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2d. Lease Agreementof Kalispell illIMEM Post Office Box 1997 - Kalispell, Montana 59903-1997 • Telephone (406) 758-7700 • FAX (406) 758-7758 Honorable Mayor and City Council FROM: Chris A. Kukulski, City Manager SUBJECT: Lease Agreement MEETING DATE: February 7, 2000 BACK GROUND: Attached is a copy of the Lease Agreement that will be signed by the Flathead Valley Port Authority City of Kalispell and Stream International. The Lease Agreement details the relationship between the City/Port and Stream as it pertains to the lease arrangement between the three parties. The intent of this memo is to cover only the additional major business points that have not already been reviewed through the Location, Development and Use Agreement and Interlocal Agreement. Glenn and Jonathan Smith will be at the meeting to answer any questions regarding the lease. The Major points are as follows: Improvement - Stream is accepting the space in its current "as is where is" condition, and is responsible, for all costs associated with improving the space (roof, HVAC, walls, floors etc.) Lease Payment - Annually Stream will have a lease payment due of $275,000 . Under the LDUA this lease payment will be offset by the City's annual reimbursement for capital improvements made to the site. Stream is responsible for the lease for the full ten years even if they no longer occupy the space. Stream will pay additional lease payments of $129,704.78 as Land Lord Improvement Rent, payable in two equal semi-annual payments. Common Areas - Under the purchase arrangement between the City and American Capital, the City has use of all common areas within the mall. In addition, the City is responsible for its per rata share of improvement costs in these areas (parking lot, common area improvements etc.). Under the lease, Stream will be responsible for paying the City's per rata share. Capital Improvements - For any capital improvements that are necessary after the structure is brought up to specification (after Stream has refurbished the space). The City/Port will be responsible for certain capital items which cannot be passed through to Stream.. The City/Port is creating a building reserve fund as described in the Interlocal Agreement to cover these unforseen costs. Because of the magnitude of improvements being made by American Capital and Stream, we do not expect any major improvements. RECOMMENDATION: That the City Council authorize me to sign the attached Lease Agreement. I further request that I be authorized to make non -substantive (minor) changes to the agreement, if necessary, based on the advise of our legal counsel. Page 1 of 2 FISCAL EFFECTS: The direct impact of this project on the City's tax revenues will be offset by the expenses paid out in order to complete the project. However, the indirect impact of creating 500 full time jobs will definitely help to strengthen our economy and spur economic growth. ALTERNATIVES: As suggested by the Council. Respectfully submitted, L "- A, � ;- � � �-,- Chris A. Kukulski City Manager Report compiled February 3, 2000 Page 2 of 2 SHOPPING CENTER LEASE BY AND BETWEEN THE CITY OF KALISPELL, A BODY POLITIC AND THE FLATHEAD ECONOMIC DEVELOPMENT AUTHORITY A BODY POLITIC AS LANDLORD, AND STREAM INTERNATIONAL SERVICES CORP.. A DELAWARE CORPORATION, AS TENANT Gatewayl Leaseldot/CAF/TAYLOR FORM/02-04-00/jf SHOPPING CENTER LEASE Table of Contents ARTICLE I BASIC LEASE PROVISIONS................................................................................ 1 1.1 Date of Lease........................................................................................................ 1 1.2 Tenant's Trade Name............................................................................................ 1 1.3 Shopping Center.................................................................................................... 1 1.4 Premises................................................................................................................1 1.5 Floor Area..............................................................................................................1 1.6 Term................................................................................................................... 1 1.7 Time to Complete Tenant's Work.......................................................................... 1 1.8 Minimum Rent........................................................................................................ 1 1.9 Percentage Rent Rate........................................................................................... 1 1.10 Use of Premises.................................................................................................... 1 1.11 Security Deposit..................................................................................................... 1 1.12 Guarantor...............................................................................................................1 1.13 (a) Estimated Initial Pro Rata Share of Common Area Expenses .................... 1 (b) Estimated Initial Monthly Impound............................................................... 1 1.14 Address For Notices to Tenant.............................................................................. 1 1.15 Address For Notices to Landlord........................................................................... 1 1.16 Interest Rate.......................................................................................................... 1 1.17 Estimated Commencement Date; Outside Date ................................................... 1 ARTICLE II LEASED PREMISES............................................................................................. 2 2.1 Premises; Floor Area; Shopping Center................................................................ 2 2.2 Reservations..........................................................................................................2 2.3 Conditions of Record............................................................................................. 2 ARTICLE III TERM..................................................................................................................... 2 3.1 Term; Commencement Date................................................................................. 2 3.2 Memorandum of Commencement Date................................................................ 2 3.3 Early Occupancy.................................................................................................... 2 ARTICLEIV RENT..................................................................................................................... 2 4.1 Rent..................................................................................................................... 2 4.2 Additional Rent...................................................................................................... 2 4.3 Late Payment......................................................................................................... 2 ARTICLE V CONSTRUCTION OF LEASED PREMISES......................................................... 3 5.1 Landlord's And Tenant's Obligations..................................................................... 3 5.2 Construction Activities........................................................................................... 3 5.3 Delay in Possession.............................................................................................. 4 ARTICLE VI RECORDS AND BOOKS OF ACCOUNT............................................................. 4 6.1 Tenant's Records................................................................................................... 4 6.2 Reports by Tenant.................................................................................................4 6.3 Annual Balance Sheet........................................................................................... 5 ARTICLE VII AUDIT.................................................................................................................... 5 7.1 Right to Examine Books........................................................................................ 5 7.2 Audit....................................................................................................................5 ARTICLE Vill TAXES................................................................................................................... 5 8.1 Real Property Taxes.............................................................................................. 5 8.2 Personal Property Taxes....................................................................................... 5 ARTICLE IX SECURITY DEPOSIT............................................................................................ 5 9.1 Amount of Deposit................................................................................................. 5 9.2 Use and Return of Deposit.................................................................................... 5 9.3 Transfer of Security Deposit.................................................................................. 6 -i- Gatewayl Lease3.dot/CAF/TAYLOR FORM/02-04-00/jf ARTICLE X CONDUCT OF BUSINESS BY TENANT.............................................................. 6 10.1 Use of Premises.................................................................................................... 6 10.2 Operation of Business........................................................................................... 6 10.3 Competition............................................................................................................6 10.4 Auctions.................................................................................................................7 10.5 Compliance With Laws.......................................................................................... 7 ARTICLE XI MAINTENANCE AND REPAIRS........................................................................... 7 11.1 Landlord's Maintenance Obligations..................................................................... 7 11.2 Landlord's Right of Entry ....................................................................................... 7 11.3 Tenant's Maintenance Obligations........................................................................ 7 11.4 Plate Glass............................................................................................................ 8 ARTICLE XII COMMON AREA................................................................................................... 8 12.1 Definition of Common Area................................................................................... 8 12.2 Maintenance and Use of Common Area............................................................... 8 12.3 Control of and Changes to Common Area............................................................ 8 12.4 Common Area Expenses.. ..................................................................................... 8 12.5 Proration of Common Area Expenses................................................................... 9 12.6 Parking.................................................................................................................10 ARTICLE XIII UTILITIES............................................................................................................10 ARTICLE XIV ALTERATIONS, SIGNS AND FIXTURES........................................................... 10 14.1 Installation............................................................................................................ 10 14.2 Removal by Tenant.............................................................................................. 10 14.3 Liens.................................................................................................................10 14.4 Signs, Awnings and Canopies............................................................................. 10 ARTICLE XV SURRENDER OF PREMISES............................................................................ 11 ARTICLE XVI INSURANCE AND INDEMNITY.......................................................................... 11 16.1 Tenant Insurance................................................................................................. 11 16.2 Landlord Insurance.............................................................................................. 12 16.3 Indemnification of Landlord................................................................................. 12 16.4 Waiver of Subrogation......................................................................................... 12 16.5 Waiver of Loss and Damage............................................................................... 12 16.6 Notice by Tenant.................................................................................................. 12 16.7 Restrictions on Uses............................................................................................ 12 ARTICLE XVII OFFSET STATEMENT, ATTORNMENT, SUBORDINATION, MORTGAGEE PROTECTIONCLAUSE...................................................................................... 13 17.1 Offset Statement.................................................................................................. 13 17.2 Attornment and Nondisturbance.......................................................................... 13 17.3 Subordination.......................................................................................................13 17.4 Mortgagee Protection Clause.............................................................................. 13 ARTICLE XVIII ASSIGNMENT AND SUBLETTING..................................................................... 13 18.1 Assignment and Subletting.................................................................................. 13 18.2 Tenant's Request................................................................................................. 14 18.3 Recapture............................................................................................................ 14 18.4 Other Prohibited Transfers.................................................................................. 14 18.5 Sale of Premises.................................................................................................. 15 ARTICLE XIX ASSIGNMENT OF RENTS.................................................................................. 15 ARTICLEXX DESTRUCTION................................................................................................... 15 20.1 Total or Partial Destruction of Premises.............................................................. 15 20.2 Partial Destruction of Shopping Center............................................................... 15 20.3 Proceeds..............................................................................................................15 20.4 Waiver of Termination.......................................................................................... 15 ARTICLE XXI EMINENT DOMAIN............................................................................................. 16 21.1 Total Condemnation of Premises........................................................................ 16 21.2 Total Condemnation of Parking Area.................................................................. 16 21.3 Partial Condemnation of Premises...................................................................... 16 Gatewayl Lease3.doUCAF/TAYLOR FORM/02-04-00/jf 21.4 Partial Condemnation of Parking Area................................................................ 16 21.5 Allocation of Award..............................................................................................16 ARTICLE XXII DEFAULT............................................................................................................ 16 22.1 Notice and Remedies.......................................................................................... 16 22.2 Default by Landlord.............................................................................................. 17 22.3 Limitation on Tenant's Recourse......................................................................... 17 22AInsolvency ............................................................................................................17 ARTICLE XXIII HOLDING OVER, SUCCESSORS...................................................................... 17 23.1 Holding Over........................................................................................................ 17 23.2 Successors.......................................................................................................... 17 ARTICLE XXIV QUIET ENJOYMENT........................................................................................... 18 24.1 Landlord's Covenant............................................................................................ 18 24.2 Relocation............................................................................................................18 ARTICLE XXV LANDLORD WAIVER.......................................................................................... 18 ARTICLE XXVI MISCELLANEOUS.............................................................................................. 18 26.1 Index.................................................................................................................18 26.2 Waiver..................................................................................................................19 26.3 Accord and Satisfaction....................................................................................... 19 26.4 Entire Agreement................................................................................................. 19 26.5 No Partnership..................................................................................................... 19 26.6 Force Majeure...................................................................................................... 19 26.7 Notices.................................................................................................................19 26.8 Captions and Section Numbers........................................................................... 19 26.9 Tenant Defined, Use of Pronoun......................................................................... 19 26.10 Partial Invalidity....................................................................................................19 26.11 No Option............................................................................................................. 19 26.12 Recording............................................................................................................ 19 26.13 Legal Expenses................................................................................................... 19 26.14 Rights Cumulative................................................................................................ 20 26.15 Authority...............................................................................................................20 26.16 Time of the Essence............................................................................................ 20 26.17 Nondisclosure of Lease Terms............................................................................ 20 26.18 Lease Addenda and Exhibits............................................................................... 20 Gateways Leaseldot/CAF/TAYLOR FORM/02-04-00/jf SHOPPING CENTER LEASE THIS LEASE is made and entered as of the "Date of Lease" (as described in Section 1.1 below), by and between THE CITY OF KALISPELL, A BODY POLITIC, AND THE FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY, A BODY POLITIC ("Landlord"), and STREAM INTERNATIONAL SERVICES CORP., A DELAWARE CORPORATION ("Tenant"). ARTICLE I -- BASIC LEASE PROVISIONS 1.1 Date of Lease. March 8, 2000. 1.2 . NOT APPLICABLE. 1.3 Shopping Center. Gateway West Mail, located in the City of Kalispell, County of Flathead, State of Montana. 1.4 Premises. 1203 Highway 2 West Kalispell, Merl Per Exhibit "A" 1.5 Floor Area of the Premises. Approximately 50,009 59,000 square feet ; RSF. There is no usable square foot/common area factor included with this lease. Floor Area of the Shopping Center: Approximately 200,000 square feet RSF. 1.6 Term. Ten Years. (120 months). 1.7 Time to Complete Tenant's Work. NOT APPLICABLE. 1.8 Rent. $275,000 per year, payable at the end of each year of the Term. In addition to Rent Tenant will {may to Landlord Improvement Rent in the amount of $129 704 78 annually, to be paid in equal semiannual payments due on December 15 and June 15 of each year throughout the Term. 1.9 Percentage Rent Rate. NOT APPLICALBE. 1.10 Use of Premises. Call Center, Training, and General Office. 1.11 Security Deposit. NONE 1.12 Guarantor. NONE 1.13 (a) Estimated Initial Pro Rata Share of Common Area Expenses. NOT APPLICABLE (b) Estimated Initial Monthly Impound. NOT APPLICABLE. 1.14 Address For Notices to Tenant. Stream International Services Corp., 85 Dan Road, Canton, Massachusetts 02021 Attention: Telephone Number (781) 575-6800 1.15 Address For Notices to Landlord. Jobs Now, Inc., 213 East Idaho, Kalispell, Montana 59901 Attention: Myrt Webb Telephone Number (406) 257-7711 1.16 Interest Rate. shall mean the greater of ten percent (10%) per annum or the maximum rate permitted under Montana Code Annotated 31-1-107(1), or any amendments thereto in effect on the twenty-fifth (25th) day of the calendar month immediately prior to the event giving rise to the Interest Rate imposition; provided, however, the Interest Rate will in no event exceed the maximum interest rate permitted to be charged by applicable law. 1.17 Estimated Commencement Date. June 8, 2000; Outside Date. 02/04/00 Landlord Initial's Tenant's Initials ARTICLE II -- LEASED PREMISES 2.1 Premises; Floor Area; Shopping Center. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, those certain Premises described in Section 1.4 which are located in the Shopping Center described in Section 1.3. The Premises consist of a space having Floor Area of approximately that square footage stated in Section 1.5. "Floor Area" means all areas designated by Landlord for the exclusive use of Tenant or other occupants of Shopping Center measured from the outside of the exterior walls and the center of the interior demising walls. The boundaries and location of the Premises are generally depicted on the site plan of the Shopping Center attached hereto as Exhibit "A" (the "Site Plan") and shall be deemed to include the entryway to the Premises. Tenant acknowledges and agrees that the Site Plan depicts a proposed general layout of the Shopping Center and shall not be deemed a representation by Landlord that the Shopping Center is or will be constructed as indicated thereon, or that any tenants or occupants designated by name or type of business do or will conduct business in the Shopping Center, or that the Shopping Center will not be expanded, reduced or otherwise modified. 2.2 Reservations. Provided Landlord does not unreasonably interfere with Tenant's use of and access to the Premises, Landlord reserves the right at any time with reasonable notice to Tenant to o on the roof of the Premises for the purpose of effecting certain items of repair and maintenance as provided in this Lease. Easements for light and air are not included with the Premises. 2.3 Conditions of Record. Landlord's title is subject to: (a) the effect of any covenants, conditions, restrictions, easements, reciprocal easement and operating agreements, development agreements, mortgages or deeds of trust, ground leases, rights of way, and other matters or documents of record now or hereafter recorded against Landlord's title, (b) the effects of all zoning laws of the city, county and state where the Shopping Center is situated, and (c) general and special taxes and assessments. Tenant agrees that (i) as to its leasehold estate, it, and all persons in possession or holding under it, will conform to and will not violate said matters of record, and (ii) this Lease is and shall be subject and subordinate to said matters of record and any amendments or modifications thereto. Landlord represents that there are no zoning or matters of record that will prohibit use of Premises described in Section 1.10 and that said use will not violate any such matters of record. ARTICLE III --TERM 3.1 Term; Commencement Date. The term of this lease (the "Term") shall commence on the date of the first to occur of: (a) the date Tenant first opens for business in the Premises or (b) ninety days from the Date of Lease as referenced in Section 1.1 (the Commencement Date). The Term shall continue from the Commencement Date for the number of months specified in Section 1.6 and shall include any extension period pursuant to this Lease unless sooner terminated in accordance with the provisions of this Lease. The number of months of the Term shall be computed from the first day of the month following the Commencement Date. 3.2 Memorandum of Commencement Date. Within five (5) business days following the Commencement Date, Tenant and Landlord shall execute a written memorandum ("Commencement Memorandum") stating the actual Commencement Date and the expiration date of the Term as determined pursuant to Section 3.1. 3.3 Early Occupancy. If Tenant occupies the Premises prior to the Commencement Date for the purpose of completing Tenant's Work, such early occupancy shall be subject to all of the terms and conditions of this Lease, including, without limitation, the provisions of Article XVI regarding insurance and indemnification, except that, provided Tenant does not commence the operation of business from the Premises, Tenant will not be obligated to pay rent or operating expenses or taxes during the period of such early occupancy. Tenant agrees to provide Landlord with prior notice of any such intended early occupancy and to cooperate with Landlord during the period of any such early occupancy so as not to interfere with Landlord in the completion of Landlord's Work. ARTICLE IV -- RENT 4.1 Rent. Tenant shall pay to Landlord during the Term, annual rent ("Rent") in the amount stated in Section 1.8. Rent shall be paid annually at the end of each year that the Lease is in effect, provided that during any extension of the Lease Rent shall be paid on the first day of each month without prior demand deduction counterclaim or offset, (a) The first and last Improvement Rent payments in the amount stated in Section 1 8 hall be prorated on a calendar year basis in accordance with the Commencement Date set forth is Section 3.1. The Improvement Rent shall be secured by the delivery to Landlord of a Letter of Credit approved by the Landlord and attached hereto as Exhibit "E". The Landlord may draw against the Letter of Credit the amount of the Improvement Rent payment at any time that a payment of Improvement Rent is late All rent payments are to be applied as specified by Tenant when making the payment. 4.2 Additional Rent. All other sums required to be paid by Tenant to Landlord pursuant to this Lease including, without limitation, Rent and Common Area Expenses and any other sums, whether or not designated as rent, shall be deemed to be rent for purposes of this Lease. 4.3 Late Payment. If Tenant fails to pay the Minimum Rent or any installment thereof OF PeF68"tage ReSt if aR! as defined herein or any other additional rent under this Lease within five (5) business days after the same has become due, both Tenant and Landlord agree that Landlord will incur additional expenses including, but not limited to, 02/04/00 Landlord Initial's West Park Plaza - MT 2 Tenant's Initials extra collection efforts and handling costs. Both parties agree that should Tenant so fail to pay its rent, Landlord is entitled to compensation for the detriment caused by the failure, but that it is extremely difficult and impractical to ascertain the extent of the detriment. The parties therefore agree that should Tenant fail to pay any rent due hereunder within five (5) business days after the same becomes due, Landlord shall be entitled to recover from Tenant ten percent (10%) of the amount past due as a late charge; jbut in no event less than $150.001 plus any reasonable attorneys' fees incurred by Landlord by reason of Tenant's failure to pay such amount when due. Such past due amounts shall also bear interest at the Interest Rate set forth in Section 1.16 from the date due any Tenant's cure period expires until paid. Tenant further agrees to pay Landlord any reasonable costs incurred by Landlord in the collection of such past due rent including, but not limited to, reasonable fees of an attorney and/or collection agency. Nothing herein contained shall limit any other remedy of Landlord under this Lease. Landlord shall also have the right to require Tenant to pay any past due sums by cashier's check or money order. late ehaFge f6F tWe (2) eenseewtiye menths, Minimum Rent feF the fellewing twelye (12) Fnenths shall aWtefflat*Gall�' be ARTICLE V -- CONSTRUCTION OF LEASED PREMISES 5.1 Landlord's And Tenant's Obligations. To the extent that the Premises are not occupied, Landlord shall deliver possession of the Premises to Tenant on the GemmellGeFnent Lease Date in its existing, as -is, condition with all faults and without any representations or warranties from Landlord. Tenant hereby agrees to accept possession of the Premises from landlord on the Gemmeasemen Lease Date in the condition called for herein. Possession of any portion of the Premises that is occupied on the Lease Date shall be delivered to Tenant in its existing as is condition with all faults and without any representations or warranties from Landlord on orb fore 2000. 5.2 Construction Activities. Landlord understands and agrees that Tenant will remodel the Premises to suit its business needs Said remodeling shall be completed in accordance with Exhibit B Prior to commencement of Tenant's Work, Tenant shall deliver to Landlord certificates of insurance evidencing the existence of insurance as required by Section 16.1 and Article 8 of the "Declarations of Restrictions and Establishment of Easements Affecting Land" filed under Reception No. in the Office of the Clerk and Recorder, Flathead County, Montana. Upon completion Tenant shall deliver to Landlord prior to Tenant's opening for business: (a) a copy of a recorded notice of completion if such recordation is required by law; (b) appropriate lien releases relative to any improvements made by Tenant and/or Tenant's contractor at the Premises; and (c) a certificate of occupancy or equivalent occupancy permit for the Premises issued by the appropriate local governmental authority if required by law. After completion of Tenant's Work set forth in Exhibit B, unless otherwise agreed to in writing by Landlord, any work performed on the Premises in connection with the heating, ventilation, air conditioning equipment (collectively, "HVAC"), any roof penetrations, or automatic sprinklers, and the contractor performing the work, shall be approved by Landlord prior to commencement of such work. Landlord reserves the right to have Landlord's contractor inspect Tenant's improvements at Tenant's expense and correct any defects at Tenant's expense. Until such time as any substandard work has been repaired by Landlord's contractor, Tenant will be responsible for any necessary and reasonable repairs and/or service calls. 5.3 Delay in Possession. Landlord shall not be liable to Tenant for failure to deliver possession of the Premises to Tenant on any date or time specified herein; provided, however, that if Landlord fails to deliver possession of the Premises to Tenant, with Landlord's Work, if any, substantially completed, on or before the date which is five (5) days after the date specified in Section 1.17 herein, then Tenant may terminate this Lease by giving thirty (30) days written notice to Landlord, unless Landlord delivers possession of the Premises to Tenant within such thirty (30) day period of time. Landlord shall not be deemed to be in default with respect to the performance of any of its construction obligations herein, if any, if Landlord delays or is unable to complete any such construction obligations due to any "Tenant Delays" as defined in Exhibit "B" or "Force Majeure Delays" as defined in Section 26.6 below. ARTICLE VI -- RECORDS AND BOOKS OF ACCOUNT 6.1 Annual Balance Sheet. Tenant shall provide Landlord, whenever reasonably requested by Landlord for sale or re -finance purposes and provided said information is held confidential, a current annual balance sheet for Tenant's business at the Premises, either certified by an officer or partner of Tenant to be true and correct or accompanied by a report of an independent certified public accountant. 7.1 NOT APPLICABLE. ARTICLE VII — AUDIT ARTICLE Vlll -- TAXES 8.1 Real Property Taxes. (a) The term "Real Property Taxes" shall mean any form of general or special tax or assessment, license, charge, fee, levy or other imposition (other than Landlord's net income, estate, succession, inheritance or franchise taxes and rent taxes) now or hereafter imposed by any authority having the direct or indirect power to tax, including, without limitation, the state or federal government, any city, county, agency, improvement district or other district or any other political subdivision thereof, and whether or not now customary or within the 02/04/00 Landlord Initial's West Park Plaza - MT 3 Tenant's Initials contemplation of the parties. Tenant agrees to pay all Real Property Taxes levied against the Premises, on time as they become due, subject to the provisions of the Location, Development and Use Agreement between the parties to this Lease. (b) All Real Property Taxes for the tax year in which the Term commences and for the tax year in which this Lease terminates shall be apportioned and adjusted so that Tenant shall not be responsible for taxes and assessments for the periods of time occurring prior to the commencement or subsequent to the expiration of the Term. Tenant shall pay the pro-rata share of Real Propea Taxes for the final year of the Lease or any extension thereof, upon termination of the Lease prorated on the basis of the previous year's taxes such payment to be adjusted upon receipt of the tax notice for the final year. (c) Without limiting the generality of the definition of Real Property Taxes described above, if at any time during the Term under the laws of the United States, or the state, county, municipality, or any political subdivision thereof in which the Shopping Center is located, a tax or excise on rent or any other tax however described is levied or assessed by any such political body against Landlord on account of rent payable to Landlord hereunder, or any tax is levied or assessed upon Landlord based upon Tenant's use or occupancy or operation of its business within the Premises, such tax or excise shall be considered "Real Property Taxes" for purposes of this Section 8.1, and shall be payable in full by Tenant. e)(Gises shall be payable menthly in advanee on an estimated basis as pFevided in this Seetien 8.1 eF shall be payable within teR (10) days afteF TeRaRt'S Feseilat of the tax boll theFefeF fFeFR LandlGF 8.2 Personal Property Taxes. Tenant shall pay prior to delinquency all federal, municipal, county or state taxes, charges, assessments and fees assessed during the Term against any leasehold interest or personal property of any kind, owned by or placed in, upon or about the Premises by Tenant, whether or not title thereto is vested in Tenant. ARTICLE IX -- SECURITY DEPOSIT 9.1 Amount of Deposit. None. ARTICLE X -- CONDUCT OF BUSINESS BY TENANT 10.1 Use of Premises. Tenant shall use the Premises solely for the use specified in Section 1.10. Tenant shall not use, or permit the Premises or any part thereof to be used, for any other use. Without limiting the generality of the preceding paragraph, Tenant agrees as follows: (a) Tenant shall at no time allow gaming machines (slots or otherwise) and/or arcade amusement machines (pinball, video, etc.) to be used, operated or kept within the Premises. Tenant shall not commit or suffer to be committed any waste upon the Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenants or their customers in the Shopping Center; and (b) No use shall be made or permitted to be made of the Premises, nor acts done, which will increase the existing rate of insurance upon the Building Premises, or cause a cancellation of any insurance policy covering the Premises or any part thereof. Tenant shall not sell or permit to be kept, used, stored or sold in or about Premises any article which may be prohibited by standard form fire insurance policies. Tenant shall, at its sole cost, comply with any and all requirements pertaining to the use of the Premises of any insurance organization or company necessary for the maintenance of the fire and public liability insurance described in this Lease covering the Building and its appurtenances. If Tenant's use of the Premises results in a rate increase for the Building, Tenant shall pay within ten (10) days of billing from Landlord, as additional rent, a sum equal to the additional premium caused by such rate increase. (c) Tenant shall use its best efforts to complete, or cause to be completed, all deliveries, loading, unloading and services to the Premises prior to 10:00 a.m. each day. Tenant shall ensure that no delivery trucks or other vehicles servicing the Premises park in front of the Premises between the hours of 10:00 a.m. and 9:00 p.m. Landlord reserves the right to further regulate the activities of Tenant with regards to deliveries and servicing of the Premises. Notwithstanding anything contained herein to the contrary, Tenant may accept deliveries at the East entrance to the Premises, as depicted on the attached Site Plan, beyond the hours stipulated in this Section. 10.2 Auctions. No auction, "fire", sidewalk, close-out or bankruptcy sales may be conducted in or upon the Premises without Landlord's prior written consent. 10.3 Compliance With Laws. Tenant shall not use the Premises, or permit anything to be done in or about the Premises, which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force and with the requirements of any board of fire underwriters or other similar bodies now or hereafter constituted relating to or affecting the condition, use, occupancy, alteration or improvement of the Premises, including, without limitation, the provisions of the Americans with Disabilities Act of 1990 as it pertains to Tenant's use, occupancy, improvement and alteration of the Premises. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any law, statute, ordinance or governmental rule, regulation or requirement, shall be conclusive of that fact as between the Landlord and Tenant. 02/04/00 Landlord Initial's West Park Plaza - MT 4 Tenant's Initials ARTICLE XI -- MAINTENANCE AND REPAIRS 11.1 Landlord's Maintenance Obligations. After completion of the Work set forth in Exhibit B, Landlord on behalf of Tenant and the OtheF ae6upants of the B shall maintain in good condition and repair the foundations, roofsT (except that Tenant shall maintain, repair or replace the roof membranes), and exterior surfaces of the exterior walls of the Building (exclusive of doors, door frames, door checks, windows, window frames, and store fronts); provided, however, if any repairs or replacements are necessitated by the negligence, gross negligence, or willful acts of Tenant or anyone acting under Tenant or by reason of Tenant's failure to observe or perform any provisions contained in this Lease or caused by alterations, additions or improvements made by Tenant or anyone acting under Tenant, the cost of such repairs and replacements shall be solely borne by Tenant. It is acknowledged by Tenant that subject to Article 12 below the reasonable cost of Landlord's maintenance obligations referenced in the preceding sentence (excluding the costs of maintaining the structural portions of the walls and foundation of the Building) shall be pFerated and paid by Tenant as Common Area Expenses, as defined herein. Notwithstanding anything to the contrary contained in this Lease, Landlord shall not be liable for failure to make repairs required to be made by Landlord under the provisions of this Lease unless Tenant has previously notified Landlord in writing of the need for such repairs and Landlord has failed to commence and complete the repairs within a reasonable period of time following receipt of Tenant's written notification. Tenant waives any right of offset against any rent due hereunder and agrees not to assert as an affirmative defense in any judicial proceeding or arbitration brought by Landlord against Tenant on claims made under this Lease including, without limitation, the provisions of Section 70-26-203 of the Montana Code Annotated, or any superseding statute, and of any other law permitting Tenant to make repairs at Landlord's expense. 11.2 Landlord's Right of Entry. Landlord, its agents, contractors, employees and assigns may enter the Premises at all reasonable times upon reasonable prior notice under the circumstances (a) to examine the Premises; (b) to perform any obligation of, or exercise any right or remedy of, Landlord under this Lease; (c) to make repairs, alterations, improvements or additions to the Premises, the BuildiRg eF te etheF POFUORS ef the Shopping Gente,F as Landlord reasonably deems necessary; (d) to perform work necessary to comply with laws, ordinances, rules or regulations of any public authority or of any insurance underwriter; (e) to show prospective tenants the Premises during the last six (6) months of the Term; and (f) to perform work that Landlord reasonably deems necessary to prevent waste or deterioration in connection with the Premises should Tenant fail to commence to make, and diligently pursue to completion, its required repairs as provided herein. In exercising such entry rights, Landlord agrees to use commercially reasonably efforts under the circumstances to minimize interference with Tenant's use of the Premises. 11.3 Tenant's Maintenance Obligations. Tenant, at its sole cost and expense, shall keep the Premises and all parts thereof including, without limitation, utility meters, pipes and conduits, all fixtures, furniture and equipment including heating, ventilation and air conditioning equipment, the storefront or storefronts, Tenant's signs, locks and closing devices, security devices, windows, window sashes, casements or frames, all doors and door frames, floor coverings, including carpeting, tile and other flooring, all wall coverings, shelving, restrooms and other lavatory facilities, in first class order, condition and repair, reasonable wear and tear excepted, and shall make all replacements necessary to keep the Premises in such condition. All replacements shall be of a quality equal to or exceeding that of the original. Should Tenant fail to make, or initiate and diligently pursue, these repairs and replacements or otherwise so maintain the Premises for a period of thirty (30) days after written demand by Landlord, or should Tenant commence, but fail to complete, any repairs or replacements within a reasonable time after written demand by Landlord, Landlord may make such repairs or replacements without liability to Tenant for any loss or damage that may occur to Tenant's stock or business other than those resulting from Landlord's negligence or willful misconduct, and Tenant shall pay to Landlord the reasonable costs incurred by Landlord in making such repairs or replacements together with interest thereon at the Interest Rate from the date of commencement of the work until repaid. Tenant shall, at its expense, repair promptly any damage to the Building or the Shopping Center caused by Tenant or its agents or employees or caused by the installation or removal of Tenant's personal property. Tenant shall contract with a service company licensed and experienced in servicing HVAC equipment and approved by Landlord for the quarterly maintenance of the HVAC equipment serving the Premises and shall provide Landlord with a copy of the service contract within thirty (30) days following its execution, or Landlord, at its option, may contract with a service company of its own choosing, or provide such service itself, for the maintenance of the HVAC equipment, and bill Tenant for the reasonable cost of same. The sum so billed to Tenant shall become immediately due to Landlord as additional rent within ten (10 days after billing. Tenant shall, at its own expense, comply with all requirements, including the installation and periodic maintenance of fire extinguishers or automatic dry chemical extinguishing system, of the insurance underwriters and other governmental authority having jurisdiction thereover as necessary for maintenance of reasonable fire and extended coverage insurance for the Premises. Notwithstanding anything contained herein to the contrary, in the event Tenant must replace any existing equipment necessary to its business (except the generator) or the roof membrane(s). OF atheF eapital impreverrient, Landlord agrees to reimburse Tenant the cost of said replacement equal to the remaining useful life beyond the term of the Lease or any extension thereof according to generally accepted accounting principles. Landlord's reimbursement shall be limited to the cost of the replacement that is equal to the cost of the equipment or other capital improvement originally installed on the Premises adjusted for inflation and Tenant shall be responsible for the cost of the new equipment or capital improvement that exceeds said base amount. 11.4 Plate Glass. Tenant shall replace, at its expense, any and all plate and other glass in and about the Premises which is damaged or broken from any cause whatsoever except due to the negligence or willful misconduct of Landlord, its agents or employees. ARTICLE XII -- COMMON AREA 12.1 Common Area. Tenant agrees that all obligations and responsibilities of Landlord, financial or otherwise, set forth in the document titled "Declarations of Restrictions and Establishment of Easements Affecting Land" filed under 02/04/00 Landlord Initial's West Park Plaza - MT 5 Tenant's Initials Reception No. in the Office of the Clerk and Recorder, Flathead County, Montana, shall be assumed by Tenant. Landlord agrees that Tenant may exercise all of the rights and easements of the Landlord set forth in the document titled "Declarations of Restrictions and Establishment of Easements Affecting Land" filed under Reception No. in the Office of the Clerk and Recorder, Flathead County, Montana provided that if the exercise of any such right or easement shall either (1) adversely affect the Landlord during the Term by increasing it obligations or otherwise, or (ii) have an effect lasting beyond the Term. then Tenant may exercise such right or easement only with the prior written consent of the Landlord, such consent not to -be unreasonably withheld. delayed or conditione ARTICLE XIII -- UTILITIES Tenant shall be solely responsible for and shall promptly pay all charges for heat, water, gas, electricity, telephone and any other utility used, consumed or provided in, or furnished, or attributable to the Premises at the rates charged by the supplying utility companies. Should Landlord elect to supply any or all of such utilities, Tenant agrees to purchase and pay for the same as additional rent as apportioned by Landlord. The rate to be charged by Landlord to Tenant shall not exceed the rate charged Landlord by any supplying utility plus any reasonable expenses incurred by Landlord in connection with billing and supplying such utility service to Tenant. Unless due to the negligence of Landlord, its agents, contractors, or employees, in no event shall Landlord be liable for any interruption or failure in the supply of any such utilities to the Premises, nor shall rent be abated as a result of any such interruption. Tenant agrees to reimburse Landlord within ten (10) days of billing for fixture charges and/or water tariffs, if applicable, which are charged by local utility companies. Landlord will notify Tenant of any such charges as soon as they become known. Any such charges will increase or decrease with current charges being charged Landlord by the local utility company, and will be due as additional rent. ARTICLE XIV -- ALTERATIONS, SIGNS AND FIXTURES 14.1 Installation. Without Landlord's prior written consent, not to be unreasonably withheld, delayed or conditioned, Tenant shall not make or cause to be made any alterations, additions or improvements to the Premises (except for (a) non-structural, interior alterations not exceeding $25,000.00 in cost in any calendar year, and (b) Tenant's Work pursuant to Exhibit "B"), or install or cause to be installed any trade fixtures, floor covering, interior lighting, plumbing fixtures, or make any changes to the store front of the Premises. Tenant shall present Landlord with plans and specifications for such work concurrently with the request for approval. Notwithstanding anything to the contrary contained herein, no alterations, additions or improvements to any electrical system or outlet exceeding $10,000.00 for the Premises shall be made or allowed to be made by Tenant without first obtaining the written consent of Landlord. 14.2 Removal by Tenant. All alterations, decorations, fixtures, additions and improvements made by the Tenant, or made by Landlord on Tenant's behalf by agreement under this Lease, whether temporary or permanent in character, and whether or not affixed to the Premises (except furnishings, trade fixtures and equipment installed by Tenant) shall remain the property of Landlord and shall not be removed from the Premises without Landlord's prior written consent. During the Term, Tenant shall not remove any of its trade fixtures or other personal property, without the immediate replacement thereof with comparable fixtures or property. Notwithstanding the foregoing provisions of this Section 14.2, upon the expiration or earlier termination of this Lease, Landlord may require Tenant to remove all the alterations, decorations, fixtures, additions, and improvements, and to restore the Premises as provided in Article XV hereof. excluding those improvements Tenant made at the inception of the Lease as more fully depicted on the attached floor plan. If, following Landlord's request to do so upon the expiration of this Lease, Tenant fails to remove such alterations, decorations, additions and improvements and restore the Premises, Tenant shall promptly reimburse Landlord for the cost of removal and restoration. 14.3 Liens. Tenant shall keep the Premises free of any kinds of liens arising out of work performed for or materials furnished to Tenant, and shall promptly pay all contractors and materialmen used by Tenant to improve the Premises so as to minimize the possibility of a lien attaching thereto. If required by Landlord, Tenant shall also provide security for the lien free completion of such work in the form of a bond or other security reasonably satisfactory to Landlord. Should any lien be made or filed, Tenant shall bond against or discharge the same within twenty (20) days after written request by Landlord. Tenant shall indemnify, defend, protect and hold Landlord free and harmless from and against any and all liability, damage, claims, demands, suits, actions or expense (including attorneys' fees) arising out of any work done or materials furnished with respect to the Premises by Tenant, its employees, representatives, successors, contractors, subcontractors, materialmen and assigns. 14.4 Signs, Awnings and Canopies. "Any improvements to or work on the exterior of the Premises by Tenant, including the placement of exterior signs, shades, awnings or canopies, shall be completed in accordance with the applicable laws, rules or regulations adopted by any governmental body. ARTICLE XV -- SURRENDER OF PREMISES At the expiration or earlier termination of this Lease, Tenant shall surrender the Premises in a first class, clean condition in accordance with the requirements of Section 14.2 herein, reasonable wear and tear and damage by unavoidable casualty excepted, and shall surrender all keys for the Premises to Landlord at the place then fixed for the payment of rent and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Tenant shall remove all of its furnishings, equipment and trade fixtures, and any alterations or improvements if required by Landlord as provided in Section 14.2 hereof, before surrendering the Premises to Landlord and shall repair any 02/04/00 Landlord Initial's West Park Plaza - MT 6 Tenant's Initials damage to the Premises caused thereby. Tenant shall provide Landlord with a written statement, obtained at Tenant's sole expense from a reputable company licensed and experienced in HVAC repair and maintenance and approved by Landlord, certifying that the HVAC equipment serving the Premises was inspected and serviced, if necessary, within the last thirty (30) days of the Term and is in good working order, subject to reasonable wear and tear. ARTICLE XVI -- INSURANCE AND INDEMNITY 16.1 Tenant Insurance. During the Term, Tenant shall perform the obligations and responsibilities of Landlord set forth in Article 8 of the document titled "Declarations of Restrictions and Establishment of Easements Affecting Land" and„ filed under Reception No. in the Office of the Clerk and Recorder Flathead County, Montana, and shall maintain at its own expense in full force and effect the following insurance policies: (a) the Premises and the business opeFated by TeRant and the subtenants and eeRGessienaiFeS ef Tenant in the theFeto. The limits ef said 'RsuFanee shall not, heweyeF, "mit the liability ef T-eRaRt undeF this Lease, The aRy ebligatieRs undeF this Lease. - I , , I II be en an 66GHWeRee (and net en a 6la4Fns made) basis; The insurance policies required to be purchased and maintained by Landlord under Article 8 of the document titled "Declarations of Restrictions and Establishment of Easements Affecting Land" filed under Reception No in the Office of the Clerk and Recorder. Flathead County. Montana: (b) Insurance covering all trade fixtures, merchandise, personal property and plate glass in or upon the Premises in amounts no less than one hundred percent (100%) of the replacement value thereof, providing protection against any peril included within the classification of "Fire and Extended Coverage" including sprinkler damage, if any, vandalism and malicious mischief; (c) Boiler and machinery insurance on the air conditioning equipment, evaporative coolers, boilers, and other pressure vessels and systems whether fired or unfired, located in the Premises, and if such objects and the damage that may be caused by them or result from them are not covered by Tenant's extended coverage insurance, then such boiler insurance shall be in an amount satisfactory to Landlord and equal 100% of the replacement value of such equipment; (d) Business interruption insurance in such amount as will reimburse Tenant for direct or indirect loss of earnings attributable to the perils insured against under Subparagraphs (b) and (c) above for a period of twelve (12) months; and (e) Workers' compensation insurance as required by law. Each of Tenant's insurance policies required hereinabove shall name Landlord, and any person, firms, or corporations designated by Landlord, as additional insureds. Such persons or entities shall not, by reason of their inclusion under any such policy, incur liability for payment of any premium. Tenant's insurance policies shall contain a clause that insurer will not cancel or change coverage without first giving Landlord at least thirty (30) days prior written notice. All insurance required hereunder shall be issued by an insurance company or companies approved by Landlord, licensed to do business in Montana and having a financial rating of Class A-X or better as rated in the most current available "Bests Key Rating Guide". A copy of the policy or certificate of insurance (and of all endorsements thereto) shall be delivered to Landlord prior to Tenant's occupancy of the Premises, and thereafter at least ten (10) days prior to the expiration of any existing policy. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with and not in excess of coverage which Landlord may carry. No policy required to be maintained by Tenant under this Section shall have a deductible in excess of $1,000 without Landlord's prior written consent. If Tenant fails to maintain any insurance required under this Section, Landlord may itself maintain such insurance and charge the cost thereof to Tenant as additional rent. Such amount shall be due and owing within ten (10) days following written request therefor, and shall bear interest at the Interest Rate until paid. Landlord makes no representation or warranty to Tenant that the amount of insurance to be carried by Tenant under the terms of this Lease is adequate to fully protect Tenant's interests and Tenant assumes full responsibility to confirm the adequacy of its insurance coverage. 02/04/00 Landlord Initial's West Park Plaza - MT 7 Tenant's Initials Landlord Carried !RsuFanee based E)H the Fatie of the squaFe feetage ef the ROOF AFea ef the PFemises te the total 16.32 Indemnification of Landlord. Tenant will, during the Term, indemnify, protect, defend and save Landlord harmless from and against any and all claims, demands, actions, damages, losses, liabilities, costs and expenses (including reasonable attorneys' fees and costs of investigation with respect to any claim, demand or action) in connection with loss of life, bodily injury, personal injury and/or damage to property arising from or connected with the conduct or management of the business conducted by Tenant on the Premises, or the occupancy or use by Tenant of the Premises or any part thereof, or from any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of Tenant to be performed pursuant to this Lease, or from violations of or noncompliance with any governmental requirements or insurance requirements, or from any acts or omissions of Tenant or any person on the Premises by license or invitation of Tenant or occupying the Premises or any part thereof under Tenant, whether such injury occurs in, on or about the Premises or the Common Area, In case Landlord shall be made a party to any litigation commenced by or against Tenant, Tenant L=aadl9Fd and shall, notwithstanding any allegations of negligence or willful misconduct on the part of Landlord, its agents or employees, defend Landlord and protect and hold Landlord harmless and pay all costs, expenses and reasonable attorneys' fees incurred or paid by Landlord in connection with such litigation; provided, however, Tenant shall not be liable for any such injury or damage to the extent and in the proportion such injury or damage is ultimately determined to be attributable to the negligence or misconduct of Landlord, its agents or employees, unless such injury or damage would be covered by insurance required to be carried by Tenant under this Lease. Landlord may, at its option, require Tenant to assume Landlord's defense in any action covered by this section through counsel satisfactory to Landlord. 16.3 Indemnification of Tenant. Landlord will. during the Term. indemnify, protect defend and ave Tenant harmless from and against any and all claims demands actions damages losses liabilities costs and exes (including reasonable attorneys' fees and costs of investigation with respect to any claim demand or action) in connection with loss of life bodily injurypersonal injury and/or damage to property arising from or connected with the conduct or management of Landlord's business conducted by Landlord on the Premises or from any acts or omissions of Landlord or any person on the Premises by license or invitation of Landlord or occupying the Premises or any part thereof under Landlord. 16.4 Waiver of Subrogation. Provided that their respective policies of insurance are not invalidated thereby, each party hereby waives (a) its rights of recovery against the other party, its successors, assigns, directors, agents and representatives in connection with any loss or damage caused to the insured's property, and (b) on behalf of its carriers, any right of subrogation it may have against the other relative to such loss or damage. Each party shall notify its carrier of the waiver contained herein and shall obtain, if required by their respective insurers, any special endorsements required by such insurers to evidence compliance with the foregoing waiver. 16.5 Waiver of Loss and Damage. Except to the extent such matter would not be covered by the insurance required to be maintained by Tenant under this Lease and such matter is attributable to the negligence or willful misconduct of Landlord, Landlord shall not be liable to Tenant, Tenant's employees, agents or invitees for: (i) any damage to property of Tenant, or of others, located in, on or about the Premises, (ii) the loss of or damage to any property of Tenant or of others by theft or otherwise, (iii) any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or leaks from any part of the Premises or from the pipes, appliance of plumbing works or from the roof, street or subsurface or from any other places or by dampness or by any other cause of whatsoever nature, or (iv) any such damage caused by other tenants or persons in the Premises, occupants of adjacent property of the Shopping Center, or the public, or caused by operations in construction of any private, public or quasi -public work. 16.6 Notice by Tenant. Tenant shall give immediate reasonable notice to Landlord in case of fire or accidents in the Premises or in the Building or of any damage or defects in the Premises, the Building or any fixtures or equipment therein. 16.7 Restrictions on Uses. Tenant shall not use, or permit the Premises, or any part thereof, to be used for any purpose or purposes which will increase the existing rate of insurance upon the building or the Shopping Center (once said rate is established), or cause a cancellation of any insurance policy covering the Shopping Center or any part thereof, nor shall Tenant sell or permit to be kept, used or sold in or about the Premises any article which may be prohibited by a standard form of fire insurance policies. Tenant shall, at its sole cost, comply with any and all requirements, pertaining to the use of the Premises, of any insurance organization or company necessary for the maintenance of reasonable fire and public liability insurance covering the building and appurtenances. In the event Tenant's use of the Premises results in a rate increase for the building of which the Premises are a part, Tenant shall pay annually on the anniversary date of this Lease, as additional rent, a sum equal to that of the additional premium occasioned by said rate increase. ARTICLE XVII -- OFFSET STATEMENT, ATTORNMENT, SUBORDINATION, MORTGAGEE PROTECTION CLAUSE 17.1 Offset Statement. Within fifteen 15 days after Landlord's written request, in connection with any sale, assignment, hypothecation or other transfer of Landlord's interest in this Lease, the Premises, the Building or the 02/04/00 Landlord Initial's West Park Plaza - MT 8 Tenant's Initials Shopping Center, Tenant agrees to deliver in recordable form a certificate or tenant estoppel letter to any proposed mortgagee, purchaser, or other transferee, or to Landlord, certifying to the extent true that this Lease is in full force and effect, that to Tenant's knowledge, except for diminimus materials commonly used in offices, Tenant has not maintained during the period of Tenant's tenancy any toxic materials or hazardous waste in, on or about the Premises, that no more than one month's rent has been paid in advance, that a true and correct copy of the Lease and all amendments thereto are attached to the certificate or tenant estoppel letter, and that there are no defenses or offsets thereto, or stating those claimed by Tenant, and such other items as may be reasonably requested. Failure by Tenant to execute said offset statement shall be considered a material default by Tenant under this Lease. 17.2 Attornment and Nondisturbance. In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage, deed of trust or other encumbrance made by Landlord covering the Premises, Tenant shall attorn to the purchaser or mortgagee upon any such foreclosure sale or transfer in lieu of foreclosure sale and recognize such purchaser or mortgagee as the Landlord under this Lease, provided that any such purchaser or mortgagee shall recognize this Lease as remaining in full force and effect so long as Tenant is not in default hereunder. 17.3 Subordination. Subject to the nondisturbance and attornment provisions of Section 17.2 above, Tenant agrees that this Lease, at Landlord's option, shall be subject and subordinate to the lien of any mortgages or trust deeds or the lien resulting from any other method of financing or refinancing, now or hereafter in force against the land and buildings of which the Premises are a part or upon any buildings hereafter placed upon the land of which the Premises are a part, and to all advances made or hereafter to be made upon the security thereof. This section shall be self -operative and no further instrument of subordination shall be required unless requested by Landlord. Tenant covenants and agrees that it will execute such additional subordination agreements from time to time within twenty (20) days following written request therefor by Landlord. However, if Landlord so elects, this Lease shall be deemed senior in priority to any mortgage, deed of trust or other encumbrance upon or including the Premises, regardless of date of recording and Tenant will execute a statement in writing to such effect at Landlord's request. Tenant's failure to timely execute and return any required agreement under this Section shall be considered a material default by Tenant under this Lease. Landlord shall obtain a non -disturbance agreement reasonably satisfactory to Tenant from any ground lessor and/or the holder of any lien upon the Premises to which this Lease is subordinate. 17.4 Mortgagee Protection Clause. Tenant agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served by Tenant upon Landlord, provided that prior to such notice Tenant has been notified in writing (by way of notice of assignment of lease, or otherwise) of the addresses of such mortgagees and/or trust deed holders. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default, or if such default cannot be cured within that time, then such additional time as may be necessary, provided such mortgagees and/or trust deed holders commence such cure within thirty (30) days and diligently pursue the remedies necessary to cure such default (excluding, however, commencement of foreclosure proceedings, even if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued. Tenant shall not unreasonably withhold its consent to changes or amendments to this Lease requested by the holder of any mortgage or deed of trust covering Landlord's interest in the Premises so long as such changes do not alter the economic terms of this Lease or otherwise diminish the rights or increase the obligations of Tenant hereunder. ARTICLE XVIII -- ASSIGNMENT AND SUBLETTING 18.1 Assignment and Subletting. (a) Tenant will not assign this Lease in whole or in part, nor sublet all or any part of the Premises, without the prior written consent of Landlord, which consent Landlord shall not unreasonably withhold. Without in any way limiting Landlord's right to reasonably refuse to give consent, Landlord may withhold condition or delay its consent to any requested assignment or subletting if in Landlord's reasonable business judgment: (i) The financial strength of the proposed assignee or subtenant, both in terms of net worth and in terms of reasonably anticipated cash flow over the Lease Term, is materially less than Tenant's financial strength at the time this Lease is signed or is insufficient, based on generally accepted accounting principles, to capitalize the business to be conducted in the Premises; (ii) The business of the proposed assignee or subtenant is substantially similar to the business of another tenant currently leasing a portion of the Shopping Center, conflicts with the permitted uses set forth in this Lease, or would violate the exclusive use rights of another tenant of the Shopping Center (or a prospective tenant of the Shopping Center with which Landlord is then negotiating); (iii) The proposed assignee or subtenant is currently a tenant of the Shopping Center and other space within the Shopping Center is vacant and would adequately serve the space requirements of such assignee or subtenant. (b) Any proposed assignee or subtenant which Landlord does not disapprove shall be deemed a "Permitted Business." The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for obtaining Landlord's consent to any subsequent assignment or subletting. This prohibition against assigning or subletting shall be construed to include a prohibition against any assignment or subletting by operation of law. If this Lease is assigned by Tenant, or if the Premises or any part thereof is sublet or occupied by any person or entity other than Tenant, Landlord may collect rent from the assignee, subtenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver on the part of Landlord, or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained unless expressly made in 02/04/00 Landlord Initial's West Park Plaza - MT 9 Tenant's Initials writing by Landlord. Irrespective of any assignment or sublease, Tenant shall remain fully liable under this Lease and shall not be released from performing any of the terms, covenants and conditions of this Lease. Any assignment or sublease made by Tenant without Landlord's written consent shall be voidable at Landlord's election. If Tenant assigns this Lease or sublets the Premises or any portion thereof as permitted herein or as consented to by Landlord, any rent or additional rent paid to Tenant by such assignee or subtenant which exceeds the rent payable by Tenant to Landlord as set forth in this Lease and Tenant's reasonable subleasing costs including, but not limited to, Tenant Improvements, free rent, commissions, legal fees (which total rent shall be reasonably prorated on a square footage basis in the event that less than all of the Premises is assigned or sublet) 50% shall be paid by Tenant to Landlord as additional rent. (c) If Tenant is a corporation, or is an unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership in the aggregate in excess of forty-nine percent (49%) shall be deemed an assignment within the meaning and provisions of this Section 18.1. (d) Tenant shall pay Landlord a non-refundable processing fee of $500.00 for each requested assignment or sublease to cover Landlord's costs. This fee shall accompany any request for assignment or sublease. In addition, Tenant shall pay all costs reasonably incurred by Landlord in connection with reviewing a request to consent to an assignment or sublease, including Landlord's reasonable attorneys' and accountants' fees. 18.2 Tenant's Request. If Tenant desires to make an assignment or sublease, Tenant shall submit a written request therefor to Landlord which shall state (a) the name of the proposed assignee or subtenant, (b) the nature of the assignee's or subtenant's business to be carried on in the Premises, and (c) the terms and conditions of the proposed assignment or sublease. Tenant shall provide such financial information regarding the proposed assignee or sublessee as Landlord may reasonably request. Any assignment or sublease, if approved by Landlord, shall be pursuant to a written document approved by Landlord, and Landlord shall receive an original or copy of such fully executed document. 18.3 Recapture. If Tenant proposes to assign this Lease or sublease the Premises to a party which is not or which does not propose to operate a Permitted Business, Landlord may, at its option, exercisable upon written notice to Tenant within thirty (30) days after Landlord's receipt of the notice from Tenant set forth in Section 18.2 above, elect to recapture the Premises and terminate this Lease. If Tenant proposes to sublease all or part of the Premises to a party which is not a Permitted Business, Landlord may, at its option, exercisable upon written notice to Tenant within thirty (30) days after Landlord's receipt of the notice from Tenant set forth in Section 18.2 above, elect to recapture such portion of the Premises as Tenant proposes to sublease and, upon such election by Landlord, this Lease shall terminate as to the portion of the Premises recaptured. In the event a portion only of the Premises is recaptured, the rental payable under this Lease shall be proportionately reduced. If Tenant shall, however, elect to rescind its notice of assignment or sublease, pursuant to written demand to Landlord given within fifteen (15) days after Tenant's receipt of Landlord's notice of recapture, then Landlord shall not have said right of recapture with respect to the notice so rescinded. 18.4 Other Prohibited Transfers. Tenant shall not grant any concession or right of use or occupancy to all or any part of the Premises (other than an assignment or sublease which shall be governed by Section 18.1), without Landlord's prior written consent which may be withheld in Landlord's sole, absolute and arbitrary discretion. Any such concession, right or security interest made by Tenant without Landlord's written consent shall be null and void. If Tenant shall select or appoint some person or entity other than Tenant to manage and control the business conducted in the Premises, and the result thereof shall be substantially similar to the result of a sublease or assignment, then such selection or appointment shall be deemed an assignment within the meaning and provisions of this Article. 18.5 Sale of Premises. In the event Landlord shall sell, convey, transfer or exchange the Premises, the Shopping Center or the Building, Tenant agrees to recognize and attorn to the purchaser, or transferee, as the Landlord hereunder and Landlord shall be and is hereby relieved and released from any liability under any and all of its covenants and obligations under the Lease arising out of any act, occurrence or event which occurs after such sale, conveyance, transfer or exchange. Notwithstanding anything to the contrary, Landlord consent shall not be required for subletting or assignment to related entities. Tenant shall have the right to assign or sublease any portion of the space to any parry resulting from a corporate transfer, merger or consolidation or the sale of any significant portion of Tenant's stock or assets or to any subsidiary or affiliate of Tenant without the written consent of Landlord (Permitted Transfers). ARTICLE XIX -- ASSIGNMENT OF RENTS With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the beneficiary of a deed of trust or ground lessor on or of property which includes the Premises, Tenant agrees as follows: (a) That the execution thereof by Landlord, and the acceptance thereof by the beneficiary of such deed of trust, or the ground lessor, shall never be treated as an assumption by such beneficiary or ground lessor of any of the obligations of Landlord hereunder, unless such beneficiary or ground lessor shall, by notice sent to Tenant, specifically elect otherwise; and (b) That, except as aforesaid, such beneficiary or ground lessor shall be treated as having assumed Landlord's obligations hereunder only upon foreclosure of such deed of trust and/or the taking of possession of the Premises, or, in the case of a ground lessor, the assumption of Landlord's position hereunder by such ground lessor. 02/04/00 Landlord Initial's West Park Plaza - MT 10 Tenant's Initials ARTICLE XX -- DESTRUCTION 20A Total or Partial Destruction of Premises. If the Premises shall be damaged by fire, the elements or other casualty insured against under the provisions of Section 16.2 but are not thereby rendered untenantable in whole or in part, Landlord shall, at its own expense, cause such damage to be repaired as soon as reasonably practical, and any rent or other charges payable hereunder shall not be abated. If by reason of any damage or casualty, the Premises shall be rendered untenantable only in part, the damage shall be repaired as described above, and the Minimum Rent shall be abated proportionately based on the portion of the Premises rendered untenantable. If the Premises shall be rendered wholly untenantable by reason of such occurrence, the damage shall be repaired as described above, and the Wnknum Rent and all additional rent and common area expenses shall be abated, ^)(ee^* that' and'Wd shall have shall eease as ef the date ef said damage, the Fent and all additieRal Fent and isemmen aFea expenses te4)e-adjwted within feFly five (46) days feliewiRg the date ef sueh damage Fnay Gammenee suah repail: eF FeGeAStRiGtieR WG* 8 may eleot to teFfflinate this Lease an the expiFatien of f" fiye (46) days fe'19WiRg deliveFy ef WFiften Fiatiee te Tenant In the event the Premises are totally destroyed by fire if the Tenant requests Landlord agrees to reconstruct the Premises to the extent insurance proceeds are available for the reconstruction In the event the Premises are damaged or destroyed as a result of casualty during the last 24 months of the Term or any extension thereof, Landlord may elect to terminate this Lease provided however. if Landlord does so Landlord agrees to pay Tenant from the proceeds the fair rental value of the property as set forth in Section 1.8. 20.2 Proceeds. All proceeds from the insurance required to be kept under Section 16.2 shall be delivered to and constitute the property of Landlord and the proceeds of all property insurance covering Tenant's leasehold improvements which would constitute the property of Landlord upon termination of the Lease shall also be paid to Landlord. Unless Landlord elects to terminate this Lease in accordance with Section 20.1 above, Landlord shall apply its insurance proceeds toward reconstruction of the Premises. Tenant shall be entitled to retain the proceeds of its insurance carried pursuant to Section 16.1 covering its trade fixtures, merchandise, signs and other personal property which it would be entitled to remove upon the expiration of the Lease. 20.3 Waiver of Termination. Tenant and Landlord hereby waive any statutory rights which they may have to terminate the Lease in the event of the partial or total destruction of the Premises, Building or Shopping Center, it being agreed that the provisions of this Article XX shall control in the event of any damage or destruction. ARTICLE XXI -- EMINENT DOMAIN 21.1 Total Condemnation of Premises. If the whole of the Premises shall be acquired for any public or quasi - public use or purpose or taken by eminent domain, then the Term shall cease and terminate as of the date possession of title is given to such condemning authority in such proceeding and all rentals shall be paid up to that date. 21.2 Total Condemnation of Parking Area. If the entire portion of the Common Area used for parking in the Shopping Center ("Parking Area") shall be acquired for any public or quasi -public use or purpose or taken by eminent domain, the Term shall cease and terminate as of the date possession or title is given to such condemning authority in such proceeding unless Landlord shall provide other parking facilities substantially equal to the previously existing ratio between the Parking Area and the Premises within ninety (90) days from the date of such taking. In the event that Landlord shall provide such other parking facilities, this Lease shall continue in full force and effect without abatement of rent or other charges, except for abatement during such 90 day period. 21.3 Partial Condemnation of Premises. If any part of the Premises shall be acquired or taken by eminent domain for any public or quasi -public use or purpose, and in the event that such partial taking or condemnation shall render the Premises unsuitable for the operation of Tenant's business, this Lease shall cease and terminate as of the date possession or title is given to such condemning authority in such proceeding. In the event of a partial taking or condemnation which is not extensive enough to render the Premises unsuitable for the operation of Tenant's business, Landlord shall promptly restore the Premises to a condition comparable to its condition at the time of such condemnation less the portion lost in the taking, and this Lease shall continue in full force and effect and the Minimum Rent shall be equitably reduced based on the percentage of Floor Area of the Premises lost in the taking. 21.4 Partial Condemnation of Parking Area. If any part of the Parking Area shall be acquired or condemned by eminent domain for any public or quasi -public use or purpose and if, as the result of such partial taking, the ratio of square feet of Parking Area to square feet of the sales Floor Area of the entire Shopping Center is reduced to a ratio below 5 te--4 4 per 1,000 square feet of Floor Space in the Shopping Center, this Lease shall cease and terminate with 90 day notice to Tenant from the date possession or title is given to such condemning authority in such proceeding, unless Landlord shall provide reasonable evidence of its ability to increase the parking ratio to a ratio equal to or in excess of 6 tee 4 per 1,000 square feet of Floor Space in the Shoppinq_Center or Landlord can provide substitute parking either in or outside the Shopping Center, in which event this Lease shall be unaffected and remain in full force and effect as between the parties. 21.5 Allocation of Award. Except as provided below, in the event of any condemnation or taking as herein provided, whether whole or partial, Tenant shall not be entitled to any part of the award, as damages or otherwise, for 02/04/00 Landlord Initial's West Park Plaza - MT 11 Tenant's Initials such condemnation and Landlord is to receive the full amount of such award. Tenant expressly waives any right or claim to any part thereof, including the right or claim for the value of the unexpired portion of the Term or diminution in value of Tenant's leasehold interest, or for the value of any option to extend the Term or renew this Lease. Tenant shall, however, have the right, provided such award shall not diminish Landlord's award, 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 costs or loss which Tenant might incur in removing Tenant's merchandise, furniture, fixtures and equipment from the Premises. Tenant hereby waives any rights it might otherwise have pursuant to Montana law to terminate this Lease as a result of any condemnation action or proceeding in lieu thereof. ARTICLE XXII -- DEFAULT 22.1 Notice and Remedies. In the event of Tenant's failure to pay rent or to perform any of Tenant's other obligations under this Lease, or any part thereof, when due or called for hereunder, Tenant shall have a period of four (4) business days after service of written notice by Landlord specifying the nature of Tenant's default within which to cure such defaults, provided that if the nature of a non -monetary default is such that it cannot be fully cured within said four (4) business day period, Tenant shall have such additional time as may be reasonably necessary to cure such default days so long as Tenant commences such cure promptly after service of Landlord's notice and proceeds diligently at all times to complete such cure. Tenant agrees that a notice served in accordance with the provisions of this Section 22.1 shall be in lieu of, and not in addition to, any notice required under applicable law. If Tenant fails to comply with the foregoing provisions, Tenant shall be deemed to be in material breach of this Lease, and Landlord with or without further notice or demand may either: (a) Terminate Tenant's right to possession of the Premises because of such breach, and upon termination, recover from Tenant as damages (i) the worth at the time of award of any unpaid rent which had been earned at the time of termination, plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been due and payable after termination until the time of award exceeds the amount of such rent loss that Tenant proves could have been reasonably avoided, plus (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rent loss that Tenant proves could be reasonably avoided, plus (iv) any other amounts necessary to compensate Landlord for all of the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom, including, without limitation, any reasonable costs or expenses incurred by Landlord insofar as they are reasonably necessary to bring the Premises to a market -oriented condition and for market -oriented expenses. (A) in retaking possession of the Premises, (B) in maintaining, repairing, preserving, restoring, replacing, cleaning, altering or rehabilitating the Premises or any portion thereof, including such acts for reletting to a new tenant or tenants, (C) for leasing commissions, or (D) for any other costs necessary or appropriate to relet the Premises, plus (v) at Landlord's election, such other reasonable amounts and remedies in addition to or in lieu of the foregoing as may be permitted from time to time by the laws of the State of Montana. The "worth at the time of award" of the amounts referred to in subsections 22.1 (a) (i) and (ii) above shall be computed by allowing interest at the Interest Rate. The "worth at the time of award" of the amount referred to in subsection 22.1 (a) (III) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%. Tenant hereby waives redemption or relief from forfeiture under current Montana law, or under any other present or future law, in the event Tenant is evicted or Landlord takes possession of the Premises by reason of any default of Tenant hereunder. No act by Landlord other than giving written notice thereof to Tenant shall terminate this Lease. Any act of maintenance or efforts to relet the Premises or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession; or (b) Not terminate Tenant's right to possession because of such breach, but continue this Lease in full force and effect; and in that event (1) Landlord may enforce all rights and remedies under this Lease and under the provisions of Montana law, including the right to recover the rent and all other charges due hereunder as such rent and other charges become due hereunder, and (2) Tenant may assign its interest in this Lease with Landlord's prior written consent, which shall not be unreasonably withheld, delayed or conditioned, as provided in Section 18.1 herein; or (c) With or without terminating this Lease, re-enter the Premises and remove all persons and property from the Premises. Such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. No re-entry or taking possession of the Premises by Landlord pursuant to this paragraph shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant. Landlord shall use commercially reasonable efforts to mitigate Tenant's damages. 22.2 Default by Landlord. Landlord shall be deemed to be in default under this Lease only if Landlord fails to perform any of the covenants or conditions required on its part to be performed pursuant to this Lease, and such failure continues for a period of thirty (30) days after receipt of written notice specifying the nature and extent of such default in detail; provided, however, that if such default is of a nature that it cannot reasonably be cured within such thirty (30) day period, Landlord shall have such additional time as may be required to effect such cure provided Landlord commences the cure within such thirty (30) day period and thereafter diligently prosecutes such cure to competition. In no event shall Tenant have the right to terminate this Lease as a result of Landlord's default and Tenant's remedies shall be limited to damages and/or an injunction. 22.3 Limitation on Tenant's Recourse. Tenant's sole recourse under this Lease against Landlord is to the interest of Landlord in and to the Premises and any portion of the Shopping Center owned by Landlord. Tenant shall have no right to satisfy any judgment which it may have against Landlord from any other assets of Landlord or from 02/04/00 Landlord Initial's West Park Plaza - MT 12 Tenant's Initials any other assets of any partner, venturer or shareholder of Landlord or any beneficiary of any trust of which any person from time to time holding Landlord's interest is trustee. The provisions of this Section are not intended to limit Tenant's right to seek injunctive relief or specific performance, or Tenant's right to claim the proceeds of insurance (if any) specifically maintained by Landlord for Tenant's benefit. The foregoing limitations shall also apply to any successor to Landlord's interest in the Premises. In no event shall Landlord ever be liable to Tenant for any indirect or consequential damages by reason of Landlord's breach or default of the terms of this Lease. 22.4 Insolvency. The occurrence of any of the following shall constitute a material, incurable breach which shall entitle Landlord to the remedies provided in Section 22.1 (the cure periods provided below shall be in lieu of, and not in addition to, any cure periods provided in Section 22.1): (a) This Lease or the Premises or any part of the Premises are taken upon execution or by other process of law directed against Tenant, or are taken upon or subjected to any attachment by any creditor of Tenant or claimant against Tenant, and such attachment is not discharged within thirty (30) days after its levy; (b) Tenant files a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or under any insolvency act of any state, or is dissolved, or makes an assignment for the benefit of creditors; or (d) Involuntary proceedings under any such bankruptcy laws or insolvency act or for the dissolution of Tenant are instituted against Tenant, or a receiver or trustee is appointed for all or substantially all of Tenant's property, and such proceedings are not dismissed or such receivership or trusteeship is not vacated within sixty (60) days after such institution or appointment. 22.5 Improvement Rent If Tenant fails to make an Improvement Rent payment as set forth in Sections 1.6 and 4 1 Landlord may accelerate the payment of the entire amount of Improvement Rent due for the entire Term so that that entire amount shall be then due and owing and may draw the entire amount due from the ignatory of the Letter of Credit provided that the entire amount due shall be reduced to present day value using an interest rate of 11.5 percent Landlord's remedy for any default of Tenant in making Improvement Rent Payments on time shall be the acceleration of the entire amount of the Improvement Rent obligation and draw upon the Letter of Credit and shall not include termination of this Lease. ARTICLE XXIII -- HOLDING OVER, SUCCESSORS 23.1 Holding Over. Any holding over after the expiration of the Term, with the consent of the Landlord, express or implied, shall, in the absence of a written agreement providing otherwise, be construed to be a tenancy from month to month at a Minimum Rent equal to 150% of the Minimum Rent in effect upon the expiration of the Term and shall otherwise be on the terms and conditions of this Lease. 23.2 Successors. All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators, successors, and assigns of said parties; and if there shall be more than one party comprising Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant unless the assignment of such assignee has been approved by Landlord in writing as provided in Section 18.1 hereof. ARTICLE XXIV -- QUIET ENJOYMENT 24.1 Landlord's Covenant. Upon timely payment by Tenant of the rents herein provided, and upon the observance and performance of all of the covenants, terms and conditions on Tenant's part to be observed and performed hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term without unreasonable hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under the Landlord, subject, nevertheless, to the terms and conditions of this Lease. ARTICLE XXV -- LANDLORD WAIVER Within thirty (30) days after written request from Tenant, Landlord agrees to waive in writing (the "Landlord Waiver") for the benefit of a bonafide third -party lender ("lender") any lien or security interest on Tenant's property now or hereafter placed in the Premises and not paid for by Landlord, such as trade fixtures, machinery, equipment, furnishings and other articles of personalty (collectively, the "personalty"). The Landlord Waiver shall be in form and substance satisfactory to Landlord and shall in all events require the lender to (a) indemnify Landlord for all losses caused by the lender's (and its employees', agents' and contractors') activities on or about the Premises, (b) refrain from conducting any public auction of the personalty from the Premises, (c) immediately repair all damage caused by its removal of the personalty from the Premises, and (d) give Landlord reasonable prior written notice prior to removing the personalty from the Premises. ARTICLE XXVI -- MISCELLANEOUS 26.1 Index. Wherever in this Lease there is a reference to the Index, such reference shall refer to the following: 02/04/00 Landlord Initial's West Park Plaza - MT 13 Tenant's Initials (a) The "Index" as used in this Lease shall be deemed to mean the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index -Los Angeles -Anaheim -Riverside -All Urban Consumers -All Items -Base 1982- 1984=100. If at any time the Index does not exist in the format recited herein, Landlord shall substitute any official index published by the Bureau of Labor Statistics or successor thereto or similar governmental agency, as may then be in existence and shall, in Landlord's opinion, be most nearly equivalent thereto. (b) The sum to be increased in accordance with the provisions of the Index shall be increased using the following formula: Such sum shall be increased by a percentage equal to the percentage increase, if any, in the Index published for the Comparison Month over the Index published for the Base Month; provided, however, in no event shall said sum be less than that which was due immediately preceding the date of adjustment. 26.2 Waiver. The waiver by either party of any breach of any term, covenant or condition of this Lease shall not be deemed to be a waiver of any other term, covenant or condition of this Lease or of any subsequent breach of the same term, covenant or condition. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No covenant, term or condition of this Lease shall be deemed to have been waived by either party, unless such waiver is in writing by the waiving party. 26.3 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 a partial payment of the rent herein stipulated, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, 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 in this Lease. 26.4 Entire Agreement. This Lease, and -the Exhibits- and Addenda, if any, attached hereto and forming a part hereof, the Declarations of Restrictions and Establishment of Easements Affecting Land" filed under Reception No in the Office of the Clerk and Recorder. Flathead County. Montana and the "Location Development and Use Agreement between the parties, set forth all the representations, covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Premises, and there are no representations, covenants, promises, agreements, conditions or understandings, either oral or written, between them other than are herein set forth. 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 parties. 26.5 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 by reason of this Lease. The provisions of this Lease relating to the Percentage Rent payable hereunder are included solely for the purpose of providing a method whereby rent is to be measured and ascertained. 26.6 Force Majeure. In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of acts of God, strikes, lock -outs, labor troubles, inability to procure materials, failure of power, governmental moratorium, riots, insurrection, war or other reason of a like nature not the fault of the party delaying in performing work or doing acts required under the terms of this Lease (but excluding delays due to financial inability) (herein collectively, "Force Majeure Delays"), then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. The provisions of this Section 26.6 shall not apply to nor operate to excuse Tenant from the payment of Minimum Rent, additional rent or any other payments strictly in accordance with the terms of this Lease. 26.7 Notices. All notices hereunder must be served personally by nationally recognized overnight delivery service to Tenant at the address specified in Section 1.14 and to Landlord at the address specified in Section 1.15, or at such other address as Landlord or Tenant may designate by written notice pursuant to this Section. 26.8 Captions and Section Numbers. The captions, section numbers and article numbers in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such sections or articles of this Lease nor in any way affect this Lease. 26.9 Tenant Defined, Use of Pronoun. The word "Tenant" means jointly and severally each and every person or party mentioned as a tenant herein; and if there shall be more than one Tenant or more than one party comprising Tenant, any notice required or permitted by the terms of this Lease may be given by or to any one thereof, and shall have the same force and effect as if given by or to all thereof. The use of the neuter singular pronoun to refer to Landlord or Tenant shall be deemed a proper reference even though Landlord or Tenant may be an individual or entity or a group of two or more individuals or entities. The necessary grammatical changes required to make the provisions of this Lease apply in the plural sense where there is more than one Landlord or Tenant and to either corporations, associations, partnerships, or individuals, males or females, shall in all instances be assumed as though in each case fully expressed. 26.10 Partial Invalidity. If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and enforceable to the fullest extent permitted by law. 02/04/00 Landlord Initial's West Park Plaza - MT 14 Tenant's Initials 26.11 No Option. The submission of this Lease for examination does not constitute a reservation of or option for the Premises and this Lease becomes effective as a Lease only upon execution and delivery thereof by Landlord to Tenant. 26.12 Recording. At either party's T'ertaFW& request, Landlord and Tenant shall execute and record a memorandum of this Least at Terms the requesting partv's expense. 26.13 Legal Expenses. If either Landlord or Tenant should bring suit against the other with respect to this Lease, then all reasonable costs and expenses, including without limitation, actual professional fees and costs such as appraisers', accountants' and attorneys' fees and costs, incurred by the party which prevails in such action, whether by final judgment or out of court settlement, shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment. As used herein, attorneys' fees and costs shall include, without limitation, attorneys' fees, costs and expenses incurred in connection with any (i) postjudgment motions; (ii) contempt proceedings; (iii) garnishment, levy, and debtor and third party examination; (iv) discovery; and (v) bankruptcy litigation. 26.14 Rights Cumulative. The rights and remedies of Landlord specified in this Lease shall be cumulative and in addition to any other rights and remedies provided by law. 26.15 Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of such entity represents or warrants that he or she is duly authorized to execute and deliver this Lease on behalf of such entity and that such entity shall be bound by all the terms and provisions hereof. 26.16 Time of the Essence. Time is of the essence of each and every provision of this Lease except for delivery of possession of the Premises as set forth herein. 26.17 Lease Addenda and Exhibits. This Lease contains the following Addenda and Exhibits which are attached hereto and incorporated herein by this reference: (a) Addenda: Addendum No. 1 Use Restrictions Addendum No. 2 Extension of Term Addendum No. 3 Rider to Lease Addendum No. (b) Exhibits: Exhibit "A" - Exhibit "B" - Exhibit "C" - Exhibit "D" - Exhibit "E" - xhibi - Site Plan Construction Agreement Sign Criteria Rules and Regulations Letter of Credit 02/04/00 Landlord Initial's West Park Plaza - MT 15 Tenant's Initials IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date first written above. LANDLORD: THE CITY OF KALISPELL, A BODY POLITIC, By: William E. Boharski, Mayor THE FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY, A BODY POLITIC Bv: Don Bennett, Board Chair TENANT: STREAM INTERNATIONAL SERVICES CORP., A DELAWARE CORPORATION By: Its: President 02/04/00 Landlord Initial's West Park Plaza - MT 16 Tenant's Initials ADDENDUM NO. 1 TO SHOPPING CENTER LEASE (Use Restrictions) This Addendum is attached to that certain Shopping Center Lease dated March 8, 2000, (the "Lease"), between THE CITY OF KALISPELL, A BODY POLITIC, AND THE FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY, A BODY POLITIC, as Landlord, and STREAM INTERNATIONAL SERVICES CORP., A DELAWARE CORPORATION, as Tenant, with respect to premises (the "Premises") in the Gateway West Mall in the City of Kalispell, Flathead County, Montana, more particularly described in the Lease. The following additional new terms or modifications to existing terms are hereby made a part of the Lease as though fully set forth therein: Hazardous Materials. Tenant hereby makes the following covenants regarding hazardous materials: (a) Tenant shall at all times and in all respects comply with all federal, state and local laws, ordinances and regulations, including, but not limited to, the Federal Water Pollution Control Act (33 U.S.C. § 1251, et seq.), Resource Conservation & Recovery Act (42 U.S.C. § 6901 et seq.), Safe Drinking Water Act (42 U.S.C. § 300f et seq.), Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601. et seq.), California Health & Safety Code (§ 25100 et seq., § 39000 et seq.), and other comparable state, county, municipal, local or other statute, law, regulation or ordinance ("Hazardous Materials Laws"), relating to industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, disposal or transportation of any oil, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminated or polluting materials, substances or waste, including, without limitation, any "hazardous substances", "hazardous wastes", "hazardous materials" or "toxic substances" under any such laws, ordinances or regulations (collectively, "Hazardous Materials"). (b) Tenant shall, at its own expense, procure, maintain in effect and comply with all conditions of any and all permits, licenses, and other governmental and regulatory approvals required for Tenant's use of the Premises, including, without limitation, discharge of (appropriately treated) materials or wastes into or through any sanitary sewer serving the Premises. Except as discharged into the sanitary sewer in strict accordance and conformity with all applicable Hazardous Materials Laws, Tenant shall cause any and all Hazardous Materials removed from the Premises to be removed and transported solely by duly licensed haulers to duly licensed facilities for final disposal of such materials and wastes. Tenant shall in all respects handle, treat, deal with and manage any and all Hazardous Materials in, on, under or about the Premises in total conformity with all applicable Hazardous Material Laws and prudent industry practice regarding management of such Hazardous Materials. Upon expiration or earlier termination of the Lease Term, Tenant shall cause all Hazardous Materials to be removed from the Premises and transported for use, storage or disposal in accordance with and compliance with all applicable Hazardous Materials Laws. Tenant shall not take any remedial action in response to the presence of any Hazardous Materials in or about the Premises or any building, nor enter into any settlement agreement, consent decree or other comprise in respect to any claims relating to any Hazardous Materials in any way connected with the Premises or any building, without first notifying Landlord of Tenant's intention to do so and affording Landlord ample opportunity to appear, intervene or otherwise appropriately assert and protect Landlord's interest with respect thereto. (c) Tenant shall immediately notify Landlord in writing of: (i) any enforcement, cleanup, removal or other governmental or regulatory action instituted, completed or threatened pursuant to any Hazardous Materials Laws; (ii) any claim made or threatened by any person against Tenant, the Premises or any building relating to damage, contribution, cost recovery compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (iii) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in or removed from the Premises or any building, including any complaints, notices, warnings or asserted violations in connection therewith. Tenant shall also supply to Landlord as promptly as possible, and in any event within five (5) business days after Tenant first receives or sends the same, with copies of all claims, reports, complaints, notices, warnings or asserted violations, relating in any way to the Premises, any building or Tenant's use thereof. Tenant shall promptly deliver to Landlord copies of hazardous waste manifests reflecting the legal and proper disposal of all Hazardous Materials removed from the Premises. (d) Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect, and hold Landlord and each of Landlord's partners, employees, agents, attorneys, successors and assigns, free and harmless from and . against any and all claims, liabilities, penalties, forfeitures, losses or expenses (including attorneys' fees), or death of or injury to any person or damage to any property whatsoever, arising from or caused in whole or in part, directly or indirectly, by (i) the presence in, on, under or about the Premises or any building, of any Hazardous Materials caused by or knowingly permitted by Tenant or for which Tenant may be legally liable; (ii) Tenant's use, analysis, storage, transportation, generation of Hazardous Materials to, in, on, under, about or from the Premises or any building; or (iii) Tenant's failure to comply with any Hazardous Materials Laws. Tenant's obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, cleanup or detoxification or decontamination of the Premises or any building, or the preparation and implementation of any closure, remedial action or other required plans in connection therewith, and shall survive the expiration or earlier termination of the Lease term. For purposes of the release and indemnity provisions hereof, any acts or omissions of 02/04/00 ADDENDUM NO. 1 -1- West Park Plaza - MT Landlord Initial's Tenant's Initials Tenant, or by employees, agents, assignees, contractors or subcontractors of Tenant or others acting for or on behalf of Tenant (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Tenant. (e) If at anytime it reasonably appears to Landlord that Tenant is not maintaining sufficient insurance or other means of financial capacity to enable Tenant to fulfill its obligations to Landlord hereunder, whether or not then accrued, liquidated, conditional or contingent, Tenant shall procure and thereafter maintain in full force and effect such insurance or other form of financial assurance, with or from companies or persons and in forms reasonably acceptable to Landlord, as Landlord may from time to time reasonably request. 2. Sewer Damages. Tenant agrees not to discharge any acid or other harmful or dangerous chemicals into the sewer system, the sinks, drains and toilets, if any, of the Premises or inside the main system leading from the Premises to the main sewer line. Should Tenant discharge any acid or harmful chemicals into any such systems, Tenant shall be fully responsible for the cost and repair of such damage. Landlord reserves the right to select an expert of its choosing to inspect any damage at Tenant's cost. Initial 02/04/00 ADDENDUM NO. 1 Initial -2- West Park Plaza - MT Landlord Initial's Tenant's Initials ADDENDUM NO. 2 TO SHOPPING CENTER LEASE (Extension of Term) This Addendum is attached to that certain Shopping Center Lease dated March 8, 2000, (the "Lease"), between THE CITY OF KALISPELL, A BODY POLITIC, AND THE FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY, A BODY POLITIC, as Landlord, and STREAM INTERNATIONAL SERVICES CORP., A DELAWARE CORPORATION, as Tenant, with respect to premises (the "Premises") in the Gateway West Mall in the City of Kalispell, Flathead County, Montana, more particularly described in the Lease. The following additional new terms or modifications to existing terms are hereby made a part of the Lease as though fully set forth therein: 1. Provided that Tenant is not in default under the Lease beyond expiration of any applicable cure periods and provided Tenant has not assigned or sublet the Premises in whole or in part, Tenant shall have the right to extend the term of the Lease for two (2) additional five (5) year period(s) (each, an "extension term") under the same terms and conditions as the original Lease (except for Rent as provided below). It is understood that this option is unique to STREAM INTERNATIONAL SERVICES CORP., A DELAWARE CORPORATION, and upon any assignment or subletting, with or without Landlord's consent, this option shall be rendered null and void. 32. In order to exercise such option to extend the Term of the Lease, Tenant shall give to Landlord written notice of its election to do so no fewer than one hundred eighty (180) days and no more than three hundred sixty (360) days prior to expiration of the original Term or extension term, as applicable, and if Tenant shall fail to give such notice within said time limit, all rights and privileges as granted to Tenant to extend the term of the Lease shall thereupon be null and void. 4-3. If Tenant shall exercise an option to extend the Term set forth herein, then the parties shall attempt to agree upon'the Minimum Rent for the initial year of the extension term in writing. Notwithstanding the amount of square feet actually leased by Tenant the Rent shall be based upon market rent for 50 000 square feet If the parties are unable to agree on the Minimum Rent within thirty (30) days following Landlord's receipt of Tenant's written election to extend the Term, then the Minimum Rent shall be determined by arbitration in accordance with the provisions of this Section. Should Tenant be subject to a late charge for two (2) consecutive months during any extension term M44mttrn Rent for the following twelve (12) months shall automatically be adjusted to be quarterly rental payable in advance commencing upon the first day of the month following such consecutive late month and continuing for the next twelve (12) months on a quarterly basis in advance. 54. Within fifteen (15) days after the expiration of such thirty (30) day period, each party shall appoint a duly qualified MAI appraiser with a well known firm who has at least five (5) years experience specializing in retail and office leasing and sale of commercial properties to act as an arbitrator. Within fifteen (15) days thereafter, the two arbitrators so appointed shall appoint a third person similarly qualified to act as the third arbitrator. If the two arbitrators appointed by the parties are unable to agree on the third arbitrator, then the parties hereto (or either of them) shall diligently apply to the Judge of the District Court in Flathead County, Montana, for the appointment of such a person. Within thirty (30) days after appointment of the third arbitrator, the three arbitrators shall attempt to determine the fair market MiniffluM Rent for i the �,�-",itial year9 the extension term, taking into account the terms of the Lease, the location of the Shopping Center and its major co -tenants, and the market rental value of similar space within the Shopping Center. If the arbitrators are unable to reach a unanimous agreement, the vote of two shall control and the decision of the arbitrators shall be final and binding upon the parties hereto. If no two of the arbitrators are able to reach an agreement, each of the arbitrators shall submit in writing a proposed fair market Minimum Rent. The two proposals that are closest to each other in amount shall be averaged together, and the averaged amount shall be deemed the fair market Minirnufn Rent and shall be final and binding upon the parties hereto. Landlord and Tenant shall each bear the entire cost of the arbitrator appointed by it, and one-half of the cost of the third arbitrator and any other costs of the arbitration. 65. Pending determination of such adjusted rental, the Minimum Rent for the extension term shall be equal to the Minimum Rent in effect upon the expiration of the prior original Term or extension term, as applicable the expiFatien date „f the teffnifl eFda..,.e with the Lease. Upon determination of the new MiRimum Rent, the previous Minimum Rent shall be retroactively adjusted and paid within thirty (30) days of such determination. Initial Initial Addendum No. 2 02/04/00 Landlord Initials West Park Plaza — MT Tenant Initials ADDENDUM NO.3 TO SHOPPING CENTER LEASE (Rider to Lease) RIDER TO LEASE DATED MARCH 8, 2000 BETWEEN THE CITY OF KALISPELL, A BODY POLITIC, AND THE FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY, A BODY POLITIC ("LANDLORD") AND STREAM INTERNATIONAL SERVICES CORP., A DELAWARE CORPORATION ("TENANT") A. PROHIBITED USE. Tenants and/or Tenant's assignees hereby covenant that during the entire term of this Lease or any extension thereof, they will respect and abide by any other exclusive agreements Landlord has granted. 1. Tenant shall be prohibited from operating an adult book store, gym, dance hall, billiard or pool hall, massage parlor, theater, bowing alley, skating rink, warehouse (except the existing Sears Warehouse), car wash, or for the renting, leasing or sale of or displaying for the purpose of renting, leasing or sale of any motor vehicle or trailer, or for industrial purposes. Nothing in this paragraph shall adversely affect or invalidate any existing lease or occupancy of any tenant of the Shopping Center. 2. Tenant shall be prohibited from operating a Supermarket (which shall be defined as any store or department containing at least five thousand (5,000) square feet of floor area, including aisle space and storage, primarily devoted to the retail sale of food for off premises consumption), a bakery, a doughnut shop, a delicatessen, nor for the sale of fresh or frozen meat, poultry or produce for off premises consumption. Such restriction on the use of the Premises shall terminate if the Albertson's Premises is not used as a Supermarket for a continuous period of six (6) months for any reason other than: (i) strikes, walkouts, or other labor difficulties, war, riot, insurrection, act of God fire or other casualty, the requirements of any governmental act, law or regulation, or any temporary closure beyond the reasonable control of Tenant; or (ii) temporary closure due to restoration, reconstruction, expansion or remodeling of any building on the Albertson's Premises. 3. Tenant shall be prohibited from operating a Drugstore (which shall be defined as retail operation of a similar type to that operated by American Stores, Inc. [Osco] or their affiliates), nor for the sale or offer for sale of any ethical pharmaceutical products requiring the services of a registered pharmacist. Such restriction shall terminate if the Premises are not used as a Drugstore for a continuous period of six (6) months for any reason other than: (i) strikes, walkouts, or other labor difficulties, war, riot, insurrection, act of God fire or other casualty, the requirements of any governmental act, law or regulation, or any temporary closure beyond the reasonable control of Tenant; or (ii) temporary closure due to restoration, reconstruction, expansion or remodeling of any building on the Albertson's Premises. 4. Tenant shall be prohibited from the retail sale of Brio Toys, Educational Insights, Aristo Play, Battat, Ravesberger, Himstedt Dolls, European Artist Dolls, Susan Waukeen Dolls, and Steiff Toys. 5. Tenant shall be prohibited from the sale of greeting cards as their primary business, primary defined to be more than twelve (12) linear feet of greeting cards for sale. 6. Tenant is prohibited from operating a fitness center, health club, and/or aerobic studio in the Shopping Center. 7. Tenant is prohibited from operating a nail salon as its primary business, primary is defined to be 50% or greater of gross sales. This paragraph Rider "A", Prohibited Use, shall only act to restrict Tenant's rights that Tenant may otherwise have under the terms of this lease. It is not the intent of the parties hereto to have this paragraph Rider "A" interpreted in a manner which would broaden or grant any greater rights to Tenant than is otherwise set forth in the Lease. B. The following additional new terms or modifications to existing terms are hereby made a part of the Lease as though fully set forth therein: Addendum No. 3 02/04/00 Landlord Initials West Park Plaza — MT Tenant Initials To the extent of any conflict between the terms of this Addendum and the terms of the Lease, the terms of this Addendum shall prevail and control. Initial Addendum No. 3 02/04/00 Landlord Initials West Park Plaza — MT Tenant Initials SITE PLAN (To Be Supplied) EXHIBIT "A" 02/04/00 Landlord Initials West Park Plaza — MT Tenant Initials CONSTRUCTION AGREEMENT 1. Plans Within ten (10) days after execution hereof, Tenant, at its expense shall submit to Landlord for its approval two (2) sets of fully dimensioned scale drawings, prepared by a licensed architect or building designer, which drawings shall indicate the specific requirements of Tenant's space, clearly outlining the store in such detail as Landlord may require, including types of materials and colors, interior partitions, reflected ceiling plan, roof plan, if applicable, plumbing fixtures, and electrical plans prepared by a licensed electrical engineer setting forth all electric requirements of Tenant, all in conformity with the description of Landlord's Work and description of Tenant's Work herein. Landlord shall have thirty (30) days from receipt of these drawings to approve or disapprove them. If Landlord disapproves such plans, Tenant shall, within ten (10) days of receipt of Landlord's notice of disapproval, revise and resubmit such plans to Landlord, correcting or altering such disapproved items. 2. Landlord's Work Landlord agrees to deliver possession of the Premises to Tenant [in its "AS -IS" condition.] or [with the following improvements ("Landlord's Work"):] [The following is optional and should only be used (or supplemented if Landlord is performing any additional or different work) to the extent necessary.] A. Structure 1. Partitioning: Standard demising walls consisting of a) unpainted masonry, b) drywall over studs, taped and finished, ready to receive paint, or c) other materials permitted by applicable building or fire code. 2. Doors: One (1) front entry door, manually operated and one (1) single rear personnel/service door manually operated if feasible and necessary, with cylinder lock key sets. 3. Storefron : In accordance with Landlord's design. Any alteration and/or deviations to the storefront must be requested by Tenant, in writing, and be approved by Landlord. All excess costs for design and construction above the standard storefront shall be borne by Tenant. 4. Floor: Standard natural colored concrete slab. 5. Roof Platforms and Penetrations: Roof platforms for heating and air conditioning equipment and roof penetrations for ducts, vents, plumbing and conduits shall be provided in accordance with Landlord's drawings. Any additions, deletions, relocations or changes to the roof platforms or roof penetrations must be requested by Tenant in writing, and be approved by Landlord. All costs for the design and construction of these additions, deletions, relocations or changes from that on Landlord's drawings and any repair required to the roof itself, shall be borne by Tenant. Utilities. 1. Heating/Air Conditioning: One or more heating and air conditioning unit(s) will be furnished consistent with sound engineering practices and per state energy requirements in effect when the Building was constructed. Unit(s) will be located on platform(s) constructed on the roof structure. Air conditioning will not be provided for dry cleaning plants, laundries, kitchen areas for restaurants or for similar businesses not normally air conditioned. Heating and air conditioning equipment control devices and time switch will be furnished and installed. 2. Electrical Service: One 200 amp 120/408 volts, 3 phase, 4 wire electric service panel(s). Meter will not be supplied. 3. Gas Service: Gas service shall be brought to locations designated on Landlord's drawings only. 4. Telephone Service: Telephone service shall be brought to telephone equipment room and one (1) empty conduit for same shall be provided to the Premises by Landlord. Tenant shall arrange for further interior distribution. 5. Electrical Outlets: One (1) 110V wall duplex outlet per 250 square feet, up to a maximum of six (6) outlets. Floor outlets are not furnished. 6. Liaht Fixtures: A minimum of one (1) 2' x 4' lay -in fluorescent fixture for every 100 square feet including necessary conduit and wiring per Landlord's drawings. EXHIBIT "B" 02/04/00 Landlord Initials Sprinkler System (If Applicable). If required, a fire sprinkler system based on a standard grid and store space. System will be sized to permit the addition of heads to accommodate space configuration changes. Such changes, if required, shall be supplied by Landlord at Tenant's expense. 8. Restroom: One (1) standard restroom to code consisting of vinyl flooring, Marolite walls, one water closet, one cold water lavatory, one light fixture and one wall outlet per Landlord's drawings and specifications. Water heater shall not be supplied by Landlord. C. Signs Ceilings Si na e: One (1) conduit and "J" box without wire from Landlord's service panel to designated sign location per Landlord's drawings for sign lighting. Address Numerals: Address numerals shall be provided and installed by Landlord. Ceiling: 2' x 4' acoustical tile ceiling with suspended T-bar system at a height above finished floor as designated on Landlord's drawings. Tenant's Work A. General Requirements Tenant shall submit to Landlord, by certified or registered mail, at least ten (10) days prior to the commencement of construction, the following information: a. The names and addresses of all contractors and subcontractors Tenant intends to engage in the construction of the Premises. b. The date on which Tenant's construction work will commence, together with the estimated date of completion of Tenant's construction work and fixturization, and the date on which Tenant expects to be ready to open for business in the Premises. C. Evidence of such builders all risk and worker's compensation insurance as Landlord may reasonably require. d. An itemized statement of estimated construction costs, including architectural, engineering and contractors' fees. e. Tenant's contractors' performance and/or labor and material bonds, if so required by Landlord, or any other bond to be furnished by Tenant as may be required by Landlord to insure the faithful performance of the work in accordance with the approved plans. 2. All contractors engaged by Tenant shall be bondable, licensed contractors, possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord's contractors and other contractors on the job. All work shall be coordinated with the general project work of the Shopping Center. 3. Construction shall comply in all respects with applicable Federal, State, County and City statutes, ordinances, regulations, laws and codes. All required building and other permits in connection with the construction and completion of the Premises shall be obtained and paid for by Tenant. 4. Tenant shall apply and pay for all utility services. 5. Tenant shall cause its contractor to provide warranties for not less than one (1) year against defects in workmanship materials and equipment. 6. Tenant's Work shall be subject to the inspection of Landlord and its supervisory personnel. Description of Tenant's Work The work to be done by Landlord in satisfying its obligation to construct the demised Premises shall be limited to only that described in the foregoing Paragraph 2. All other items of work not therein specified shall be performed by Tenant at Tenant's expense in accordance with Tenant's final plans and specifications as approved by Landlord. Tenant's Work shall include, but shall not be limited to, the purchase and/or installation and/or performance of the following (including all architectural and engineering fees, permits and special assessments, taxes or fees relating to Tenant's work): All interior partitions and curtain walls within the Premises. B-2 02/04/00 Landlord Initials 2. Such extra or special work that may be required for the installation of Tenant's fixtures and furnishings. 3. Light coves and hung or furred ceilings. Any changes to the ceiling system shall be subject to Landlord's prior written approval. 4. Furring of masonry walls, columns and other construction to provide finished store space. 5. All interior painting, decorating, wall covering, paneling and any other finishing materials and applications. 6. All floor coverings and floor finishes including base and preparation of surface to receive the same. 7. All store fixtures, furnishings and accessories. 8. Hot water heater, water treatment systems and drinking fountains with plumbing thereto connected to facilities provided by Landlord, if required. 9. All water and sewer connections if required in excess of Landlord's provision including any related governmental or other fees related to said connections. 10. All required adjustments and additions to the fire sprinkler system, if any, and fire protection work required as a result of Tenant's improvements including dry chemical fire protection system if required by code, portable extinguishers per the Fire Marshall's requirement or ADT service if required by Tenant's insurance underwriters. 11. Internal communications and security/alarm systems. 12. Elevators, dumbwaiters, chutes, conveyors and pneumatic tubes and their shafts, doors and other components, including electrical hookup and service, if any. 13. All show window finishes including window display furring, fixturing, or special requirements. 14. Any special reinforcing, raised areas or depressions in concrete floor. 15. In addition to the HVAC equipment to be provided by Landlord as set forth above, special heating, cooling or ventilating equipment, including that required by local codes or otherwise for show windows, dressing rooms, toilet rooms and stock rooms, provided that all duct work shall be concealed or treated in a manner which receives prior approval of Landlord. Relocations, adjustments to, additions or deletions of roof platforms and roof penetrations from those provided by Landlord shall be performed by Landlord at Tenant's expense. 16. Telephone conduit, cabinets and outlets within the Premises as required by the telephone company including wiring from the terminal board. All telephone service and equipment shall be installed and thereafter maintained and used at the expense of Tenant. 17. Gas connection and distribution from point of connection designated at Landlord's drawings, if any. 18. All electrical work and equipment, including lighting, not expressly stated herein as being provided by Landlord, including separate circuits and time clocks for interior show window and/or ceiling lighting, special lighting fixtures, additional electrical or power outlets, or increased electrical service due to Tenant's use and operations. 19. Installation, wiring and connection of power to Tenant sign(s), both exterior and interior. All exterior signs shall be designed, constructed and located pursuant to the requirements and specifications set forth in Landlord's sign criteria attached as Exhibit "C" to the Lease. 20. Tenant to make application for all utility services and pay for water, gas and/or electrical meter including any installation or hookup fees. 21. Tenant to make application for and obtain sign and construction permits and pay any fees related thereto. 22. All other items and requirements not specifically included under Landlord's work and any work directly or indirectly referred to as Tenant's work herein. 23. The following work items, if required, shall be done by Landlord for Tenant at Tenant's expense: Design and construction of any additions, deletions, relocations or changes to the roof platforms for heating and air conditioning equipment. B-3 02/04/00 Landlord Initials b. Design and construction of any additions, deletions, relocations or changes to roof penetrations for ducts, vents, plumbing and conduits. C. Design and construction of any changes to the fire sprinkler systems, if any, to accommodate space configuration ceiling matters. C. Landlord's Right to Perform Work Landlord shall have the right but not the obligation to perform, on behalf of and for the account of Tenant, subject to reimbursement of the cost thereof by Tenant, any and all of the Tenant's Work which Landlord determines, in its sole discretion, is not being performed in a timely manner or which should be performed immediately and on an emergency basis for the best interest of the Shopping Center, including, without limitation, work which pertains to structural components, mechanical, sprinkler and general utility systems, roofing and removal of unduly accumulated construction material and debris. D. Temporary Facilities During Construction Tenant shall provide and pay for all temporary utility facilities, and the removal of debris, as necessary and required in connection with the construction of the Premises. Storage of Tenant's contractors' construction material, tools, equipment and debris shall be confined to the Premises and in areas which may be designated for such purposes by Landlord, in no event shall any material or debris be stored on the sidewalks or service and exit corridors. 2. During construction, Tenant shall maintain such barricades, fences or other measures as may be necessary to insure the security of the Premises and to prevent unauthorized persons from entering the Premises or any persons suffering any injury. E. As Built Drawings: Notice of Completion Tenant shall cause "as built drawings" to be delivered to Landlord and/or Landlord's representative no later than 30 days after the completion of the Tenant's Work. If these drawings are not received by such date, Landlord may, at its election, cause such drawings to be obtained and Tenant shall pay to Landlord, as additional rent, Landlord's cost of producing or obtaining these drawings. Immediately following substantial completion of Tenant's Work, Tenant shall cause a valid Notice of Completion to be recorded in the Official Records of the County in which the Premises are located. Tenant Delays For purposes of the Lease and this Construction Agreement, "Tenant Delays" means any delay in the completion of Tenant's Work or Landlord's Work resulting from any of the following: (a) Tenant's failure to timely perform any of its obligations pursuant to this Construction Agreement; (b) Tenant's failure or delay in preparing, submitting, revising or approving plans; (c) Tenant's request for changes to plans or work after the plans have been approved by Landlord or such Work has been initiated; or (d) any other act or failure to act by Tenant, its employees, agents, contractors or consultants. B-4 02/04/00 Landlord Initials SIGN CRITERIA A. Introduction 1. The intent of this Sign Criteria is to provide the guidelines necessary to achieve a visually coordinated, balanced and appealing signage environment. 2. This Sign Criteria shall be rigorously enforced, and any nonconforming signs shall be removed by the Tenant or his sign contractor at their expense, upon demand by Landlord. 3. In addition to the criteria established within, Landlord shall evaluate each sign based upon its overall design and character, considering such items as letter height, thickness, density and spacing, also consideration shall be given to volume or length of message. Accordingly Landlord will retain full rights of approval of any sign used in the Shopping Center. B. General Landlord/Tenant Requirements 1. The Tenant shall submit to the Landlord for written approval, three (3) copies of the detailed shop drawings of the proposed sign (one in full color) indicating conformance with the sign criteria herein outlined. 2. The Tenant shall submit a sign drawing approved by the Landlord to the appropriate governmental authority for approval prior to the start of any sign fabrication, 3. The Tenant shall pay for all signs, their installation (including final connection, transformers and other labor and materials) and maintenance. 4. The Tenant shall obtain all necessary permits. 5. The Tenant shall be responsible for fulfillment of all requirements of this sign criteria. 6. The Landlord shall provide primary electrical service terminations for the allowed signage area on the interior wall. 7. It is the responsibility of the Tenant's sign company to verify all conduit and transformer locations and service prior to fabrication. 8. The location of all signs shall be per the accompanying design criteria. 9. Design and location must be approved by Landlord prior to fabrication and installation. 10. Note! No sign shall be constructed until approved permits from Planning and Building Department are received. C. General Sign Specifications 1. No exposed raceway, crossovers, conduits, conductors, transformers, etc., shall be permitted. 2. All graphics shall be restricted to the "maximum sign area". See accompanying design criteria for specific information. 3. No protection outside the "maximum sign area" will be permitted- 4. All signs and their installation must comply with all local building and electrical codes and bear a U.L. label placed in an inconspicuous location. D. Specific Sign Specifications (TO BE SUPPLIED) E. Prohibited Signs 1. Signs Constituting a Traffic Hazard: No person shall install or maintain any sign which simulates or imitates in size, color, lettering or design any traffic sign or signal, or which makes use of the words "STOP", LOOK", "DANGER", or any other words, phrases, symbols, or characters in such a manner to interfere with, mislead or confuse traffic. 2. Immoral or Unlawful Advertising: It shall be unlawful for any person to exhibit, post or display cause to be exhibited, posted or displayed upon any sign, anything of an obscene, indecent, or immoral nature or unlawful activity. EXHIBIT "C" Gatewayl Lease3.doUCAF/TAYLOR FORM/02-04-00/jf 3. Signs on Doors. Windows or Fire Escape: No window signs or signing visible through the window, will be permitted except as noted herein. No sign shall be installed, relocated, or maintained so as to prevent free ingress to or egress from any door. No sign of any kind shall be attached to a stand pipe except those signs as required by code of ordinance. 4. Animated. Audible or Moving Signs: Moving, swinging, rotating, flashing, blinking, scintillating, fluctuating or otherwise animated signs are prohibited. 5. Off -Premise Signs: Any signs, other than a directional sign, installed for the purpose of advertising a project, event, person or subject not related to the premises upon which said sign is located, are prohibited. 6. Vehicle Signs: Signs on or affixed to trucks, automobiles, trailers, or other vehicles which advertise, identify, or provide direction to a use or activity not related to its lawful making of deliveries of sales or merchandise or rendering of services from such vehicles, is prohibited. 7. Light Bulb Strings and Exposed Tubing: External displays, other than temporary decorative holiday lighting, which consist of unshielded light bulbs, and open, exposed neon or gaseous light tubing, are prohibited. An exception hereto may be granted by the Landlord when the display is an integral part of the design character of the activity to which it relates. 8. Banners. Pennants. and Balloons Used for Advertising Purposes: Temporary flags, banners, or pennants, or a combination of same, may be permitted subject to Landlord and governmental approval. 9. Signs in Proximity to Utility Lines: Signs which have less horizontal or vertical clearance from authorized communication or energized electrical power lines that prescribed by the laws of the State of California are prohibited. C-2 Gatewayl Lease3AoUCAF/TAYLOR FORM/02-04-00/jf RULES AND REGULATIONS 1. The sidewalks, entrances, passages, or stairways shall not be obstructed or used for any purpose other than ingress and egress. No tenant or the agents, employees or invitees of any tenant shall go upon the roof of the Building or on to other areas not open to the general public (unless specifically designated in the lease for such tenant's use) without the prior written consent of Landlord. 2. All garbage and refuse shall be placed by Tenant in the containers at the location prepared by Landlord for refuse collection, in the manner and at the times and places specified by Landlord. Tenant shall not burn any trash or garbage of any kind in or about the leased Premises or the Shopping Center. All cardboard boxes must be "broken down" prior to being placed in the trash container. All styrofoam chips must be bagged or otherwise contained prior to placement in the trash container so as not to constitute a nuisance. Pallets may not be disposed of in the trash bins or enclosures. It is the Tenant's responsibility to dispose of pallets by alternative means. Except when removed for immediate temporary use, or for use within a building, all trash bins shall remain within trash enclosures at all times. Enclosure doors shall remain closed when not in active use. No uncontainerized liquids shall be poured or placed into a trash bin. Should any garbage or refuse not be deposited in the manner specified by Landlord, Landlord may, after three (3) hours verbal notice to Tenant, take whatever action necessary to correct the breach at Tenant's expense. 3. No awnings or other projections shall be attached to the outside walls of the Building without the prior written consent of the Landlord. No hanging planters, television sets or other objects shall be attached to or suspended from ceilings without the prior written consent of Landlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises, without the prior written consent of Landlord. 4. No sign, advertisement or notice shall be exhibited, painted or affixed by any tenant on any part of, or so as to be seen from the outside the Premises of the Building without the prior written consent of the Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove same without any liability, and may charge the expense incurred in such removal to the tenant violating this rule. 5. The wash room partitions, mirrors, wash basins and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein. All damage resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. 6. No tenant shall mark, paint, drill into, or in any way deface any part of the exterior of the Building except as expressly permitted under the Lease. 7. No animals of any kind shall be brought into, or kept in or about the Premises and unless the Premises shall be designed for food and beverage service, no cooking shall be done or permitted by the tenant of the Premises except that the preparation of coffee, tea, hot chocolate and similar items for the tenant and its employees and business visitors shall be permitted. No tenant shall cause or permit any unusual or objectionable odors to escape from the Premises. 8. Landlord reserves the right to exclude or expel from the Shopping Center any person who, in the judgment of Landlord is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Shopping Center. 9. No tenant shall occupy or permit any portion of the Premises to be occupied as an office for a public stenographic or typist, or for the manufacture or sale of narcotics in any form, or as a medical office, or as a barber shop, manicure shop or employment agency without the express written consent of Landlord. No tenant shall engage or pay any employees on the Premises except those actually working for such tenant of the Premises nor advertise for laborers giving an address at the Premises. The Premises shall not be used for lodging or sleeping or for any immoral or illegal purposes. 10. No tenant shall make, or permit to be made any unseemly or disturbing noises, sounds or vibrations or disturb or interfere with occupants of this or neighboring buildings or premises or those having business with them whether by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. 11. No tenant shall throw anything out of doors or onto the parking lot and common areas. The outside areas immediately adjoining the Premises shall be kept clean and free from dirt and rubbish by the Tenant to the satisfaction of the Landlord, and Tenant shall not place or permit any obstruction or materials in such areas. No exterior storage shall be allowed. 12. No tenant shall at any time bring or keep upon the Premises any flammable, combustible, or explosive fluid, chemical or substance. No tenant shall do or permit anything to be done in the Premises, or bring or keep anything herein, which shall in any way increase the rate of the fire insurance on the Building or on the property kept therein, or obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or conflict with the regulations of the Fire Department, or with any insurance policy upon the Shopping Center or any part thereof, or with any rules and ordinances established by the Board of Health or other governmental authority. 13. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof without Landlord's written approval. Each tenant must, upon the termination of this tenancy, restore to the Landlord all keys of stores. offices, and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such EXHIBIT "E" tenant shall pay to the Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change. 14, Any persons employed by any tenant to do janitor work, shall, while in the Building and outside of the Premises, be subject to all rules and regulations contained herein, and the tenant shall be responsible for all acts of such persons. 15. Canvassing, soliciting and peddling in the Shopping Center are prohibited and each tenant shall cooperate to prevent the same. No tenant shall display, paint or place or cause to be displayed, painted or placed, any handbills, bumper stickers or other advertising devices on any vehicle parked in the Shopping Center, whether belonging to Tenant, Tenant's agents, or to any other person, nor shall Tenant distribute, or cause to be distributed, any handbills or other advertising devices in the Shopping Center. 16. No air conditioning unit or other similar apparatus shall be installed or used by any tenant without the written consent of Landlord. No aerial antenna shall be erected on the roof or exterior walls of the Premises, or on the grounds, without in each instance, the written consent of Landlord first being obtained. Any aerial or antenna so installed without such written consent shall be subject to removal by Landlord at any time without notice. 17. Landlord will direct electricians as to where and how telephone wires are to be introduced. No boring or cutting for wires or stringing of wires will be allowed without written consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. 18. Landlord reserves the exclusive right to regulate and control the use of all parking ramps and areas, pedestrian walkways, plaza and other public areas forming a part of the Shopping Center. Landlord does not hereby assume any responsibility to provide security in and around these areas and tenant assumes all responsibility for the protection of the property and person of tenant, its agents and invitees from the acts of third persons. 19. Tenant shall be entitled to park in common with other tenants of Landlord. Tenant agrees not to overburden the parking facilities and agrees to cooperate with Landlord and other tenants in the use of parking facilities. Landlord reserves the right in its absolute discretion to determine whether parking facilities are becoming crowded and, in such event, to allocate parking spaces among Tenant and other tenants. There will be no assigned parking. Parking stalls shall be used solely for temporary parking purposes and shall not be used for the storage, repair or maintenance of any items, including, but not limited to, vehicles, trailers or recreational vehicles business machinery or personal or business materials. Storage shall be defined as remaining on the Premises for forty-eight (48) hours or more. 20. Truck wells shall be used solely for temporary and immediate loading and unloading purposes. Parking or storage of items within truck well areas is strictly prohibited. Truck well doors shall remain closed when not in active use. No use of truck wells shall be allowed which causes vehicles waiting use thereof to park or wait excessively on a public street. Truck wells shall be kept neat and free of debris at all times. Tenant agrees to comply with all such rules and regulations upon notice from Landlord. Should Tenant not abide by these Rules and Regulations, Tenant will be in default of the Lease if such failure is not cured within any notice and cure period provided in the Lease. Landlord reserves the right to amend or supplement the foregoing rules and regulations and to adopt and promulgate additional rules and regulations applicable to the Shopping Center or any portion thereof. Notice of such rules and regulations and amendments and supplements thereto, if any, shall be given to the Tenant. E-2 Gateway] LeaseIdot1CAF/TAYLOR FORM/02-04-00fjf