. Landlord must represent that it owns the shopping center; if there is a defect or claim against that ownership, the landlord needs to defend its tenant against such claims, whatever the source. Typically, such claims will trigger title policy coverage. On the other hand, this formulation does not add anything that the implied covenant of quiet enjoyment, implied in every lease, does not already provide. Consequently, the issue raised for a landlord is whether it should be obligated to protect the tenancy when its tenant is in material default under the lease, such as when it is not paying its rent. Increasingly, the covenant of quiet enjoyment is being applied to non-title matters, such as physical interference or severe building defects. (f) Landlord shall warrant and defend Tenant in the quiet enjoyment and possession of the Premises during the Term. 13. Landlord’s Repairs: Landlord covenants and agrees that, within fifteen (15) days following written notice from Tenant and at Landlord’s sole cost and expense, Landlord shall make, or for those items which reasonably would take longer, commence and diligently pursue to completion, all necessary repairs and replacements to the structural elements and exterior surfaces of the Premises including, but not limited to, the roof of the Premises, roof covering and membrane (including interior ceiling and coverings if damaged by leakage), exterior paint, the major components of the heating, ventilation and air conditioning (“HVAC”) system servicing the Premises, and all necessary structural repairs to the walls, concrete slab, footings, and foundations of the Prem-

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ises. Furthermore, Landlord covenants and agrees, within fifteen (15) days following receipt of written notice from Tenant, to make, or for those items which reasonably would take longer, commence and diligently pursue to completion, all necessary repairs and replacements to the electrical and plumbing exterior to the Premises, gutters, sprinkler system (if any), parking areas, access roads, curbs, and sidewalks which make up the common areas, any subterranean utility infrastructure servicing the Premises, and all other reasonable maintenance to the common areas of the Center, provided such repairs are not made necessary through negligence or willful misconduct of Tenant. Except as otherwise provided under Section 6(i) of this Lease, Tenant shall pay its pro rata share of all such costs and expenses for the maintenance and upkeep of the common areas. Commentary: Section 13. Landlord’s Repairs. This section describes a tenant’s right of self-help following its landlord’s failure to make repairs, and gives the tenant certain offset rights in the event the landlord subsequently fails to pay for those repairs. Here, the parties are attempting to balance two primary concerns. The tenant is concerned that its landlord’s repairs will not be performed in a timely fashion, thereby impairing the store’s appearance and possibly store operations. On the other side, a landlord is concerned that it may inadvertently overlook a repair notice or that a tenant may demand unnecessary repairs, and then perform those repairs itself upon landlord’s failure to do so. The term “necessary repairs” may not be clear. Certainly, a tenant is legitimately concerned with items whose defects will adversely affect its business at the premises, but this drafting approach seems to cover much more than that. Additionally, landlords need to protect their ability to finance their property and will not want to include clauses which could potentially disrupt the rental revenue on which that financing will be based. Landlords may feel that fifteen (15) days is too short a period, while tenants may want to include a much shorter time for emergent situations. This provision must be coordinated with the allocation of repair and other responsibilities under the lease. For example, in a given lease, the tenant, not its landlord, might be responsible for HVAC items. The right of self-help need not include the right of offset. A tenant who performs repairs following its landlord’s failure to do so may recover its expenses through legal process or arbitration based upon the landlord’s breach of its lease obligations, but will then have to go through the time and expense of a formal dispute resolution process. Creative negotiators can address each of these concerns, for example, by fashioning a special notice mechanism that is not likely to be overlooked by landlord, or by limiting the amount of offset so that no more than a certain percentage of the monthly rent is offset in any given month. In the event Landlord fails to make necessary repairs to the Premises or the common areas within the fifteen (15) day period following its receipt of written notice or to commence such repairs and diligently pursue them to completion in the case of repairs that cannot be completed within that period, Tenant shall be permitted to make such repairs and bill Landlord for the reasonable costs of same. In the event of an emergency, Tenant shall attempt to provide Landlord with prompt notice, but shall be permitted to make necessary repairs and bill Landlord for the reasonable cost of such repairs. In the event Landlord fails to pay any bona fide bill within thirty (30) days after receipt from Tenant, Tenant shall have the right to deduct such

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costs and expenses from subsequent Minimum Monthly Rent installments to be made under this Lease. Commentary: Section 14. Hazardous Materials. Mutual indemnity for hazardous materials is an essential element of any commercial lease. A tenant is expected to indemnify its landlord for the tenant’s activities at the shopping center, and the landlord should hold its tenant harmless from landlord’s activities there. In addition, tenants will want indemnification from their landlords for environmental problems caused by other tenants as well as by pre-existing conditions. With respect to conditions caused by a landlord’s other tenants, a tenant might take the position that because it has no right to select its neighbors, a landlord should be willing to protect it from the activities of those other tenants. This position is based on the premise that only the landlord is in a position to properly screen and regulate other tenants’ activities and obtain appropriate protection from them in the leases with those other tenants. Many landlords feel otherwise, believing that both parties should bear the risk of environmental damage caused by persons not under their respective control or direction, such as other tenants and “midnight dumpers.” Whatever the case might be, landlords have strict liability to the government for environmental contamination regardless of what the lease might say. There should be no argument, however, that a landlord should be liable for pre-existing conditions and that each party should be liable for its own acts and the acts of those acting for, or under the direction of, that party. 14. Hazardous Materials: Neither Tenant, its successors or assigns, nor any permitted assignee, permitted sublessee or other person acting at the direction of Tenant shall: (i) manufacture, treat, use, store or dispose of any Hazardous Materials (as hereinafter defined) on the Premises or any part thereof in violation of any applicable Environmental Laws; or (ii) permit the release of a Hazardous Material on or from the Premises or any part thereof. Notwithstanding the foregoing, Landlord hereby consents to the use by Tenant of materials routinely used in [list specific tenant applications] so long as the materials are used, kept, stored, and disposed of in a manner that complies with all laws relating to the use, storage, and disposal of such materials. In the event of a release of Hazardous Material by Tenant or any of Tenant’s agents, employees, contractors, subtenants or licensees, Tenant shall indemnify, protect, defend, and hold Landlord harmless from and against any and all costs, fees, damages, losses, expenses, and liabilities of any kind or nature in any way related to the release, removal, transportation or disposal of such Hazardous Materials. If any action or proceeding is brought against Landlord by reason of such claim, Tenant upon notice from Landlord shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. In the event Landlord incurs any costs, fees, damages, losses, expenses or liabilities in connection with a release of Hazardous Materials by Tenant or any of Tenant’s agents, employees, contractors, subtenants or licensees, Tenant shall pay such costs, fees, and expenses within ten (10) days after receipt of written request from Landlord. Landlord shall not incur any fees or costs before notifying Tenant that it is likely to incur such fees and costs if Tenant fails to take corrective action. Landlord represents and warrants that as of the date of this Lease, Landlord has no knowledge, nor has reasonable cause to believe that a release (as hereinafter defined) of Hazardous Materials has occurred in the Premises or the Property or that Hazardous Materials

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are otherwise present in the Premises or the Property. Landlord represents and warrants to the best of its knowledge as of the date of this Lease that the Premises are in compliance with all federal, state, and local statutes, regulations, rules, and ordinances, and with all orders, decrees, and judgments of governmental authorities or courts having jurisdiction, relating to the use, generation, manufacture, collection, treatment, disposal, storage, control, removal or clean up of Hazardous Materials (“Environmental Laws”). To the extent any Hazardous Materials are present in, at, on or about the Premises or the Property through no fault of Tenant, Landlord shall be responsible for removing or otherwise remediating such Hazardous Materials as required by, and in full compliance with, all Environmental Laws at no cost to Tenant. Landlord shall indemnify, protect, defend, and hold Tenant harmless from and against any and all costs, fees, damages, losses, expenses, and liabilities of any kind or nature in any way related to the existence, removal, transportation or disposal of any Hazardous Materials in, at, on or about the Premises or the Property unless caused by Tenant or any of Tenant’s agents, employees, contractors, subtenants or licensees. If any action or proceeding is brought against Tenant by reason of such claim, Landlord, upon notice from Tenant, shall defend the same at Landlord’s expense by counsel reasonably satisfactory to Tenant. Commentary: Section 14. Hazardous Materials. This is an important section for input from local counsel. Each state has its own scheme of regulation for hazardous substances, and careful attention should be paid to such regulations so that the parties can properly allocate responsibilities and risk. For example, New Jersey has a unique, pervasive law regulating the termination of leases at a property where any occupant at the property, with an industrial operation and using hazardous substances, terminates its business or its lease. Such an occurrence triggers investigation and filing requirements that affect even those other tenants who are not involved. The term “Hazardous Material” means any waste, substance or material that is: (i) identified in Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time (“CERCLA”); or (ii) determined to be hazardous, toxic, a pollutant or contaminant, under federal, state or local law, including, but not limited to, petroleum and petroleum products. The term “release” shall have the meaning given to such term in Section 101(22) of CERCLA. Commentary: Section 15. ADA Compliance. Responsibility for compliance with ADA should be allocated according to zones of control: Normally, a tenant is responsible for the interior of its premises, including doors, and its landlord for all areas outside the premises. The indemnity should include the obligation to defend in the event one of the parties is named in a lawsuit directed to the other’s failure to maintain compliance. This Section, as drafted, may not appropriately deal with a situation where a tenant’s unique activities at the shopping center create an obligation to make changes to the shopping center or cause an increase in the cost to operate the shopping center. In such cases, it might be that the tenant, not its landlord, should bear the burdens of such activities. Similarly, the tenant’s initial outfitting of, or subsequent renovation of, its

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premises might trigger such obligations or the need to change the ingress to, or egress from, the premises. 15. ADA Compliance: Notwithstanding any provision of this Lease to the contrary, all exterior areas of the Premises, including without limitation, customer parking areas, walkways, ramps, exterior of the buildings, and ingress to and egress from the Premises shall be constructed and maintained by Landlord at all times during the Term [and any renewed Term] in strict compliance with applicable requirements of the Americans with Disabilities Act (“ADA”). Landlord shall indemnify, protect, defend, and hold Tenant harmless from any and all costs, fees, damages, losses, expenses, and liabilities of any kind or nature in any way related to Landlord’s obligations under this Section. Tenant shall maintain the interior of the Premises and construct and maintain its improvements thereto in strict compliance with applicable ADA requirements. Tenant shall indemnify, protect, defend, and hold Landlord harmless from any and all costs, fees, damages, losses, expenses, and liabilities of any kind or nature in any way related to Tenant’s obligations under this Section. Commentary: Section 16. Landlord’s Services. Itemizing the services that the tenant expects its landlord to provide is advisable. This will avoid confusion for both parties during the lease term. Tenants, however, should take care to make sure that all services they expect from the landlord are listed, since a reasonable implication from such an itemization is that services not listed are not the landlord’s responsibility. Landlords, on the other hand, should be concerned that inclusion of a list such as this does not serve to limit the services that may be included within allowable common area maintenance costs. The terms “adequate” and “necessary” may be troubling to a landlord because they give no standards for performance. In addition, the parties could not possibly mean that the shopping center will always be totally free of debris, snow, and ice. Lastly, inclusion of any obligation to provide security can serve to shift the risk of all crime to a landlord, and the addition of the phrase “if necessary” to such a requirement does nothing to clarify when security services are to be employed, let alone to what extent they should be employed. In all likelihood, a tenant will not want to pay for extensive security patrols or snow removal at levels as little as one-half inch. 16. Landlord’s Services: Landlord agrees to provide, as reasonably necessary: (a) sweeping and upkeep for the common areas; (b) trash and garbage service; (c) adequate lighting for twenty-four (24) hour operation; (d) maintenance of the landscaping; (e) the keeping of sidewalks and parking area clear of debris, snow, and ice; (f) such other repairs to the Property as may be reasonable and necessary; and (g) security for the Center, if necessary. Except as provided in Sections 6(i) and 13 above, the costs incurred by Landlord to perform the above services shall be included in the CAM charges payable by Tenant in accordance with Section 6(e) above. Commentary: Section 17. Performance by Tenant. Many tenants and landlords will prefer to incorporate a timetable to be followed in the event a landlord feels the need to perform its tenant’s obligations. In addition, a land-

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lord will want the right to act swiftly in the face of an emergency, and to be reimbursed for the related expenses. In each regard, see Article 13 and the comments thereto. 17. Performance by Tenant: Tenant covenants and agrees that it shall perform all agreements herein expressed on its part to be performed, and that upon receipt of written notice specifying action desired by Landlord in connection with any such covenant, it shall promptly comply reasonably or commence to comply with such notice. Furthermore, if Tenant shall not reasonably comply with such notice, Landlord, at its option, may enter upon the Premises, and do the things specified in such notice, and Landlord shall have no liability to Tenant in any loss or damage resulting in any way from such action by Landlord, except as caused by Landlord’s negligence or willful misconduct or that of its agents, employees, contractors, invitees or licensees. Tenant hereby agrees to pay promptly upon demand any reasonable expense incurred by Landlord in taking such action. Commentary: Section 18. Default and Remedies. This provision tracks remedies available under California statute, but generally, landlords will have their own preferred language for this section. Clearly, this is an Article that requires close review by local counsel. Tenants want to be sure that they receive reasonable notice of, and appropriate time to cure, a default. Tenants will not want to waive statutory notice or due process provisions that are otherwise prescribed by the jurisdiction in which the premises are located. From a practical standpoint, a landlord should not object to the giving of notice. Almost all landlords always do anyway. 18. Default and Remedies: Commentary: Section 18a. Tenant Default. A common formulation for sections such as this is that a party, such as the tenant, is not in default of an obligation if the alleged breach is curable, but such cured is not reasonably capable of being effectuated within the given time (30 days here), and the party commences its cure within the initial period and diligently prosecutes its cure thereafter. (a) Tenant Default. If the Rent or any other charge agreed to be paid and all other sums of money which under the provisions hereof may be due Landlord shall be in arrears in whole or in part for ten (10) or more days following Landlord’s giving of written notice, Tenant shall be in default. If Tenant shall violate any covenant contained herein, other than the covenant to pay Rent or other sums of money due Landlord, and shall fail to comply with such covenant within thirty (30) days after being given written notice by Landlord of such violation, Tenant shall be in default. In the event of Tenant’s default, Landlord shall have the following remedies: Commentary: Section 18a(1). Default and Remedies. Note that the tenant has drafted this provision to allow it to be in default of the nonmonetary provisions of the lease, even material ones. This is peculiar because an assignee would expect that the rent would be paid to date, and even insist on such, but may have been misled by its assignor as to the nature and extent of any non-monetary

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defaults. A landlord shouldn’t have to deal with a replacement tenant over items for which there may be an extensive history of discussions with the prior, defaulting tenant. (1) Landlord may continue the Lease in full force and effect for so long as Landlord does not terminate the Tenant’s right to possession and Landlord may enforce all of Landlord’s rights and remedies under this Lease, including the right to recover Rent and Additional Rent as they become due, provided that Tenant may assign or sublet its interest in the Premises, subject to the reasonable consent of Landlord, during such time that Tenant continues to pay Rent and Additional Rent; or (2) Landlord may terminate Tenant’s right to possession, in which case this Lease shall terminate and, upon such termination, the Landlord may recover from the Tenant: (i)

The worth at the time of award of the unpaid Rent and Additional Rent that had been earned at the time of termination;

Commentary: Section 18a(ii). Tenant Default. This formulation does not take into account damages continuing after the date of an award, such as the difference between the stated rent and additional rent, and the fair market rental value of the premises. (ii) The worth at the time of award of the amount by which the unpaid Rent and Additional Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Tenant proves could have been reasonably avoided; (iii) Subject to Subsection (a)(3), the worth at the time of award of the amount by which the unpaid Rent and Additional Rent for the balance of the Term after the time of award exceeds the amount of such rental loss that the Tenant proves could be reasonably avoided; Commentary: Section 18a(3). When reducing damages to present value, the parties should keep in mind that the suggested rate is very low, often up to 350 basis points below the prime rate. The discount rate to present value should not reflect what someone would earn on an investment or loan; rather, it should reflect a prediction of the future buying power which is related to the inflation rate. (3) The term “worth at the time of award” of the amounts referred to in paragraphs (i) and (ii) of Subsection (b) is computed by allowing interest at such lawful rate as may be specified in this Lease or, if no such rate is specified in this Lease, at the legal rate. The worth at the time of award of the amount referred to in paragraph (iii) of Subsection (a) is computed by discounting such amount at the discount rate of the Federal Reserve Bank of at the time of award, plus two hundred basis points.

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Commentary: Section 18b. Landlord Default. Sometimes overlooked, a lease should set an interest rate to be applied when the landlord is in default in the payment of money, probably at the same rate specified for a tenant’s rent default. (b) Landlord Default. Tenant shall have all remedies available at law and equity, together with those expressly provided herein, for instances of Landlord’s default. Upon Landlord’s default in its obligation to pay (or credit) money, the amount shall bear interest beginning five (5) days after the date due at the same annual rate specified for late Rent in Section 10(a). Commentary: Section 19. Bankruptcy or Insolvency of Tenant. There are many different formulations that address these conditions, but bankruptcy law has its own set of overriding rules that serve to prevent the lease from being terminated upon a tenant’s bankruptcy. 19. Bankruptcy or Insolvency of Tenant: If any sale of Tenant’s interest in the Premises created by this Lease shall be made under execution or similar legal process, or if Tenant shall be adjudicated a bankrupt or insolvent, and such adjudication is not vacated within sixty (60) days or if a corporate reorganization of Tenant or an arrangement with its creditors shall be approved by a court under the United States Bankruptcy Code, or if Tenant shall make an assignment for the benefit of creditors, or if in any other manner Tenant’s interest under this Lease shall pass to another by operation of law, then, in any of such events, Landlord may at its option re-enter the Premises and declare this Lease and the tenancy hereby created terminated. Commentary: Section 20. Force Majeure. Does the word “cause” refer to what brought about the condition in the first place or the event that inhibits its cure? If a lease provision is not clear, it should be revised before a problem arises and before the parties need to apply the lease provision. Landlords will want to change the word “Rent” to include “any monetary obligation.” Rent abatement and termination rights in the event the premises become untenantable due to instances of force majeure (and beyond either party’s control) may not be common tenant requests, but, as previously stated, are an anathema to landlords. In negotiating these issues, the parties should keep in mind that most lenders require a landlord (as lender’s borrower) to maintain rental interruption insurance on the projects they finance. Rental interruption insurance is the colloquial name for business interruption and extra expense coverage. Particularly where the premiums for that policy are included in common area maintenance charges and paid by tenants, a provision for rent abatement preserves the possibility of a claim under the policy. Conversely, an absolute ban on rent abatements negates those situations that would otherwise trigger this coverage. On the other hand, rent insurance, when applicable, is limited in term and allowing a tenant to terminate its lease may be untenable to a landlord and its mortgagee. Fundamentally, here, as elsewhere, the dilemma remains how to deal with allocating the risk of an occurrence not caused by either landlord or tenant.

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20. Force Majeure: Anything in this Lease to the contrary notwithstanding, providing such cause is not due to the willful act or neglect of the party charged, that party shall not be deemed in default with respect to the performance of any of the terms, covenants or conditions of this Lease other than the payment of Rent or Additional Rent if same be due to any strike, lockout, civil commotion, war-like operation, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulations or controls, through act of god or other cause beyond the control of the party. If, however, Tenant is unable to carry on its business due to such occurrence of force majeure, Tenant’s obligations under this Lease shall abate until the condition ends and Tenant is able to resume unimpaired operation of its business at the Premises. Should the abatement continue for a period of one hundred eighty (180) days, and provided Tenant is not in default of this Lease beyond any applicable cure period, Tenant shall have the right to terminate this Lease on written notice to Landlord. Commentary: Section 21. Estoppel Certificate. Although sometimes requested to do so by a landlord, a tenant will not want to consent to appointing its landlord as its attorney-in-fact for the purposes of executing these (or, for that matter, any other) documents. Landlords should be practical and realize that their mortgagee is unlikely to rely on a certificate executed by the landlord as the tenant’s attorney-in-fact. Tenants may seek a reciprocal right to demand an estoppel certificate from their landlords. 21. Estoppel Certificate: Within fifteen (15) business days after receipt of request therefor by Landlord, or in the event that upon any sale, assignment or hypothecation of the Premises or the land thereunder by Landlord an Estoppel Certificate shall be required from Tenant, Tenant agrees to deliver a certificate to any proposed mortgagee or purchaser or to Landlord, certifying (if such be the case) that this Lease is in full force and effect, that there are no defenses or offsets thereto, or stating those claimed by Tenant and certifying such other matters directly related to this Lease which may be reasonably requested by Landlord. Commentary: Section 22. Attornment. From a tenant’s perspective, it should not agree to a self-executing provision which automatically creates an attornment or subordinates the lease to a mortgage, unless, however, such language is expressly conditioned upon the terms necessary to tenant, such as assumption of landlord’s obligations, recognition of lease, and the like. Landlords should note that their current, as well as future, lenders may not be satisfied with the formulation of this attornment provision because a lender will usually refuse to assume liabilities that accrued prior to its taking over the shopping center. 22. Attornment: In the event any proceedings are brought for the foreclosure of the Premises, or in the event of exercise of the power of sale under any mortgage made by Landlord covering the Premises, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under Lease on the condition that such purchaser expressly assumes all of the Landlord’s obligations hereunder in writing.

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Commentary: Section 23. Subordination. When negotiating a Subordination and Non-Disturbance Agreement (SNDA), a tenant’s counsel may want to offer to discuss the SNDA directly with lender’s counsel. Often, landlords are required to present their lender’s standard form or standard requirements, and will not be in a position to consent to deviations from such a standard. Typically, a lender’s counsel will be much more familiar with the areas where the lender can be flexible and will be able to commit to compromise language where needed. Overall, this formulation of the obligation of a tenant to subordinate to future mortgages or deeds of trusts (and ground leases, if included) will not be satisfactory to a future lender that does not want to be bound to using insurance and condemnation proceeds in a way that conflicts with the loan provisions. For subordination provisions that more closely meet a landlord’s needs, refer to the landlord forms of retail lease within this book. Note, however, that this section does not include private mortgages, even if legitimate. 23. Subordination: The rights of Tenant under this Lease shall be and are subject and subordinate at all times to the lien of any bank or institutional mortgage or deed of trust now or hereafter in force against the Property or upon any buildings hereafter placed upon the Property, and to all advances made or hereafter to be made upon the security thereof, on the condition that the note holder and mortgagee secured by the mortgage(s) or beneficiary secured by such deed of trust or deeds of trusts, as the case may be, shall and does agree: (a) to recognize this Lease so that Tenant’s rights described herein are not diminished by reason of such subordination; and (b) not to disturb the tenancy of Tenant in writing in the event of foreclosure if Tenant is not then in default beyond any applicable cure period. Within fifteen (15) business days after receipt of request therefor by Landlord, Tenant shall deliver to Landlord such subordination and non-disturbance agreement in the form attached hereto as Exhibit K (“Subordination and Non-Disturbance Agreement,” incorporated herein by reference) as requested by any lender or proposed lender to evidence such subordination. Commentary: Section 24. Condemnation. When commercial property is condemned, the owner (landlord) has the opportunity to prove the value of the property interest taken. Once this property value is determined by the court, some jurisdictions allow tenants to prove the value of the leasehold interest consequently terminated. If a tenant can establish that the lease has value, measured in the number of remaining months/years multiplied by the amount by which the lease rate is below market rates, then the tenant may recover a “bonus award” for this value. The amount of the bonus award given to tenant(s), however, is deducted from the amount awarded to landlord in compensation for its property interest. This provision, as drafted, precludes a tenant from recovering a bonus award (which would otherwise reduce landlord’s recovery), but preserves the tenant’s right to recover other amounts, such as relocation expenses, which may be available in a given jurisdiction and which do not reduce the amount of landlord’s award. The method by which eminent domain awards are made varies greatly from jurisdiction to jurisdiction. In some jurisdictions, to make sure that the landlord, not the tenant, receives the “bonus” value, it might be necessary to have the lease terminate on the day before the taking is effective, thereby leaving the entire award to the landlord as the only party having an interest in the premises on the day of taking. For this reason alone,

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careful use of local counsel in drafting this provision is advisable. In addition, some states allow separate awards to a landlord and its tenant, and some do not. Landlords may not be entirely satisfied with this tenant form of condemnation clause. Even though it may be appropriate to allow a tenant to terminate the lease in the event of a “major” taking, however defined, a landlord will also want the right to terminate the lease if the remaining part of the shopping center or even of the building of which the premises are a part is destroyed. Also, this clause does not address the obligation to restore partially taken property, whether part of a building or parking spaces. Refer to the other form leases in this book for ways in which these issues can be handled. 24. Condemnation: If more than twenty-five percent (25%) of the Premises or parking areas shall be taken or condemned by any competent authority for any public or quasi-public use or purpose, then Tenant, at its option, may terminate this Lease. Any award for the property of which the Premises are a part shall be the property of Landlord. Tenant, however, shall be entitled to claim, prove, and receive in the condemnation proceeding such awards excluding so called bonus awards as may be allowed for fixtures and other equipment installed by it and any other award expressly made to Tenant. The Rent and additional sums in the case of any partial taking or condemnation shall be apportioned as of the date of vesting of title and Tenant shall be entitled to a pro rata reduction in the Annual Minimum Rent and Additional Rent payable hereunder based on the portion which the Floor Area in the space taken bears to gross Floor Area of the Premises immediately prior to such taking. Commentary: Section 25. Fire and Other Casualty. The landlord’s obligation to repair casualty damage raises several issues. Tenants typically agree to pay a share of property insurance premiums for the shopping center (often as a component of common area maintenance charges), so that funds are available for repairs and replacements when casualty strikes. For a tenant to benefit from those insurance policies, i.e., have its premises restored, the lease needs to provided for the parameters within which the parties can determine when proceeds will be used for repairs and when proceeds can simply be retained by landlord following termination of all affected leases. Having paid for the policies, a tenant will want to see strong language providing for prompt reconstruction, with completion of reconstruction within a reasonable time. At some point, however, it may become prudent to simply terminate the lease and seek other premises in which to reopen. Sometimes, landlords look to limit their reconstruction obligation “to the extent insurance proceeds are available.” Many tenants will want to resist this approach because, to the extent a landlord is responsible for procuring property insurance, it is reasonable to require it to bear the responsibility for (and consequences of) underinsurance. Moreover, most financing agreements give the project lender the right to retain any insurance proceeds in the event the collateral (shopping center) is damaged or destroyed. If the lender has agreed, under an SNDA, to honor the terms of the lease, a tenant is in a much better position to compel the use of insurance proceeds for reconstruction when the specific lease language so directs than if the lease only requires reconstruction when insurance proceeds are “available” to landlord. Given that a

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tenant’s interest in its lease is usually subordinated to mortgages and deeds of trust, a tenant will want to make sure that the “use of insurance (and condemnation) proceeds” sections of those documents do not negate carefully negotiated lease language that was intended to apply such proceeds in a different fashion. A tenant will feel that the repair estimate should be triggered by notice of the casualty, not by receipt of the insurance proceeds; the receipt of proceeds could take months, even years, after the parties should reasonably know whether the premises can be restored within a reasonable time. 25. Fire or Other Casualty: (a) Notice of Destruction. If the building that composes the Premises should be damaged by fire, the elements, unavoidable accident or other casualty to the extent that the Premises are rendered inaccessible for retail purposes or totally or partially unusable by Tenant in the ordinary course of Tenant’s business, Tenant shall give immediate written notice thereof to Landlord. Landlord, within forty-five (45) days after receipt of written notice of such damage, shall notify Tenant of the amount of time Landlord estimates it would take to repair such damage (“Landlord’s Estimate”). Commentary: Section 25b. Loss Covered by Insurance. Here, the repair obligation is not conditioned on the actual existence of insurance coverage, but rather on the coverage that the landlord should have maintained pursuant to the terms of the lease. See also the comments to Article 24 of the lease. There are circumstances under which a landlord might not want to rebuild a building in its old configuration or even at all, while continuing to operate the balance of the shopping center. For example, the premises may be located in an obsolete building whose location at the shopping center originally made sense, but which, in the current retailing environment, would be rebuilt elsewhere at the shopping center. In such circumstances, a landlord might not want to be obligated to rebuild the damaged building or premises, especially if the particular tenant is relatively small in importance to the success of the project. There are many ways of handling this possibility, from allowing the landlord to relocate the tenant to terminating the lease even if the tenant’s premises are in an unaffected portion of the shopping center. To see a variety of these approaches, refer to the other retail and nonretail leases in this book. (b) Loss Covered by Insurance. If the loss to Landlord would be fully covered by insurance required to be maintained by Landlord under this Lease or for Landlord’s benefit (exclusive of any deductible), which loss renders the Premises totally or partially inaccessible or unusable by Tenant in the ordinary conduct of Tenant’s business, then either party may terminate this Lease by written notice to the other, except that if: (i) Landlord’s Estimate is equal to or less than one hundred eighty (180) days from the date of such casualty; (ii) such damage or destruction is not the result of willful misconduct of Tenant; and (iii) Landlord is not prevented by applicable Laws from rebuilding the building to its preexisting condition, Landlord, at Landlord’s expense, shall repair the same and this Lease shall remain in full force and effect and a proportionate reduction of the Minimum Monthly Rent and Additional Rent shall be allowed Tenant for such portion of the Premises as shall be rendered inaccessible or unusable to Tenant during the period of time that such portion is unusable or inaccessible.

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Commentary: Section 25c. Loss Not Covered by Insurance. This is a rather “draconian” remedy. Perhaps, from a landlord’s point of view, its tenant should have the right to complete the work instead. (c) Loss Not Covered by Insurance. If, at any time prior to the expiration or termination of this Lease, the Premises are totally or partially damaged or destroyed from a risk, the loss to Landlord which would not be fully covered by insurance required to be maintained by Landlord under this Lease or for Landlord’s benefit (exclusive of any deductible), Landlord, at its option, upon written notice to Tenant within forty-five (45) days after notice to Landlord of the occurrence of such damage or destruction, may elect to repair or restore such damage or destruction, or Landlord may elect to terminate this Lease. If Landlord elects to repair or restore such damage or destruction, this Lease shall continue in full force and effect provided that such repairs or restorations are completed within one hundred eighty (180) days after the casualty and the Minimum Monthly Rent and Additional Rent shall be proportionately reduced as provided in Section 25(b). In the event such repairs are not complete within one hundred eighty (180) days, Tenant shall have the right to terminate this Lease. Commentary: Section 25d. Destruction Near End of Term. It is not uncommon for this period to be two years, especially given the understanding that it may take six months alone to rebuild the premises. In addition, with a longer period, a tenant may want the right to exercise any remaining renewal option so as to extend the remaining term. (d) Destruction Near End of Term. Notwithstanding the foregoing, if the Premises are wholly or partially damaged or destroyed within the final six (6) months of the Term, Landlord or Tenant, at its option, may elect to terminate this Lease. Commentary: Section 25e. Destruction of Improvements and Personal Property. There may be some uncertainty as to whether some of a tenant’s improvements are to be considered realty (thereby covered under the real property insurance maintained by landlord) or as personal property (thereby within the tenant’s personal property coverage). Provided that the insurance is in place (and paid for by the tenant), it can’t hurt to have both the tenant’s and landlord’s carriers involved—one or the other will have coverage obligations no matter how the loss is categorized. Some may think that this clause (ii) makes no sense, given that fires are almost always caused by negligence. Landlords will want to place this risk on the tenant who probably already carries insurance for such perils, or who should buy such insurance. (e) Destruction of Improvements and Personal Property. In the event of any damage to, or destruction of, the Premises, Landlord shall not be required to repair, replace or compensate anyone for the personal property, trade fixtures, alterations, machinery, equipment or furniture of Tenant, unless the damage or destruction: (i) is covered by insurance maintained by Landlord; or (ii) is caused by Landlord’s negligence or willful misconduct or that of its agents, employees, contractors, invitees or licensees.

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26. Landlord’s Separate Insurance: Landlord shall maintain the following policies of insurance, the cost of which shall be included in CAM charges or other charges borne by Tenant in proportion and to the extent such policies are applicable to the Center: Commentary: Section 26a. Liability Insurance. Commercial General Liability coverage is important to tenants by virtue of their landlord’s indemnity obligations for the actions of its agents and employees. This, however, does not mean that a tenant should be a “first party” to that insurance by virtue of being named as an additional insured. Being named as an additional insured means that the coverage will be available for damage caused by the tenant. Although such an endorsement is almost always without additional cost to a landlord, many landlords are concerned that the additional risk will distort the experience ratios for the shopping center, and will result in higher premiums. While most, if not all, of such premiums are absorbed by tenants as part of common area maintenance charges, higher insurance costs may make a particular project less attractive to new tenants. (a) Liability Insurance. Landlord shall maintain Commercial General Liability Insurance, including Contractual Liability Insurance coverage, covering Landlord’s operations, including those at the Center, with combined single limits of not less than two million dollars ($2,000,000.00) per occurrence for bodily injury or property damage, naming Tenant as an additional insured. Such insurance shall be endorsed to provide that the insurance shall be primary to and not contributory to any similar insurance carried by Tenant, and shall contain a severability of interest clause. Commentary: Section 26b. Worker’s Compensation Insurance. Subrogation waivers within workers’ compensation policies may not be available in every state, but a tenant would be wise to insist upon such a waiver. They may be available with or without charge. Rarely will a landlord’s form of lease contain a provision extending any workers’ compensation insurance coverage to a tenant. Workers’ compensation insurance is statutorily required. In some instances, if available, a landlord may consider purchasing its workers’ compensation coverage from its liability insurer or from a company related to that carrier. This can reduce premiums and avoid a battle between carriers over coverage disputes. Also, a landlord may want to drop its “umbrella” coverage to meet the levels of insurance required by the terms of this Section. This, of course, is a conversation a landlord should have with its insurance broker, agent or consultant. (b) Workers’ Compensation Insurance. To the extent Landlord has any employees performing work in connection with the Center, Landlord shall maintain Workers’ Compensation Insurance providing statutory benefits to the Landlord’s employees in the state where the Premises are located with a waiver of subrogation in favor of Tenant and Employer’s Liability Insurance with limits of not less than one hundred thousand dollars ($100,000.00) per accident or disease and five hundred thousand dollars ($500,000.00) aggregate by disease.

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Commentary: Section 26c. All Risk Property Insurance. Although the term “All Risk” is commonly used, such an insurance form was discontinued in 1983 and is no longer in use. The current equivalent coverage is found under the ubiquitous ISO (Insurance Services Office) form of property insurance policy with use of a “Causes of Loss – Special Form” coverage part. In addition, property insurance polices are available with a multitude of endorsements and coverage extensions. Few attorneys are knowledgeable about the details of available insurance programs or even about how insurance policies work and what they cover or, more importantly, what they don’t cover. For that reason, draftspersons would be well advised to have qualified insurance professionals review all insurance provisions (and the lease’s indemnification provisions). Leases are replete with insurance requirements that are just plain wrong and, too often, draftspersons just copy such provisions, typographical errors and all. (c) Property Insurance. Landlord shall maintain Property Insurance covering all structures and improvements in the Shopping Center, with coverage for perils as set forth on the Causes of Loss–Special Form coverage part (or the then industry replacement therefor), and in amounts sufficient to provide for replacement of such structures and improvements. Commentary: Section 26d. Waiver of Subrogation. The key to this provision, as drafted, is that it is actually a mutual release with the backup of obtaining mutual subrogation waivers. There can be no subrogation if a damaged party has no claim against the causing party. Therefore, it is important to make sure that the waiving party’s insurance coverage is not voided by the granting of such a release. Expect that such a subrogation waiver is already included, at no additional cost, within the standard ISO form of property insurance policy. Waivers of subrogation should be limited to property damage claims, since both landlord and tenant will want to preserve the right to seek indemnification (and should retain accountability) for liability claims. But note, this tenant form lease even asks for a waiver of subrogation as part of the landlord’s worker’s compensation coverage, even though such coverage is in the nature of liability insurance. (d) Waiver of Subrogation. Landlord and Tenant hereby waive and release any and all right of recovery against the other, including employees and agents (whether in contract or tort) arising during the Term for any and all loss of or damage to any property located within or constituting part of the Center, Building or Premises to the extent such loss would have been covered by any insurance required under this Lease (whether or not the party suffering the loss or damage actually carries any insurance, recovers under any insurance or self-insures for the loss or damage). Landlord and Tenant shall each have their insurance policies issued in such form as to waive any right of subrogation as might otherwise exist, and shall obtain any special endorsements required by their insurer to evidence compliance with the aforementioned waiver. This mutual waiver is in addition to any other waiver or release contained in this Lease. Commentary: Section 26e. General Insurance Standards. Be sure to understand what this means. It is not uncommon for a carrier (even a large, well known one) to fail this standard or to drop below these levels during the policy

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term. Consequently, each party should discuss these standards with a qualified insurance professional. This language has been identified as the preferred form for protecting notice and claim rights for additional insureds. The most commonly used forms of certificate of insurance (Acord forms 25 and 27) state only that the insurer will “endeavor” to give such notice, and that no rights are given to the certificate holder. At the time this comment was written, there was no standard form of Certificate of Insurance available that would bind an insurance company to giving notices to certificate holders or that constituted any real agreement between a carrier and a certificate holder. Therefore, it is necessary to have a customized (“manuscript”) certificate prepared. Not all jurisdictions permit this or will enforce such a certificate. Where such certificates are enforceable, they need to be signed by a person authorized to bind the insurance carrier. This situation has been the subject of extended, yet concluded negotiations between the insurance industry and interest holders such as lenders. The surest way for a party to have its rights protected under the other party’s insurance policy is for there to be an actual endorsement to that policy. Again, not all jurisdictions permit the use of nonstandard endorsements. (e) General Insurance Standards. All insurance policies (except for Workers’ Compensation policies) required to be maintained under this Lease by either Landlord or Tenant shall be procured from insurance companies rated at (A-/IX) or better by the then current edition of Best’s Insurance Reports published by A.M. Best Co. and licensed to do business in the state where the Premises are located. All policies shall provide that they shall not be canceled or materially changed without at least thirty (30) days’ prior written notice to the other party. Liability insurance limits may be provided through any combination of primary and excess insurance policies. Each party shall provide the other with certificates of insurance, concurrently with the execution of the lease and upon each renewal thereafter, evidencing that the required coverages are in full force and effect, each bearing the following description: Certificate Holder has been requested to be added as an Additional Insured on the above listed policy by endorsement CG2010 [or CG2011] as respects operations at [address], [City], [State]. Commentary: Article 27. Notices. This is a simple, but possibly problematic version of a notice provision. Notice provisions can be deceptively misleading. They should clearly apply to any notice required to be given pursuant to the Lease. As to whether the notice provision should apply to notices “permitted” to be given is problematic. The lease does not bar any notice from being given. Therefore, one can conclude that any notice sent by a party to the other must be sent in accordance with this Article. Depending on how one believes courts will apply common sense, one may want to revise this provision in line with her or his belief. Where a party is requiring that more than one copy of a notice be sent, it may be advisable to state that sending the additional copies is mandatory and must be done contemporaneously with sending the first copy. Use of facsimile notices troubles many people, leading them to require, when facsimile notices are permitted at all, that when sent on a non-business day or after 4:00 pm or 5:00 pm local time at the recipient’s location, they be deemed delivered on the next business day. Many notice provisions call for a copy of the facsimile notice to be mailed on the same day it is transmitted. Notice provisions should be clear about the distinction between when a notice is

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sent and when it is delivered or received. Moreover, the lease should cover situations where delivery is attempted but refused or the party delivery address is no longer valid. Frequently, allowing use of an overnight delivery service is tied to the ability to get a signed delivery receipt. With changes in technology, additional means of delivering notices can be contemplated as can be a time when there is no longer a United States Postal Service. 27. Notices: All notices from Tenant to Landlord required or permitted by any provision of this Lease shall be in writing and sent by facsimile with written transmission confirmation, overnight delivery service or registered or certified mail, postage prepaid and directed to Landlord at: [Landlord’s address for notice] [Landlord’s facsimile telephone number] All notices from Landlord to Tenant so required or permitted shall be in writing and sent by facsimile with written transmission confirmation, overnight delivery service or certified mail, postage prepaid and directed to Tenant at: [Tenant’s address for notice] [Tenant’s facsimile telephone number] and a copy to: [Tenant’s copy address for notice] [Tenant’s copy facsimile telephone number] Either party, at any time or from time to time, may designate in writing a substitute address for that above set forth, or thereafter notices shall be directed to such substitute address for that above set forth. Notices to either party shall be effective three (3) business days after their deposit in the United States Postal system, upon confirmed facsimile transmission or on the next business day if sent by overnight courier in accordance with this Section. Commentary: Section 28. Indemnity. Indemnity provisions should be reviewed in conjunction with the lease’s insurance provisions. Therefore, landlords and tenants should submit them to their insurance agents, brokers or consultants for review. Courts often rule that a lease’s insurance provisions intended to protect an additional insured are only coextensive with the lease’s indemnification provisions. Indemnification provisions should be mutual to the extent applicable, making distinctions only between claims arising in the premises and those arising outside the premises. A common allocation of responsibility is to have the tenant responsible for what happens inside the leased premises and the landlord responsible for what happens outside of the leased premises. Most draftspeople do not fully understand how these risks can be allocated and the role insurance plays in covering indemnification obligations. Therefore, it is common to find indemnification provisions that are convoluted and conflicting, and hence vague or ambiguous.

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The initial phrase of this section (“Subject to paragraph 26(d) above”) has been inserted to make sure that the mutual indemnity given here does not invalidate the property waiver of subrogation made in paragraph 26(d). 28. Indemnity: Subject to paragraph 26(d) above, Tenant shall protect, defend, indemnify, and hold Landlord harmless from and against any and all claims, damages, losses, liens, judgments, penalties, expenses (including reasonable attorneys’ and consultants’ fees), and liabilities arising out of, or relating to, injury to any person or loss of, or damage to, property which occurs at the Premises, except for those caused solely by the intentional misconduct, negligent acts or omissions of Landlord or of Landlord’s agents, members, officers, employees or contractors. Subject to paragraph 26(d) above, Landlord shall protect, defend, indemnify and hold Tenant harmless from and against any and all claims, damages, losses, liens, judgments, penalties, expenses (including reasonable attorneys’ and consultants’ fees), and liabilities arising out of, or relating to, injury to any person or loss of or damage to property which occurs at any part of the Center other than the Premises, except for those caused solely by the intentional misconduct, negligent acts or omissions of Tenant or of Tenant’s agents, members, officers, employees, contractors, sublessees, licensees, invitees or guests. Commentary: Section 29. Co-Tenancy. The inclusion of co-tenancy provisions is usually related to the relative bargaining strength of the parties. Occupancy by a particular anchor tenant or even just any anchor tenant may or may not be important to the tenant in this lease. Co-tenancy provisions are highly disfavored by landlords and their lenders. While large tenants, other anchor tenants, and possibly those located on outlots may not be significantly affected by the loss of a particular anchor tenant at the shopping center, smaller tenants who depend on the foot traffic from other merchants may be leasing space at the center because of their proximity to that particular anchor tenant. Ironically, those who may need co-tenancy protection the most often lack the negotiating strength to obtain it. This is the type of provision that is tailored to the particular characteristics of the shopping center. Frequent variables are the relevant time periods, and the acceptability standards for replacement tenants. Often, a tenant will convert to a straight percentage rent for a period of time before it can terminate its lease. In addition, it is common to set a deadline by which a tenant must make its termination decision following loss of an anchor tenant. Here, the phrase “acceptable to Tenant” may be not be acceptable to a landlord. From that perspective, it may be better to insert criteria for an acceptable replacement anchor tenant in the lease. Also, it is common for leases with co-tenancy clauses to reduce a tenant’s rent only after the anchor tenant has been gone for six to twelve months. This provision, as drafted, does not contemplate an “opening” co-tenancy requirement which would delay the start of rent or the obligation of the tenant to open for business if a named anchor or other tenant or tenants are not open and operating when the rent or obligation would otherwise become effective.

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29. Co-Tenancy: In the event: (a) __________________ or any substitute, successor, assign or replacement of similar quality, size, character, and regional stature acceptable to Tenant in Tenant’s reasonable judgment (hereinafter, the “Anchor Tenant”) is not open for business prior to the Commencement Date; or (b) Anchor Tenant vacates or ceases business operations in the Center at any time prior to, or following, the Commencement Date, Tenant shall receive an abatement of fifty (50%) percent of all sums due hereunder during the Term, until such time as a replacement Anchor Tenant, acceptable to Tenant, opens for business at the Center. If a replacement Anchor Tenant is not open in the Center within six (6) months from the date Anchor Tenant vacates or ceases to do business in the Center, Tenant may continue with the abatement or terminate this Lease upon thirty (30) days’ prior written notice to Landlord. Notwithstanding anything contained herein to the contrary, if Tenant elects to receive an abatement of the sums due hereunder, as set forth above, then Tenant shall not be deemed to have waived its right to terminate this Lease, which right may be exercised by Tenant at any time until a replacement Anchor Tenant commences business operations at the Center. Commentary: Section 30. Right of First Refusal. This may be an invitation for disaster. For example, what happens if the parties cannot come to an agreement? Is the adjacent space tied up through years of litigation? A better approach might be to provide standards for determining the rental value and even for arbitration to set the rent if no agreement can be reached. Basically, agreements to agree should be avoided whenever possible. Such a provision is certainly desirable for a tenant anticipating a need for more space in the future; however, granting a right of first refusal might be unwise for a landlord because of the potential to tie up marketable space, albeit for a brief period of time. Creative approaches can often address this concern, such as providing for a right of first offer or an anticipatory notice and refusal period that ends some time before a space actually becomes vacant. The inclusion of this type of provision is usually a function of nothing more than the relative bargaining strengths of the parties. This is a place where a landlord might want to insist the deadline for tenant making its election be one of “time of the essence.” 30. Right of First Refusal: During the Term and any Renewed Term, Tenant shall have a right of first refusal to lease any adjacent space in the Center. Landlord shall notify Tenant in writing of the availability of such adjacent space and Tenant shall have fifteen (15) days from receipt of such written notice to notify Landlord of its election to lease such space. Minimum Monthly Rent for the adjacent space shall be as agreed upon by the parties. In the event Tenant fails or refuses to exercise its option to lease the adjacent space, Landlord shall have no further obligation to offer the space to Tenant until a subsequent termination or expiration of the lease for the adjacent space. 31. Not a Joint Venture: Any intention to create a joint venture or partnership relation between the parties hereto is hereby expressly disclaimed.

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Commentary: Article 32. Successors and Assigns. A cautious draftsperson may want to make clear that all permitted assignees of the tenant’s interest in the lease be obligated for the tenant’s obligations under the lease regardless of when those obligations arise even if before or after when the assignee was the tenant under the lease. 32. Successors and Assigns: This Lease and the covenants and conditions herein contained shall inure to the benefit of, and be binding upon, Landlord, its successors, and assigns, and shall be binding upon Tenant, its successors, assigns, executors, administrators, and legal representatives, and shall inure to the benefit of Tenant, its successors, and only such assignees of Tenant to whom Tenant has assigned this Lease in compliance with the provisions of this Lease. Commentary: Section 33. Waiver. In many jurisdictions, landlords will want to add that acceptance of rent after a default or after lease termination does not waive the default or negate the termination, and that acceptance of a partial payment does not act as an accord and satisfaction. 33. Waiver: The failure of either party to insist, in any one or more instances, upon a strict performance of any covenant of this Lease or to exercise any option or right herein contained shall not be construed as a waiver or relinquishment for the future of such covenant, right or option, but the same shall remain in full force and effect unless the contrary is expressed in writing. Commentary: Section 34. Memorandum of Lease. A recorded memorandum of lease is advisable for a tenant, particularly where there are option rights or exclusive uses granted in the lease for which the tenant may want to give the public constructive notice. To avoid the mechanics of recording a termination or quitclaim at the end of a lease, some landlords favor including a provision for a memorandum that automatically expires by its own terms after a certain specified date. Be aware that some jurisdictions exact extremely high recording fees for such memorandums or in conjunction with leases having terms (inclusive of available options) of more than a given number of years. Pennsylvania, by way of example, uses a threshold of 30 years. That is why it is common to see leases in that jurisdiction with lease terms of 29 years and 364 days. 34. Memorandum of Lease: The parties agree that upon the request of either party, they shall execute, acknowledge, and deliver a Memorandum of Lease to the end that the same may be recorded at the expense of the requesting party. Upon the expiration or earlier termination of the Lease and within ten (10) days following written notice from Landlord, Tenant agrees to execute a Memorandum of Lease Termination or Quitclaim Deed discharging any recording made pursuant to this Section. Commentary: Section 35. Holding Over. Frequently, an applicable statute provides for a higher holdover rate, usually twice the previous (or sometimes, market) rent. Sometimes, those statutes only apply to

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non-consensual holdover situations. Many jurisdictions allow the parties to establish their own holdover terms, thereby overriding the “gap filling” statute. When tenants and landlords have trouble on agreeing as to the amount of holdover rent, they will agree on a multi-tier arrangement with lower rents in the first months followed by higher rents thereafter. 35. Holding Over: This Lease shall terminate without further notice at the expiration of the Term (or Renewed Term if Tenant has exercised same). Any holding over by Tenant after expiration of the Term or Renewed Term, as the case may be, shall not constitute a renewal of the Lease or extension of the Term or Renewed Term or give Tenant any rights in or to the Premises except as expressly provided in this Lease. Any holding over after the expiration of the Lease without the consent of Landlord shall be construed to be a tenancy from month to month on the same terms and conditions herein specified except for Minimum Monthly Rent which shall be one hundred twenty-five percent (125%) of the Minimum Monthly Rent payable for the last month of the previous Term (or Renewed Term, if applicable). 36. Interpretation of Agreement: This Lease shall be construed under the laws of the state in which the Premises are located. All headings preceding the text of the several provisions and sub-provisions are inserted solely for convenience of reference and none of them shall constitute a part of this Lease or affect its meaning, interpretation or effect. Venue for any action brought by Landlord or Tenant in relation to this Lease shall be in the County and judicial district or division in which the Premises are located. Commentary: Section 37. Attorneys’ Fees. Generally, attorneys’ fees are not recoverable in a contract action on the lease unless there is an express provision for their recovery. An attorneys’ fee provision should be mutual, and some jurisdictions automatically impose mutuality when a contract awards such fees to one party and not the other. Keep in mind, courts and court rules often limit collectible attorneys’ fees to those that are “reasonable” whether a lease says so or not. A party may object to paying the fee of in-house counsel on the grounds that such expenses are overhead costs and often incurred in addition to the cost of outside counsel. The language about entitlement to attorneys’ fees in settled matters is included to enhance the bargaining power of the “rightful” party, but is essentially superfluous given that a negotiated dispute settlement should address recovery of such costs. 37. Attorneys’ Fees: If any action at law or equity is commenced between the parties hereto, the prevailing party shall be entitled to its reasonable attorneys’ fees, including fees for In-House Counsel, and costs in connection with such action. In the event any dispute arising between the parties is resolved without court proceedings, the prevailing party shall be entitled to recover reasonable attorneys’ fees, including fees for In-House Counsel, and costs in connection with such dispute.

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Commentary: Section 38. Broker’s Commissions. Including a provision for broker’s commissions serves to insulate each party from disputes that might arise with respect to the other party’s broker. Moreover, this creates a basis in the lease by which tenant may seek to enforce the landlord’s obligation to pay commissions as agreed. Landlords and tenants would be wise to avoid provisions that could give third-party rights to a real estate broker. Where a tenant has used the services of an exclusive broker with whom it has an ongoing relationship, it might want to add a provision allowing it, the tenant to pay the commission if the landlord fails to do so, and then offset that payment against future rent obligations. 38. Broker’s Commissions: Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease, except for _______________________________, whose commission shall be paid by the Landlord pursuant to a separate agreement. Each party shall hold the other party harmless from all damages resulting from any claims that may be asserted against the other party by any broker, finder or other person, with whom the other party has or purportedly has dealt in connection with this Lease. Commentary: Section 39. Lease Subject to CC&Rs. Obviously, this is unnecessary if inapplicable. A tenant with bargaining power will want to prevent the landlord from terminating, modifying or failing to renew any CC&R, declaration or easement agreement where doing so would adversely affect the tenant. Such tenants may want to have a mechanism that requires the landlord to enforce its rights under any CC&R, declaration or easement agreement where failure to do so would adversely affect the tenant. 39. Lease Subject to CC&Rs: Tenant acknowledges that its tenancy is subject to, and subordinate to, the declarations, covenants, conditions, and restrictions and reciprocal easements agreements of record as of the date of this Lease, which, if any, are attached hereto as Exhibit J (“Covenants, Conditions, and Restrictions,” herein incorporated by reference). 40. Confidentiality: Landlord and Tenant acknowledge and agree that the terms and conditions contained in this Lease are confidential and proprietary to their business operations, and shall not be disclosed to any persons or entities other than their respective officers, employees, lenders, accountants, and attorneys, who shall each keep the terms and conditions herein confidential. 41. Entire Agreement: This Lease sets forth all the promises, agreements, conditions, and understandings between Landlord and Tenant relative to the Premises, and there are no promises, agreements, conditions or understandings, either oral or written, expressed or implied, between them other than set forth herein. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by both of them.

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed in their names by their duly authorized officers under their seals. Landlord:

Tenant:

[NAME OF COMPANY]

[Name of Tenant]

______________________________ By: Its:

____________________________ By: Its:

Commentary: Signatures and Acknowledgments. State law will determine how many witnesses will be required, if any, and whether the lease must bear acknowledgements. Draftspersons MUST become knowledgeable about such jurisdiction-specific requirements. [Provide for witnesses and acknowledgements, if needed]

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EXHIBIT A

SITE PLAN

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EXHIBIT B

LEGAL DESCRIPTION

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Commentary: Exhibit C-1. This is provided without comment, but is an excellent example of a comprehensively drafted set of tenant-construction standards. This is a technical document requiring careful review by a landlord’s design professionals.

EXHIBIT C-1 LANDLORD’S SCOPE OF WORK [Existing Space] Landlord’s Work shall conform to the following: Tenant’s Standard Shell / Space Requirements Landlord shall construct and deliver the Premises with Landlord’s Work complete, all on and off-site improvements completed, with a Certificate of Occupancy by the local authorities and in accordance with the complete set of Construction Drawings from __________________, Architects, dated . In the event of a conflict or ambiguity between this Standard Shell/ Space Requirements (“Requirements”) and the Construction Drawings, the Requirements shall be controlling. Without limiting the foregoing, Landlord’s Work shall conform to the following work items: Division 1 – GENERAL R EQUIREMENTS 01060 All points of egress must comply with local codes and required ADA standards. 01062 All ADA accessibility standards in public areas and access(es) to the premises must be met by the landlord prior to building turnover. 01064 Landlord to guarantee approval by local zoning, planning or other governing agency for 24 hour and 7 days a week operations on a continuing basis. 01158 Landlord to certify that the entire Premises are free and clear of all Hazardous Materials, and shall be responsible for the removal, remediation or encapsulation of any Hazardous Materials existing at the Premises at the time of delivery. Division 2 – SITEWORK 02050 Landlord to demolish all existing interior features including, but not limited to: partition walls, built-in fixtures, ceiling grid, and lighting, etc., as directed and approved by Tenant. Landlord to remove and dispose of any signage at Premises from prior tenancies and resurface or paint wall(s) as necessary to remove markings or discoloration from such prior signage. After demolition, the entire tenant space must be “broom clean” throughout. 02480 Landlord to be responsible for all landscape, parking lot, and landscape improvements required by local code or ordinance as a condition of Tenant’s occupancy and use. 02500 Reserved parking spaces preferred. Minimum of one parking space per 250 sq. ft. of lease area, or as dictated by local codes and ordinances, whichever is greater. 02510 Two parking spaces dedicated for delivery vehicles adjacent to the delivery door.

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02520

02870

Rear delivery door must be accessible by trucks for loading and unloading. A sidewalk or other accessible means shall be in place from the street to the delivery entrance. Access must be level or via a ramp; no stairs will be accepted. Trash enclosure shall be located within 50 feet of rear delivery door with well-lit 24-hour access. Location to be approved by Tenant. Enclosure shall be of adequate size to accommodate the waste and recycle material produced by Tenant (approximately one, four cubic yard waste dumpster and one, four cubic yard recycle dumpster for Tenant’s operations and local recycling service with a weekly pickup).

Division 3 – CONCRETE 03010 All floor areas of stores and training centers must support a min. live load of 100 PSF. All floor areas of production centers must support a min. live load of 150 PSF. Certification from a structural engineer may be required. 03020 Entire floor area must be on one level with no level changes. Floor area must be level within 1/16” per 12’-0,” ready for application of direct glue-down carpet. Division 5 – METALS 05100 Structural columns within the space must be minimized and of the smallest dimension allowable. Final placement and number of columns must be approved by Tenant. 05110 Bottom of all roof framing shall be a minimum of 14’-6” A.F.F. to allow for a 12’-0” ceiling. 05115 Roof structure shall accommodate the required Tenant’s HVAC equipment weight load. Each unit weighs approximately 1,500 lbs. The exact quantity and location of roof mounted units will be provided during Tenant’s space planning process. 05410 Roof parapets shall be minimum of 36” high or of sufficient height to conceal rooftop HVAC units, whichever is greater. Division 8 – DOORS & WINDOWS 08100 Secondary emergency exit shall be 3’-0” x 7’-0” door in rear of space or along one side. Location to be specified by Tenant. 08110 Delivery door shall be a minimum of 4’-0” x 7’-0” door at the rear delivery area. Location to be specified by Tenant. 08400 Entry doors shall be one set of bi-parting automatic sliding doors with a clear opening of 6’-0”W X 7’-0”H at the storefront. A 7’-0”D x 14’-0”W inside vestibule with a second set of bi-parting automatic sliding doors with a clear opening of 6’-0”W x 7’-0”H. Automatic sliding doors to be Stanley Dura Glide 2000 bi-parting sliding door with clear anodized finish or finish to match existing storefront. Location to be specified by Tenant. 08800 Window glazing to be 1” insulated glass, low ‘E’, and shall be from 2’-6” to 9’-0” A.F.F.

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Division 10 – SPECIALTIES 10400 Tenant shall be permitted to display the maximum area of exterior signage allowed by the governing agency codes and ordinances. 10410 Allow illuminated channel letters that comply with the specifications published in the Tenant’s Corporate Identity Manual per the registered trademark. 10420 Approval for a standard Tenant’s location requires up to twelve fiber optic signs in the storefront window area. In addition, [specific] window signs should be accommodated. 10430 Approval of pole sign or top position on a monument or pylon sign. Tenant requires the top position in all shared signage. Division 15 – MECHANICAL & PLUMBING 15400 Waste and water supply stub-outs for restrooms shall be in the rear of the space or along one sidewall towards the rear of the space. Location to be specified by Tenant. Provide 1½” water supply line with adequate pressure for flush valve toilets, minimum 25 PSI. 15420 Supply a 2” natural gas line to the space, 2 PSIG minimum. Location to be specified by Tenant. 15500 Provide a fire suppression system that includes, but not limited to: alarms, flow switches, building system connections, and fire sprinkler systems as required by code for Tenant’s occupancy and use. Provide all work necessary for finished Tenant’s improvements including, but not limited to: installation of drops and head locations. All work to be coordinated with Tenant and installed as part of the shell. 15800 HVAC equipment to be provided and installed by Tenant. Landlord to provide an HVAC allowance of $1,500.00 per ton of cooling capacity. HVAC required is approximately one ton of cooling capacity for every 200 square feet of leasable space based on the building shell. Roof curbs for the HVAC units shall be furnished by Tenant and installed by landlord with the roof. Division 16 – ELECTRICAL 16300 Provide electrical service to the space connected to a main distribution panel with one breaker for every 200 amps of service, to meet local code requirements. Service shall be located inside the space in a location specified by Tenant. 16310 Service shall be 120v/208/3 phase. Amperage, for spaces with normal HVAC loads, is based on the following: 600 amps for spaces with less than 5,500 sq. ft. 800 amps for spaces with 5,500 to 10,000 sq. ft. 1,000 amps for spaces greater than 10,000 sq. ft. 16500 Provide adequate lighting in all exterior areas (min 3 foot-candles. from bldg. to 16 feet out, and no less than 0.5 foot-candles. in all parking areas) for 24-hour safety of customers and co-workers. 16700 Telephone supply conduit (1”) to be stubbed into space per Tenant’s specifications. Location to be specified by Tenant.

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Commentary: Exhibit C-2. Care should be taken to avoid conflict between these requirements and those negotiated as part of the base lease. Remember that the Exhibits are every much a part of the lease as are the provisions that precede the signature blocks. Consequently, the provisions in this Exhibit should be reviewed and negotiated as carefully as the main lease provisions.

EXHIBIT C-2

TENANT’S WORK Tenant shall be responsible for all interior design necessary to secure: (a) Landlord’s approval; and (b) the consent of the appropriate governmental agencies necessary to complete its work. Tenant shall submit its interior drawings to Landlord for approval within forty (40) days after receipt of Landlord’s shell drawings, which approval shall not be unreasonably withheld. Landlord shall review and approve, approve as noted, or disapprove within ten (10) days after its receipt thereof. Should Landlord fail to respond within the ten (10) day period, the plans shall be deemed approved. Tenant shall make all revisions within the following ten (10) days and shall re-submit the drawings to Landlord. Tenant shall also submit shop drawings of its proposed signage and pylon signage for the Landlord’s review prior to installation. Landlord hereby agrees that it is familiar with Tenant’s prototypical signage, has approved same, and shall base its review on placement and other technical matters rather than aesthetic considerations. If Tenant fails to furnish Landlord with its plans and specifications as required herein, Landlord shall have the right to cancel and terminate this Lease in addition to any other right or remedy it may have at law of equity. The parties acknowledge that Tenant’s diligent and timely preparation of plans and completion of their respective construction obligations is a material inducement in entering into this transaction and that time is of the essence.

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EXHIBIT D

COMMENCEMENT MEMORANDUM WHEREAS, [NAME OF L ANDLORD], a [type of entity and jurisdiction] (“Landlord”) and [NAME OF TENANT], a [type of entity and jurisdiction] (“Tenant”) entered into a lease dated (“Lease”) for the property commonly known as [address], [City], [State] (“Premises”), a more accurate and complete description of which is attached to the Lease as Exhibit B; and WHEREAS, Section 2(c) of the Lease calls for Landlord and Tenant to execute a Commencement Memorandum confirming the Commencement Date, Rent Commencement Date, Termination Date, and Total Leasable Square Footage of the Premises upon completion of construction and delivery of the Premises to Tenant; and WHEREAS, the completion of construction and delivery of the Premises to Tenant has occurred and Tenant has opened for business as of ______________; and WHEREAS, in accordance with the terms and conditions of the Lease, Landlord and Tenant hereby execute this Commencement Memorandum. NOW THEREFORE, Landlord and Tenant hereby agree as follows: The COMMENCEMENT DATE, as defined in paragraph 1(a) of the Lease, shall hereafter be  , . The RENT COMMENCEMENT DATE as defined in paragraph 2(a)(ii) of the Lease shall be  , . The TERMINATION DATE as described in paragraph 1(a) of the Lease shall be  , unless Tenant notifies Landlord of its intent to exercise its option(s) to renew as defined in paragraph 1(b) of the Lease. 4. The TOTAL LEASABLE SQUARE FOOTAGE of the Premises as determined by the project architect for the building shell and confirmed by Tenant in accordance with the terms of the Lease is _______ SQUARE FEET. 5. All capitalized terms not defined herein shall have the meaning given them in the Lease.

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IN WITNESS WHEREOF, each of the undersigned has executed this Commencement Memorandum as of be  , . LANDLORD:

TENANT:

[Name of Landlord] [entity type and jurisdiction]

[Name of Tenant] [entity type and jurisdiction]

By:____________________________ Name: Its:

By:_____________________________ Name: Its:

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Commentary: Exhibit E. See comments to Section 4(g). Landlords may want to condition payment of an Improvement Allowance upon the tenant opening for business, obtaining a certificate of occupancy, delivering lien waivers (if applicable in the jurisdiction), obtaining an architect’s certificate of completion, and providing as-built plans.

EXHIBIT E

IMPROVEMENT ALLOWANCE 1. TENANT’S ALLOWANCE: Subject to the adjustment outlined in Section 2(c) above, the Landlord shall supply a Tenant Improvement Allowance of $ for construction of the Tenant’s leasehold improvements. Such improvements shall include all items required to be constructed by Tenant above the Landlord’s Work including carpet, signage, and architecturals. Items that are specifically excluded are removable trade fixtures, personal property, and inventory. The Tenant Improvement Allowance shall be funded in two (2) draws as follows: Draw I - One-half (1/2) upon Tenant providing Landlord with all applicable building permits, construction commencement and no lien existing as a result of Tenant’s actions. Draw II - One-half (1/2) upon Tenant providing Landlord with Tenant’s certification that one hundred percent (100%) of Tenant’s Work is complete, the title update confirms the property is free of liens as a result of Tenant’s construction, and Landlord’s architect has approved and confirmed Tenant’s Work. 2. In the event that the Landlord fails to pay Tenant the sum of $ within ten (10) days following written notice from Tenant that it has complied with the respective conditions set forth in Section 1 above, then, in addition to such other remedies as are available to Tenant, it may withhold the payment of Rent and other monies otherwise due and payable to Landlord until such time as Landlord has paid such sum with interest at a rate equal to highest rate permissible by law on any unpaid balance and until the monies, together with interest, are paid to Tenant. Nothing herein shall relieve Landlord of its obligation to reimburse the Tenant Improvement Allowance as herein provided.

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Commentary: Exhibit E. Alternative Provision. There are tax consequences to the landlord and to the tenant arising out of the payment of the Tenant Improvement Allowance. Section 110(c) of the Internal Revenue Service Regulations has been adopted to deal with leases having a term (with available renewal options) of less than 15 years. It is only a “safe harbor” and does not preclude getting the same tax treatment outside of that IRS Regulation. This is a tricky area, and competent tax counsel should be consulted because facts and circumstances are important and the tax law changes in opaque ways. In addition, accounting principles bear upon how a Tenant Improvement Allowance is to be handled for reporting purposes, including with respect to how public companies are to treat such allowances. With that in mind, here is a suggested alternative provision for Exhibit E intended to have that portion of the Tenant Improvement Allowance used for real property improvement to receive the same treatment as if the landlord had made the improvements itself. Any portion not used for “qualified real property improvements” would be treated as income to the tenant as would any other cash allowance paid by the landlord to the tenant.

ALTERNATE PROVISION FOR EXHIBIT E Not later than thirty (30) days after the later of when Tenant furnishes Landlord with a copy of the Cost Certification described below or when Tenant opens a fully fixtured, staffed, and stocked typical [Tenant’s Type Of] store for business with the retail public at the Premises, Landlord shall pay Tenant a “Total Allowance” in an amount equal to ($ ) multiplied by the Floor Area of the Premises, in square feet, as measured on the Rent Commencement Date. Should Landlord fail to pay the Total Allowance to Tenant within the thirty (30) day period, Tenant may deduct from the monthly Minimum Monthly Rent, Additional Rent or Percentage Rent (if applicable) otherwise due and payable to Landlord, all that which is due and payable to Tenant, plus interest accruing at the same annual rate specified for late Rent in Section 10(a) from the time the payment was due until such time as Tenant has been fully paid. Tenant shall furnish, to Landlord, its certification of its cost to further adapt the Premises for use as a [Tenant’s Type Of] store outlining in reasonable itemized detail, including the associated costs, the leasehold improvements for which Tenant is seeking payment (“Cost Certification”) and including a representation as to how much of the Total Allowance has been used for the purpose of constructing or improving “qualified long-term real property” [as defined in Section 110(c) of the Internal Revenue Service Regulations, as may be amended from time to time] and as to how much of the Total Allowance has been used for Tenant’s personal property including, but not limited to, trade fixtures, point of sale equipment, security systems, counters, display cases, free standing display racks, unattached movable equipment and machinery and goods held for sale to the public. The portion of the Total Allowance used for the purpose of constructing or improving “qualified long-term real property” shall be called the “Construction Allowance” and the remaining amount of the Total Allowance shall be categorized as the “Tenant Allowance.” Immediately upon their placement in the Premises, Landlord shall be the legal title and beneficial owner of all of the qualified long-term real property improvements to which the Construction Allowance was applied. Each party shall prepare its federal, state and local income tax forms and

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schedules, and calculate taxable income, in a manner consistent with Landlord’s ownership of such improvements for all taxable years. Eligible leasehold improvements to which the Construction Allowance may be applied shall only include the following costs and/or fees: architect, building permit, dumpsters and clean-up, barricades and staging area, demolition, concrete work, masonry work, structural and miscellaneous steel, roof work, carpentry, doors and roll-up grilles, drywall and metal studs, lay-in ceiling work, floor covering (carpet, VCT, vinyl base), ceramic tile, granite and marble, non-fixture package millwork and trim, painting and wall covering, storefront and glazing, plumbing, fire protection sprinkler, HVAC work (including curbs and units), electrical and lighting, fire alarm, connections to energy management system, meters and connection fees, utility usage fees and impact fees. Commentary: Landlords are advised to copy or closely parrot the exact language of each of their other leases exclusive use right grants.

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EXHIBIT F

PRE-EXISTING EXCLUSIVE USES

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EXHIBIT G

TENANT’S SIGNAGE

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EXHIBIT H

PARKING PLAN

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EXHIBIT I

LANDLORD’S RULES & REGULATIONS

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EXHIBIT J

COVENANTS, CONDITIONS & RESTRICTIONS

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Commentary: Exhibit K. A landlord’s starting point is often the form utilized by its current lender, not the form proposed by any particular tenant. Review the SNDA forms and commentaries thereto in Chapter 5.

EXHIBIT K Store No. RECORDING REQUESTED BY, AND WHEN RECORDED RETURN TO:

Subordination and Non-Disturbance Agreement This SUBORDINATION AND NON-DISTURBANCE AGREEMENT (“Agreement”) is made and entered into this day of  , by and between [Name of Tenant], a [entity type and jurisdiction] (“Tenant”) and [Name of Lender], a [entity type and jurisdiction] (“Lender”) and [NAME OF L ANDLORD], a [entity type and jurisdiction] (“Landlord”).

Recitals WHEREAS, Landlord executed a Lease dated , in favor of Tenant, and a memorandum covering certain Premises therein described located on a parcel of real estate, a legal description of which is attached hereto and incorporated herein by this reference as Exhibit A (the parcel of real estate and the Premises being sometimes collectively referred to herein as the “Property”); and WHEREAS, Landlord has executed a Deed of Trust (“Mortgage”) dated  , and recorded on in Book ________, Page ______, of the County Records of ___________ County, State of in favor of Lender, payable upon the terms and conditions described therein; and WHEREAS, it is a condition to the loan that the Mortgage shall unconditionally be and remain at all times a lien or charge upon the Property, prior and superior to the Lease and to the leasehold estate created thereby; and WHEREAS, the parties hereto desire to assure Tenant’s possession and control of the Property under the Lease upon the terms and conditions therein contained,

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NOW, THEREFORE, for and in consideration of the mutual covenants and premises herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and confessed by the parties hereto, the parties hereto do hereby agree as follows:

Agreement 1. The Lease is and shall be subject and subordinate to the Mortgage, and to all renewals, modifications, consolidations, replacements, and extensions thereof, and to all future advances made thereunder. 2. Should Lender become the owner of the Property, or should the Property be sold by reason of foreclosure or other proceedings brought to enforce the Mortgage which encumbers the Property, or should the Property be transferred by deed in lieu of foreclosure, or should any portion of the Property be sold under a trustee’s sale, the Lease shall continue in full force and effect as a direct lease between the then owner of the Property covered by the Mortgage and Tenant, upon, and subject to, all of the terms, covenants and conditions of the Lease for the balance of the term thereof remaining, including any extensions therein provided. Tenant does hereby agree to attorn to Lender or to any such owner as its landlord, and Lender hereby agrees that it will accept such attornment. 3. Notwithstanding any other provision of this Agreement, Lender shall not be: (a) liable for any default of Landlord under the Lease, except that Lender agrees to cure any default of Landlord that is continuing as of the date Lender forecloses the Property within thirty (30) days after the date Tenant delivers written notice to Lender of such continuing default, unless such default is of such a nature to reasonably require more than thirty (30) days to cure and then Lender shall be permitted such additional time as is reasonably necessary to effect such cure, provided Lender diligently and continuously proceeds to cure such default; (b) subject to any offsets or defenses which have accrued prior to the date of foreclosure, unless Tenant shall have delivered to Lender written notice of the default which gave rise to such offset or defense and has permitted Lender the same right to cure such default as is permitted Landlord under the Lease; (c) bound by any Rent that Tenant may have paid under the Lease more than one month in advance; (d) bound by any amendment or modification of the Lease hereafter made without Lender’s prior written consent; or (e) responsible for the return of any security deposit delivered to Landlord under the Lease and not subsequently received by Lender. 4. If Lender sends written notice to Tenant to direct its Rent payments under the Lease to Lender instead of Landlord, then Tenant agrees to follow the instructions set forth in such written instructions and deliver Rent payments to Lender; however, Landlord and Lender agree that Tenant shall be credited under the Lease for any Rent payments sent to Lender pursuant to such written notice. 5. All notices that may or are required to be sent under this Agreement shall be in writing and shall be sent by first-class certified U.S. mail, postage prepaid, return receipt requested, and sent to the party at the address appearing below or such other address as any party shall hereafter inform the other party by written notice:

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Tenant: Landlord: Lender: All notices delivered as set forth above shall be deemed effective three (3) days after the date deposited in the U.S. mail. 6. The Mortgage shall not cover or encumber and shall not be construed as subjecting in any manner to the lien thereof any of Tenant’s improvements or trade fixtures, furniture, equipment or other personal property at any time placed or installed in the Premises. In the event the Property or any part thereof shall be taken for public purposes by condemnation or transfer in lieu thereof or the same are damaged or destroyed, the rights of the parties to any condemnation award or insurance proceeds shall be determined and controlled by the applicable provisions of the Lease. 7. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors in interest, heirs, assigns, and any subsequent owner of the Property secured by the Mortgage. 8. Should any action or proceeding be commenced to enforce any of the provisions of this Agreement or in connection with its meaning, the prevailing party in such action shall be awarded, in addition to any other relief it may obtain, its reasonable costs and expenses, not limited to taxable costs, and reasonable attorney’s fees. 9. Tenant shall not be joined as a party-defendant in any action or proceeding that may be instituted or taken by reason or under any default by Landlord in the performance of the terms, covenants, conditions, and agreements set forth in the Mortgage. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. LENDER: [NAME OF LENDER] By: Name: Title: TENANT: [NAME OF TENANT] By: Name: Title:

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LANDLORD: [NAME OF L ANDLORD] By: Name: Title:

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[Add appropriate forms of acknowledgement]

SUBORDINATION AND NON-DISTURBANCE AGREEMENT

EXHIBIT A

LEGAL DESCRIPTION OF PREMISES

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