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1 Lisa C. McCurdy (SBN 228755)
Joy Chen (SBN 316842)
2 GREENBERG TRAURIG, LLP
1840 Century Park East, Suite 1900
3 Los Angeles, California 90067-2121
Telephone: (310) 586-7700
4 Facsimile: (310) 586-7800
mccurdyl@gtlaw.com
5 chenjoy@gtlaw.com
6 Attorneys for Plaintiff SEAN DUGGAN,
individually and derivatively on behalf of
7 the Duggan Family Limited Partnership
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9 SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 COUNTY OF SONOMA
11
SEAN DUGGAN, an individual, on his CASE NO. SCV-268905
12 own behalf and derivatively on behalf of
the Duggan Family Limited Partnership; Assigned for all purposes to Hon. Arthur A. Wick,
13 Dept. 17
Plaintiff,
14 DECLARATION OF SEAN DUGGAN IN
v. SUPPORT OF REPLY IN SUPPORT OF
15 MOTION FOR (I) APPOINTMENT OF
LYNN DUGGAN, an individual; and DOES 1 RECEIVER; AND
16 through 25, inclusive, (II) PRELIMINARY INJUNCTION
17 Defendants,
Date: May 18, 2022
18 -and- Time: 3:00 PM
Dept: 17
19 THE DUGGAN FAMILY LIMITED
PARTNERSHIP, a California Limited Action filed: July 27, 2021
20 Partnership, KELLY MOFFAT, an individual, Trial date: May 12, 2023
21 Nominal Defendants.
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REPLY DECLARATION OF SEAN DUGGAN
ACTIVE 64859103v2
1 REPLY DECLARATION OF SEAN DUGGAN
2 I, Sean Duggan, declare as follows:
3 1. I am a Limited Partner in the Duggan Family Limited Partnership (the “Partnership”). I
4 have personal knowledge of the facts set forth herein, and could and would competently testify thereto if
5 called upon to do so.
6 2. Attached hereto as Exhibit A is a true and correct copy of a February 18, 2010
7 correspondence from the then-tenant of the theater space, Ky Boyd of Sonoma Motion Picture
8 Company, to Lynn Duggan, in response to correspondence from Mr. Wasem as President of Selway. In
9 this correspondence, Mr. Boyd expresses concern about Mr. Wasem’s conflict of interest in negotiating
10 Boyd’s possible extension of the Sonoma Motion Picture Company lease because of Mr. Wasem’s other
11 business interests in the theater industry (in direct competition with Mr. Boyd and his business. Mr.
12 Boyd states that Mr. Wasem “has a vested interest in the success of our primary competitor” at the
13 Property. Mr. Boyd requests that his lease negotiations take place directly with the Partnership, and that
14 Selway “specifically not be involved.”
15 3. Attached hereto as Exhibit B is a true and correct copy of an October 14, 2009 Lease,
16 entered into between the Partnership as owner, and inter alia, Larry Wasem, as tenant, which lease was
17 set to commence by its terms on September 1, 2010, following the expiration of Mr. Boyd’s lease (but
18 negotiated the year prior).
19 4. Attached hereto as Exhibit C is a true and correct copy of a news article from March
20 2010, which chronicles these issues, the conflict of interest, and Mr. Boyd’s loss of the lease.
21 5. Attached hereto as Exhibit D is a true and correct copy of a July 21, 2021 email from my
22 father, sharing that Summerfield Cinemas received shuttered venue federal assistance.
23 I declare under penalty of perjury that the foregoing is true and correct, and that this declaration
24 was executed on May 13, 2022, in Newport Beach, California.
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____________________________
27 Sean Duggan
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REPLY DECLARATION OF SEAN DUGGAN
ACTIVE 64859103v2
EXHIBIT A
EXHIBIT B
INDEX TO LEASE
Section Page
1. Commencement of Term .................................................................................................... 2
2. Rent ..................................................................................................................................... 2
3. Taxes, Assessments and Environmental Fees..................................................................... 3
4. Rent Default Payment ......................................................................................................... 4
5. Acceptance of Premises ...................................................................................................... 5
6. Use of Premises................................................................................................................... 5
7. Conduct of Business ........................................................................................................... 5
8. Competition......................................................................................................................... 5
9. Security Deposit.................................................................................................................. 6
10. Tenant Improvements ......................................................................................................... 7
11. Removal and Insurance By Tenant ..................................................................................... 7
12. Mechanic’s Liens ................................................................................................................ 8
13. Maintenance and Repairs.................................................................................................... 9
14. Maintenance and Repairs By Owner ................................................................................ 10
15. Fire Insurance.................................................................................................................... 10
16. Liability Insurance ............................................................................................................ 11
17. Exemption and Indemnification of Owner ....................................................................... 11
18. Plate Glass......................................................................................................................... 12
19. Utility Charges .................................................................................................................. 12
20. Offset Statement................................................................................................................ 12
21. Attornment ........................................................................................................................ 13
22. Subordination.................................................................................................................... 13
23. Execution of Documents................................................................................................... 13
24. Prohibition of Transfer...................................................................................................... 13
25. Waste or Nuisance ............................................................................................................ 14
26. Governmental Regulations................................................................................................ 14
27. Hazardous or Toxic Wastes or Substances ....................................................................... 15
28. Damage or Destruction ..................................................................................................... 15
29. Eminent Domain ............................................................................................................... 16
30. Default of the Tenant ........................................................................................................ 18
31. Legal Expenses ................................................................................................................. 19
32. California Law .................................................................................................................. 19
33. Right of Entry ................................................................................................................... 19
34. Loss and Damage.............................................................................................................. 20
35. Holding Over .................................................................................................................... 20
36. Successors ......................................................................................................................... 21
37. Owner’s Successor............................................................................................................ 21
38. Waiver............................................................................................................................... 21
39. Accord and Satisfaction .................................................................................................... 21
40. Entire Agreement .............................................................................................................. 21
41. No Partnership .................................................................................................................. 22
42. Notices .............................................................................................................................. 22
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43. No Option.......................................................................................................................... 22
44. Recording.......................................................................................................................... 22
45. Time of Essence................................................................................................................ 22
46. Rules and Regulations....................................................................................................... 22
47. Authority ........................................................................................................................... 23
48. Parties’ Familiarity............................................................................................................ 24
ii
LEASE
THIS INDENTURE OF LEASE, made as of the 14th day of October, 2009 by The
Duggan Family Limited Partnership, a California limited partnership, of 410 Summerfield Road,
Santa Rosa, California 95405-5230, herein called “Owner”, and Daniel F. Tocchini, Richard A.
Coombs and Larry L. Wasem, of 414 Aviation Boulevard, Santa Rosa, CA 95403-1069 herein
called “Tenant”, without distinction as to number or gender.
W I T N E S S E T H:
That the Owner, in consideration of the rents, covenants, and agreements hereinafter
contained, to be paid, kept and performed by the Tenant, and upon the condition that each and all
of the said agreements shall be fully kept and performed by the Tenant, does by these presents
lease, demise and let unto the Tenant, for any lawful purpose, including, without limitation, the
purpose of conducting therein a multi-screen movie theatre complex and incidental thereto the
sale of snacks and food and related merchandise and electronic games, those certain premises
situated in the County of Sonoma, State of California, and more particularly described as
follows, to wit: a building containing approximately 14,400 square feet of ground floor area
together with all appurtenances therein and thereon and all improvements therein and thereon,
commonly known as 551 Summerfield Road, Santa Rosa, California. The boundaries and
location of the leased premises are outlined in red on Exhibit “A” attached hereto and made a
part hereof. Tenant shall accept the premises “as is”, subject however to the provisions of this
Lease. Tenant acknowledges that the present intent of Tenant is to conduct on the premises a
multi-screen movie theatre complex and incidental thereto the sale of snacks and food and
related merchandise and electronic games.
The use and occupation by Tenant of the leased premises shall include the use in
common with others entitled thereto of the common areas, service roads, loading facilities,
sidewalks and customer parking areas shown and depicted and outlined in green on Exhibit “A”
and other facilities as may be designated, from time to time by the Owner subject however to the
terms and conditions of this Lease and to permissible rules and regulations herein and control of
the area outlined in green on Exhibit “A” as Owner shall determine in its reasonable discretion
subject, however, to the terms and conditions of this Lease. Owner covenants that Owner will
keep the common areas in condition and repair commensurate with other shopping centers in the
area.
The common area shown outlined in green on Exhibit “A” shall at all times be subject to
the exclusive control and management of Owner (provided that there is no material impairment
of access to, or use or visibility of the premises), and Owner shall have the right from time to
time to establish, modify and enforce reasonable rules and regulations with respect to all
facilities and areas in the common area as set forth herein. Owner shall have the right to make
any changes in the common area as Owner shall determine in its reasonable discretion, including
the removal and/or addition of buildings and structures and improvements from time to time
(provided that there is no material adverse impairment of access to, or use or visibility of the
premises or parking needed by Tenant’s business).
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1. Commencement of Term
(a) The term of this Lease, and Tenant’s obligation to pay rent, shall commence on
September 1, 2010, provided however, the commencement of this Lease is expressly contingent
upon Owner terminating the Lease of the tenant currently occupying the premises and Owner
obtaining possession of the premises both of which Owner shall use its best efforts to do on or
before September 1, 2010, and Owner shall avail itself of all legal rights and remedies, at
Owner’s cost, in order to do so. The first day of the month immediately following the date the
Tenant is granted actual occupancy of the premises is hereinafter referred to as the
“Commencement Date” (Tenant shall have the obligation to pay rent for the partial month of
occupancy preceding the Commencement Date). If this Lease has not commenced within three
(3)-years from the date of this Lease, then this Lease shall be null and void.
(b) The term of this Lease shall expire ten (10) years after the Commencement Date,
provided however, Tenant shall have the option to extend the term of this Lease, by giving
written notice thereof, for an additional five (5) years. Tenant shall exercise such option by
giving written notice thereof at least, and no later than, one (1) year before expiration of the then
existing term of the Lease.
2. Rent
(a) Tenant shall pay to Owner Eighteen Thousand and NO/100 Dollars ($18,000.00),
as monthly rental, on or before the first day of each month in advance, at the office of Owner or
at such place other than the office designated by Owner, without any prior demand therefore, and
without any deduction or set-off whatsoever except as expressly provided to the contrary in this
Lease.
(b) Upon the expiration of the first five (5) years of the lease term, the monthly rental
shall increase to $19,800 per month and continue throughout the remaining term of the Lease.
(c) In the event that Tenant exercises its option to extend for an additional five (5)
year term, as provided in Section 1(b), the monthly rent shall be increased to $21,780 per month
to be paid throughout the extended term.
(d) In the event that Tenant exercises its option to extend for an additional period of
five (5) years as provided in section 1(b) (the “Extended Lease Term”), the monthly rent shall, in
addition to the modification provided in Section 2(c), be adjusted as follows:
On each anniversary date following the commencement of the Extended Lease Term, the
rent, provided by Section 2 hereof, shall be adjusted upward (but not downward) for the ensuing
twelve (12) months in the same percentage proportion that the Consumer Price Index for All
Urban Consumers (CPI-U) for the San Francisco-Oakland-San Jose area, (1982-1984 equal 100)
published by the U.S. Department of Labor, Bureau of Labor Statistics for the date two (2)
months prior to each such anniversary date, shall be increased over said Consumer Price Index
published two (2) months prior to the previous anniversary date. Said increase shall not exceed
five percent (5%) per year cumulative.
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In case the U.S. Department of Labor shall discontinue the computation and publication
of said Consumer Price index or the publication thereof should be delayed so as to prevent its use
hereunder at the times required, there shall be substituted therefor by Owner such other index or
method of ascertaining changes in the price levels as, in the reasonable opinion of Owner, most
closely resembles said Consumer Price index and method of arriving at the index figure by said
Bureau.
(e) Notwithstanding anything to the contrary herein, if at any time during the term of
this lease (including, without limitation, during any Extended Lease Term or any other extension
of the term of this Lease), Tenant’s annual payment of real property taxes, assessments and
environmental fees under Section 3(a) shall increase by more than two percent (2.00%) over the
previous year, the then current monthly rental payment due under this Section 2 shall be
decreased by the following formula:
adjusted monthly rental = (then current monthly rental) – [{[(current year’s payment of
real property taxes, assessments and environmental fees) - (previous year’s payment of
real property taxes, assessments and environmental fees)]/12} × 50%].
As an example, if during the third year of the Lease, the annual property tax, assessments and
environmental fees bill went from $5,000 to $24,000, the adjusted monthly rental would be:
adjusted monthly rental = $18,000 – [{[($24,000) – ($5,000)]/12} × 50%]
adjusted monthly rental = $18,000 – [{[$19,000]/12} × 50%]
adjusted monthly rental = $18,000 – [$791.67]
adjusted monthly rental = $17,208.33
All subsequent increases in monthly rental payments (e.g. monthly rental payment increases
contemplated by Sections 2(b), 2(c) and 2(d)) shall be reduced by the same amount. As an
example, given the example above, the monthly rental payment in year six of the lease term
would be $19,008.83 ($19,800.00 - $791.67) and the monthly rental payment in year eleven
(assuming exercise of the first option to extend) would be $20,988.33 ($21,780 - $791.67).
3. Taxes, Assessments and Environmental Fees
(a) Real Property Taxes, Assessments and Environmental Fees. Tenant shall pay at
least ten (10) days before delinquency, in addition to all other sums agreed to be paid by it under
the terms of this Lease, and as additional rent, any and all real property taxes, assessments and
environmental fees which are assessed against the leased premises due to Tenant’s use and/or
occupancy of the leased premises during the term of this Lease. If the leased premises are only
part of a building or parcel of real property, Tenant shall pay its pro rata share of such real
property taxes, assessments and environmental fees against all the land and improvements of the
Assessor’s Parcel on which the leased premises are located. Tenant shall be obligated to pay all
such real property taxes, assessments and environmental fees from the date of delivery of the
premises to Tenant to expiration of the Lease term, prorated for any partial year on a daily basis
so that Tenant shall pay all such environmental fees attributable to the portion of any tax year
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occurring within the period of Tenant’s obligation. In addition, throughout the term of this Lease
Tenant shall pay upon demand any supplemental assessment because of “new construction”
performed by or on behalf of Tenant (as defined in Article XIIIA of the California Constitution
and implementing legislation) on the leased premises. Tenant shall also pay upon demand any
governmental underground storage tank maintenance fees, and any Water Quality Control Board
permit fees, if assessed due to Tenant’s use and/or occupancy of the leased premises.
If at any time during the term of this Lease, the federal government, the State of
California or any political subdivision of the state, including any county, city, city and county,
public corporation, district, or any other political entity or public corporation of this state, levies
or assesses against Owner a tax, fee, or excise on rents, on the square footage of the premises, on
the act of entering into this Lease, on the business of leasing the premises, or on the occupancy
of Tenant, a value added tax, or any other tax, fee, or excise, however described, as a direct
substitution in whole or in part for any real property taxes, whether or not now customary or
within the contemplation of the parties to this Lease, Tenant shall pay before delinquency that
tax, fee, or excise to the extent that such tax; fee, or excise is a substitute for taxes otherwise
payable or required to be paid by Tenant under this Lease; and/or the extent that such tax, fee or
excise is assessed solely due to Tenant’s use and/or occupancy of the leased premises and not of
retail tenants in general. Tenant’s share of any such tax, fee, or excise shall be substantially the
same as Tenant’s proportionate share of real property taxes, assessments and environmental fees
as provided in this Lease.
(b) Other Property. Tenant shall also pay before delinquency any and all taxes,
assessments, license fees, and public charges levied, assessed, or imposed during the term of this
Lease upon Tenant’s leasehold interest or upon Tenant’s fixtures, furniture, appliances and
personal property installed or located on the premises.
4. Rent Default Payment
Rent or any other monetary obligation not paid within five (5) days after the date when
due shall bear interest from the date due until paid at the rate of ten percent (10%) per annum.
In addition to such interest, Tenant acknowledges that late payment by Tenant to Owner
of rent or any other monetary obligation will cause Owner to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such
costs include, without limitation, processing and accounting charges, and late charges that may
be imposed on Owner by the terms of any encumbrance and note secured by any encumbrance
covering the premises. Therefore, if any installment of rent due from Tenant is not received by
Owner within five (5) days after the date when due, Tenant shall pay to Owner an additional sum
of Three Percent (3%) of the overdue rent or other monetary obligation (but not less than $35.00)
as a late charge. The parties agree that this late charge represents a fair and reasonable estimate
of the costs that Owner will incur by reason of late payment by Tenant. Acceptance of any late
charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, nor
prevent Owner from exercising any of the other rights and remedies available to Owner.
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5. Acceptance of Premises
Prior to delivery of possession, Landlord and Tenant agree to determine that that the said
premises, and every part thereof, including, but not limited to, all window glass or other glazing,
electric and gas globes, water heaters, plumbing (including sewer system), heating, air
conditioning, and lighting fixtures, in and about the said premises shall be at the date of such
entry in good order, condition and repair. In the event Landlord and Tenant determine that the
premises, or parts thereof, are not in good order, condition and repair, Landlord and Tenant agree
to cooperate in bringing such items into good order, condition and repair and to equitably
determine the allocation of costs in bringing such items into good order, condition and repair. In
general Tenant’s responsibilities shall encompass the roof, heating, ventilation and air
conditioning, fixtures, trade fixtures, equipment, furnishings, furniture, leasehold improvements,
decorations and signs and Landlord’s responsibilities shall encompass the foundation, plumbing
(including sewer system) and structural parts of the premises. On the last day of said term or
other sooner termination of this Lease, the Tenant will peaceably and quietly leave, surrender
and yield up to the Owner the said premises, with the said appurtenances and fixtures in good
order, condition and repair, reasonable use and wear and tear thereof and damage by casualty
excepted, provided however all insurance proceeds for damage by casualty paid or required to be
paid to Tenant by Tenant’s insurance under Section 11 of this Lease for all appurtenances and
improvements constituting Owner’s property shall be paid to Owner by Tenant, and in such
event Tenant shall not be responsible for repairs or rebuilding due to such casualty.
6. Use of Premises
Tenant will not use, or permit the said premises, or any part thereof, to be used by any
purpose or purposes other than the purpose or purposes for which the said premises are leased to
Tenant as hereinbefore specified; and no use shall be made or permitted to be made of said
premises, nor acts done, which will increase the existing rate of insurance upon the building
thereon, or cause a cancellation of any insurance policy covering said building, or any part
thereof nor shall the Tenant sell, or permit to be kept, used or sold, in or about the said premises,
any article which may be prohibited by the standard form of fire insurance policies. Owner, to
its knowledge, acknowledges that Tenant’s permitted use hereunder will not increase the existing
rate of insurance upon the building or cause a cancellation of any insurance policy covering said
building.
7. Conduct of Business
Tenant shall conduct its business in the leased premises and keep the leased premises
open for business during substantially the same days, nights and hours as are customary for the
type of business carried out by Tenant in the trading area where the premises are located.
8. Competition
The Owner acknowledges that Tenant, or affiliates of Tenant, currently operate other
multi-screen movie theatre complex in Sonoma County, California, including without limitation,
the Roxy Stadium 14, 85 Santa Rosa Avenue, Santa Rosa, California, the 3rd Street Cinema Six,
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620 Third Street, Santa Rosa, California, the Airport Stadium 12, 409 Aviation Boulevard, Santa
Rosa, California and the Raven Film Center, 415 Center Street, Healdsburg, California. Owner
further acknowledges that Tenant, or affiliates of Tenant, may engage in new multi-screen
theatre complexes.
Notwithstanding the above, during the term of this Lease neither Tenant nor any affiliate
of Tenant shall, except for those existing movie theaters already operated by Tenant, or affiliates
of Tenant, directly or indirectly engage in any similar business to that for a multi-screen movie
theatre complex within a radius of five (5) miles from the leased premises. This restriction shall
not apply to a cinema pub (for the purpose herein a cinema pub shall be defined as premises
adapted for the simultaneous serving of food, beverages and alcoholic beverages and the
showing of films in non-traditional theatre setting using however a mixture of tables, chairs and
theatre seating possibly along with couches and other furniture seating).
Owner agrees that during the term of this Lease, Owner will not allow the construction
and/or operation of a new multi-screen movie theatre complex in the complex of which the
leased premises is a part.
9. Security Deposit
Tenant, contemporaneously with the execution of this Lease, agrees to deposit with
Owner the sum of Eighteen Thousand and NO/100 Dollars ($18,000.00). Said deposit shall be
held by Owner, without liability for interest, as security for the faithful performance by Tenant of
all the terms, covenants, and conditions of this Lease by said Tenant to be kept and performed
during the term hereof. If at any time during the term of this Lease any of the rent herein
reserved shall be overdue and unpaid (after notice and expiration of the applicable cure period),
or any other sum payable by Tenant to Owner hereunder shall be overdue and unpaid (after
notice and expiration of the applicable cure period), then Owner may, at the option of Owner
(but Owner shall not be required to), appropriate and apply the portion of said deposit equal to
the amount of any such overdue rent or other sum. Owner is not a trustee of the deposit and may
commingle it and use it in ordinary business. In the event of the failure of Tenant to keep and
perform any of the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant (after notice and expiration of the applicable cure period), then the Owner at its option
may appropriate and apply so much of the deposit thereof as may be necessary, to compensate
the Owner for all loss or damage sustained or suffered by Owner due to such breach on the part
of Tenant. Should the entire deposit, or any portion thereof, be appropriated and applied by
Owner for the payment of overdue rent or other sums due and payable to Owner by Tenant
hereunder, then Tenant shall, upon the written demand of Owner, forthwith remit to Owner a
sufficient amount of cash to restore said security to the original sum deposited, and Tenant’s
failure to do so within five (5) days after receipt of such demand shall constitute a breach of this
Lease. Should Tenant comply with all of said terms, covenants and conditions and promptly pay
all of the rental herein provided for as it falls due, and all other sums payable by Tenant to
Owner hereunder, the said deposit shall be returned in full to Tenant at the end of the term of this
Lease. Owner may deliver the funds deposited hereunder by Tenant to the purchaser or
transferee of Owner’s interest in the leased premises, in the event that such interest be sold or
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transferred, and thereupon Owner shall be discharged from any further liability with respect to
such deposit.
Tenant hereby agrees not to look to the mortgagee, as mortgagee, mortgagee in
possession, or successor in title to the property, for accountability for any security deposit
required by the Owner hereunder, unless said sums have actually been received by said
mortgagee or successor as security for the Tenant’s performance of this lease.
10. Tenant Improvements
(a) Tenant shall be responsible for and shall undertake the design, construction, repair
and maintenance of all Tenant improvements necessary to operate the leased premises as a multi-
screen movie theater complex including, but not limited to, the roof and any roof replacement
and the heating, ventilation and air conditioning system during the term of this Lease, or any
extended lease term.
(b) All fixtures, trade fixtures, equipment, furnishings, furniture, leasehold
improvements, decorations and signs installed by Tenant shall be of good quality. Tenant shall
not make or cause to be made any exterior alterations, additions or improvements or install or
cause to be installed any exterior signs, exterior lighting, exterior plumbing fixtures, shades or
awnings or make any other exterior changes to the building without first obtaining Owner’s
written approval and consent which shall not be unreasonably withheld so long as Tenant
conforms to reasonable design criteria. Tenant shall present to the Owner plans and
specifications for all such exterior work at the time approval is sought and Tenant shall prior to
the commencement of any interior work which requires a building permit, give Owner written
notice specifying the work to be performed and the area of the leased premises to be affected by
such work, including a copy of all plans and specifications and a copy of the building permits.
(c) If Tenant installs any restaurant equipment that warrants grease containment then
Tenant shall provide and install at Tenant’s sole cost and expense and in accordance with plans
and specifications prepared by Tenant or Tenant’s architect and approved in writing by Owner,
which approval shall not be unreasonably withheld, a grease containment system.
11. Removal and Insurance By Tenant
All alterations, additions, fixtures, and improvements including, without limitation,
carpeting and all other improvements, whether temporary or permanent in character, made in or
upon the premises by Tenant, or acquired by Tenant from the prior tenant shall be Tenant’s
property. All such alterations, additions, fixtures, and improvements shall, at Tenant’s option,
either remain on the premises without compensation to Tenant or be removed by Tenant, and
Tenant shall repair any damage to the premises or the building caused by the installation and
subsequent removal; provided however Owner shall have the right to require Tenant to remove
any alterations, additions, fixtures and improvements Tenant intended to remain on the premises
and Tenant shall repair any damage to the premises or building caused by the installation and
subsequent removal of same. The Tenant shall at all times maintain fire insurance with extended
and “all risk” (special form) coverages in the name of the Owner and the Tenant and naming
7
Owner as the loss payee in the event of loss, in an amount adequate to cover the cost of
replacement of all alterations, additions, fixtures, and improvements, whether owned by Owner
or Tenant, and all appurtenances and improvements existing as of the date Owner notified
Tenant the premises were ready for occupancy, in the event of fire or extended coverage loss.
Tenant shall deliver to the Owner certificates of such fire insurance policies confirming Owner’s
inclusion as loss payee together with actual additional insured endorsements and which shall
contain a clause requiring the insurer to give the Owner ten (10) days notice of cancellation of
such policies. No alterations, additions, fixtures, or improvements other than Tenant’s property
shall be removed from the premises without prior consent in writing from the Owner.
Contractors, subcontractors, maintenance and/or repair companies, or individuals hired
by Tenant to perform work on the leased premises (excluding employees on the Tenant’s
payroll), must be licensed to do such work and must provide to Owner certificates of
comprehensive general liability insurance with a combined single limit of at least $1 million per
occurrence, naming Owner as an additional insured by endorsement, prior to the commencement
of any such work.
12. Mechanic’s Liens
Tenant agrees that it will pay or cause to be paid all costs for work done by it or caused to
be done by it on the leased premises and that it will keep the leased premises free and clear of all
mechanics’ liens and other liens on account of work done by or for Tenant or by or for persons
claiming under it. Tenant agrees to and shall indemnify and save Owner free and harmless
against liability, loss, damage, costs, attorneys’ fees, and all other expenses on account of claims
of lien of laborers or materialmen or others for work performed or materials or supplies
furnished for Tenant or persons claiming under it.
Tenant shall have the right to contest the correctness or the validity of any such lien if
Tenant procures and records a lien release bond issued by a corporation authorized to issue
surety bonds in California in an amount equal to one and one-half times the amount of the claim
of lien. The bond shall meet the requirements of Civil Code Section 3143 and shall provide for
the payment of any sum that the claimant may recover on the claim (together with costs of suit, if
it recovers in the action).
Should any claims of lien be filed against the leased premises or any action affecting the
title to such property be commenced, the party receiving notice of such lien or action shall
forthwith give the other party notice thereof.
Owner or its representatives shall have the right, upon three (3) days notice to Tenant
(except in cases of emergency) to go upon and inspect the leased premises at all reasonable
times, and shall have the right to post and keep posted thereon notices as permitted or provided
by law or which Owner may deem to be proper for the protection of Owner’s interest in the
leased premises. Tenant shall, before the commencement of any work which might result in any
such lien, give to Owner written notice of its intention to do so in sufficient time to enable
Owner to file and record such notices.
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13. Maintenance and Repairs
(a) Subject to Section 13(b), Tenant agrees, at the expense of Tenant, to maintain the
leased premises in good and clean order, condition and repair throughout the term of this Lease
(and shall make any necessary replacements thereto) including, but not limited to, building front
(excluding structural components as required by Owner pursuant to Section 13(b)), front canopy
and exterior entrances, plate and window glass, all doors, floor and floor covering, lighting,
exterior lighting attached to the building, electrical facilities, plumbing (including free flow to
sewer lines in the public right-of-way), water heaters, heating and air conditioning system,
ceilings and roofs, foundations, interior and exterior walls, sidewalks, downspouts, water pipes,
gas main, sewers, electrical conduits and connections within the building (including panel box),
and under canopy sidewalks. Tenant shall provide screening of garbage, rubbish, and refuse
areas as required by any applicable laws, ordinances or regulations. Tenant waives the
provisions of California Civil Code Sections 1941 and 1942 with respect to a landlord’s
obligations for tenantability of the premises and a tenant’s right to make repairs and deduct the
expenses of such repairs from rent.
(b) If Tenant installs any restaurant equipment at the leased premises, in addition to
customary movie concession equipment, then Tenant agrees as follows:
I. A. Tenant agrees to clean its cooking exhaust flue and related
equipment and to service the extinguishing system installed to prevent grease fires at least twice
each lease year and more frequently if so recommended by the manufacturer or installer of the
flue or by the servicer of the flue or by Owner or Owner’s insurance carrier. Tenant also agrees
to keep all equipment located on the roof, including the roof free and clear
Preview
1 Lisa C. McCurdy (SBN 228755) Joy Chen (SBN 316842) 2 GREENBERG TRAURIG, LLP 1840 Century Park East, Suite 1900 3 Los Angeles, California 90067-2121 Telephone: (310) 586-7700 4 Facsimile: (310) 586-7800 mccurdyl@gtlaw.com 5 chenjoy@gtlaw.com 6 Attorneys for Plaintiff SEAN DUGGAN, individually and derivatively on behalf of 7 the Duggan Family Limited Partnership 8 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SONOMA 11 SEAN DUGGAN, an individual, on his CASE NO. SCV-268905 12 own behalf and derivatively on behalf of the Duggan Family Limited Partnership; Assigned for all purposes to Hon. Arthur A. Wick, 13 Dept. 17 Plaintiff, 14 DECLARATION OF SEAN DUGGAN IN v. SUPPORT OF REPLY IN SUPPORT OF 15 MOTION FOR (I) APPOINTMENT OF LYNN DUGGAN, an individual; and DOES 1 RECEIVER; AND 16 through 25, inclusive, (II) PRELIMINARY INJUNCTION 17 Defendants, Date: May 18, 2022 18 -and- Time: 3:00 PM Dept: 17 19 THE DUGGAN FAMILY LIMITED PARTNERSHIP, a California Limited Action filed: July 27, 2021 20 Partnership, KELLY MOFFAT, an individual, Trial date: May 12, 2023 21 Nominal Defendants. 22 23 24 25 26 27 28 REPLY DECLARATION OF SEAN DUGGAN ACTIVE 64859103v2 1 REPLY DECLARATION OF SEAN DUGGAN 2 I, Sean Duggan, declare as follows: 3 1. I am a Limited Partner in the Duggan Family Limited Partnership (the “Partnership”). I 4 have personal knowledge of the facts set forth herein, and could and would competently testify thereto if 5 called upon to do so. 6 2. Attached hereto as Exhibit A is a true and correct copy of a February 18, 2010 7 correspondence from the then-tenant of the theater space, Ky Boyd of Sonoma Motion Picture 8 Company, to Lynn Duggan, in response to correspondence from Mr. Wasem as President of Selway. In 9 this correspondence, Mr. Boyd expresses concern about Mr. Wasem’s conflict of interest in negotiating 10 Boyd’s possible extension of the Sonoma Motion Picture Company lease because of Mr. Wasem’s other 11 business interests in the theater industry (in direct competition with Mr. Boyd and his business. Mr. 12 Boyd states that Mr. Wasem “has a vested interest in the success of our primary competitor” at the 13 Property. Mr. Boyd requests that his lease negotiations take place directly with the Partnership, and that 14 Selway “specifically not be involved.” 15 3. Attached hereto as Exhibit B is a true and correct copy of an October 14, 2009 Lease, 16 entered into between the Partnership as owner, and inter alia, Larry Wasem, as tenant, which lease was 17 set to commence by its terms on September 1, 2010, following the expiration of Mr. Boyd’s lease (but 18 negotiated the year prior). 19 4. Attached hereto as Exhibit C is a true and correct copy of a news article from March 20 2010, which chronicles these issues, the conflict of interest, and Mr. Boyd’s loss of the lease. 21 5. Attached hereto as Exhibit D is a true and correct copy of a July 21, 2021 email from my 22 father, sharing that Summerfield Cinemas received shuttered venue federal assistance. 23 I declare under penalty of perjury that the foregoing is true and correct, and that this declaration 24 was executed on May 13, 2022, in Newport Beach, California. 25 26 ____________________________ 27 Sean Duggan 28 1 REPLY DECLARATION OF SEAN DUGGAN ACTIVE 64859103v2 EXHIBIT A EXHIBIT B INDEX TO LEASE Section Page 1. Commencement of Term .................................................................................................... 2 2. Rent ..................................................................................................................................... 2 3. Taxes, Assessments and Environmental Fees..................................................................... 3 4. Rent Default Payment ......................................................................................................... 4 5. Acceptance of Premises ...................................................................................................... 5 6. Use of Premises................................................................................................................... 5 7. Conduct of Business ........................................................................................................... 5 8. Competition......................................................................................................................... 5 9. Security Deposit.................................................................................................................. 6 10. Tenant Improvements ......................................................................................................... 7 11. Removal and Insurance By Tenant ..................................................................................... 7 12. Mechanic’s Liens ................................................................................................................ 8 13. Maintenance and Repairs.................................................................................................... 9 14. Maintenance and Repairs By Owner ................................................................................ 10 15. Fire Insurance.................................................................................................................... 10 16. Liability Insurance ............................................................................................................ 11 17. Exemption and Indemnification of Owner ....................................................................... 11 18. Plate Glass......................................................................................................................... 12 19. Utility Charges .................................................................................................................. 12 20. Offset Statement................................................................................................................ 12 21. Attornment ........................................................................................................................ 13 22. Subordination.................................................................................................................... 13 23. Execution of Documents................................................................................................... 13 24. Prohibition of Transfer...................................................................................................... 13 25. Waste or Nuisance ............................................................................................................ 14 26. Governmental Regulations................................................................................................ 14 27. Hazardous or Toxic Wastes or Substances ....................................................................... 15 28. Damage or Destruction ..................................................................................................... 15 29. Eminent Domain ............................................................................................................... 16 30. Default of the Tenant ........................................................................................................ 18 31. Legal Expenses ................................................................................................................. 19 32. California Law .................................................................................................................. 19 33. Right of Entry ................................................................................................................... 19 34. Loss and Damage.............................................................................................................. 20 35. Holding Over .................................................................................................................... 20 36. Successors ......................................................................................................................... 21 37. Owner’s Successor............................................................................................................ 21 38. Waiver............................................................................................................................... 21 39. Accord and Satisfaction .................................................................................................... 21 40. Entire Agreement .............................................................................................................. 21 41. No Partnership .................................................................................................................. 22 42. Notices .............................................................................................................................. 22 i 43. No Option.......................................................................................................................... 22 44. Recording.......................................................................................................................... 22 45. Time of Essence................................................................................................................ 22 46. Rules and Regulations....................................................................................................... 22 47. Authority ........................................................................................................................... 23 48. Parties’ Familiarity............................................................................................................ 24 ii LEASE THIS INDENTURE OF LEASE, made as of the 14th day of October, 2009 by The Duggan Family Limited Partnership, a California limited partnership, of 410 Summerfield Road, Santa Rosa, California 95405-5230, herein called “Owner”, and Daniel F. Tocchini, Richard A. Coombs and Larry L. Wasem, of 414 Aviation Boulevard, Santa Rosa, CA 95403-1069 herein called “Tenant”, without distinction as to number or gender. W I T N E S S E T H: That the Owner, in consideration of the rents, covenants, and agreements hereinafter contained, to be paid, kept and performed by the Tenant, and upon the condition that each and all of the said agreements shall be fully kept and performed by the Tenant, does by these presents lease, demise and let unto the Tenant, for any lawful purpose, including, without limitation, the purpose of conducting therein a multi-screen movie theatre complex and incidental thereto the sale of snacks and food and related merchandise and electronic games, those certain premises situated in the County of Sonoma, State of California, and more particularly described as follows, to wit: a building containing approximately 14,400 square feet of ground floor area together with all appurtenances therein and thereon and all improvements therein and thereon, commonly known as 551 Summerfield Road, Santa Rosa, California. The boundaries and location of the leased premises are outlined in red on Exhibit “A” attached hereto and made a part hereof. Tenant shall accept the premises “as is”, subject however to the provisions of this Lease. Tenant acknowledges that the present intent of Tenant is to conduct on the premises a multi-screen movie theatre complex and incidental thereto the sale of snacks and food and related merchandise and electronic games. The use and occupation by Tenant of the leased premises shall include the use in common with others entitled thereto of the common areas, service roads, loading facilities, sidewalks and customer parking areas shown and depicted and outlined in green on Exhibit “A” and other facilities as may be designated, from time to time by the Owner subject however to the terms and conditions of this Lease and to permissible rules and regulations herein and control of the area outlined in green on Exhibit “A” as Owner shall determine in its reasonable discretion subject, however, to the terms and conditions of this Lease. Owner covenants that Owner will keep the common areas in condition and repair commensurate with other shopping centers in the area. The common area shown outlined in green on Exhibit “A” shall at all times be subject to the exclusive control and management of Owner (provided that there is no material impairment of access to, or use or visibility of the premises), and Owner shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas in the common area as set forth herein. Owner shall have the right to make any changes in the common area as Owner shall determine in its reasonable discretion, including the removal and/or addition of buildings and structures and improvements from time to time (provided that there is no material adverse impairment of access to, or use or visibility of the premises or parking needed by Tenant’s business). 1 1. Commencement of Term (a) The term of this Lease, and Tenant’s obligation to pay rent, shall commence on September 1, 2010, provided however, the commencement of this Lease is expressly contingent upon Owner terminating the Lease of the tenant currently occupying the premises and Owner obtaining possession of the premises both of which Owner shall use its best efforts to do on or before September 1, 2010, and Owner shall avail itself of all legal rights and remedies, at Owner’s cost, in order to do so. The first day of the month immediately following the date the Tenant is granted actual occupancy of the premises is hereinafter referred to as the “Commencement Date” (Tenant shall have the obligation to pay rent for the partial month of occupancy preceding the Commencement Date). If this Lease has not commenced within three (3)-years from the date of this Lease, then this Lease shall be null and void. (b) The term of this Lease shall expire ten (10) years after the Commencement Date, provided however, Tenant shall have the option to extend the term of this Lease, by giving written notice thereof, for an additional five (5) years. Tenant shall exercise such option by giving written notice thereof at least, and no later than, one (1) year before expiration of the then existing term of the Lease. 2. Rent (a) Tenant shall pay to Owner Eighteen Thousand and NO/100 Dollars ($18,000.00), as monthly rental, on or before the first day of each month in advance, at the office of Owner or at such place other than the office designated by Owner, without any prior demand therefore, and without any deduction or set-off whatsoever except as expressly provided to the contrary in this Lease. (b) Upon the expiration of the first five (5) years of the lease term, the monthly rental shall increase to $19,800 per month and continue throughout the remaining term of the Lease. (c) In the event that Tenant exercises its option to extend for an additional five (5) year term, as provided in Section 1(b), the monthly rent shall be increased to $21,780 per month to be paid throughout the extended term. (d) In the event that Tenant exercises its option to extend for an additional period of five (5) years as provided in section 1(b) (the “Extended Lease Term”), the monthly rent shall, in addition to the modification provided in Section 2(c), be adjusted as follows: On each anniversary date following the commencement of the Extended Lease Term, the rent, provided by Section 2 hereof, shall be adjusted upward (but not downward) for the ensuing twelve (12) months in the same percentage proportion that the Consumer Price Index for All Urban Consumers (CPI-U) for the San Francisco-Oakland-San Jose area, (1982-1984 equal 100) published by the U.S. Department of Labor, Bureau of Labor Statistics for the date two (2) months prior to each such anniversary date, shall be increased over said Consumer Price Index published two (2) months prior to the previous anniversary date. Said increase shall not exceed five percent (5%) per year cumulative. 2 In case the U.S. Department of Labor shall discontinue the computation and publication of said Consumer Price index or the publication thereof should be delayed so as to prevent its use hereunder at the times required, there shall be substituted therefor by Owner such other index or method of ascertaining changes in the price levels as, in the reasonable opinion of Owner, most closely resembles said Consumer Price index and method of arriving at the index figure by said Bureau. (e) Notwithstanding anything to the contrary herein, if at any time during the term of this lease (including, without limitation, during any Extended Lease Term or any other extension of the term of this Lease), Tenant’s annual payment of real property taxes, assessments and environmental fees under Section 3(a) shall increase by more than two percent (2.00%) over the previous year, the then current monthly rental payment due under this Section 2 shall be decreased by the following formula: adjusted monthly rental = (then current monthly rental) – [{[(current year’s payment of real property taxes, assessments and environmental fees) - (previous year’s payment of real property taxes, assessments and environmental fees)]/12} × 50%]. As an example, if during the third year of the Lease, the annual property tax, assessments and environmental fees bill went from $5,000 to $24,000, the adjusted monthly rental would be: adjusted monthly rental = $18,000 – [{[($24,000) – ($5,000)]/12} × 50%] adjusted monthly rental = $18,000 – [{[$19,000]/12} × 50%] adjusted monthly rental = $18,000 – [$791.67] adjusted monthly rental = $17,208.33 All subsequent increases in monthly rental payments (e.g. monthly rental payment increases contemplated by Sections 2(b), 2(c) and 2(d)) shall be reduced by the same amount. As an example, given the example above, the monthly rental payment in year six of the lease term would be $19,008.83 ($19,800.00 - $791.67) and the monthly rental payment in year eleven (assuming exercise of the first option to extend) would be $20,988.33 ($21,780 - $791.67). 3. Taxes, Assessments and Environmental Fees (a) Real Property Taxes, Assessments and Environmental Fees. Tenant shall pay at least ten (10) days before delinquency, in addition to all other sums agreed to be paid by it under the terms of this Lease, and as additional rent, any and all real property taxes, assessments and environmental fees which are assessed against the leased premises due to Tenant’s use and/or occupancy of the leased premises during the term of this Lease. If the leased premises are only part of a building or parcel of real property, Tenant shall pay its pro rata share of such real property taxes, assessments and environmental fees against all the land and improvements of the Assessor’s Parcel on which the leased premises are located. Tenant shall be obligated to pay all such real property taxes, assessments and environmental fees from the date of delivery of the premises to Tenant to expiration of the Lease term, prorated for any partial year on a daily basis so that Tenant shall pay all such environmental fees attributable to the portion of any tax year 3 occurring within the period of Tenant’s obligation. In addition, throughout the term of this Lease Tenant shall pay upon demand any supplemental assessment because of “new construction” performed by or on behalf of Tenant (as defined in Article XIIIA of the California Constitution and implementing legislation) on the leased premises. Tenant shall also pay upon demand any governmental underground storage tank maintenance fees, and any Water Quality Control Board permit fees, if assessed due to Tenant’s use and/or occupancy of the leased premises. If at any time during the term of this Lease, the federal government, the State of California or any political subdivision of the state, including any county, city, city and county, public corporation, district, or any other political entity or public corporation of this state, levies or assesses against Owner a tax, fee, or excise on rents, on the square footage of the premises, on the act of entering into this Lease, on the business of leasing the premises, or on the occupancy of Tenant, a value added tax, or any other tax, fee, or excise, however described, as a direct substitution in whole or in part for any real property taxes, whether or not now customary or within the contemplation of the parties to this Lease, Tenant shall pay before delinquency that tax, fee, or excise to the extent that such tax; fee, or excise is a substitute for taxes otherwise payable or required to be paid by Tenant under this Lease; and/or the extent that such tax, fee or excise is assessed solely due to Tenant’s use and/or occupancy of the leased premises and not of retail tenants in general. Tenant’s share of any such tax, fee, or excise shall be substantially the same as Tenant’s proportionate share of real property taxes, assessments and environmental fees as provided in this Lease. (b) Other Property. Tenant shall also pay before delinquency any and all taxes, assessments, license fees, and public charges levied, assessed, or imposed during the term of this Lease upon Tenant’s leasehold interest or upon Tenant’s fixtures, furniture, appliances and personal property installed or located on the premises. 4. Rent Default Payment Rent or any other monetary obligation not paid within five (5) days after the date when due shall bear interest from the date due until paid at the rate of ten percent (10%) per annum. In addition to such interest, Tenant acknowledges that late payment by Tenant to Owner of rent or any other monetary obligation will cause Owner to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Owner by the terms of any encumbrance and note secured by any encumbrance covering the premises. Therefore, if any installment of rent due from Tenant is not received by Owner within five (5) days after the date when due, Tenant shall pay to Owner an additional sum of Three Percent (3%) of the overdue rent or other monetary obligation (but not less than $35.00) as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Owner will incur by reason of late payment by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, nor prevent Owner from exercising any of the other rights and remedies available to Owner. 4 5. Acceptance of Premises Prior to delivery of possession, Landlord and Tenant agree to determine that that the said premises, and every part thereof, including, but not limited to, all window glass or other glazing, electric and gas globes, water heaters, plumbing (including sewer system), heating, air conditioning, and lighting fixtures, in and about the said premises shall be at the date of such entry in good order, condition and repair. In the event Landlord and Tenant determine that the premises, or parts thereof, are not in good order, condition and repair, Landlord and Tenant agree to cooperate in bringing such items into good order, condition and repair and to equitably determine the allocation of costs in bringing such items into good order, condition and repair. In general Tenant’s responsibilities shall encompass the roof, heating, ventilation and air conditioning, fixtures, trade fixtures, equipment, furnishings, furniture, leasehold improvements, decorations and signs and Landlord’s responsibilities shall encompass the foundation, plumbing (including sewer system) and structural parts of the premises. On the last day of said term or other sooner termination of this Lease, the Tenant will peaceably and quietly leave, surrender and yield up to the Owner the said premises, with the said appurtenances and fixtures in good order, condition and repair, reasonable use and wear and tear thereof and damage by casualty excepted, provided however all insurance proceeds for damage by casualty paid or required to be paid to Tenant by Tenant’s insurance under Section 11 of this Lease for all appurtenances and improvements constituting Owner’s property shall be paid to Owner by Tenant, and in such event Tenant shall not be responsible for repairs or rebuilding due to such casualty. 6. Use of Premises Tenant will not use, or permit the said premises, or any part thereof, to be used by any purpose or purposes other than the purpose or purposes for which the said premises are leased to Tenant as hereinbefore specified; and no use shall be made or permitted to be made of said premises, nor acts done, which will increase the existing rate of insurance upon the building thereon, or cause a cancellation of any insurance policy covering said building, or any part thereof nor shall the Tenant sell, or permit to be kept, used or sold, in or about the said premises, any article which may be prohibited by the standard form of fire insurance policies. Owner, to its knowledge, acknowledges that Tenant’s permitted use hereunder will not increase the existing rate of insurance upon the building or cause a cancellation of any insurance policy covering said building. 7. Conduct of Business Tenant shall conduct its business in the leased premises and keep the leased premises open for business during substantially the same days, nights and hours as are customary for the type of business carried out by Tenant in the trading area where the premises are located. 8. Competition The Owner acknowledges that Tenant, or affiliates of Tenant, currently operate other multi-screen movie theatre complex in Sonoma County, California, including without limitation, the Roxy Stadium 14, 85 Santa Rosa Avenue, Santa Rosa, California, the 3rd Street Cinema Six, 5 620 Third Street, Santa Rosa, California, the Airport Stadium 12, 409 Aviation Boulevard, Santa Rosa, California and the Raven Film Center, 415 Center Street, Healdsburg, California. Owner further acknowledges that Tenant, or affiliates of Tenant, may engage in new multi-screen theatre complexes. Notwithstanding the above, during the term of this Lease neither Tenant nor any affiliate of Tenant shall, except for those existing movie theaters already operated by Tenant, or affiliates of Tenant, directly or indirectly engage in any similar business to that for a multi-screen movie theatre complex within a radius of five (5) miles from the leased premises. This restriction shall not apply to a cinema pub (for the purpose herein a cinema pub shall be defined as premises adapted for the simultaneous serving of food, beverages and alcoholic beverages and the showing of films in non-traditional theatre setting using however a mixture of tables, chairs and theatre seating possibly along with couches and other furniture seating). Owner agrees that during the term of this Lease, Owner will not allow the construction and/or operation of a new multi-screen movie theatre complex in the complex of which the leased premises is a part. 9. Security Deposit Tenant, contemporaneously with the execution of this Lease, agrees to deposit with Owner the sum of Eighteen Thousand and NO/100 Dollars ($18,000.00). Said deposit shall be held by Owner, without liability for interest, as security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease by said Tenant to be kept and performed during the term hereof. If at any time during the term of this Lease any of the rent herein reserved shall be overdue and unpaid (after notice and expiration of the applicable cure period), or any other sum payable by Tenant to Owner hereunder shall be overdue and unpaid (after notice and expiration of the applicable cure period), then Owner may, at the option of Owner (but Owner shall not be required to), appropriate and apply the portion of said deposit equal to the amount of any such overdue rent or other sum. Owner is not a trustee of the deposit and may commingle it and use it in ordinary business. In the event of the failure of Tenant to keep and perform any of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant (after notice and expiration of the applicable cure period), then the Owner at its option may appropriate and apply so much of the deposit thereof as may be necessary, to compensate the Owner for all loss or damage sustained or suffered by Owner due to such breach on the part of Tenant. Should the entire deposit, or any portion thereof, be appropriated and applied by Owner for the payment of overdue rent or other sums due and payable to Owner by Tenant hereunder, then Tenant shall, upon the written demand of Owner, forthwith remit to Owner a sufficient amount of cash to restore said security to the original sum deposited, and Tenant’s failure to do so within five (5) days after receipt of such demand shall constitute a breach of this Lease. Should Tenant comply with all of said terms, covenants and conditions and promptly pay all of the rental herein provided for as it falls due, and all other sums payable by Tenant to Owner hereunder, the said deposit shall be returned in full to Tenant at the end of the term of this Lease. Owner may deliver the funds deposited hereunder by Tenant to the purchaser or transferee of Owner’s interest in the leased premises, in the event that such interest be sold or 6 transferred, and thereupon Owner shall be discharged from any further liability with respect to such deposit. Tenant hereby agrees not to look to the mortgagee, as mortgagee, mortgagee in possession, or successor in title to the property, for accountability for any security deposit required by the Owner hereunder, unless said sums have actually been received by said mortgagee or successor as security for the Tenant’s performance of this lease. 10. Tenant Improvements (a) Tenant shall be responsible for and shall undertake the design, construction, repair and maintenance of all Tenant improvements necessary to operate the leased premises as a multi- screen movie theater complex including, but not limited to, the roof and any roof replacement and the heating, ventilation and air conditioning system during the term of this Lease, or any extended lease term. (b) All fixtures, trade fixtures, equipment, furnishings, furniture, leasehold improvements, decorations and signs installed by Tenant shall be of good quality. Tenant shall not make or cause to be made any exterior alterations, additions or improvements or install or cause to be installed any exterior signs, exterior lighting, exterior plumbing fixtures, shades or awnings or make any other exterior changes to the building without first obtaining Owner’s written approval and consent which shall not be unreasonably withheld so long as Tenant conforms to reasonable design criteria. Tenant shall present to the Owner plans and specifications for all such exterior work at the time approval is sought and Tenant shall prior to the commencement of any interior work which requires a building permit, give Owner written notice specifying the work to be performed and the area of the leased premises to be affected by such work, including a copy of all plans and specifications and a copy of the building permits. (c) If Tenant installs any restaurant equipment that warrants grease containment then Tenant shall provide and install at Tenant’s sole cost and expense and in accordance with plans and specifications prepared by Tenant or Tenant’s architect and approved in writing by Owner, which approval shall not be unreasonably withheld, a grease containment system. 11. Removal and Insurance By Tenant All alterations, additions, fixtures, and improvements including, without limitation, carpeting and all other improvements, whether temporary or permanent in character, made in or upon the premises by Tenant, or acquired by Tenant from the prior tenant shall be Tenant’s property. All such alterations, additions, fixtures, and improvements shall, at Tenant’s option, either remain on the premises without compensation to Tenant or be removed by Tenant, and Tenant shall repair any damage to the premises or the building caused by the installation and subsequent removal; provided however Owner shall have the right to require Tenant to remove any alterations, additions, fixtures and improvements Tenant intended to remain on the premises and Tenant shall repair any damage to the premises or building caused by the installation and subsequent removal of same. The Tenant shall at all times maintain fire insurance with extended and “all risk” (special form) coverages in the name of the Owner and the Tenant and naming 7 Owner as the loss payee in the event of loss, in an amount adequate to cover the cost of replacement of all alterations, additions, fixtures, and improvements, whether owned by Owner or Tenant, and all appurtenances and improvements existing as of the date Owner notified Tenant the premises were ready for occupancy, in the event of fire or extended coverage loss. Tenant shall deliver to the Owner certificates of such fire insurance policies confirming Owner’s inclusion as loss payee together with actual additional insured endorsements and which shall contain a clause requiring the insurer to give the Owner ten (10) days notice of cancellation of such policies. No alterations, additions, fixtures, or improvements other than Tenant’s property shall be removed from the premises without prior consent in writing from the Owner. Contractors, subcontractors, maintenance and/or repair companies, or individuals hired by Tenant to perform work on the leased premises (excluding employees on the Tenant’s payroll), must be licensed to do such work and must provide to Owner certificates of comprehensive general liability insurance with a combined single limit of at least $1 million per occurrence, naming Owner as an additional insured by endorsement, prior to the commencement of any such work. 12. Mechanic’s Liens Tenant agrees that it will pay or cause to be paid all costs for work done by it or caused to be done by it on the leased premises and that it will keep the leased premises free and clear of all mechanics’ liens and other liens on account of work done by or for Tenant or by or for persons claiming under it. Tenant agrees to and shall indemnify and save Owner free and harmless against liability, loss, damage, costs, attorneys’ fees, and all other expenses on account of claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished for Tenant or persons claiming under it. Tenant shall have the right to contest the correctness or the validity of any such lien if Tenant procures and records a lien release bond issued by a corporation authorized to issue surety bonds in California in an amount equal to one and one-half times the amount of the claim of lien. The bond shall meet the requirements of Civil Code Section 3143 and shall provide for the payment of any sum that the claimant may recover on the claim (together with costs of suit, if it recovers in the action). Should any claims of lien be filed against the leased premises or any action affecting the title to such property be commenced, the party receiving notice of such lien or action shall forthwith give the other party notice thereof. Owner or its representatives shall have the right, upon three (3) days notice to Tenant (except in cases of emergency) to go upon and inspect the leased premises at all reasonable times, and shall have the right to post and keep posted thereon notices as permitted or provided by law or which Owner may deem to be proper for the protection of Owner’s interest in the leased premises. Tenant shall, before the commencement of any work which might result in any such lien, give to Owner written notice of its intention to do so in sufficient time to enable Owner to file and record such notices. 8 13. Maintenance and Repairs (a) Subject to Section 13(b), Tenant agrees, at the expense of Tenant, to maintain the leased premises in good and clean order, condition and repair throughout the term of this Lease (and shall make any necessary replacements thereto) including, but not limited to, building front (excluding structural components as required by Owner pursuant to Section 13(b)), front canopy and exterior entrances, plate and window glass, all doors, floor and floor covering, lighting, exterior lighting attached to the building, electrical facilities, plumbing (including free flow to sewer lines in the public right-of-way), water heaters, heating and air conditioning system, ceilings and roofs, foundations, interior and exterior walls, sidewalks, downspouts, water pipes, gas main, sewers, electrical conduits and connections within the building (including panel box), and under canopy sidewalks. Tenant shall provide screening of garbage, rubbish, and refuse areas as required by any applicable laws, ordinances or regulations. Tenant waives the provisions of California Civil Code Sections 1941 and 1942 with respect to a landlord’s obligations for tenantability of the premises and a tenant’s right to make repairs and deduct the expenses of such repairs from rent. (b) If Tenant installs any restaurant equipment at the leased premises, in addition to customary movie concession equipment, then Tenant agrees as follows: I. A. Tenant agrees to clean its cooking exhaust flue and related equipment and to service the extinguishing system installed to prevent grease fires at least twice each lease year and more frequently if so recommended by the manufacturer or installer of the flue or by the servicer of the flue or by Owner or Owner’s insurance carrier. Tenant also agrees to keep all equipment located on the roof, including the roof free and clear