Exhibit 10.14(b)

SECOND AMENDMENT
TO
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
HF LOGISTICS-SKX, LLC

This Second Amendment to Amended and Restated Limited Liability Company
Agreement of HF Logistics-SKX, LLC (“Amendment”) is made and entered into this
12th day of February, 2019 by and between HF Logistics I, LLC, a Delaware
limited liability company (“HF”) and Skechers R.B., LLC, a Delaware limited
liability company (“Skechers”, and together with HF, the “Members”).

RECITALS

A.The Members executed that certain Amended and Restated Limited Liability
Company Agreement of HF Logistics-SKX, LLC dated April 12, 2010, but effective
as of January 30, 2010 (as amended by a First Amendment dated as of August 11,
2015, the “Existing LLC Agreement”).

B.Although the expansion right set forth in the Existing LLC Agreement has
lapsed, Skechers Parent has stated its desire to expand into the Expansion
Parcel (although the expansion building will contain approximately 750,000
square feet instead of 500,000 square feet, as originally contemplated under the
Existing LLC Agreement), and to that end, Skechers Parent and the T2 Subsidiary
will be entering into a new lease (the “Expansion Parcel Lease”) for the
building and other improvements to be constructed on the Expansion Parcel (as
defined herein).  However, to accomplish the desired expansion, additional land
is required beyond the approximately 22.37 acre Expansion Parcel, which is
currently owned by the T2 Subsidiary (the “Original Expansion
Parcel”).  Highland Fairview Partners V, a Delaware general partnership
(“HFPV”), which is an Affiliate of HF, owns approximately 12.93 acres of land
adjacent to the Original Expansion Parcel (the “Additional Expansion Parcel”),
and is willing to contribute the Additional Expansion Parcel to the T2
Subsidiary to enable the expansion to occur.  The Original Expansion Parcel and
the Additional Expansion Parcel are together referred to herein as the
“Expansion Parcel”.

C.The Members desire to further amend the Agreement.

NOW, THEREFORE, it is agreed as follows:

1.Concurrently with the execution of this Amendment, and in accordance with the
terms and conditions of the Amended T2 LLC Agreement (as defined below):

(a)The Company shall assign its entire Company Interest in the T2 Subsidiary to
HF and Skechers, pursuant to an assignment in the form of Exhibit “A” attached
hereto;

(b)HF shall cause HFPV to contribute (by grant deed), the Additional Expansion
Parcel to the T2 Subsidiary; and

(c)Skechers shall contribute cash in the amount of $7,000,000 to the T2
Subsidiary.

2.As a condition to the effectiveness of this Amendment, concurrently herewith
(a) Skechers Parent and the T2 Subsidiary shall enter into the Expansion Parcel
Lease, which shall be in the form of Exhibit “B” attached hereto (and the
Sublease referred to therein shall also be executed), (b) Skechers Parent and
the Company shall enter into a Fourth Amendment to Lease Agreement in the form

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089402.000005 4814-7657-7400.7

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of Exhibit “C” attached hereto, and (c) Skechers, HF and HFPV shall have
executed the Amended and Restated Limited Liability Company Agreement of HF
Logistics-SKX T2, LLC (the “Amended T2 LLC Agreement”) (and the Development
Management Agreement referred to therein shall also be executed) in the form of
Exhibit “D” attached hereto.

3.New Section 10.2.4 is hereby added to the Existing LLC Agreement, as follows:

“10.2.4  Partner Representative.  The Members shall take all reasonable actions
to avoid the application to the Company of the provisions of Section 6221
through 6241 of the Code, as amended by the Bipartisan Budget Act of 2015,
including filing all necessary elections to avoid the application of such
provisions.  If, however, such provisions do apply to the Company, the Tax
Matters Partner shall act as the “Partnership Representative” for purposes of
Sections 6221 through 6241 of the Code, as so amended.”

4.Section 17.1 of the Existing LLC Agreement is hereby amended by changing the
address for notices to HF to read as follows:

“c/o HF Logistics-SKX, LLC

HF Logistics I, LLC

c/o Highland Fairview Properties

14225 Corporate Way

Moreno Valley, California 92553

Attention:  Iddo Benzeevi

With Copy To:

Baker & Hostetler LLP

11601 Wilshire Boulevard, Suite 1400

Los Angeles, California 90025-7120

Attention:  Bruce R. Greene, Esq.

With Additional Copy To:

James Lieb, Esq.

Executive Vice President

TG Services, Inc.

4 Stage Coach Run

East Brunswick, New Jersey 08816”

5.Skechers hereby releases and discharges HF, and its members, officers,
directors, agents and employees, and the heirs, successors and assigns of each
of the foregoing, from any and all claims, demands, costs, expenses, lawsuits,
actions, causes of action, obligations and liabilities of every nature, known or
unknown, which relate to the fact that the Expansion Parcel was not leased to
Skechers, and the fact that the Expansion Parcel has not yet been developed and
is not producing income, including, but not limited to, those claims made in
that certain letter dated September 4, 2018 from Eric V. Rowen, Esq. of
Greenberg Traurig LLP (Skechers’ attorney) to HF (including claims for breach of
fiduciary duty, or any other claims which Skechers may have which relate to the
subject matter of such letter).

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In executing and delivering this Amendment (and specifically the release
provisions of this Paragraph), Skechers acknowledges it is familiar with the
provisions of California Civil Code Section 1542 and expressly agrees to waive
the provisions of said statute, which provides:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

Skechers acknowledges that it understands the terms of the foregoing release
provision and is entering into this Amendment and the release herein freely and
voluntarily, without duress or coercion.  

6.Capitalized terms used in this Amendment have the same meanings as are set
forth in the Existing LLC Agreement, except as provided herein.

7.Except as set forth in this Amendment, the Existing LLC Agreement remains in
full force and effect as written.

 

[Signatures on next page]

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IN WITNESS WHEREOF, the Members have executed this Amendment as of the date
first above written.

 

“HF”

 

“SKECHERS”

HF LOGISTICS I, LLC, a Delaware limited liability company

 

SKECHERS R.B., LLC, a Delaware limited liability company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Iddo Benzeevi

 

By:

 

Skechers U.S.A., Inc., a Delaware

 

 

Iddo Benzeevi, President and Chief Executive Officer

 

 

 

corporation, its sole member

 

 

 

 

 

 

 

 

 

By:

 

/s/ David Weinberg

 

 

 

 

 

 

 

David Weinberg, Chief Operating Officer

 

By its signature hereon, Skechers Parent guarantees to HF and the Company, its
obligation to fund the $7,000,000 Additional Capital Contribution of Skechers as
set forth in Section 1(c) of this Amendment.

 

 

 

“SKECHERS PARENT”

 

 

SKECHERS U.S.A., INC., a Delaware corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ David Weinberg

 

 

 

 

 

 

David Weinberg, Chief Operating Officer

 

 

 

 

 

 

 

 

 

 

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EXHIBIT “A”

FORM OF ASSIGNMENT

 

 

HF Logistics-SKX, LLC, a Delaware limited liability company (“Assignor”) hereby
assigns and transfers its entire Company Interest (as such term is defined in
that certain Amended and Restated Limited Liability Company Agreement of HF
Logistics-SKX T2, LLC, a Delaware limited liability company (the “T2 LLC
Agreement”) as follows:

(a)50% to HF Logistics I, LLC, a Delaware limited liability company (“HF”); and

(b)50% to Skechers R.B., LLC, a Delaware limited liability company (“Skechers”,
and together with HF, the “Assignees”).

The foregoing assignment includes all right, title and interest in Assignor’s
Capital Account in HF Logistics-SKX T2, LLC, a Delaware limited liability
company (“T2”), all right to receive distributions from T2, and all voting and
management rights in T2, all as more fully set forth in the T2 LLC Agreement.

It is agreed that the foregoing Assignment shall be treated as a distribution of
property from T2 to Assignees.

Assignees hereby agree that they shall be deemed to be Members of T2 from and
after the date of this Assignment, and agree to be bound by and to comply with
all provisions of the T2 LLC Agreement relating to the rights and obligations of
the Members.

[Signatures on next page]

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Executed this _____ day of _____________, 2019.

ASSIGNOR:

 

HF LOGISTICS-SKX, LLC, a Delaware limited liability company

 

By:

HF Logistics I, LLC, a Delaware limited liability company

 

 

 

 

 

By:

 

 

 

Iddo Benzeevi, President and Chief Executive Officer

 

 

By:

Skechers R.B., LLC, a Delaware limited liability company

 

 

 

By:

Skechers U.S.A., Inc., Delaware corporation, its sole member

 

 

 

 

 

 

 

 

By:

 

 

 

 

David Weinberg, Chief Operating Officer

 

 

ASSIGNEES:

 

HF LOGISTICS I, LLC, a Delaware limited liability company

 

 

By:

 

 

Iddo Benzeevi, President and Chief Executive Officer

 

 

 

 

SKECHERS R.B., LLC, a Delaware limited liability company

 

By:

Skechers U.S.A., Inc., Delaware corporation, its sole member

 

 

 

 

 

By:

 

 

 

David Weinberg, Chief Operating Officer

 

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EXHIBIT “B”

EXPANSION PARCEL LEASE

THIS LEASE AGREEMENT (the “Lease”) is made this _____ day of ______________,
2019 (the “Effective Date”), between HF LOGISTICS-SKX T2, LLC, a Delaware
limited liability company (“Landlord”), and the Tenant named below.

Tenant:

Skechers U.S.A., Inc., a Delaware corporation

Tenant's Representative:

Paul Galliher

Address and Phone:

228 Manhattan Beach Blvd.

Manhattan Beach, CA  90266

Telephone:(909) 390-1619

Building:

That certain Building, containing approximately 750,000 net rentable square
feet, to be constructed by Landlord in accordance with the provisions of this
Lease.

Project:

Highland Fairview Corporate Park

Premises:

The Building, together with the parking areas, landscaped areas and other areas
consisting of approximately 35.30 acres of land situated in Moreno Valley,
California, as shown on the Site Plan attached hereto as Exhibit “A”, and
consisting of Parcel 2 and Parcel 3 of Parcel Map No. 35629 (APN’s: 488-350-031
and 035, and 488-350-027, 032 and 036).

Possession:

If construction has not commenced within eighteen (18) months after the
Effective Date, for any reason other than a default hereunder by Tenant, then
Tenant may terminate this Lease by notice to Landlord within thirty (30) days
after the end of such eighteen (18) month period (unless construction is
commenced within such thirty (30) day period, in which case this Lease shall not
be terminated).  Upon termination, any prepaid Base Rent and Estimated Operating
Expense Payments made by Tenant shall be promptly returned to Tenant, and
neither party shall have any further rights or obligations under this Lease,
except for those rights and obligations which expressly survive termination of
the Lease as set forth herein.  

Lease Term:

Beginning on the Commencement Date and ending on the last day of the 180th full
calendar month thereafter (the “Termination Date”).

Commencement Date:

The earlier of (a) 30 days after the date of Substantial Completion of the
Premises or (b) the date Tenant shall commence its business operations in the
Premises.  The parties agree to execute a written instrument which confirms the
Commencement Date and the Termination Date promptly after such dates have been
determined.  

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Monthly Base Rent:

See Addendum 1

Expense Payments (estimates only

Operating Expenses$10,588

and subject to adjustment to actual

Taxes$73,333

costs and expenses according to the

Insurance$24,044

provisions of this Lease)

Total:$107,965

 

Initial Monthly Base Rent and Estimated

 

Operating Expense Payments:

$565,465

 

Security Deposit:

None

 

Broker:

None

 

Addenda:

1. Base Rent

2.Construction  

3.Miscellaneous Provisions

 

Exhibits:

A - Site Plan

B – Building Design Criteria

C – Form of Highland Fairview Sublease

 

 

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1.Granting Clause.  In consideration of the obligation of Tenant to pay rent as
herein provided and in consideration of the other terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease.

2.Acceptance of Premises.  Except as otherwise set forth in the Lease, Tenant
shall accept the Premises in its condition as of the Commencement Date, subject
to all applicable laws, ordinances, regulations, covenants and
restrictions.  Landlord has made no representation or warranty as to the
suitability of the Premises for the conduct of Tenant's business, and Tenant
waives any implied warranty that the Premises are suitable for Tenant's intended
purposes.  Except as otherwise set forth in the Lease, in no event shall
Landlord have any obligation for any defects in the Premises or any limitation
on its use.  The taking of possession of the Premises shall be conclusive
evidence that Tenant accepts the Premises and that the Premises were in good
condition at the time possession was taken except for items that are Landlord's
responsibility under the Lease and any punchlist items agreed to in writing by
Landlord and Tenant.  Notwithstanding anything to the contrary set forth herein,
Landlord represents and warrants that as of the Commencement Date (i) the
structural integrity of the Premises, including without limitation, the
foundation, roof, and any load bearing or retaining walls, is free from any
material latent or patent defects, (ii) Landlord is currently not the subject of
any bankruptcy or insolvency proceeding, (iii) the Premises shall be in
compliance with all Legal Requirements (hereinafter defined) in effect as of the
Commencement Date of this Lease, (iv) Landlord has full power, right and
authority to execute and perform this Lease and all limited liability company
action necessary to do so has been duly taken, and (v)  there are no covenants,
conditions, restrictions or agreements in existence which are not part of the
public records which will adversely affect the permitted use of the
Premises.  If any of the foregoing representations or warranties are inaccurate,
Landlord shall, promptly after receipt of written notice from Tenant setting
forth with specificity the nature and extent of such inaccuracy, rectify the
same at Landlord’s expense.

3.Use.  The Premises shall be used only for the purpose of receiving, storing,
packaging, shipping and selling (but limited to wholesale sales) products,
materials and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto; provided, however, with Landlord's
prior written consent, and provided that such use is permissible under
applicable zoning and other Legal Requirements.  Tenant may also use the
Premises for light manufacturing.  Tenant shall not conduct or give notice of
any auction, liquidation, or going out of business sale on the Premises, without
Landlord’s prior written consent which shall not be unreasonably withheld,
conditioned or delayed.  Tenant will use the Premises in a careful, safe and
proper manner and will not commit waste, overload the floor or structure of the
Premises or subject the Premises to use that would damage the Premises.  Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise,
or vibrations to emanate from the Premises, or take any other action that would
constitute a nuisance or would disturb, unreasonably interfere with, or endanger
Landlord or any tenants of the Project.  For purposes of the preceding sentence,
noise or vibrations from Tenant’s material handling system shall not be
considered “objectionable” by Landlord.  Outside storage, including without
limitation, storage of non-operable trucks and other non-operable vehicles, is
prohibited without Landlord's prior written consent; provided, however, that
subject to applicable Legal Requirements, Tenant shall be permitted to park
trucks and trailers used in Tenant’s business operations on and from the
Premises overnight at the truck docks of the Premises and Tenant’s customers
shall be permitted to park their vehicles overnight from time to time in the
parking areas of the Premises, provided such customer’s vehicles and such trucks
and trailers are at all times in operable condition and there is no interference
with the ingress and egress of the Project.  Except as otherwise set forth in
the Lease, Tenant, at its sole expense, shall use and occupy the Premises in
compliance with all laws, including, without limitation, the Americans With
Disabilities Act, orders, judgments, ordinances, regulations, codes, directives,
permits, licenses, covenants and restrictions now or hereafter applicable to the
Premises (collectively, “Legal Requirements”). Tenant shall, at its

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expense, make any alterations or modifications, within or without the Premises,
that are required by Legal Requirements related to Tenant's specific use or
occupation of the Premises.  Tenant will not use or permit the Premises to be
used for any purpose or in any manner that would void Tenant's or Landlord's
insurance, increase the insurance risk, or cause the disallowance of any
sprinkler credits.  If any increase in the cost of any insurance on the Premises
or the Project is caused by Tenant's use or occupation of the Premises, or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord.  Any occupation of the Premises by Tenant prior to the
Commencement Date shall be subject to all obligations of Tenant under this
Lease.

Notwithstanding anything contained herein to the contrary, Tenant's obligations
hereunder shall relate only to the interior of the Premises and any changes to
the Premises or the Building that relate solely to the specific manner of use of
the Premises by Tenant, and Landlord shall make all other additions to or
modifications of the Premises required from time to time by Legal
Requirements.  The cost of such additions or modifications made by Landlord
shall be included in Operating Expenses pursuant to Paragraph 6 of this Lease,
except for those additions or modifications which are Landlord's sole
responsibility pursuant to the provisions of this Lease.

Landlord represents that the improvements constructed or installed by Landlord
pursuant to the Construction Addendum attached to this Lease shall comply in all
material respects with all applicable covenants or restrictions of record and
all applicable laws, building codes, regulations and ordinances in effect on the
Commencement Date of this Lease.

4.Rent.  Tenant shall pay Base Rent in the amount set forth above.  The first
month's Base Rent (estimated at $457,500) and the first monthly installment of
estimated Operating Expenses (as hereafter defined) shall be due and payable on
the Effective Date, and Tenant promises to pay to Landlord in advance, without
demand, deduction or set-off, monthly installments of Base Rent on or before the
first day of each calendar month succeeding the Commencement Date.  Payments of
Base Rent for any fractional calendar month shall be prorated.  All payments
required to be made by Tenant to Landlord hereunder shall be payable at such
address as Landlord may specify from time to time by written notice delivered in
accordance herewith.  The obligation of Tenant to pay Base Rent and other sums
to Landlord and the obligations of Landlord under this Lease are independent
obligations.  Tenant shall have no right at any time to abate, reduce, or
set-off any rent due hereunder except as may be expressly provided in this
Lease.  If Tenant is delinquent in any monthly installment of Base Rent or
estimated Operating Expenses for more than 10 days, Tenant shall pay to Landlord
on demand a late charge equal to 5 percent of such delinquent sum.  The
provision for such late charge shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as a penalty.

5.Security Deposit.  Intentionally Omitted.  

6.Operating Expense Payments.  During each month of the Lease Term, on the same
date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of
the annual cost, as estimated by Landlord from time to time, of the Operating
Expenses for the Premises.  Payments thereof for any fractional calendar month
shall be prorated.  The term “Operating Expenses” means all costs and expenses
incurred by Landlord with respect to the ownership, maintenance, and operation
of the Premises including, but not limited to costs of: Taxes (hereinafter
defined) and fees payable to tax consultants and attorneys for consultation and
contesting taxes; insurance; maintenance, repair and replacement of the
Premises, including without limitation, paving and parking areas, non-structural
areas of the roof (including the roof membrane), alleys, and driveways, mowing,
landscaping, exterior painting, amounts paid to contractors and subcontractors
for work or services performed in connection with any of the foregoing; charges
or assessments of any association to which the Premises is, or may in the future
be, subject to; property management fees payable to an independent property
manager, but excluding

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property management fees paid to Landlord or any affiliate of Landlord; security
services, if any; trash collection, sweeping and removal; and additions or
alterations made by Landlord to the Premises in order to comply with Legal
Requirements enacted after the Commencement Date (other than those expressly
required herein to be made by and paid for exclusively by Tenant or Landlord) or
that are appropriate to the continued operation of the Premises as a warehouse
and distribution facility in the market area.  The cost of additions or
alterations or repairs that are required to be capitalized for federal income
tax purposes shall be amortized on a straight line basis over a period equal to
the useful life thereof for federal income tax purposes.  Operating Expenses do
not include amortization for capital repairs and capital replacements required
to be made by Landlord under Paragraph 10 of this Lease, costs of Restoration to
the extent of Net Proceeds received by Landlord with respect thereto, or leasing
commissions.  Further, Operating Expenses shall not mean or include:  (i) costs
incurred in connection with the initial construction of the Premises, or
correction of defects in design or construction;  (ii) interest, principal, or
other payments on account of any indebtedness that is secured by any encumbrance
on any part of the Premises, or rental or other payments under any ground lease,
or any payments in the nature of returns on or of equity of any kind;  (iii)
costs of selling, syndicating, financing, mortgaging or hypothecating any part
of or interest in the Premises;  (iv) taxes on the income of Landlord or
Landlord's franchise taxes (unless any of said taxes are hereafter instituted by
applicable taxing authorities in substitution for ad valorem real property
taxes);  (v) depreciation;  (vi) Landlord's overhead costs, including equipment,
supplies, accounting and legal fees, rent and other occupancy costs or any other
costs associated with the operation or internal organization and function of
Landlord as a business entity (but this provision does not prevent the payment
of a management fee to Landlord as provided in this Paragraph 6);  (vii) fees or
other costs for professional services provided by space planners, architects,
engineers, and other similar professional consultants, real estate commissions,
and marketing and advertising expenses;  (viii) costs of defending or
prosecuting litigation with any party, unless a favorable judgment would reduce
or avoid an increase in Operating Expenses, or unless the litigation is to
enforce compliance with Rules and Regulations of the Project, or other standards
or requirements for the general benefit of the tenants in the Project;  (ix)
costs incurred as a result of Landlord's violation or breach of this Lease or of
any other lease, contract, law or ordinance, including fines and penalties; (x)
late charges, interest or penalties of any kind for late or other improper
payment of any public or private obligation, including ad valorem taxes;  (xi)
costs of removing Hazardous Materials or of correcting any other conditions in
order to comply with any environmental law or ordinance (but this exclusion
shall not constitute a release by Landlord of Tenant for any such costs for
which Tenant is liable pursuant to Paragraph 30 of this Lease);  (xii) costs for
which Landlord is reimbursed from any other source;  (xiii) costs related to any
building or land not included in the Premises; (xiv) the part of any costs or
other sum paid to any affiliate of Landlord that may exceed the fair market
price or cost generally payable for substantially similar goods or services in
the area of the Premises; (xv) bad debt expenses; (xvi) costs arising from
Landlord’s charitable or political contributions, if any; and (xvii) the cost of
Landlord’s compliance with the provisions of Paragraphs 2, 3 or Addendum 3
hereof, or any other costs which are charged to Landlord and not to be borne by
Tenant under the terms of the Lease.

Notwithstanding anything contained herein to the contrary, the property
management fees payable to any independent property manager (which excludes
Landlord or any affiliate of Landlord), as set forth in this Paragraph 6, shall
not exceed 2% of the gross monthly revenues collected from Tenant.

Landlord shall provide Tenant within 90 days following the final day of the
calendar year Landlord's itemized year-end operating expense reconciliation
reports which reference and include all applicable Operating Expenses for such
year.  Upon Tenant's written request (which request shall be limited to once in
a calendar year), Landlord shall provide photocopies of invoices, bills and
other verification to substantiate Operating Expenses.  If Tenant's total
payments of estimated Operating Expenses for any year are less than the actual
Operating Expenses for such year, then Tenant shall pay the difference to
Landlord within 30 days after demand, and if more, then Landlord shall retain
such excess

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and credit it against Tenant's next payment of Operating Expenses.  For purposes
of calculating Operating Expenses, a year shall mean a calendar year except the
first year, which shall begin on the Commencement Date, and the last year, which
shall end on the expiration of this Lease.  

7.Utilities.  Tenant shall pay for all water, gas, electricity, heat, light,
power, telephone, sewer, sprinkler services, refuse and trash collection, and
other utilities and services used on the Premises, all maintenance charges for
utilities, and any storm sewer charges or other similar charges for utilities
imposed by any governmental entity or utility provider, together with any taxes,
penalties, surcharges or the like pertaining to Tenant's use of the
Premises.  All utilities shall be separately metered or charged directly to
Tenant by the provider. No interruption or failure of utilities shall result in
the termination of this Lease or the abatement of rent.

If not part of the initial construction, Landlord may, at its sole expense,
install solar panels on the roof of the Premises which will generate electricity
which will be supplied to the Premises (which may flow directly into the power
grid established by the electrical utility provider selected by Tenant).  Tenant
agrees to cooperate with Landlord (at no expense to Tenant) in connection with
such installation, including any metering system which Landlord may elect to
install, and Tenant agrees to utilize the electrical power generated by such
solar panel system when it is available.  To the extent that Tenant’s electrical
bill is reduced (either directly or indirectly,  which may be effectuated by
means of credits and/or  vouchers provided to Tenant by Landlord or by the
electrical service provider) by virtue of Tenant’s use of the electrical power
generated by such solar panel system, Tenant will pay a like amount (including
any applicable sales tax) to Landlord as payment for the cost of providing such
electrical power; provided, however, that under no circumstances will the total
amount paid to Landlord and the electrical utility provider exceed the amount
which Tenant would otherwise have paid to the electrical utility provider had
the solar panel system not been utilized.  Payments to Landlord shall be made
monthly along with the payments of Base Rent, for the cost of electrical power
for the previous month.  Landlord shall not be responsible to Tenant for any
disruption or any other problem involving the electrical service supplied by
such solar panels.   Tenant acknowledges that electricity may only be provided
from such solar panels during daylight and that accordingly, Tenant will still
need to obtain and maintain its own electrical service (24/7) from an electrical
utility provider.  

8.Taxes.  Landlord shall pay all taxes, assessments and governmental charges
(collectively referred to as “Taxes”) that accrue against the Premises during
the Lease Term, including any increased Taxes resulting from the sale or other
disposition of the Premises by Landlord, or any other change of ownership which
results in the reassessment of Taxes.  Taxes shall be included in the
computation of Operating Expenses charged to Tenant.  Landlord may contest by
appropriate legal proceedings the amount, validity, or application of any Taxes
or liens thereof.   If Landlord fails to contest the real estate taxes, Tenant
shall have the right to request Landlord to contest such taxes, and Landlord
shall so contest, at Tenant's sole cost and expense (including, without
limitation, Landlord's reasonable attorneys' fees and reasonable fees payable to
tax consultants and attorneys for consultation and  contesting taxes) , if, in
Landlord's reasonable judgment, such contest is warranted; provided, however,
Tenant's request of such contesting of Taxes shall be limited to one request in
a calendar year.  Landlord shall cooperate in the institution and prosecution of
any such proceedings of contesting taxes and will execute any documents
reasonably required therefor.  All reductions, refunds, or rebates of Taxes paid
or payable by Tenant shall belong to Tenant whether as a consequence of a Tenant
proceeding or otherwise.  All capital levies or other taxes assessed or imposed
on Landlord upon the rents payable to Landlord under this Lease and any
franchise tax, any excise, transaction, sales or privilege tax, assessment, levy
or charge measured by or based, in whole or in part, upon such rents from the
Premises and/or the Project or any portion thereof shall be paid by Tenant to
Landlord monthly in estimated installments or upon demand, at the option of
Landlord, as additional rent; provided, however, in no event shall Tenant be
liable for any net income taxes imposed on Landlord unless such net income taxes
are in substitution for any Taxes payable

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hereunder.  If any such tax or excise is levied or assessed directly against
Tenant, then Tenant shall be responsible for and shall pay the same at such
times and in such manner as the taxing authority shall require.  Tenant shall be
liable for all taxes levied or assessed against any personal property or
fixtures placed in the Premises, whether levied or assessed against Landlord or
Tenant.

9.Insurance.  Landlord shall maintain special form (including theft) property
insurance covering the full replacement cost of the Building and other
improvements on the Premises.  Landlord may, but is not obligated to, maintain
such other insurance and additional coverages as it may deem necessary,
including, but not limited to, commercial liability insurance or rent loss
insurance and earthquake insurance and terrorism insurance, if such insurance is
customarily required by lenders with respect to comparable buildings in the
market area of the Premises, and if the cost thereof is commercially
reasonable.  All such insurance shall be included as part of the Operating
Expenses charged to Tenant.  The Building (and such other improvements) may be
included in a blanket policy (in which case the cost of such insurance allocable
to the Building and such other improvements will be determined by Landlord based
upon the insurer's cost calculations).  Tenant shall also reimburse Landlord for
any increased premiums or additional insurance which Landlord reasonably deems
necessary as a result of Tenant's use of the Premises.

Tenant, at its expense, shall maintain during the Lease Term:  all risk property
insurance covering the full replacement cost of all property and improvements
installed or placed in the Premises by Tenant at Tenant's expense; worker's
compensation insurance with no less than the minimum limits required by law;
employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may reasonably require) for property
damage, personal injuries, or deaths of persons occurring in or about the
Premises.  Landlord may from time to time require reasonable increases in any
such limits.  The commercial liability policies shall name Landlord and any
Lender as an additional insured, insure on an occurrence and not a claims-made
basis, be issued by insurance companies which are reasonably acceptable to
Landlord, not be cancelable unless 30 days' prior written notice shall have been
given to Landlord, contain a hostile fire endorsement and a contractual
liability endorsement and provide primary coverage to Landlord (any policy
issued to Landlord providing duplicate or similar coverage shall be deemed
excess over Tenant's policies).  Such policies or certificates thereof shall be
delivered to Landlord by Tenant upon commencement of the Lease Term and upon
each renewal of said insurance.

Without affecting any other rights or remedies, Tenant and Landlord each hereby
release and relieve the other, and waive their entire right to recover damages
against the other, for loss of or damage to its property arising out of or
incident to the perils required to be insured against herein.  The effect of
such releases and waivers is not limited by the amount of insurance carried or
required, or by any deductibles applicable hereto.  The Parties agree to have
their respective property damage insurance carriers waive any right to
subrogation that such companies may have against Landlord or Tenant, as the case
may be, so long as the insurance is not invalidated thereby.

Except in the case of negligence or breach of this Lease by Landlord or its
agents, neither Landlord nor its agents shall be liable under any circumstances
for: (i) injury or damage to the person or goods, wares, merchandise or other
property of Tenant, Tenant’s employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, indoor air
quality, the presence of mold or from the breakage, leakage, obstruction or
other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or
lighting fixtures, or from any other cause, whether the said injury or damage
results from conditions arising upon the Premises or upon other portions of the
Project or from other sources or places, (ii) injury to Tenant’s business or for
any loss of income or profit therefrom.  

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10.Landlord's Repairs.  Landlord shall maintain, at its expense (and not as part
of Operating Expenses), the structural components of the roof, foundation
footings (excluding the slab), and exterior walls of the Building in good
repair, reasonable wear and tear and uninsured losses and damages caused by
Tenant, its agents and contractors excluded.  The term “walls” as used in this
Paragraph 10 shall not include windows, glass or plate glass, doors or overhead
doors, special store fronts, dock bumpers, dock plates or levelers, or office
entries.  Tenant shall promptly give Landlord written notice of any repair
required by Landlord pursuant to this Paragraph 10, after which Landlord shall
have a reasonable opportunity to repair.

Landlord shall also be responsible for the repair, maintenance and upkeep of the
non-structural portions of the roof (including skylights), exterior walls
(including exterior wall painting), and for the upkeep and maintenance (in
accordance with applicable Legal Requirements) of the areas of the Premises
which are subject to the Water Quality Management Plan.  The costs and expenses
of the foregoing shall be included in the computation of Operating Expenses
charged to Tenant.

In the event of an emergency, Tenant shall have the right to make such
temporary, emergency repairs (and only such temporary, emergency repairs) to the
roof, foundation or exterior walls of the Building as may be reasonably
necessary to prevent material damage to Tenant's property at the Premises and/or
personal injury to Tenant's employees at the Premises (provided Tenant first
attempts to notify Landlord telephonically of such emergency and notifies
Landlord of such circumstances in writing as soon as practicable
thereafter).  In such event, Landlord shall reimburse Tenant for the reasonable,
out-of-pocket costs actually incurred by Tenant in making such repairs.  If
Landlord fails to reimburse Tenant for the reasonable, out-of-pocket costs
incurred by Tenant in making such repairs, up to but not to exceed $25,000.00
with respect to such emergency, within 30 days after demand therefor,
accompanied by supporting evidence of the costs incurred by Tenant, then Tenant
may bring an action for damages against Landlord to recover such costs, together
with interest thereof at the rate provided for in Paragraph 37(j) of the Lease,
and reasonable attorney's fees incurred by Tenant in bringing such action for
damages. In no event, however, shall Tenant have a right to terminate the Lease.

11.Tenant's Repairs.  Subject to Landlord's obligations as set forth in
Paragraph 10 of this Lease, and subject to the provisions of Paragraphs 15 and
16, and subject to the right of Landlord set forth below in this Paragraph 11,
Tenant, at its expense, shall repair, replace and maintain in good condition,
reasonable wear and tear, and losses and damages caused by Landlord, its agents
and contractors excepted, all portions of the Premises including, without
limitation, dock and loading areas, truck doors, plumbing, water and sewer lines
up to the public right-of-way, entries, doors, ceilings, windows, interior
walls, interior side of demising walls, heating, ventilation and air
conditioning systems, the fire sprinklers and fire protection systems, the slab
(other than structural defects in the slab), the parking areas, driveways,
alleys, and all landscaped areas and grounds.  Such repair and replacements
include capital expenditures and repairs whose benefit may extend beyond the
Lease Term.  Heating, ventilation and air conditioning systems shall be
maintained at Tenant's expense pursuant to maintenance service contracts entered
into by Tenant.  The scope of services and contractors under such maintenance
contracts shall be reasonably approved by Landlord.  If Tenant fails to perform
any repair or replacement for which it is responsible, Landlord may perform such
work and be reimbursed by Tenant within 10 days after demand therefor.  Subject
to Paragraphs 15 and 16, Tenant shall bear the full cost of any repair or
replacement to any part of the Building or other improvements to the Premises or
the Project that results from damage caused by Tenant, its agents, contractors,
or invitees and any repair that benefits only the Premises.

12.Tenant-Made Alterations and Trade Fixtures.  Any alterations, additions, or
improvements made by or on behalf of Tenant to the Premises (“Tenant-Made
Alterations”) in excess of $50,000 shall be subject to Landlord's prior written
consent, which shall not be unreasonably withheld, conditioned or delayed,
provided that such alteration does not materially affect the structure or the
roof of

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the Building, or modify the utility systems of the Building.  Tenant shall
cause, at its expense, all Tenant-Made Alterations to comply with insurance
requirements and with Legal Requirements and shall construct at its expense any
alteration or modification required by Legal Requirements as a result of any
Tenant-Made Alterations.  All Tenant-Made Alterations shall be constructed in a
good and workmanlike manner by contractors reasonably acceptable to Landlord and
only good grades of materials shall be used.  All plans and specifications for
any Tenant-Made Alterations shall be submitted to Landlord for its
approval.  Landlord may monitor construction of the Tenant-Made
Alterations.  Tenant shall reimburse Landlord for its reasonable costs in
reviewing plans and specifications and in monitoring construction.  Landlord's
right to review plans and specifications and to monitor construction shall be
solely for its own benefit, and Landlord shall have no duty to see that such
plans and specifications or construction comply with applicable laws, codes,
rules and regulations.  Tenant shall provide Landlord with the identities and
mailing addresses of all persons performing work or supplying materials, prior
to beginning such construction, and Landlord may post on and about the Premises
notices of non‑responsibility pursuant to applicable law.  Tenant shall furnish
security or make other arrangements reasonably satisfactory to Landlord to
assure payment for the completion of all work free and clear of liens and shall
provide certificates of insurance for worker's compensation and other coverage
in amounts and from an insurance company satisfactory to Landlord protecting
Landlord against liability for personal injury or property damage during
construction.  Upon completion of any Tenant-Made Alterations, Tenant shall
deliver to Landlord sworn statements setting forth the names of all contractors
and subcontractors who did work on the Tenant-Made Alterations and final lien
waivers from all such contractors and subcontractors.  Upon surrender of the
Premises, all Tenant-Made Alterations and any leasehold improvements constructed
by Landlord or Tenant shall remain on the Premises as Landlord's property,
except to the extent Landlord requires removal at Tenant's expense of any such
items or Landlord and Tenant have otherwise agreed in writing in connection with
Landlord's consent to any Tenant-Made Alterations.  Upon Tenant's written
request, Landlord shall provide Tenant, at the time of Tenant's request for
approval of Tenant-Made Alterations, a list of which Tenant-Made Alterations
Landlord will require Tenant to remove upon surrender of the Premises.  Tenant
shall repair any damage caused by such removal.

Tenant, at its own cost and expense and without Landlord's prior approval, may
erect such shelves, bins, machinery and trade fixtures (collectively “Trade
Fixtures”) in the ordinary course of its business provided that such items do
not alter the basic character of the Premises, do not overload or damage the
Premises, and may be removed without injury to the Premises, and the
construction, erection, and installation thereof complies with all Legal
Requirements and with Landlord's requirements set forth above.  Upon surrender
or vacating of the Premises, Tenant shall remove its Trade Fixtures and shall
repair any damage caused by such removal.

13.Signs and Roof.  Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door lettering,
placards, decorations, or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed.  Without limiting the
generality of the foregoing, Tenant may not paint its name on the roof of the
Building.  Upon surrender or vacation of the Premises, Tenant shall have removed
all signs and repair, paint, and/or replace the building facia surface to which
its signs are attached.  Tenant shall obtain all applicable governmental permits
and approvals for sign and exterior treatments.  All signs, decorations,
advertising media, blinds, draperies and other window treatment or bars or other
security installations visible from outside the Premises shall be subject to
Landlord's approval and conform in all respects to Landlord's requirements.  The
use of the roof shall be reserved exclusively to Landlord for any use which does
not interfere with Tenant’s business operations including, but not limited to
the installation of solar panels (as described in Section 7) or leasing space to
cellular telephone service providers for cell tower placement.

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14.Parking.  Tenant shall be entitled to parking only within the boundaries of
the Premises which are designated as parking areas on the Site Plan.

15.Damage and Destruction.  If at any time during the Lease Term the Premises
are damaged by a fire or other casualty, Landlord shall notify Tenant within 30
days after such damage as to the amount of time Landlord reasonably estimates it
will take to restore the Premises.  

(a)If the Premises are damaged by fire or other casualty covered by insurance
which Landlord is required to carry hereunder (and for which there are
sufficient insurance proceeds available, excluding any deductible, to repair the
damage), then Landlord shall, subject to Force Majeure events and delays arising
from the collection of insurance proceeds, repair such damage (excluding the
improvements installed by Tenant or by Landlord and paid by Tenant) within 9
months and this Lease shall continue in full force and effect.  Tenant at
Tenant's expense shall promptly perform, subject to delays arising from the
collection of insurance proceeds, or from Force Majeure events, all repairs or
restoration not required to be done by Landlord.  If the Premises are damaged by
fire or other casualty and there is no insurance or insufficient insurance
proceeds (excluding any deductible) to repair the Premises, then Landlord may,
at its option, either terminate this Lease, by giving notice to Tenant within 30
days of the date of damage, or repair such damage in the same manner as if there
had been sufficient insurance proceeds available, at Landlord’s expense, and if
Landlord so elects to repair, then the Lease shall continue in full force and
effect.  Landlord’s failure to deliver a termination notice to Tenant as
aforesaid, shall be deemed Landlord’s election to repair the Premises.

(b)If the Premises are damaged during the last 18 months of the Lease Term, and
if the restoration time is estimated to exceed 6 months and such damage
materially interferes with Tenant’s use of the Premises, Tenant may elect to
terminate this Lease upon notice to Landlord given no later than 30 days after
Tenant’s receipt of Landlord's written notice of its estimate of the amount of
time it will take to repair the Premises.  If Tenant elects not to terminate
this Lease or if Landlord estimates that the repair will take 6 months or less,
then, Landlord shall promptly repair the Premises excluding the improvements
installed by Tenant or by Landlord and paid by Tenant, subject to delays arising
from the collection of insurance proceeds from Force Majeure events. Tenant at
Tenant's expense shall promptly perform, subject to delays arising from the
collection of insurance proceeds, or from Force Majeure events, all repairs or
restoration not required to be done by Landlord and shall promptly re-enter the
Premises and commence doing business in accordance with this Lease.

(c)Notwithstanding the foregoing, either party may terminate this Lease if the
Premises are damaged during the last 9 months of the Lease Term and Landlord
reasonably estimates that it will take more than one month to repair such
damage.  Base Rent and Operating Expenses shall be abated for the period of
repair and restoration in the proportion which the area of the Premises, if any,
which is not usable by Tenant bears to the total area of the Premises.  Unless
Tenant has terminated the Lease pursuant to this Section 15, such abatement
shall be the sole remedy of Tenant.

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(d)If Landlord shall be obligated to repair or restore the Premises under the
provisions of this Section 15 and shall not complete the restoration within the
estimated or required time as provided above, Tenant may, at its election, give
written notice to Landlord and to any Lenders of which Tenant has actual notice
of Tenant's election to use the proceeds of such insurance to perform the
necessary repairs or restorations of the Premises.  If Tenant gives such notice
to Landlord and such Lenders and such repair or restoration is not commenced
within 60 days after receipt of such notice, then Tenant shall be entitled to
take over the repairs or restoration and to use all available insurance proceeds
for such purposes.  If Landlord or a lender completes the repair or restoration
of the Premises within 60 days after receipt of such notice, Tenant shall not
have such right.  “Commence” as used in this Paragraph shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.

(e)In the event Landlord fails to perform any terms, covenants, conditions, or
warranties under this Lease or under applicable law, beyond the applicable cure
period, then Tenant shall have the right, but not the obligation to make the
necessary and applicable repairs or to take the necessary appropriate action, on
behalf of Landlord, and Landlord shall credit Tenant’s Base Rent for the cost of
such repairs.

(f)Tenant hereby waives the provisions of California Civil Code Sections 1932(2)
and 1933(4), to the extent that they are inconsistent with the provisions of
this Paragraph.

16.Condemnation.

(a)Immediately upon obtaining knowledge of the institution of any proceeding
which may result in the transfer of title to all or a portion of the Premises by
condemnation or other eminent domain proceeding, or by reason of any agreement
with any potential condemning authority in settlement of or under any such
proceedings (each, a “Taking”), Tenant shall notify Landlord thereof and
Landlord (and Landlord’s Lender, if any) shall be entitled to participate in any
such proceeding at Tenant’s expense.  Landlord, immediately upon obtaining
knowledge of the institution of any proceeding which may result in Taking, shall
notify Tenant thereof and Tenant shall have the right to participate in such
proceeding at its own expense.  Tenant hereby irrevocably assigns to Landlord
any award or payment in respect of any Taking, except that Tenant does not
assign to Landlord any award or payment on account of Tenant’s Trade Fixtures or
other tangible personal property, moving expenses and similar claims which do
not decrease the award to Landlord, and Tenant shall have a right to make a
separate claim therefore against the condemning authority.

(b)If (i) the entire Premises or (ii) at least 15% of the floor area of the
Premises, the loss of which, in any case, even after Restoration (meaning the
restoration of the Premises as nearly as possible to the same physical condition
as existed immediately prior to the Taking) would, in Tenant’s reasonable
business judgment, be substantially and materially adverse to the business
operations of Tenant, or (iii) access to the Premises that exists as of the date
hereof (unless sufficient access can be available after Restoration at a
reasonable cost to Tenant in excess of the “Net Award”, being the entire award
paid by reason of the Taking, less actual and reasonable costs incurred in
collecting same, or (iv) the number of parking spaces that would, if eliminated,
reduce the total number required by Legal Requirements (unless sufficient
replacement parking spaces can be provided on the Premises to satisfy such Legal
Requirements at a reasonable cost to Tenant in excess of the Net Award), shall
be subject of a Taking, then Tenant shall have the right, exercisable within
thirty (30) days after the Taking has occurred, to serve Tenant’s Termination
Notice of its intention to terminate this Lease the Termination Date, which
shall be no sooner than thirty (30) days after the date of Tenant’s Termination
Notice and not later than ninety (90) days after the Tenant’s Termination
Notice.

In the event that Tenant shall timely serve Tenant’s Termination Notice upon
Landlord, this Lease and the Lease Term hereof shall terminate on the
Termination Date.  

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(c)In the event of any Taking of part of the Premises which does not result in a
termination of this Lease, the Net Award of such Taking shall be retained by
Landlord, unless if separately awarded to Tenant, and, promptly after such
Taking, Tenant shall commence and diligently continue to perform the Restoration
whether or not the Net Award shall be sufficient to do so.

Upon the payment to Landlord of the Net Award of the Taking which falls within
the provisions of this subparagraph (c), Landlord (and Landlord’s Lender, if
any) shall, to the extent received, make that portion of the Net Award equal to
the cost of Restoration (the “Restoration Award”) available to Tenant for
Restoration, the balance remaining (the “Net Surplus Award”) shall be the
property of Landlord, and shall be applied, at Landlord’s option, as follows:

(i)The Net Surplus Award shall be retained by Landlord, in which  event the Base
Rent becoming due after Landlord receives the Net Surplus Award, but exclusive
of any extended Term for which Tenant had not exercised its extension option as
of the date Tenant received notice of such Taking, shall be reduced by an amount
which bears the same proportion to the Base Rent payable immediately prior to
such Taking as the fair market rent of the portion of the Premises so taken
shall bear to the fair market rent of the whole of the Premises immediately
prior to such Taking.

(ii)Tenant shall receive that portion of the Net Surplus Award equal to the
present value (calculated at a discount rate of nine percent (9%) of the
reductions in the Base Rent, exclusive of any extended Terms for which Tenant
had not exercised its extension option as of the date Tenant received notice of
such Taking, that would have occurred had Landlord elected to apply the Net
Surplus Award under subparagraph (i) above; that portion of the Net Surplus
Award in excess of the amount so received by Tenant shall be retained by
Landlord; and the Base Rent shall not be reduced.

(d)Except with respect to an award or payment to which Tenant is entitled
pursuant to the foregoing provisions of this Paragraph no agreement with any
condemning authority in settlement of or under threat of any condemnation or
other eminent domain proceedings shall be made by either Landlord or Tenant
without the written consent of the other, which consent shall not be reasonably
withheld, conditioned or delayed provided such award or payment is applied in
accordance with this Lease.

(e)Notwithstanding anything to the contrary set forth herein after a Taking
which does not result in the termination of this Lease, the Monthly Base Rent
and Operating Expense Payments and other charges, if any, due hereunder shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the original rentable floor area of the Premises prior to such
taking.  

17.Assignment and Subletting.  Without Landlord's prior written consent, which
Landlord shall not unreasonably withhold, condition or delay, Tenant shall not
assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or license
within the Premises and any attempt to do any of the foregoing shall be void and
of no effect.  For purposes of this paragraph, a transfer of the ownership
interests controlling Tenant shall be deemed an assignment of this Lease unless
such ownership interests are publicly traded or unless such transfers do not
result in a loss of such control.  Notwithstanding the above, Tenant may assign
or sublet the Premises, or any part thereof, to any entity controlling Tenant,
controlled by Tenant or under common control with Tenant (a “Tenant Affiliate”),
without the prior written consent of Landlord, but upon notice to Landlord, and
provided that any Tenant Affiliate which is assignee assumes in writing all of
Tenant’s obligations under the Lease and any Tenant Affiliate which is a
subtenant executes a sublease which complies with the requirements
below.  Notwithstanding the above, concurrently with the execution of this
Lease, Tenant shall enter into a sublease of 30,000 square feet of the Premises
with Highland Fairview (or one of its affiliates).  The sublease shall be in
substantially the form of Exhibit “C” attached

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hereto.  The prior written consent of Landlord to such sublease shall not be
required, provided that the sublease shall remain subordinate to this
Lease.  Tenant shall reimburse Landlord for all of Landlord's reasonable
out-of-pocket expenses in connection with any assignment or sublease.

It shall be reasonable for the Landlord to withhold its consent to any
assignment or sublease in any of the following instances:  (i) an Event of
Default has occurred and is continuing that would not be cured upon the proposed
sublease or assignment; (ii) the assignee or sublessee does not have a net worth
calculated according to generally accepted accounting principles at least equal
to $50 million immediately prior to such assignment or sublease; (iii) the
intended use of the Premises by the assignee or sublessee is not reasonably
satisfactory to Landlord; (iv) the identity or business reputation of the
assignee or sublessee will, in the good faith judgment of Landlord, tend to
damage the goodwill or reputation of the Project; (v) in the case of a sublease,
the subtenant has not acknowledged that the Lease controls over any inconsistent
provision in the sublease; or (vi) the proposed assignee or sublessee is a
governmental agency.  Tenant and Landlord acknowledge that each of the foregoing
criteria is reasonable as of the date of execution of this Lease.  The foregoing
criteria shall not exclude any other reasonable basis for Landlord to refuse its
consent to such assignment or sublease.  Any approved assignment or sublease
shall be expressly subject to the terms and conditions of this Lease.  Tenant
shall provide to Landlord all information concerning the assignee or sublessee
as Landlord may request.

Notwithstanding any assignment or subletting, Tenant and any guarantor or surety
of Tenant's obligations under this Lease shall at all times remain fully
responsible and liable for the payment of the rent and for compliance with all
of Tenant's other obligations under this Lease (regardless of whether Landlord's
approval has been obtained for any such assignments or sublettings).  In the
event that the rent due and payable by a sublessee or assignee (or a combination
of the rental payable under such sublease or assignment plus any bonus or other
consideration therefor or incident thereto) exceeds the rental payable under
this Lease (prorated if less than 100% of the Premises are subleased or
assigned), then Tenant shall be bound and obligated to pay Landlord as
additional rent hereunder 50% of all such excess rental and other excess
consideration within 10 days following receipt thereof by Tenant.

If this Lease be assigned or if the Premises be subleased (whether in whole or
in part) or in the event of the mortgage, pledge, or hypothecation of Tenant's
leasehold interest or grant of any concession or license within the Premises or
if the Premises be occupied in whole or in part by anyone other than Tenant,
then upon a default by Tenant hereunder Landlord may collect rent from the
assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest
was hypothecated, concessionee or licensee or other occupant and, except to the
extent set forth in the preceding paragraph, apply the amount collected to the
next rent payable hereunder; and all such rentals collected by Tenant shall be
held in trust for Landlord and immediately forwarded to Landlord.  No such
transaction or collection of rent or application thereof by Landlord, however,
shall be deemed a waiver of these provisions or a release of Tenant from the
further performance by Tenant of its covenants, duties, or obligations
hereunder.  

18.Indemnification.  Except for the gross negligence or willful misconduct of
Landlord, its agents, employees or contractors, and to the extent permitted by
law, Tenant agrees to indemnify, defend and hold harmless Landlord, and
Landlord's members and their respective agents, employees and contractors and
any Lender, from and against any and all losses, liabilities, damages, costs and
expenses (including attorneys' fees) resulting from claims by third parties for
injuries to any person and damage to or theft or misappropriation or loss of
property occurring in or about the Premises and arising from the use and
occupancy of the Premises or from any activity, work, or thing done, permitted
or suffered by Tenant in or about the Premises or due to any other act or
omission of Tenant, its subtenants, assignees, invitees, employees, contractors
and agents.  The furnishing of insurance required hereunder shall not be deemed
to limit Tenant's obligations under this Paragraph 18.

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Except for the gross negligence or willful misconduct of Tenant, its agents,
employees or contractors, and to the extent permitted by law, Landlord agrees to
indemnify, defend and hold harmless Tenant, and Tenant's shareholders,
directors, officers, agents, employees and contractors,  from and against any
and all losses, liabilities, damages, costs and expenses (including attorneys'
fees) resulting from claims by third parties for injuries to any person and
damage to or loss of property occurring in or about the Premises or the Project
resulting from the grossly negligent or willful acts or omissions of Landlord.

The provisions of this paragraph shall survive termination of the Lease with
respect to events occurring prior to such termination.

19.Inspection and Access.  Landlord and its agents, representatives, and
contractors may enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any other business purpose.  Landlord and Landlord's
representatives may enter the Premises during business hours for the purpose of
showing the Premises to prospective purchasers and, during the last two years of
the Lease Term, to prospective tenants.  Landlord may erect a suitable sign on
the Premises stating the Premises are available to let or that the Premises is
available for sale.  Landlord may grant easements, make public dedications,
designate common areas and create restrictions on or about the Premises,
provided that no such easement, dedication, designation or restriction
materially interferes with Tenant's use or occupancy of the Premises. At
Landlord's request, Tenant shall execute such instruments as may be necessary
for such easements, dedications or restrictions.

20.Quiet Enjoyment.  Upon payment by Tenant of the rent for the Premises and the
observance and performance of all of the covenants, conditions and provisions on
Tenant's part to be observed and performed under this Lease, Tenant shall have
quiet possession of the Premises for the entire term hereof subject to all of
the provisions of this Lease.  If Tenant shall not be in default beyond any
applicable grace period provided herein, Tenant shall peaceably and quietly
occupy and enjoy the full possession and use of the Premises and the use of the
Common Areas.  

21.Surrender.  Upon expiration of the Lease Term or earlier termination of the
Lease, Tenant shall surrender the Premises to Landlord in the same condition as
received, broom clean, ordinary wear and tear and casualty loss and condemnation
covered by Paragraphs 15 and 16, and Tenant’s removal or non-removal of
Tenant-Made Alterations pursuant to the provisions of Paragraph 12
excepted.  Any Trade Fixtures, Tenant-Made Alterations and property not so
removed by Tenant as permitted or required herein shall be deemed abandoned and
may be stored, removed, and disposed of by Landlord at Tenant's expense, and
Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property.  All obligations of
Tenant hereunder not fully performed as of the termination of the Lease Term
shall survive the termination of the Lease Term, including without limitation,
indemnity obligations, payment obligations with respect to Operating Expenses,
and obligations concerning the condition and repair of the Premises.

22.Holding Over.  If Tenant retains possession of the Premises after the
expiration of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to double the
Base Rent in effect on the termination date, computed on a monthly basis for
each month or part thereof during such holding over.  All other payments shall
continue under the terms of this Lease.  In addition, Tenant shall be liable for
all damages incurred by Landlord as a result of such holding over.  No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this Lease except as otherwise expressly provided, and this Paragraph

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22 shall not be construed as consent for Tenant to retain possession of the
Premises.  For purposes of this Paragraph 22, “possession of the Premises” shall
continue until, among other things, Tenant has delivered all keys to the
Premises to Landlord, Landlord has complete and total dominion and control over
the Premises, and Tenant has completely fulfilled all obligations required of it
upon termination of the Lease as set forth in this Lease, including, without
limitation, those concerning the condition and repair of the Premises.

23.Events of Default.  Each of the following events shall be an event of default
(“Event of Default”) by Tenant under this Lease:

(i)Tenant shall fail to pay any installment of Base Rent or any other payment
required herein when due, and such failure shall continue for a period of 10
days from the date of written notice thereof.  

(ii)Tenant or any guarantor or surety of Tenant's obligations hereunder shall
(A) make a general assignment for the benefit of creditors; (B) commence any
case, proceeding or other action seeking to have an order for relief entered on
its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any substantial part of its
property (collectively a “proceeding for relief”); (C) become the subject of any
proceeding for relief which is not dismissed within 60 days of its filing or
entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or surety
is an individual) or be dissolved or otherwise fail to maintain its legal
existence (if Tenant, guarantor or surety is a corporation, partnership or other
entity).

(iii)Any insurance required to be maintained by Tenant pursuant to this Lease
shall be cancelled or terminated or shall expire or shall be reduced or
materially changed, except, in each case, as permitted in this Lease.

(iv)Tenant shall abandon or vacate the Premises or fail to continuously operate
its business at the Premises for the permitted use set forth herein, whether or
not Tenant is in monetary or other default under this Lease.  Notwithstanding
anything contained herein to the contrary, Tenant's abandoning, vacating, or
failing to continuously operate its business at, the Premises shall not
constitute an Event of Default if, prior to vacating, abandoning, or ceasing to
continuously operate its business at the Premises, Tenant has made arrangements
reasonably acceptable to Landlord to (a) insure that the insurance for the
Premises will not be voided or cancelled with respect to the Premises as a
result of such vacancy, abandonment, or ceasing of operations, (b) insure that
the Premises are reasonably secured from theft and vandalism, and (c) insure
that the Premises will be properly maintained after such vacation.  Tenant shall
inspect the Premises at least once each month and report monthly in writing to
Landlord in the event the condition of the Premises has materially changed.

(v)Tenant shall attempt or there shall occur any assignment, subleasing or other
transfer of Tenant's interest in or with respect to this Lease except as
otherwise permitted in this Lease.

(vi)Tenant shall fail to discharge any lien placed upon the Premises in
violation of this Lease within 30 days after any such lien or encumbrance is
filed against the Premises.

(vii)As long as Tenant (or an affiliate of Tenant) is a member of Landlord, any
default by Tenant, or an affiliate of Tenant, under Landlord’s Operating
Agreement (beyond any applicable notice or cure period set forth therein).

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(viii)Tenant shall fail to comply with any provision of this Lease other than
those specifically referred to in this Paragraph 23, and except as otherwise
expressly provided herein, such default shall continue for more than 30 days
after Landlord shall have given Tenant written notice of such default, or if
performance is not possible within such period, any failure of Tenant to
commence performance within such period and to diligently prosecute such
performance to completion.

(ix)Tenant shall default (beyond any applicable notice and/or cure period) under
that certain Lease dated September 25, 2007 (as amended) between Landlord and
Tenant for approximately 82.59 acres of land adjacent to the Premises (the
“Prior Lease”).

24.Landlord's Remedies.  Upon each occurrence of an Event of Default and so long
as such Event of Default shall be continuing, Landlord may at any time
thereafter at its election:  terminate this Lease or Tenant's right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity.  Upon the termination of this
Lease or termination of Tenant's right of possession, it shall be lawful for
Landlord, without formal demand or notice of any kind, to re-enter the Premises
by summary dispossession proceedings or any other action or proceeding
authorized by law and to remove Tenant and all persons and property
therefrom.  If Landlord re-enters the Premises, Landlord shall have the right to
keep in place and use, or remove and store, all of the furniture, fixtures and
equipment at the Premises.

Except as otherwise provided in the next paragraph, if Tenant breaches this
Lease and abandons the Premises prior to the end of the term hereof, or if
Tenant's right to possession is terminated by Landlord because of an Event of
Default by Tenant under this Lease, this Lease shall terminate.  Upon such
termination, Landlord may recover from Tenant the following, as provided in
Section 1951.2 of the Civil Code of California: (i) the worth at the time of
award of the unpaid Base Rent and other charges under this Lease that had been
earned at the time of termination; (ii) the worth at the time of award of the
amount by which the reasonable value of the unpaid Base Rent and other charges
under this Lease which would have been earned after termination until the time
of award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; (iii) the worth at the time of the award by which the
reasonable value of the unpaid Base Rent and other charges under this Lease for
the balance of the term of this Lease after the time of award exceeds the amount
of such rental loss that Tenant proves could have been reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or that in the ordinary course of things would be likely to result
therefrom.  As used herein, the following terms are defined: (a) the “worth at
the time of award” of the amounts referred to in Sections (i) and (ii) is
computed by allowing interest at the lesser of 18 percent per annum or the
maximum lawful rate.  The “worth at the time of award” of the amount referred to
in Section (iii) is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus one percent;
(b) the “time of award” as used in clauses (i), (ii), and (iii) above is the
date on which judgment is entered by a court of competent jurisdiction; (c) The
“reasonable value” of the amount referred to in clause (ii) above is computed by
determining the mathematical product of (1) the “reasonable annual rental value”
(as defined herein) and (2) the number of years, including fractional parts
thereof, between the date of termination and the time of award.  The “reasonable
value” of the amount referred to in clause (iii) is computed by determining the
mathematical product of (1) the annual Base Rent and other charges under this
Lease and (2) the number of years including fractional parts thereof remaining
in the balance of the term of this Lease after the time of award.

Even though Tenant has breached this Lease and abandoned the Premises, this
Lease shall continue in effect for so long as Landlord does not terminate
Tenant's right to possession, and Landlord may enforce all its rights and
remedies under this Lease, including the right to recover rent as it becomes
due.  This remedy is intended to be the remedy described in California Civil
Code Section 1951.4 and the

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following provision from such Civil Code Section is hereby repeated:  “The
Lessor has the remedy described in California Civil Code Section 1951.4 (lessor
may continue lease in effect after lessee's breach and abandonment and recover
rent as it becomes due, if lessee has right to sublet or assign, subject only to
reasonable limitations).”  Any such payments due Landlord shall be made upon
demand therefor from time to time and Tenant agrees that Landlord may file suit
to recover any sums falling due from time to time.  Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect in
writing to terminate this Lease for such previous breach.

Exercise by Landlord of any one or more remedies hereunder granted or otherwise
available shall not be deemed to be an acceptance of surrender of the Premises
and/or a termination of this Lease by Landlord, whether by agreement or by
operation of law, it being understood that such surrender and/or termination can
be effected only by the written agreement of Landlord and Tenant.  Any law,
usage, or custom to the contrary notwithstanding, Landlord shall have the right
at all times to enforce the provisions of this Lease in strict accordance with
the terms hereof; and the failure of Landlord at any time to enforce its rights
under this Lease strictly in accordance with same shall not be construed as
having created a custom in any way or manner contrary to the specific terms,
provisions, and covenants of this Lease or as having modified the same.  Tenant
and Landlord further agree that forbearance or waiver by Landlord to enforce its
rights pursuant to this Lease or at law or in equity shall not be a waiver of
Landlord's right to enforce one or more of its rights in connection with any
subsequent default.  A receipt by Landlord of rent or other payment with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by Landlord.  To
the greatest extent permitted by law, Tenant waives the service of notice of
Landlord's intention to re-enter as provided for in any statute, or to institute
legal proceedings to that end, and also waives all right of redemption in case
Tenant shall be dispossessed by a judgment or by warrant of any court or
judge.  The terms “enter,” “re-enter,” “entry” or “re-entry,” as used in this
Lease, are not restricted to their technical legal meanings.  Any reletting of
the Premises shall be on such terms and conditions as Landlord in its sole
discretion may determine (including without limitation a term different than the
remaining Lease Term, rental concessions, alterations and repair of the
Premises, lease of less than the entire Premises to any tenant and leasing any
or all other portions of the Project before reletting the Premises).  Landlord
shall not be liable, nor shall Tenant's obligations hereunder be diminished
because of, Landlord's failure to relet the Premises or collect rent due in
respect of such reletting.

25.Tenant's Remedies/Limitation of Liability.  Landlord shall not be in default
hereunder unless Landlord fails to perform any of its obligations hereunder
within 30 days after written notice from Tenant specifying such failure (unless
such performance will, due to the nature of the obligation, require a period of
time in excess of 30 days, then after such period of time as is reasonably
necessary so long as Landlord commences performing within said period and
diligently prosecutes such performance to completion).  Upon such failure Tenant
shall have the option but not the obligation to cause such repair and deduct
such reasonable amount from the Base Rent.  Notwithstanding anything to the
contrary contained herein, in the event of an emergency situation which effects
the roof or structural integrity of the Premises, Landlord shall use its best
efforts to repair such damage within five (5) days of Tenant’s written notice of
such event.  In the event of an emergency (any event that in Tenant’s reasonable
opinion poses a potential threat to life and/or property), and/or in the event
that Landlord shall fail to perform any of Landlord’s responsibilities within
the applicable cure period, then Tenant shall have the right, but not the
obligation to make the necessary and appropriate repairs, or to take the
appropriate action on behalf of Landlord, and Landlord shall promptly reimburse
Tenant the full cost of such repairs or action.  If Landlord shall fail to fully
reimburse Tenant for such costs, Tenant may, but shall not be required to deduct
such amounts from any amounts owing or to become owing from Tenant to
Landlord.  All obligations of Landlord hereunder shall be construed as
covenants, not conditions; and, except as may be otherwise expressly provided in
this Lease, Tenant may not terminate this Lease for breach of Landlord's

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obligations hereunder.  All obligations of Landlord under this Lease will be
binding upon Landlord only during the period of its ownership of the Premises
and not thereafter.  The term “Landlord” in this Lease shall mean only the
owner, for the time being of the Premises, and in the event of the transfer by
such owner of its interest in the Premises, such owner shall thereupon be
released and discharged from all obligations of Landlord thereafter accruing, it
being understood that Landlord shall not be released from any obligations
accruing prior to such transfer unless such obligations have been assumed in
writing by Landlord’s successor, but such obligations shall be binding during
the Lease Term upon each new owner for the duration of such owner's
ownership.  Any liability of Landlord under this Lease shall be limited solely
to its interest in the Premises, and in no event shall any personal liability be
asserted against Landlord or any of Landlord’s partners in connection with this
Lease nor shall any recourse be had to any other property or assets of Landlord
or any of Landlord’s partners.

26.Intentionally Deleted.

27.Subordination.  This Lease and Tenant's interest and rights hereunder are and
shall be subject and subordinate at all times to the lien of any mortgage, now
existing or hereafter created on or against the Project or the Premises, and all
amendments, restatements, renewals, modifications, consolidations, refinancing,
assignments and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant.  Tenant agrees, at the election of the
holder of any such mortgage, to attorn to any such holder.  Tenant agrees upon
demand to execute, acknowledge and deliver such instruments, confirming such
subordination and such instruments of attornment as shall be requested by any
such holder.  Tenant hereby appoints Landlord attorney in fact for Tenant
irrevocably (such power of attorney being coupled with an interest) to execute,
acknowledge and deliver any such instrument and instruments for and in the name
of the Tenant and to cause any such instrument to be recorded. Notwithstanding
the foregoing, any such holder may at any time subordinate its mortgage to this
Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon
this Lease shall be deemed prior to such mortgage without regard to their
respective dates of execution, delivery or recording and in that event such
holder shall have the same rights with respect to this Lease as though this
Lease had been executed prior to the execution, delivery and recording of such
mortgage and had been assigned to such holder.  The term “mortgage” whenever
used in this Lease shall be deemed to include deeds of trust, security
assignments and any other encumbrances, and any reference to the “holder” of a
mortgage shall be deemed to include the beneficiary under a deed of trust.

Notwithstanding the foregoing paragraph, Tenant shall not be obligated to
subordinate the Lease or its interest therein to any mortgage, deed of trust or
ground lease on the Project or the Premises unless concurrently with such
subordination the holder of such mortgage or deed of trust or the ground lessor
under such ground lease upon commercially reasonable terms including, agreeing
not to disturb Tenant's possession of the Premises under the terms of the Lease
in the event such holder or ground lessor acquires title to the Premises through
foreclosure, deed in lieu of foreclosure or otherwise.  Landlord shall use
reasonable commercial efforts to obtain, at no cost to Tenant, a non-disturbance
agreement from any such holder or ground lessor existing as of the Commencement
Date for the benefit of Tenant in a commercially reasonable form within 20 days
of the date of this Lease.

28.Mechanic's Liens.  Tenant has no express or implied authority to create or
place any lien or encumbrance of any kind upon, or in any manner to bind the
interest of Landlord or Tenant in, the Premises or to charge the rentals payable
hereunder for any claim in favor of any person dealing with Tenant, including
those who may furnish materials or perform labor for any construction or
repairs. Tenant covenants and agrees that it will pay or cause to be paid all
sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the Premises and
that it will save and hold Landlord harmless from all loss, cost or expense
based on or arising out of asserted claims or liens against the leasehold estate
or against the interest of Landlord in the

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Premises or under this Lease.  Tenant shall give Landlord immediate written
notice of the placing of any lien or encumbrance against the Premises and cause
such lien or encumbrance to be discharged within 30 days of the filing or
recording thereof; provided, however, Tenant may contest such liens or
encumbrances as long as such contest prevents foreclosure of the lien or
encumbrance and Tenant causes such lien or encumbrance to be bonded or insured
over in a manner satisfactory to Landlord within such 30 day period.

29.Estoppel Certificates.  Tenant agrees, from time to time, within 10 days
after request of Landlord, to execute and deliver to Landlord, or Landlord's
designee, any estoppel certificate requested by Landlord, stating that this
Lease is in full force and effect, the date to which rent has been paid, that
Landlord is not in default hereunder (or specifying in detail the nature of
Landlord's default), the termination date of this Lease and such other matters
pertaining to this Lease as may be requested by Landlord.  Tenant's obligation
to furnish each estoppel certificate in a timely fashion is a material
inducement for Landlord's execution of this Lease.  No cure or grace period
provided in this Lease shall apply to Tenant's obligations to timely deliver an
estoppel certificate.  Tenant hereby irrevocably appoints Landlord as its
attorney in fact to execute on its behalf and in its name any such estoppel
certificate if Tenant fails to execute and deliver the estoppel certificate
within 10 days after Landlord's written request thereof.  

30.Environmental Requirements.  Except for Hazardous Material (as defined below)
contained in products used by Tenant in de minimis quantities for ordinary
cleaning and office purposes and equipment maintenance, Tenant shall not permit
or cause any party to bring any Hazardous Material upon the Premises or
transport, store, use, generate, manufacture or release any Hazardous Material
in or about the Premises without Landlord's prior written consent.  Tenant, at
its sole cost and expense, shall operate its business in the Premises in strict
compliance with all Environmental Requirements and shall remediate in a manner
satisfactory to Landlord any Hazardous Materials released on or from the
Premises or the Project by Tenant, its agents, employees, contractors,
subtenants or invitees.  Tenant shall complete and certify to disclosure
statements as requested by Landlord from time to time relating to Tenant's
transportation, storage, use, generation, manufacture or release of Hazardous
Materials on the Premises.  The term “Environmental Requirements” means all
applicable present and future statutes, regulations, ordinances, rules, codes,
judgments, orders or other similar enactments of any governmental authority or
agency regulating or relating to health, safety, or environmental conditions on,
under, or about the Premises or the environment, including without limitation,
the following:  the Comprehensive Environmental Response, Compensation and
Liability Act; the Resource Conservation and Recovery Act; and all state and
local counterparts thereto, and any regulations or policies promulgated or
issued thereunder.  The term “Hazardous Materials” means and includes any
substance, material, waste, pollutant, or contaminant listed or defined as
hazardous or toxic, under any Environmental Requirements, asbestos and
petroleum, including crude oil or any fraction thereof, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural
gas and such synthetic gas).  As defined in Environmental Requirements, Tenant
is and shall be deemed to be the “operator” of Tenant's “facility” and the
“owner” of all Hazardous Materials brought on the Premises by Tenant, its
agents, employees, contractors or invitees, and the wastes, by-products, or
residues generated, resulting, or produced therefrom.

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Tenant shall indemnify, defend, and hold Landlord harmless from and against any
and all losses (including, without limitation, diminution in value of the
Premises or the Project and loss of rental income from the Premises or the
Project), claims, demands, actions, suits, damages (including, without
limitation, punitive damages), expenses (including, without limitation,
remediation, removal, repair, corrective action, or cleanup expenses), and costs
(including, without limitation, actual attorneys' fees, consultant fees or
expert fees and including, without limitation, removal or management of any
asbestos brought into the property by Tenant, its agents, employees,
contractors, subtenants, assignees or invitees or disturbed by Tenant, its
agents, employees, contractors, subtenants, assignees or invitees in breach of
the requirements of this Paragraph 30, regardless of whether such removal or
management is required by law) which are brought or recoverable against, or
suffered or incurred by Landlord as a result of any release of Hazardous
Materials for which Tenant is obligated to remediate as provided above or any
other breach of the requirements under this Paragraph 30 by Tenant, its agents,
employees, contractors, subtenants, assignees or invitees, regardless of whether
Tenant had knowledge of such noncompliance.  The obligations of Tenant under
this Paragraph 30 shall survive any termination of this Lease.

Landlord shall have access to, and a right to perform inspections and tests of,
the Premises to determine Tenant's compliance with Environmental Requirements,
its obligations under this Paragraph 30, or the environmental condition of the
Premises.  Access shall be granted to Landlord upon Landlord's prior notice to
Tenant and at such times so as to minimize, so far as may be reasonable under
the circumstances, any disturbance to Tenant's operations.  Such inspections and
tests shall be conducted at Landlord's expense, unless such inspections or tests
reveal that Tenant has not complied with any Environmental Requirement, in which
case Tenant shall reimburse Landlord for the reasonable cost of such inspection
and tests.  Landlord's receipt of or satisfaction with any environmental
assessment in no way waives any rights that Landlord holds against Tenant.

Landlord represents and warrants that except for information contained in the
Phase I Environmental Assessment Reports prepared by LOR Environmental, Inc.,
and delivered to Tenant in connection with the Prior Lease, Landlord, to
Landlord's knowledge without further inquiry, is unaware of any environmental
conditions affecting the Premises.

Notwithstanding anything to the contrary in this Paragraph 30, Tenant shall have
no liability of any kind to Landlord or any other party and Landlord shall
indemnify Tenant as to Hazardous Materials on the Premises caused or permitted
by Landlord, its agents, employees, contractors or invitees.  

31.Rules and Regulations.  Tenant shall, at all times during the Lease Term and
any extension thereof, comply with all reasonable rules and regulations at any
time or from time to time established by Landlord covering use of the Premises
and the Project.  The current rules and regulations are attached hereto.  In the
event of any conflict between said rules and regulations and other provisions of
this Lease, the other terms and provisions of this Lease shall
control.  Landlord shall not have any liability or obligation for the breach of
any rules or regulations by other tenants in the Project.

32.Security Service.  Tenant acknowledges and agrees that, while Landlord may
patrol the Project, Landlord is not providing any security services with respect
to the Premises and that Landlord shall not be liable to Tenant for, and Tenant
waives any claim against Landlord with respect to, any loss by theft or any
other damage suffered or incurred by Tenant in connection with any unauthorized
entry into the Premises or any other breach of security with respect to the
Premises.

33.Force Majeure.  Except for monetary obligations, neither Landlord nor Tenant
shall be held responsible for delays in the performance of its obligations
hereunder when caused by strikes, lockouts, labor disputes, acts of God,
inability to obtain labor or materials or reasonable substitutes therefor,
governmental restrictions, governmental regulations, governmental controls,
delay in issuance of

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permits, enemy or hostile governmental action, acts of terrorism, civil
commotion, fire or other casualty, inability to obtain financing due to general
economic conditions (as opposed to conditions which are specific to the Landlord
or the Project), and other causes beyond the reasonable control of Landlord or
Tenant (“Force Majeure”).

34.Entire Agreement.  This Lease constitutes the complete agreement of Landlord
and Tenant with respect to the subject matter hereof.  No representations,
inducements, promises or agreements, oral or written, have been made by Landlord
or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not
contained herein, and any prior agreements, promises, negotiations, or
representations are superseded by this Lease.  This Lease may not be amended
except by an instrument in writing signed by both parties hereto.

35.Severability.  If any clause or provision of this Lease is illegal, invalid
or unenforceable under present or future laws, then and in that event, it is the
intention of the parties hereto that the remainder of this Lease shall not be
affected thereby.  It is also the intention of the parties to this Lease that in
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision as
similar in terms to such illegal, invalid or unenforceable clause or provision
as may be possible and be legal, valid and enforceable.

36.No Brokers.   Tenant represents and warrants to Landlord, and Landlord
represents and warrants to Tenant, that it has dealt with no broker, agent or
other person in connection with this transaction and that no broker, agent or
other person brought about this transaction, and each of the Parties agrees to
indemnify and hold the other party harmless from and against any claims by any
other broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with indemnifying party with regard to
this leasing transaction.

37.Miscellaneous.  

(a)Any payments or charges due from Tenant to Landlord hereunder shall be
considered rent for all purposes of this Lease.

(b)If and when included within the term “Tenant,” as used in this instrument,
there is more than one person, firm or corporation, each shall be jointly and
severally liable for the obligations of Tenant.  

(c)All notices required or permitted to be given under this Lease shall be in
writing and shall be sent by registered or certified mail, return receipt
requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses
below.  Either party may by notice given aforesaid change its address for all
subsequent notices.  Except where otherwise expressly provided to the contrary,
notice shall be deemed given upon delivery.

(d)Except as otherwise expressly provided in this Lease or as otherwise required
by law, Landlord’s right to withhold any consent or approval shall not be
unreasonably withheld or delayed.

(e)All payments of monetary sums due by Tenant to Landlord hereunder, including,
but not limited to, Base Rent and payments of Operating Expenses, shall be
deemed to be “rent”.

(f)Neither this Lease nor a memorandum of lease shall be filed by or on behalf
of Tenant in any public record.  Landlord may prepare and file, and upon request
by Landlord Tenant will execute, a memorandum of lease.  

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(g)The normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Lease or any exhibits or amendments hereto.

(h)The submission by Landlord to Tenant of this Lease shall have no binding
force or effect, shall not constitute an option for the leasing of the Premises,
nor confer any right or impose any obligations upon either party until execution
of this Lease by both parties.

(i)Words of any gender used in this Lease shall be held and construed to include
any other gender, and words in the singular number shall be held to include the
plural, unless the context otherwise requires.  The captions inserted in this
Lease are for convenience only and in no way define, limit or otherwise describe
the scope or intent of this Lease, or any provision hereof, or in any way affect
the interpretation of this Lease.

(j)Any amount not paid by Tenant within 10 days after its due date in accordance
with the terms of this Lease shall bear interest from such due date until paid
in full at the lesser of the highest rate permitted by applicable law or 10
percent per year.  It is expressly the intent of Landlord and Tenant at all
times to comply with applicable law governing the maximum rate or amount of any
interest payable on or in connection with this Lease.  If applicable law is ever
judicially interpreted so as to render usurious any interest called for under
this Lease, or contracted for, charged, taken , reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be paid
in full, refunded to Tenant), and the provisions of this Lease immediately shall
be deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.   

(k)Construction and interpretation of this Lease shall be governed by the laws
of the State of California, excluding any principles of conflicts of laws.  

(l)Time is of the essence as to the performance of Tenant's obligations under
this Lease.  

(m)All exhibits and addenda attached hereto are hereby incorporated into this
Lease and made a part hereof.  In the event of any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall
control.

38.Landlord's Lien/Subordination. Provided Tenant is not in default under the
Lease, Landlord, at the request of Tenant, agrees to subordinate Landlord's
lien, if any, arising under the Lease against Tenant's property or any of
Tenant’s leased or financed property located on the Premises and agrees that
Tenant’s property or its leased or financed property shall not become part of
the Premises or encumbered by a lien by Landlord regardless of the manner in
which the leased or financed property may be attached or affixed to the
Premises.  Such subordination shall be required only if the lender or lessor
shall be a bank or other financial institution or the vendor of Tenant's
equipment or a financing entity related to such vendor and shall be subject to
such conditions as Landlord may reasonably require.  Tenant shall reimburse
Landlord for all reasonable out-of-pocket expenses incurred by Landlord in
negotiating and executing such agreement with Tenant's lender.

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39.Limitation of Liability of Trustees, Shareholders, Members and Officers of
Landlord.  Any obligation or liability whatsoever of Landlord which may arise at
any time under this Lease or any obligation or liability which may be incurred
by it pursuant to any other instrument, transaction, or undertaking contemplated
hereby shall not be personally binding upon, nor shall resort for the
enforcement thereof be had to the property of, its members, trustees, directors,
shareholders, officers, employees or agents, regardless of whether such
obligation or liability is in the nature of contract, tort, or otherwise.  

40.Limitation of Liability of Directors, Shareholders, and Officers of Tenant.
Any obligation or liability whatsoever of Tenant, which may arise at any time
under this Lease or any obligation or liability which may be incurred by it
pursuant to any other instrument, transaction, or undertaking contemplated
hereby shall not be personally binding upon, nor shall resort for the
enforcement thereof be had to the property of, its directors, shareholders,
officers, employees or agents, regardless of whether such obligation or
liability is in the nature of contract, tort, or otherwise.  

41.Civil Code § 1938 Disclosure. Pursuant to Section 1938 of the California
Civil Code, Landlord hereby advises Tenant that as of the date of this Lease,
the Premises has not undergone inspection by a Certified Access Specialist (a
“CASp”).  Further, pursuant to Section 1938 of the California Civil Code,
Landlord notifies Tenant of the following: “A Certified Access Specialist (CASp)
can inspect the Premises and determine whether the Premises comply with all of
the applicable construction-related accessibility standards under state
law.  Although state law does not require a CASp inspection of the Premises, the
commercial property owner or lessor may not prohibit the lessee or tenant from
obtaining a CASp inspection of the Premises for the occupancy or potential
occupancy of the lessee or tenant, if requested by the lessee or tenant.”  The
parties shall mutually agree on the arrangements for the time and manner of any
such CASp inspection.  Landlord and Tenant hereby mutually agree that the cost
of the CASp inspection will be borne by Tenant, and that Tenant shall be
responsible for the cost of making any repairs necessary to correct violations
of construction-related accessibility standards within the Premises.

42.Energy Disclosure Requirements.  Tenant will cooperate with Landlord in all
reasonable respects to enable Landlord to comply with its obligations under
AB-802 (or any successor statute, or any regulations promulgated thereunder, or
any similar State or City law) relating to energy disclosures, and the
measurement of energy efficiency by the State Resources Conservation and
Development Commission and/or the Public Utilities Commission, including
delivering information regarding Tenant’s energy consumption to Landlord in a
format compatible with the U.S. EPA’s Energy Star Portfolio Manager.  Tenant
hereby specifically authorizes Moreno Valley Utility to release to Landlord any
information requested by Landlord relative to Tenant’s energy consumption at the
Premises.

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
Effective Date.

 

LANDLORD:

 

TENANT:

HF LOGISTICS-SKX T2, LLC, a Delaware limited liability company

 

SKECHERS U.S.A., INC., a Delaware corporation

 

 

 

 

 

 

 

By:

 

HF Logistics I, LLC, a Delaware limited

 

By:

 

 

 

 

liability company

 

 

 

David Weinberg, Chief Operating Officer

 

 

By:

 

 

 

Address:

 

 

 

Iddo Benzeevi, President and

 

228 Manhattan Beach Blvd.

 

 

 

Chief Executive Officer

 

Manhattan Beach, CA  90266

 

 

 

 

 

 

Address:

 

 

 

14225 Corporate Way

Moreno Valley, CA  92553

 

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RULES AND REGULATIONS

1.The sidewalk, entries, and driveways of the Project shall not be obstructed by
Tenant, or its agents, or used by them for any purpose other than ingress and
egress to and from the Premises.

2.Tenant shall not place any objects, including antennas, outdoor furniture,
etc., in the parking areas, landscaped areas or other areas outside of its
Premises, or on the roof of the Project.

3.Except for seeing-eye dogs, no animals shall be allowed in the offices, halls,
or corridors in the Project.

4.Tenant shall not disturb the occupants of the Project or adjoining buildings
by the use of any radio or musical instrument or by the making of loud or
improper noises.

5.Except as otherwise set forth in the Lease, if Tenant desires telegraphic,
telephonic or other electric connections in the Premises, no boring or cutting
of wires will be permitted without Landlord’s prior consent, which shall not be
unreasonably withheld or delayed.  Any such installation or connection shall be
made at Tenant's expense.

6.Tenant shall not install or operate any steam or gas engine or boiler, or
other mechanical apparatus (except for Tenant’s material handling system) in the
Premises, except as specifically approved in the Lease.  The use of oil, gas or
inflammable liquids for heating, lighting or any other purpose is expressly
prohibited.  Explosives or other articles deemed extra hazardous shall not be
brought into the Project.

7.Parking any type of recreational vehicles is specifically prohibited on or
about the Project.  Except for the overnight parking of operative vehicles and
except as permitted in the Lease, no vehicle of any type shall be stored in the
parking areas at any time.  In the event that a vehicle is disabled, it shall be
removed within 48 hours.  There shall be no “For Sale” or other advertising
signs on or about any parked vehicle.  All vehicles shall be parked in the
designated parking areas in conformity with all signs and other markings.  All
parking will be open parking, and no reserved parking, numbering or lettering of
individual spaces will be permitted except as specified by Landlord.

8.Tenant shall maintain the Premises free from rodents, insects and other pests.

9.Landlord reserves the right to exclude or expel from the Project 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 the Rules
and Regulations of the Project.

10.Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness.  Landlord shall not be responsible to Tenant for any loss of
property on the Premises, however occurring, or for any damage done to the
effects of Tenant by the janitors or any other employee or person.

11.Tenant shall give Landlord prompt notice of any defects in the water, lawn
sprinkler, sewage, gas pipes, electrical lights and fixtures, heating apparatus,
or any other service equipment affecting the Premises.

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12.Except as otherwise set forth in the Lease, Tenant shall not permit storage
outside the Premises, including without limitation, outside storage of trucks
and other vehicles, or dumping of waste or refuse or permit any harmful
materials to be placed in any drainage system or sanitary system in or about the
Premises.

13.All moveable trash receptacles provided by the trash disposal firm for the
Premises must be kept in the trash enclosure areas, if any, provided for that
purpose.

14.No auction, public or private, will be permitted on the Premises or the
Project without Landlord’s prior written consent, which consent shall not be
unreasonably withheld or delayed.

15.No awnings shall be placed over the windows in the Premises except with the
prior written consent of Landlord.

16.The Premises shall not be used for lodging, sleeping or cooking (except for
microwave usage) or for any immoral or illegal purposes or for any purpose other
than that specified in the Lease.  No gaming devices shall be operated in the
Premises.

17.Tenant shall ascertain from Landlord the maximum amount of electrical current
which can safely be used in the Premises, taking into account the capacity of
the electrical wiring in the Project and the Premises and the needs of other
tenants, and shall not use more than such safe capacity.  Landlord's consent to
the installation of electric equipment shall not relieve Tenant from the
obligation not to use more electricity than such safe capacity.

18.Tenant assumes full responsibility for protecting the Premises from theft,
robbery and pilferage.

19.Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not related to Tenant's use of the Premises as
permitted under the Lease.

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ADDENDUM 1

BASE RENT

Base Rent shall be computed as set forth below:

The Monthly Base Rent as of the Effective Date shall be computed by multiplying
$.61 psf by the number of rentable square feet in the Premises ($457,500 based
on 750,000 rentable square feet).  The Monthly Base Rent shall increase by 2.5%
on the first day of the 13th full calendar month after the Effective Date, and
shall increase again by 2.5% on each 12-month anniversary thereafter during the
next five (5) years, and 3% thereafter.  It is understood and agreed that no
Monthly Base Rent shall be payable (other than the prepaid Base Rent due on the
Effective Date pursuant to Paragraph 4 of the Lease) until the Commencement
Date.  The Monthly Base Rent payable as of the Commencement Date shall be
determined using the foregoing computations.  

 

 

*

The foregoing Monthly Base Rent amounts are based upon the Premises containing
750,000 rentable square feet of space, and are therefore subject to adjustment
as set forth in Paragraph 1 of Addendum 3.

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ADDENDUM 2

CONSTRUCTION

CONSTRUCTION OF PREMISES

 

 

1.

Standard Specifications and Final Plans; Change Orders.

(a)Preparation of Final Plans.  Landlord shall furnish or perform, at Landlord's
sole cost and expense, those items of construction and those improvements
(“Landlord Improvements”) provided for in the Building Design Criteria, together
with the addendum thereto (collectively the “Specifications”) attached as
Exhibit “B”.  Landlord shall provide Tenant with final working drawings and
specifications for the Landlord Improvements (the “Final Plans”) which are
consistent with the Specifications.  Tenant shall respond promptly to any
inquiries by Landlord during the development of the Final Plans and, to the
extent requested by Landlord, shall cooperate with Landlord and Landlord's
architect in developing the Final Plans.  When Landlord requests Tenant to
specify details or layouts, Tenant shall promptly specify same within ten (10)
days thereafter so as not to delay completion of the Final Plans or the Landlord
Improvements.  Tenant shall pay to Landlord upon demand all increased costs
incurred by Landlord in completing the Final Plans to the extent such costs are
attributable to any such Tenant‑caused delays.

(b)Change Orders.  The Specifications define the entire scope of Landlord's
obligation to construct or provide the Landlord Improvements.  Tenant shall not
be entitled to specify or designate any finishes, grades of materials, or other
specifications or details of the construction of the Landlord Improvements which
are not specifically provided for in or contemplated by the Specifications
unless requested to do so by Landlord.  Subject to this paragraph, however,
Landlord shall make additions or changes to the Specifications requested by
Tenant.  If Tenant shall desire any such changes, Tenant shall so advise
Landlord in writing (a “Change Order Request”) as promptly as possible so as not
to delay the orderly development of the Final Plans.  All reasonable costs
incurred by Landlord in having any Change Order Request reviewed and evaluated
shall be reimbursed by Tenant upon demand.  Such costs shall include, but not be
limited to, the reasonable costs of architects, engineers, and consultants in
reviewing and designing any such changes and the cost of contractors in
providing cost estimates and constructability, functionality and product
availability analyses.  Tenant acknowledges and agrees that (i) Landlord shall
not be obligated to accept any Change Order Request if in the reasonable
judgment of Landlord the requested change would have an adverse effect on the
quality, useful life, value, functionality or costs of operating or maintaining
the Landlord Improvements; (ii) Tenant shall bear all costs and expenses
associated with incorporating into the Final Plans and the Landlord Improvements
any Change Order Request accepted by Landlord, including without limitation an
administrative fee to Landlord equal to 10 percent of the increased cost
resulting from such change (and Tenant shall pay such costs to Landlord, in
advance as provided below); (iii) Landlord shall not be obligated to accept the
least expensive method of incorporating the requested change if in the
reasonable judgment of Landlord, such method does not incorporate sound
construction practices; (iv) if the Change Order Request affects the roof, slab,
structural components or systems or equipment to be installed within the
Landlord Improvements or the future serviceability of the Landlord Improvements,
and the Landlord determines that in order to lease the building to any
subsequent tenant, additional work will have to be done to remove the effect of
such change, the anticipated costs of restoring the Landlord Improvements to the
condition it would have been in but for such change will also be paid in advance
by the Tenant as a condition to Tenant's change, as provided below; and (v) to
the extent Tenant specifies any items which have not been recommended by
Landlord, Tenant assumes full responsibility for their performance.  Upon
agreement between Landlord and Tenant on the change that will be incorporated
into the Final

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Plans and Landlord Improvements as a result of a Change Order Request, and the
cost of such change, the Landlord and Tenant shall execute a change order (a
“Change Order”) setting forth the parties' agreement as to such terms.  Payment
of the Change Order cost shall be due from Tenant within 30 days of the mutual
execution of the Change Order.

(c)Approval of Final Plans.  Landlord shall submit the Final Plans to Tenant for
its approval and Tenant shall advise Landlord, within 5 days thereafter, of its
approval or disapproval of such Final Plans.  Tenant's right to disapprove the
proposed Final Plans (“Objection”) shall be limited to material inconsistencies
with the Specifications and any Change Orders then entered into, and
noncompliance with or violation of applicable laws, codes, ordinances or other
legal requirements.  If Tenant shall not make an Objection to the proposed Final
Plans or any element or aspect thereof within the 5 day period set forth above,
then such Final Plans or the portions not objected to by Tenant shall be deemed
approved.  Resolution of any Objection by Tenant to the Final Plans shall be
governed by Paragraph 3 below.

(d)Commencement of Construction Before Final Plans.  Landlord may commence
construction prior to finalization of the Final Plans and Tenant agrees that it
shall cooperate with Landlord in reviewing and approving portions of the Final
Plans for different stages or elements of the work so that construction can
proceed on a “fast track” basis.  The approval process for such portions of the
Final Plans shall be substantially as set forth above, provided, however, that
any Objection may not be inconsistent with the previously approved portions of
the Final Plans.

(e)Change Orders During Construction.  In the event that subsequent to the
completion and approval of the Final Plans, Tenant desires to make a change in
the work provided for therein, the parties shall proceed in accordance with the
foregoing provisions relating to changes requested during the development of the
Final Plans.  

 

2.

Landlord and Tenant Representatives.  Landlord hereby designates Patrick Revere
to serve as Landlord's representative and Tenant hereby designates Paul Galliher
to serve as Tenant's representative during the design and construction of the
Landlord Improvements.  Either party may change its representative by notice to
the other party.  All communications between Landlord and Tenant relating to the
design and construction of the Initial Improvements shall be forwarded to or
made by such party's representative.  In addition, no Change Order shall be
binding on Landlord unless executed by Landlord’s Representative and no Change
Order shall be binding on Tenant unless executed by Tenant’s Representative.

 

3.

Dispute Resolution.

(a)Conference of Senior Representatives.  The parties shall make good faith
efforts to resolve any dispute which may arise under this Addendum in an
expedient manner.  In the event, however, that any dispute arises, either party
may notify the other party of its intent to invoke the dispute resolution
procedure herein set forth by delivering written notice to the other party.  In
such event, if the parties' respective representatives are unable to reach
agreement on the subject dispute within 10 business days after delivery of such
notice, then each party shall, within 5 business days thereafter, designate a
senior executive officer of its management to meet at a mutually agreed location
to resolve the dispute.

(b)Arbitration.  Should any dispute arise between Landlord and Tenant with
respect to any matters set forth in this Addendum 2 or otherwise relating to the
construction of the Improvements, which is not resolved within the time period
set forth in Paragraph 3(a) above, the parties shall submit such dispute to
final and binding arbitration to be administered in accordance with the
Streamlined Arbitration Rules and Procedures of JAMS (Judicial Arbitration and
Mediation Service).  Unless the

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parties mutually agree otherwise, the arbitration shall take place at a JAMS
Resolution Center in Los Angeles County, California, the arbitration shall be
conducted by one arbitrator (who must be disinterested and independent of the
Members), and the arbitrator shall award attorneys’ fees and the costs of
arbitration (JAMS fees and the fees of the arbitrator) to the prevailing
party.  The decision of the arbitrator (the “Determination”) shall be binding
and conclusive on the parties, except to the extent that appeals are permitted
under California Code of Civil Procedure §1286.2.  After the Determination,
subject to any cure rights set forth in this Agreement, the prevailing party
under the Determination may enforce its rights under this Agreement
notwithstanding the filing or pendency of any appeal, but such party shall be
responsible for any damages caused as a result of the taking of such action if
the Determination is eventually set aside on appeal and either the court renders
a decision on the merits in favor of the appealing party, or the appealing party
is eventually the prevailing party in any subsequent arbitration
proceeding.  The arbitration award may be enforced in accordance with California
Code of Civil Procedure §1285, et seq. or the Federal Arbitration Act (9 U.S.C.
§1, et seq.).  To the extent that matters of law are to be considered by the
arbitrator, California law shall apply.  Nothing herein shall prohibit a party
from seeking a provisional remedy from a court of competent jurisdiction (e.g.,
a temporary restraining order or preliminary injunctive relief) pending the
results of any such arbitration.

4.Tenant's Installations.  Subject to applicable ordinances and building codes
governing Tenant's right to occupy or perform in the Premises, and to the
provisions of the Lease regarding Tenant-Made Alterations, which apply to the
Tenant's initial installations before Substantial Completion as well as any
after Substantial Completion, Tenant shall be allowed to install its
improvements, machinery, equipment, fixtures, or other personal property on the
Premises when, in Landlord's opinion, such installation will not interfere with
Landlord's completion of construction or increase the cost thereof.  Tenant does
hereby agree to assume all risk of loss or damage to its machinery, equipment,
fixtures, and other personal property, including any loss or damage resulting
from the negligence of Landlord and to indemnify, defend, and hold Landlord
harmless from any and all liability, loss, or damage arising from any injury to
the property of Landlord, its contractors, subcontractors, or materialmen, and
any death or personal injury to any person or persons arising out of such
occupancy or installation.  All of Tenant’s installation work shall be
coordinated with Landlord’s general contractor.  Prior to commencement of any
such installation work by Tenant, Landlord shall be furnished with evidence that
Tenant’s contractors have obtained and maintain adequate insurance to protect
the Landlord and its related parties from any liability resulting from such
installation work.  Landlord shall receive a certificate of insurance evidencing
such insurance coverage, which shall indicate that Landlord is an additional
insured.  To the extent Tenant uses any of Landlord's contractors or
subcontractors in connection with the installation of its improvements, Tenant
acknowledges and agrees that Landlord's work shall take priority over that of
the Tenant and that Tenant shall not divert Landlord's contractors or
subcontractors from the performance of their work obligations for Landlord.

 

5.

Substantial Completion.

(a)Determination of Substantial Completion.  Landlord shall diligently proceed
with the construction of the Landlord Improvements to achieve Substantial
Completion, provided that such commencement of construction shall not be more
than eighteen (18) months after the Effective Date.  “Substantial Completion”
shall be deemed to have occurred on the date upon which the architect who
prepared the Final Plans (“Architect of Record”) certifies that the Landlord
Improvements have been completed in substantial accordance with the Final Plans
subject only to completion of punch list items which do not materially interfere
with the utilization of the Landlord Improvements for the purposes for which
they were intended.

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(b)Inspection and Punch List.  As soon as Substantial Completion has been
achieved, Landlord shall notify Tenant in writing of the date certified by the
Architect of Record as the date of Substantial Completion.  Within 15 business
days following the date of Substantial Completion, Landlord and Tenant shall
jointly inspect the Landlord Improvements and agree upon a punch list of items
in accordance with the Final Plans needing completion or correction.  Landlord
shall use all reasonable diligent efforts to complete all punch list items
within 45 days after agreement upon the punch list, subject, however, to long
lead time items which must be ordered and to seasonal requirements for any
landscaping and exterior work.

(c)Acceptance.  Within 10 days after the Commencement Date, Tenant shall, upon
demand, execute and deliver to Landlord a letter of acceptance of delivery of
the Premises and confirmation of the Commencement Date.  If Tenant occupies any
portion of the Premises prior to Substantial Completion, the terms of this Lease
shall apply to such occupancy or use of the Premises by Tenant.  Except for
incomplete punch list items referred to above, Tenant upon the Commencement Date
shall have and hold the Premises as the same shall then be without any liability
or obligation on the part of Landlord under this Lease for making any further
alterations improvements of any kind in or about the Premises during the Lease
Term, or any extension or renewal thereof.

(d)Tenant-Caused Delay.  If Substantial Completion is delayed as a result of
Tenant Change Orders, Tenant's interference with the construction of the
Landlord Improvements and/or the Tenant Improvements, delays resulting from
Tenant's using Landlord's contractors and/or subcontractors to complete Tenant's
installations), or Tenant's failure to promptly respond to Landlord's request to
specify details or layouts or other matters, or Tenant’s improperly failing or
refusing to fund its share of the cost of Tenant Improvements, as set forth in
Paragraph 6 below, then the Commencement Date shall be deemed to have occurred
when, in the opinion of the Architect of Record, Substantial Completion would
have otherwise occurred and any additional costs incurred by Landlord in
completing the Landlord Improvements and/or the Tenant Improvements which are a
result of such Tenant-caused delays shall be reimbursed by Tenant upon demand by
Landlord.

6.Tenant Improvements.

(a)In addition to the construction of the Landlord Improvements as described
above, Landlord agrees to construct those tenant improvements (the “Tenant
Improvements”) which are requested by Tenant prior to the mutual approval of the
Drawings (as defined below).

(b)Landlord shall pay for the Tenant Improvements by providing an allowance (the
“Allowance”) up to a maximum amount of $3,880,000 ($5.07 psf, exclusive of the
area to be subleased to Highland Fairview (or one of its Affiliates)), and
Tenant shall pay for the cost of the Tenant Improvements in excess of such
amount.  Provided, however, that the obligation of Landlord to pay for any
Tenant Improvements in excess of $2,880,000 are contingent upon there being any
funds left after the construction of the Building has been completed in the
“contingency” line item of the Development Budget, as defined in the Development
Management Agreement between Landlord and HFC Holdings, LLC (not to exceed
$1,000,000) (such amount, the “Contingent Allowance”). If after the Drawings (as
defined below) have been mutually agreed upon and Tenant has approved the bids
for the Tenant Improvements, the cost of the Tenant Improvements is estimated to
exceed $2,880,000, prior to Landlord’s commencement of construction of the
Tenant Improvements, Tenant shall deposit the difference (between the total
estimated cost of the Tenant Improvements and $2,880,000) into an escrow account
with First American Title Insurance Company or another mutually agreeable escrow
company (“Escrow Holder”).  The parties shall execute joint escrow instructions
to the Escrow Holder which shall also be acceptable to Escrow Holder (including
any “general escrow instructions” reasonably required by Escrow Holder), and
which shall provide that the funds shall be distributed from escrow only upon
joint written instructions from Landlord and Tenant.  The cost of the escrow
shall be paid one-half by Landlord and one-half by Tenant.

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The first $2,880,000 of the Allowance shall be applied against the actual cost
of the Tenant Improvements, as such costs are incurred by Landlord.  After such
amount has been fully applied, Landlord shall give notice to Tenant, and any
additional costs of the Tenant Improvements shall be paid from escrow.  No more
frequently than monthly, Landlord shall submit to Tenant a demand for a
disbursement from escrow, together with copies of invoices or other
documentation which shows the costs of the Tenant Improvements covered by such
demand.  Unless Tenant disputes that such costs are due and payable, within ten
(10) days after receipt of such demand from Landlord, Tenant shall give Escrow
Holder written instructions to disburse the amount requested (which instructions
shall be joined by Landlord).  If Tenant disputes the amount due, it shall
direct the disbursement of any amounts not in dispute, and shall specify the
basis for any disputed amounts.  If Landlord agrees with the dispute, Landlord
will seek to resolve the dispute with the general contractor or any applicable
subcontractors.  If Landlord does not agree with the dispute, Landlord shall
authorize Tenant to deal directly with the general contractor or any applicable
subcontractors to seek to resolve the dispute.  Any costs or expenses incurred
by Landlord which result from a dispute which is not resolved in favor of the
Tenant shall be paid or reimbursed by Tenant to Landlord on demand.  If the
Property is encumbered by any mechanics lien as a result of a dispute by Tenant
which is not agreed to by Landlord, Tenant shall, at its expense, promptly
pay-off or bond around such lien.  

After final completion of the Landlord Improvements or the Tenant Improvements,
the Tenant Improvements shall be reconciled with the total amount applied from
the Allowance and the total amount disbursed to Landlord from escrow.  If the
total cost of the Tenant Improvements exceeded $2,880,000, and if any portion of
the Contingent Allowance is available, then such amount, not to exceed
$1,000,000, shall be promptly paid by Landlord to Tenant.

If after approval of the Drawings (as defined below), Tenant shall desire any
changes to the Tenant Improvements it shall follow the procedure for Change
Orders described in Paragraph 1(b) above.  Any and all costs of reviewing any
Change Order Request relative to the Tenant Improvements, and any and all costs
of making any changes to the Tenant Improvements which Tenant may request and
which Landlord shall approve shall be at Tenant's sole cost and expense, and
shall be paid to Landlord upon demand and before commencement of the work
covered by the Change Order.

 

Landlord shall proceed with and complete the construction of the Tenant
Improvements in a good and workmanlike manner in accordance with all legal
requirements and any Drawings prepared and approved by the parties as described
below.  The construction of the Tenant Improvements shall, to the extent
possible, be coordinated with the construction of the Landlord
Improvements.  The Landlord Improvements shall not be deemed to have achieved
Substantial Completion until the Tenant Improvements shall also have been
Substantially Completed (also to be based upon the opinion of the Architect of
Record).

 

The Landlord and Tenant shall work together to prepare designs and construction
drawings (collectively, the “Drawings”) for the Tenant Improvements and any such
Drawings must be mutually approved by Landlord and Tenant before work is
commenced.  The cost of such designs and drawings shall be part of the allowance
described above.  After the Drawings are mutually approved, the Tenant
Improvements will be put out to bid, and the amount of the bids will be
presented to Tenant for approval.  Landlord will competitively bid all Tenant
Improvements and will disclose such bids to Tenant on an "open book" basis.  The
Tenant Improvements will not be constructed until Tenant has approved the bids.

38

--------------------------------------------------------------------------------

 

ADDENDUM 3

MISCELLANEOUS PROVISIONS

1.Measurement of Premises.  After completion of construction of the Building and
Improvements, and prior to the Commencement Date, Landlord shall cause its
architect to measure the rentable space in the Building and deliver to Tenant a
written certificate certifying the correct dimension of the Building.  The
measurement shall be made in accordance with current BOMA standards for
measurement of industrial buildings.  Upon the determination of the actual floor
area of the Building, the Base Rent payable by Tenant hereunder shall be
adjusted to reflect the floor area of the Building.

2.Tax Proration.  Landlord shall, at its expense, use its best efforts to have
the Premises separately assessed from any contiguous land which it owns.  If the
Premises are assessed as part of a larger tax parcel (a “Tax Parcel”), Tenant
shall pay to Landlord a proportionate amount of all Taxes attributable to such
Tax Parcel and the Building and Improvements thereon in the manner hereinafter
provided.  When Tenant is required to pay a proportionate share of Taxes to
Landlord, the same shall be paid to Landlord within twenty (20) days following
receipt of Landlord’s written notification that such taxes and assessments are
due.  Landlord’s written notification shall be forwarded to Tenant not later
than thirty (30) days prior to the date such taxes and assessments shall be due
and shall be accompanied by a copy of the tax bill or certificate and such
additional information as Tenant may reasonably require to show how Tenant’s
proportionate share of such taxes and assessments was calculated,  Tenant’s
proportionate share of such taxes and assessments shall be determined by
Landlord on an equitable basis, considering the respective land areas of the
separate parcels which make up the Tax Parcel and the respective leasable areas
of any buildings constructed thereon.  

3.Net Lease.  It is the intention of the parties hereto that the obligations of
Tenant hereunder shall be separate and independent covenants and agreements, and
that Base Rent, reimbursement of Operating Expenses and all other sums payable
by Tenant hereunder shall continue to be payable in all events, and that the
obligations of Tenant hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall have been terminated pursuant to an
express provision of this Lease.  This is a net lease and Base Rent,
reimbursement of Operating Expenses and all other sums payable hereunder by
Tenant shall be paid without notice or demand, and without setoff, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction
or defense, except as otherwise specifically set forth herein.  This Lease shall
not terminate and shall not have any right to terminate this Lease, during the
Lease Term, except as otherwise expressly provided herein.  Tenant agrees that,
except as otherwise expressly provided herein, it shall not take any action to
terminate, rescind or avoid this Lease for any reason, including (i) the
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other proceeding affecting Landlord (ii) under any
mortgage or deed of trust which may now or hereafter encumber the Premises (iii)
any action with respect to this Lease (including the rejection hereof) which may
be taken by Landlord under the Federal Bankruptcy Code or by any trustee,
receiver or liquidator of Landlord or by any court under the Federal Bankruptcy
Code or otherwise, (iv) the Taking of the Premises or any portion thereof, (v)
the prohibition of restriction of Tenant’s use of the Premises or any portion
thereof, (vii) the eviction of Tenant from possession of the Premises, by
paramount title or otherwise, or (viii) default by Landlord hereunder on any
other agreement between Landlord and Tenant.  Tenant waives all rights which are
not expressly stated herein but which may now or hereafter otherwise be
conferred by law to quit, terminate or surrender this Lease or the Premises; to
any setoff, counterclaim, recoupment, abatement, suspension, deferment,
diminution, deduction, reduction or defense of or to Base Rent, reimbursement of
Operating Expenses or any other sums payable under this Lease, and for any
statutory lien or offset right against Landlord or its property, each except as
otherwise expressly provided herein.

39

--------------------------------------------------------------------------------

 

4.Statements.  Tenant shall submit to Landlord (a) one hundred twenty (120) days
of the end of each fiscal year of Tenant annual balance sheets, income and cash
flow statements for Tenant, certified by an independent public accountant and
(ii) within 90 days of the end of each fiscal year, gross sales figures at the
Premises during such fiscal year, certified by the senior financial officer of
Tenant.  Quarterly 10Qs as filed with the Securities and Exchange Commission
shall satisfy the requirements contained in subparagraph (i) herein.  Copies of
the 10Ks filed with the Securities and Exchange Commission will satisfy the
requirement contained in subparagraph (ii).  The obligations of Tenant shall
continue whether or not this Lease shall have been assigned (unless Tenant has
been released from liability hereunder).  To the extent that any information
provided by Tenant to Landlord pursuant to this Paragraph is not otherwise
available to the general public, Landlord shall keep such information
confidential and shall only disclose such information to Landlord or Landlord’s
Lender if any, and their respective agents, partners, members, employees,
attorneys, accountants, brokers and potential purchasers and investors, unless
otherwise required by a court order.

 

 

 

40

--------------------------------------------------------------------------------

 

EXHIBIT “A”

SITE PLAN

[gp0uocwwhi45000001.jpg]

 

 

Exhibit “A”-1

--------------------------------------------------------------------------------

 

EXHIBIT “B”

 

 

Building Design Criteria

 

[gp0uocwwhi45000002.jpg]

750,000 SF Distribution Facility

Rancho Belago, CA

_____________________________________________________________________________________

 

Prepared for:

Skechers U.S.A

228 Manhattan Beach Blvd.

Manhattan Beach, CA 90266

P: 909.390.1619

 

Prepared by:

[gp0uocwwhi45000003.jpg]Highland Fairview

14225 Corporate Way

Moreno Valley, Ca 92553

P: 714.824.8037

E: prevere@highlandfairview.com

Revised: 11/29/2018

 

 

 

 

 

 

Exhibit “B”-1

--------------------------------------------------------------------------------

 

 

1.

GENERAL BUILDING DESIGN:

 

 

 

a.

Total Building Area: 750,000 SF

 

b.

Building Dimensions (Approx. excluding pop-out):  650’ x 1,150’

 

c.

Site Size:  1,540,000 SF (35.3 AC)

 

d.

Dock Height: 48”

 

e.

Clear Height: 45’ behind the first column line

 

f.

Doors:

 

i.

Drive-in Doors: 4

 

ii.

Dock Doors: 70

 

g.

Parking Requirements:

 

i.

Auto Parking Provided: 295 Stalls

 

ii.

Additional Trailer Parking Provided: 70 Spaces (12’x53’)

 

h.

Max ridge height: 50’

 

i.

Bay Spacing:

 

i.

60’ speed bay, 50’ typical bay spacing perpendicular to dock doors

 

ii.

58’-10” bay typical parallel to dock doors, odd bay at end per plan

 

 

2.

CONSTRUCTION TYPE:

 

 

 

a.

IIIB per 2016 CBC

 

b.

ESFR using FM Approved K-25 heads w/ electric or diesel fire pump (Fire
protection contractor to determine if pump is required)

 

c.

Concrete tilt-up wall construction, steel truss hybrid roof structure with wood
deck and TPO roofing

 

 

3.

OCCUPANCY CLASSIFICATION:

 

 

 

a.

B (Office)

 

b.

S-1 (Storage)  

 

i.

Designed for future High Pile Storage commodities I-IV and carton non-expanded
plastics (separate permit required)

 

 

4.

APPLICABLE CODES:

 

 

 

a.

2016 California Building Code

 

b.

2016 California Electrical Code

 

c.

2016 California Mechanical Code

 

d.

2016 California Plumbing Code

 

e.

2016 California Energy Code

 

f.

2016 California Fire Code

 

g.

2016 California Green Building Standards Code

 

h.

2016 NFPA Fire Alarm

Exhibit “B”-2

--------------------------------------------------------------------------------

 

 

i.

2016 NFPA Fire Sprinkler

 

j.

American with Disabilities Act

 

 

5.

SITE WORK:

 

 

 

a.

Soils Report:  Provided by Leighton Associates, to be considered part of the
construction documents, all paving sections below are minimum requirements,
general contractor to review soils report for specific site requirements and
requirements above these minimum specifications.

 

b.

Pad to be dock high, import/export as necessary per grading plan

 

c.

Concrete paving on site per soils report

 

d.

Concrete paving at truck yard and truck drives to be unreinforced Minimum 6”
thick concrete paving, with minimum 3,000 psi compressive strength at 28 days,
control/construction joints at 15’o.c. max, with equal sides

 

e.

Concrete paving at auto stall and auto drives to be unreinforced Minimum 5”
thick concrete paving, with minimum 3,000 psi compressive strength at 28 days,
control/construction joints at 15’o.c. max, with equal sides

 

f.

The control and construction joint spacing to be a maximum of 15’-0”
o.c.  Provide ¾” diameter x 16” long smooth dowels spaced at 12” o.c. at all
construction joints

 

g.

Concrete sidewalks to be minimum 4” thick

 

h.

6” high concrete curbs to be provided at auto parking and drive areas

 

i.

12” high concrete curbs to be provided at truck yard

 

j.

Provide screen walls, fencing, gates and trash enclosures per architectural plan

 

 

6.

ROOF FRAMING SYSTEM:

 

 

 

a.

Roof Slope: 1/8” per 1’ minimum

 

b.

Hybrid Steel Truss Panelized Wood Roof Joist Load Design:

 

i.

Steel Joist Dead Load                             = 12 PSF

 

ii.

Steel Girder Dead Load                             = 14 PSF

 

iii.

Steel Joist/Girder Live load (reducible)= 20 PSF

 

 

c.

All structural steel trusses to be prime painted “dark grey” by the truss
manufacturer.  All steel ledgers to be “gray” prime painted to match the steel
trusses. General contractor to touch up all exposed structural steel in field.

 

d.

Roof will accommodate a 4 psf solar load over the entire building

 

e.

A 400 lbs point load at the bottom chord of the truss will be included to
accommodate sprinkler loads. (Fire Sprinklers will be design build as noted in
section 22 of this specification)

 

f.

All structural steel roof support columns to be tube steel columns as per
Structural Drawings.  

Exhibit “B”-3

--------------------------------------------------------------------------------

 

 

g.

Roof Sheathing:

 

i.

Provide for 1/2” min. thick roof sheathing, unless otherwise specified by the
Structural Engineer.

 

ii.

Provide for roof sheathing Moisture Inspection interior/exterior by an inspector
approved by the roofing inspector, prior to any roofing membrane installation,
as required by owner’s roofing consultant.

 

h.

All seismic straps/steel tubes to be designed below the roof sheathing.

 

i.

All roof diaphragm nails are to be galvanized screw shank (with glue coat).

 

j.

All sub-purlin hangers to be galvanized with a medium level corrosion
protection.

 

 

7.

SMOKE HATCH/ SKYLIGHTS:

 

 

 

a.

Provide 1.33% total of building area, with 48”x96” wood curb mounted smoke
hatch/skylights with 360 ̊ fusible link to be verified by Design-Build Fire
Sprinkler Contractor and Fire Department Requirements.  Provide UL 793 listed
smoke-hatches

 

b.

Provide 1.67% total of building area, with 48”x96” wood curb mounted skylights

 

 

 

8.

ROOF ACCESS:

 

 

 

a.

Provide (1) roof access ladder(s) to meet OSHA Requirements with locking device,
location per plan.

 

Exhibit “B”-4

--------------------------------------------------------------------------------

 

 

 

9.

ROOFING:

 

 

 

a.

Mechanically fastened 60 mil TPO single ply membrane over 1/2" thick
dens-decking 20 year "NDL" warranty is included, unless otherwise specified by
the Structural Engineer.  

 

b.

Provide built-up crickets at skylights to provide drainage around skylights, or
any other mechanical equipment mounted on roof.  

 

c.

Provide cap sheet at Conditioned spaces if required per CalGreen and Local
jurisdiction.

 

 

 

10.

INSULATION:

 

 

 

a.

Roof Insulation:  Provide white – faced scrim foil at underside of roof-deck,
typ.

 

 

 

11.

FOUNDATION:

 

 

 

a.

All foundations to be minimum 3,000 psi concrete, unless specified by the
structural engineer

 

 

 

12.

BUILDING FLOOR SLAB:

 

 

 

a.

Dock height per section 1 – General Building Design

 

b.

Slab to be 7” thick 4,500 PSI at 28 days concrete design mix to allow for 1 1/2”
maximum aggregate size with concrete slump to be 4” plus or minus
1”.  Un-reinforced slab.

 

c.

Provide 3/4” diameter x 16” long smooth greased dowels spaced at 12” o.c. at all
construction joints or alternatively provide 1/4” x 4 ½”x 4 ½” @ 18” o.c.
diamond shaped plate dowels unless noted otherwise on structural
drawings.  Provide 3/4” diameter x 16” long smooth dowels at 24” o.c. placed in
dowel baskets at all control joints unless noted otherwise on structural
drawings.

 

Note:  Tenant shall provide Landlord 90 days before the issuance of building
permits any modifications required to the floor slab, including footings below
the slab, required for the Tenants Material Handling Equipment (MHE).  Landlord
will deliver the floor in accordance with this spec and the requested
modification from the tenant and the tenants rack designer / installer.  Costs
associated with modification to the slab will be credited against tenants TI
allowance in accordance with Addendum 2 of the lease.  

 

Exhibit “B”-5

--------------------------------------------------------------------------------

 

 

d.

All floor slabs to be placed on compacted native soil, unless stated otherwise
in the Soils Report.

 

e.

Finish:  Provide “burnished” floor finish throughout entire warehouse floor
slab.

 

f.

Floor Flatness:  Ff = 50 (local minimums FF34)

 

g.

Floor Levelness: Fl = 35 (local minimums FL24)

 

h.

Control Joints:  Saw cut control joints must be 1-1/4” minimum depth as soon as
the slab will support the weight of the saw and operator without disturbing the
final finish.

 

i.

Floor Joint Spacing:  To be 18’-0” maximum center to center at Office and
Warehouse floor slabs.

 

j.

Floor slab to be wet cured with an approved protective wet covering for a
minimum period of 7 days.

 

k.

Sub-grade compaction under floor slab to be 95% minimum for the upper most 12”,
unless stated otherwise in the Soils Report. (in order to achieve a bearing
pressure of 2,000 PSF minimum)

 

l.

All equipment used on the floor slab during the construction phase of work shall
be properly protected (diapered and non-marking tires) to prohibit oils from
leaking on the floor slab.

 

m.

Provide 10’-0” wide perimeter floor pour strips at all truck dock walls and 3’-1
½” wide at all other walls, unless noted otherwise on structural drawings.  No
underground piping, conduits, etc. allowed in pour-strip at dock doors to allow
for current and future recessed dock levelers.  

 

n.

All floor slab nail or brace frame holes to be filled with approved 2-part epoxy
compound to match concrete color.  Pega Bond LV 2000, Burke Epoxy Injection
Resin or equal.

 

o.

All floor slab panel form nail holes to be predrilled and wood doweled prior to
nailing.  Brace holes to be predrilled.

 

p.

Provide diamond control joints at all columns unless noted otherwise on
structural drawings

 

q.

Chamfer and reveal strips attached to floor slab must be properly patched prior
to sealing floor slab.

 

r.

Provide alternate to fill all construction joints and control joints with
semi-rigid epoxy joint filler MM-80, or an approved equal (in writing by the
Architect).

 

s.

Floor includes a floor sealer

 

t.

Slab will be designed accommodate the wire guided system

 

u.

Seismic zone:  Site Class Definition “D”

 

v.

Floor Slope will be 0%

 

 

Exhibit “B”-6

--------------------------------------------------------------------------------

 

 

13.

CONCRETE WALL PANELS:

 

 

 

a.

Concrete Panels:  Panel thickness, reinforcing, and concrete psi as per
structural drawings.

 

b.

All wall panels are to be tied with rebar into floor slab as determined by the
Structural Engineer.

 

c.

All concrete tilt-up wall panels must be lifted from building exterior.

 

d.

Properly sack all wall lift point pockets once walls have been erected.

 

 

 

14.

GLAZING:

 

 

 

a.

All exterior glazing to be low e dual glazed Medium Performance Glass set in
rear glazed aluminum system.  Systems to be wet sealed and designed for CBC code
minimum wind loads.

 

b.

Storefront framing to be design build by general contractor

 

 

 

15.

OVERHEAD DOORS:

 

 

 

a.

Dock Doors:

 

i.

9’x10’ sectional overhead with vision glazing, 2” 24 GA

 

ii.

Door track protection at all doors

 

iii.

Provide 3” x3” x ¼” steel angle at dock sill, and galvanized steel 3/16” bent
metal plate jamb guards 5’ high A.F.F.

 

iv.

Designed for CBC 2016 code minimum wind load exposure

 

v.

Manual operation

 

vi.

Prefinished by manufacturer – white

 

vii.

Provide bollards at each dock door

 

 

b.

Drive Thru Doors:

 

i.

12’x14’ sectional overhead with vision glazing, 2” 24 GA

 

ii.

Provide bollards per plan (4 per door)

 

iii.

Provide 3” x3” x ¼” steel angle at dock sill, and galvanized steel 3/16” bent
metal plate jamb guards 5’ high A.F.F.

 

iv.

Designed for CBC 2016 code minimum wind load exposure

 

v.

Prefinished by manufacturer – white

Exhibit “B”-7

--------------------------------------------------------------------------------

 

 

 

16.

EXTERIOR MAN DOORS:

 

 

 

a.

Hollow metal doors:  1 3/4” hollow metal doors.  Self-closing.  Provide heavy
duty spring chain for 90° opening.  Provide panic hardware, paint to match
building with semi-gloss enamel.  Provide steel kick plate.

 

b.

Entry doors: to be aluminum frame tempered glass with chrome push/pull bars
(self-closing) designed for CBC 2016 code minimum wind loads.  (Less active door
to be anchored to floor and head.)  Provide panic hardware.

 

c.

Emergency Exit Doors: will meet FTZ requirements (no exterior handles)

 

 

 

17.

DOCK EQUIPMENT:

 

 

 

a.

Provide two dock bumpers at all dock doors, minimum 4½ ” projection

 

b.

Provide underground conduit to all dock doors for future and current equipment

 

 

 

18.

PAINTING:

 

 

 

a.

Exterior: (2) coats acrylic flat, roll on primer; spray on finish coat.  Prime
all curbs to receive paint.

 

b.

Interior Warehouse:  

 

c.

Walls: White (2) coat flat to cover.

 

d.

Roof Structure Underside:  Touch up dark gray primer at steel, typ.

 

e.

Interior Structural Columns:  Factory prime to match roof truss color, lower 10’
to be painted safety yellow. Touch up dark gray primer above 10’ typ.

 

f.

Paint Touch-Up:  Provide paint touch-up at all field welded connections.

 

g.

Door numbers: Paint door numbers on exterior above each dock door 12” high and
on interior side of door 12” high.  Exact location to be reviewed by Landlord &
architect.

 

h.

Bollards: all bollards to be painted OSHA safety yellow, except bollards at fire
equipment to be red

 

i.

Fire Lane will be painted in shipping yards

 

j.

Parking Stalls, curbs to be painted to city requirements and approved plans

 

k.

All interior paint to meet CalGreen and LEED standards for VOC content

 

 

 

19.

MECHANICAL:

 

 

 

a.

Warehouse:  Provide roof mounted exhaust fans to provide a minimum 1 air change
per hour.  Make up air to be provided with wall louvered vents with changeable
filters, and burglar bars (Amount to be determined by mechanical

Exhibit “B”-8

--------------------------------------------------------------------------------

 

 

design-build contractor and coordinated with the Architect and structural
engineer).  

 

b.

Electrical room:  Provide exhaust fan, makeup air to come from warehouse through
louvers in door.

 

c.

Mechanical Engineering: to be design build

 

 

 

20.

PLUMBING:

 

 

 

a.

1,500 LF of sewer under the slab is provided. The tenant will provide Landlord
with the location for the installation of the sewer piping no later than 90 days
prior to the issuance of building permits. Any additional piping would be at
tenant’s expense.

 

b.

300 LF of water line overhead provided.  The tenant will provide Landlord with
the location for the installation of the water lines no later than 90 days prior
to the issuance of building permits. Any additional piping would be at tenant’s
expense.

 

c.

Provide exterior roof drains with overflow scuppers typical at exterior dock
walls.  Exterior downspouts to be 12” x 12” typ. painted. Provide cast iron
interior roof drains with interior overflow drains at office areas and walls
facing public streets. (Refer to Roof Plans for locations and sizes.)  

 

d.

Provide required monitoring manhole(s) if required by the City requirements.

 

e.

Provide domestic water service(s) to the building.

 

f.

Provide required landscape irrigation water meter(s) as required.

 

g.

Provide hose bibs at main entries, trash enclosures, trash compactors, and at
roof

 

h.

Plumbing engineering to be design build

 

 

 

21.

ELECTRICAL:

 

 

 

a.

The electrical service is to be as follows:

 

i.

Two (2) 4,000-amp UGPS / one (1) 1,200-amp UGPS / two (2) 4,000- amp metering
section & distribution boards / one (1) 1,200 amp switchgear / 200-amp house
panel

 

ii.

Additional 4,000 AMP services will be and paid for by Tenant as outlined in
section 26.

 

iii.

Run empty conduit for future power to every dock door (not within the
wall).  Panels not included.

 

b.

Exterior parking lot lighting to be LED wall mounted and steel pole mounted
fixtures (photo cell on and photo cell off).  Lighting to be two foot-candles
minimum in all parking lot areas.  Lighting at all man doors to be per code.

Exhibit “B”-9

--------------------------------------------------------------------------------

 

 

c.

Provide exterior soffit lights at exterior building entry soffits.

 

d.

Provide electrical hook up(s) for landscape irrigation controller.

 

e.

Emergency lighting and required exit lighting to meet CBC, N.F.P.A. and CFC
editions currently enforced by the governing agencies.

 

f.

Stub in phone service and provide required telephone backboard(s). Provide (2)
4” conduits.

 

g.

Provide for electric/telephone room accessible by Power Company from exterior of
building.  Room size to be determined by Electrical Design-Build Contractor.

 

h.

Electrical conduit to all fire PIV’s and detector checks for fire monitoring.

 

i.

Electrical gear by ‘Square D’, or approved equal by the Owner, in writing.

 

j.

Any conduit to be installed by tenant after the slab has been installed is
subject to the alterations and improvements provisions in the lease.

 

k.

Electrical engineering to be design build

 

 

 

22.

FIRE SPRINKLER SYSTEM:

 

 

 

a.

All fire systems must be 100% complete with all required fire hydrants, piv’s,
bells, fire loops approved by Fire Department, and the most current Edition of
the CFC.

 

b.

Full Sprinkler System to be ESFR using FM approved K-25 heads and pump if
required

 

c.

Max ridge not to exceed 50’.  

 

d.

Provide fire extinguisher(s) per Fire Department Requirements and MHE Design.  

 

e.

All ceiling hung sprinkler pipe will be recessed within the trusses.

 

f.

Fire protection is design-build.

 

g.

All gaps in slab at fire risers to be filled with clean gravel, typ.

 

 

 

23.

FIRE ALARM:

 

 

 

a.

Designed to comply with all codes by design build contractor.

 

b.

Design to be design build by general contractor

 

c.

Permitting and plans submittal to be by design-build contractor

 

 

 

24.

PIPE BOLLARD PROTECTION

 

 

 

a.

Provide 6” diameter schedule 80 pipe bollards 2500 psi concrete filled at the
minimum following locations.    All bollards within truck court to be 10”
diameter filled with concrete:

Exhibit “B”-10

--------------------------------------------------------------------------------

 

 

i.

At fire riser locations, exposed PIV’s

 

ii.

Fire hydrants

 

iii.

Power transformers per utility comparing requirements

 

iv.

At exterior stairs

 

v.

At gates (4 per gate minimum)

 

vi.

At each light pole in the shipping yard

 

vii.

At dock and ramp doors

 

viii.

Elsewhere as noted on plan

 

 

 

25.

LANDSCAPE AND IRRIGATION:

 

 

 

a.

Landscape and Irrigation to meet the governing jurisdiction standards.

 

b.

All irrigation systems to be automatic and meet City requirements.

 

c.

Provide separate water meter(s) for landscape irrigation.

 

d.

Provide drip irrigation where glazing is adjacent to the grade.

 

e.

Irrigation heads to be (1) foot behind curbs at parking stalls.

 

f.

Landscape Architect to determine if recycled water is available for the project.

 

 

26.

TENANT IMPROVEMENTS:

 

 

The Tenant has requested that Landlord deliver the following items (“Tenant
Improvements”), which were not included in the “Landlord Improvements” listed in
the building design criteria set forth in Paragraphs 1-25 above.  

 

 

•

Three (3) additional 4,000 AMP Services

 

•

Stairs to Roof Access

 

•

Float and Grind VNA for a F-min of 70/80 (Long/ Trans)  

 

•

Electrical distribution on each column

 

•

Guardhouse with Restrooms (2)

 

•

Driver Check-In Entrance (8x10 area with a restroom, power for vending machines,
notification bell)

Exhibit “B”-11

--------------------------------------------------------------------------------

 

 

•

Dock Door Equipment (mechanical levelers, dock seals, dock light, dock lock,
dock fan and convenience electrical outlet) (includes conduit within wall)

 

•

Facility Area - Battery Charging Areas (3) (12 and 20 amp disconnects, safety
eyewash, quad receptacles, each charging area will have panel scheduling of 1400
AMPS)

 

•

Electrical Connections for Compactors (750 AMP power and disconnects for 5
compactors)

 

•

Electric Drop and Data Runs for Supervisor Work Stations

 

•

Facility Areas / Office Area (7,500 SF Total)

 

•

Open Offices (2,500 SF)

 

•

Breakroom (600 SF)

 

•

Supply Closet & Storage Closet (160 SF)

 

•

Other Office Area with Restrooms (approx. 4,240 SF)

 

•

Lighting System (LED lighting)

 

•

Signage

 

•

Outside Smoking Area (400 SF)  

 

•

Conveyor Bridge & Conveyor Openings + Reinforcement of Bldg A wall

 

•

Roof reinforcement for ceiling hanging of conveyor

 

•

Equipment canopies (if any) & supporting wall openings

 

•

4” empty conduit for fiber run from current data center to MDF in new
building—no 90˚ bends

 

•

UPS & back-up generators

 

•

Mezzanine footings

 

Landlord has budgeted $1,260,000 (which includes a contingency of $210,000) in
the Development Budget (a copy of which is attached as an exhibit to the
Development Management Agreement, a copy of which is an exhibit to the Amended
and Restated Limited Liability Company Agreement of Landlord), for roof-mounted
solar panels which will generate 350 kW.  Landlord will have a discussion with
Tenant before the roof-mounted solar panels are installed, and if Tenant
requests, some or all of the solar panels will be installed on carports,
provided that the solar panels generate 350 kW in the aggregate.  Any costs in
excess of those in the Development Budget for the construction of
carport-mounted solar panels (including the cost of the construction of the
carports and any additional solar panels required to generate 350 kW) shall be
paid for in accordance with Paragraph 6(b) of Addendum 2 to the Lease (as
described below).

Landlord will install the Tenant Improvements as indicated above, which shall be
paid for in accordance with Paragraph 6(b) of Addendum 2 to the Lease, which
provides as follows:

“Landlord shall pay for the Tenant Improvements by providing an allowance (the
“Allowance”) up to a maximum amount of $3,880,000 ($5.07 psf, exclusive of the
area to be subleased to Highland Fairview (or one of its Affiliates)), and
Tenant shall pay for the cost of the Tenant Improvements in excess of such
amount.  Provided, however, that the obligation of Landlord to pay for any
Tenant Improvements in excess of $2,880,000 are contingent upon there being any
funds left after the construction of the Building has been completed in the
“contingency” line item of the Development Budget, as defined in the Development
Management Agreement between Landlord and HFC Holdings, LLC (not to exceed
$1,000,000) (such amount, the “Contingent Allowance”).  If after the Drawings
(as defined below) have been mutually agreed upon and Tenant has approved the
bids for the Tenant

Exhibit “B”-12

--------------------------------------------------------------------------------

 

Improvements, the cost of the Tenant Improvements is estimated to exceed
$2,880,000, prior to Landlord’s commencement of construction of the Tenant
Improvements, Tenant shall deposit the difference (between the total estimated
cost of the Tenant Improvements and $2,880,000) into an escrow account with
First American Title Insurance Company or another mutually agreeable escrow
company (“Escrow Holder”).  The parties shall execute joint escrow instructions
to the Escrow Holder which shall also be acceptable to Escrow Holder (including
any “general escrow instructions” reasonably required by Escrow Holder), and
which shall provide that the funds shall be distributed from escrow only upon
joint written instructions from Landlord and Tenant.  The cost of the escrow
shall be paid one-half by Landlord and one-half by Tenant.

The first $2,880,000 of the Allowance shall be applied against the actual cost
of the Tenant Improvements, as such costs are incurred by Landlord.  After such
amount has been fully applied, Landlord shall give notice to Tenant, and any
additional costs of the Tenant Improvements shall be paid from escrow.  No more
frequently than monthly, Landlord shall submit to Tenant a demand for a
disbursement from escrow, together with copies of invoices or other
documentation which shows the costs of the Tenant Improvements covered by such
demand.  Unless Tenant disputes that such costs are due and payable, within ten
(10) days after receipt of such demand from Landlord, Tenant shall give Escrow
Holder written instructions to disburse the amount requested (which instructions
shall be joined by Landlord).  If Tenant disputes the amount due, it shall
direct the disbursement of any amounts not in dispute, and shall specify the
basis for any disputed amounts.  If Landlord agrees with the dispute, Landlord
will seek to resolve the dispute with the general contractor or any applicable
subcontractors.  If Landlord does not agree with the dispute, Landlord shall
authorize Tenant to deal directly with the general contractor or any applicable
subcontractors to seek to resolve the dispute.  Any costs or expenses incurred
by Landlord which result from a dispute which is not resolved in favor of the
Tenant shall be paid or reimbursed by Tenant to Landlord on demand.  If the
Property is encumbered by any mechanics lien as a result of a dispute by Tenant
which is not agreed to by Landlord, Tenant shall, at its expense, promptly
pay-off or bond around such lien.  

After final completion of the Landlord Improvements or the Tenant Improvements,
the Tenant Improvements shall be reconciled with the total amount applied from
the Allowance and the total amount disbursed to Landlord from escrow.  If the
total cost of the Tenant Improvements exceeded $2,880,000, and if any portion of
the Contingent Allowance is available, then such amount, not to exceed
$1,000,000, shall be promptly paid by Landlord to Tenant.

If after approval of the Drawings (as defined below), Tenant shall desire any
changes to the Tenant Improvements it shall follow the procedure for Change
Orders described in Paragraph 1(b) above.  Any and all costs of reviewing any
Change Order Request relative to the Tenant Improvements, and any and all costs
of making any changes to the Tenant Improvements which Tenant may request and
which Landlord shall approve shall be at Tenant's sole cost and expense, and
shall be paid to Landlord upon demand and before commencement of the work
covered by the Change Order.

 

Landlord shall proceed with and complete the construction of the Tenant
Improvements in a good and workmanlike manner in accordance with all legal
requirements and any Drawings prepared and approved by the parties as described
below.  The construction of the Tenant Improvements shall, to the extent
possible, be coordinated with the construction of the Landlord
Improvements.  The Landlord Improvements shall not be deemed to have achieved
Substantial Completion until the Tenant Improvements shall also have been
Substantially Completed (also to be based upon the opinion of the Architect of
Record).

 

The Landlord and Tenant shall work together to prepare designs and construction
drawings (collectively, the “Drawings”) for the Tenant Improvements and any such
Drawings must be mutually

Exhibit “B”-13

--------------------------------------------------------------------------------

 

approved by Landlord and Tenant before work is commenced.  The cost of such
designs and drawings shall be part of the allowance described above.  After the
Drawings are mutually approved, the Tenant Improvements will be put out to bid,
and the amount of the bids will be presented to Tenant for approval.  Landlord
will competitively bid all Tenant Improvements and will disclose such bids to
Tenant on an "open book" basis.  The Tenant Improvements will not be constructed
until Tenant has approved the bids.”

 

 

Exhibit “B”-14

--------------------------------------------------------------------------------

 

EXHIBIT “C”

FORM OF HIGHLAND FAIRVIEW SUBLEASE

 

THIS SUBLEASE AGREEMENT (the “Sublease”) is made as of __________, 2019
(“Effective Date”) by and between SKECHERS, U.S.A., INC., a Delaware corporation
(“Sublandlord”), and HIGHLAND FAIRVIEW PROPERTIES, a Delaware general
partnership (“Subtenant”).

RECITALS

WHEREAS, HF Logistics-SKX T2, LLC, a Delaware limited liability company, as
landlord (“Landlord”), and Sublandlord, as tenant, entered into that certain
Lease of even date herewith (as the same may be amended from time to time, the
“Master Lease”) for the premises (the “Premises”), which will consist of
approximately 750,000 net rentable square feet in a building (the “Building”) to
be constructed on approximately 35.30 acres of land in Moreno Valley,
California, as  more particularly described in the Master Lease, which Premises
is part of a project known as Highland Fairview Corporate Park (the “Project”).

WHEREAS, Sublandlord desires to sublease a portion of the Premises to Subtenant,
consisting of approximately 30,000 net rentable square feet in the approximate
location shown on Exhibit “B” attached hereto (the “Subleased Premises”);

WHEREAS, Landlord has previously approved the subletting of the Subleased
Premises by Sublandlord to Subtenant; and

WHEREAS, Sublandlord and Subtenant desire to set forth herein the terms and
conditions applicable to the subleasing of the Subleased Premises.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Sublandlord and Subtenant agree as follows:

AGREEMENT

1.Term.

(a)Initial Term.  Sublandlord does hereby lease and demise to Subtenant, and
Subtenant does hereby lease and accept from Sublandlord, the Subleased Premises
for a term (the “Sublease Term”) commencing on the “Commencement Date” of the
Master Lease (the “Sublease Commencement Date”) and terminating at the end of
the 60th full month thereafter (the “Sublease Termination Date”), subject to
extension or earlier termination pursuant to the terms of the Master Lease or
this Sublease.

(b)Option to Extend.  Subtenant may extend the Sublease Term for one (1) period
of sixty (60) months, on the same terms and conditions (including the Base Rent
calculation), provided that Subtenant gives notice of its exercise of its option
to extend to Sublandlord not later than three (3) months prior to the Sublease
Termination Date.

2.Rent.

(a)Base Rent.  Commencing on the Sublease Commencement Date, Subtenant shall pay
to Sublandlord base rent (the “Base Rent”) for the Subleased Premises in the
same amount on a per square foot basis as is payable by Sublandlord to Landlord
under the Master Lease.  Base Rent shall be payable in advance, without demand
and without abatement, reduction, set-off or deduction, on the first day of each
calendar month during the Sublease Term with appropriate prorations for partial
months.

Exhibit “C”-1

--------------------------------------------------------------------------------

 

All rent shall be paid by Subtenant to Sublandlord at the address set forth in
Paragraph 16 below, or any other address designated by Sublandlord in a notice
to Tenant:

(b)Additional Rent.

(i)Subtenant shall pay to Sublandlord, as Additional Rent, an amount equal to
Subtenant’s “pro rata share” of Operating Expenses, Taxes and Insurance (as such
terms are defined in the Master Lease), which are sometimes herein collectively
referred to as “Other Charges,” for each Lease Year during the Sublease
Term.  Subtenant’s “pro rata share” share shall be a fraction, the numerator of
which is the number of rentable square feet in the Subleased Premises and the
denominator of which is the number of rentable square feet in the Building
(which is agreed initially to be 750,000 square feet, subject to adjustment as
set forth in the Master Lease, and accordingly, it is agreed that Subtenant’s
pro rata share is initially (4%).

(ii)Within a reasonable time following receipt from Landlord of invoices or
other notices with respect to the Other Charges, Sublandlord shall invoice
Subtenant for the Additional Rent due from Subtenant as described in clause (i)
above, which invoices shall be based upon Landlord’s calculation (or estimate,
if Landlord is permitted to estimate such charges under the Master Lease) of the
Other Charges, and Subtenant shall pay the Additional Rent to Sublandlord within
ten (10) business days after Subtenant’s receipt of such invoice.  If and when
any of the Other Charges which have been estimated are reconciled under the
Master Lease, they shall likewise be reconciled under this Sublease.

(iii)Any costs or expenses for services or utilities in excess of those required
by the Master Lease to be supplied to a Sublandlord by Landlord, which are not
otherwise included in Operating Expenses, and which are attributable directly to
Subtenant’s use or occupancy of the Subleased Premises, shall be paid by
Subtenant as Additional Rent on the next date for payment of Base Rent after the
date Sublandlord invoices Subtenant therefor (which invoices shall be based on
invoices for such costs or expenses received from Landlord).

(c)Rent.  All Base Rent, Additional Rent and other monetary sums payable by
Subtenant under this Sublease are considered to be “rent.”

3.Landlord Obligations.  With respect to provisions regarding any work, services
or other obligations required to be performed by Landlord under the Master
Lease, Sublandlord’s sole obligation to Subtenant with respect thereto shall be
to request performance of the same from Landlord, upon request in writing by
Subtenant, and to use reasonable efforts to obtain the performance of such work,
services or other obligations by Landlord; provided, however, the foregoing
shall not require Sublandlord to institute any legal action to obtain such
performance.  If Sublandlord fails or refuses to do so after request from
Subtenant, Subtenant shall have the right to request the performance of any such
work, services or other obligations directly from Landlord, and to institute
legal proceedings against Landlord (which may be brought in Sublandlord’s name
if required by law) as may be required to obtain from Landlord any such work,
services or other obligations. Sublandlord agrees to cooperate with Subtenant in
connection therewith, at Subtenant’s expense, and to execute such documents as
may be reasonably required in connection therewith.

4.Landlord Consents.  In all cases where the consent or approval of Landlord is
required under the Master Lease to take any actions, the consent or approval of
Sublandlord shall also be required under this Sublease, and Subtenant shall
therefore be required to obtain the consent of both Sublandlord and Landlord
before taking such actions.  Sublandlord shall use reasonable efforts to obtain
any such consents or approvals of Landlord, upon request in writing by
Subtenant, but Sublandlord shall not be required to institute any legal action
to obtain any such consent or approval.  If Sublandlord fails or refuses to do
so after request from Subtenant, Subtenant shall have the right to request such
consents or

Exhibit “C”-2

--------------------------------------------------------------------------------

 

approvals directly from Landlord, and to institute legal proceedings against
Landlord (which may be brought in Sublandlord’s name if required by law) as may
be required to obtain from Landlord any such consents or approvals.  Sublandlord
agrees to cooperate with Subtenant in connection therewith, at Subtenant’s
expense, and to execute such documents as may be reasonably required in
connection therewith.

5.Relationship to Master Lease.

(a)This Sublease and all of Subtenant’s rights hereunder are expressly subject
and subordinate to all of the terms of the Master Lease, provided that the sum
of $50 million in the second paragraph of Paragraph 17 shall instead be $5
million.  Subtenant shall comply with all obligations of and restrictions
imposed on Sublandlord under the Master Lease with respect to the Subleased
Premises, except to the extent any such obligations are not applicable to this
Sublease or are limited by the terms of this Sublease (e.g., without limitation,
Subtenant only pays those amounts of Base Rent and Additional Rent described
herein).  Subtenant hereby acknowledges that Subtenant shall look solely to
Landlord for the performance of all the Landlord’s obligations under the Master
Lease and, except as expressly set forth herein, Sublandlord shall not be
obligated to provide any services to Subtenant in connection with this
Sublease.  Subtenant acknowledges that any termination of the Master Lease will
result in a termination of the Sublease, provided, however, that Sublandlord
shall not voluntarily terminate the Master Lease prior to the end of the Term of
the Master Lease without the consent of Subtenant.

(b)Except as otherwise expressly provided herein, (i) Sublandlord shall be
deemed to have the same rights, in its capacity as “sublandlord” hereunder, as
Landlord has in its capacity as “landlord” under the Master Lease; and (ii)
Subtenant shall be deemed to have the same rights, in its capacity as
“subtenant” hereunder, as Sublandlord has in its capacity as “tenant” under the
Master Lease, all to the extent and only to the extent such rights pertain to
the use and occupancy of the Subleased Premises (and the parking areas) during
the Sublease Term.  To the extent the provisions of this Sublease contradict the
terms of the Master Lease insofar as they impact Sublandlord’s obligations under
the Master Lease (such that Sublandlord would be in default under the Master
Lease), the terms of the Master Lease shall govern.

(c)Nothing contained in this Sublease shall serve to release Sublandlord from
the further performance of any of its obligations under the Master Lease or to
relieve Sublandlord from any of its liability under the Master Lease.

6.Use.  The Subleased Premises shall be used by Subtenant only for general
office uses, and services and storage incidental to such uses, and any other
uses permitted under the Master Lease.

7.Default.  Any act or omission by Subtenant that would constitute a default
under the Master Lease shall, subject to the same notice and cure provisions
provided in the Master Lease, be deemed a default by Subtenant under this
Sublease.  For purposes of clarification, any failure by Subtenant to pay rent
when due hereunder or any failure by Subtenant to perform any other obligations
required under this Sublease shall be deemed a default hereunder if any of the
same is not cured within the applicable cure period after notice thereof.  Any
such default by Subtenant shall entitle Sublandlord to exercise any and all
remedies available to Landlord under the Master Lease or any other remedies
available at law or in equity under the laws of the State of California.

8.Intentionally Omitted.

9.Quiet Enjoyment.  Provided Subtenant is not in default beyond applicable
notice and cure periods hereunder, Subtenant shall have the quiet enjoyment of
the Subleased Premises during the Sublease Term without interference by
Sublandlord or anyone claiming by, through or under Sublandlord.

Exhibit “C”-3

--------------------------------------------------------------------------------

 

10.Subordination.  Notwithstanding the provisions of Section 9 above, Subtenant
accepts this Sublease subject and subordinate to any mortgage, deed of trust or
ground lease now or hereafter placed on the Premises or the Building, or any
portion thereof, and to replacements, renewals and extensions thereof. This
clause shall be self-operative, but upon the request of any mortgagee of
Sublandlord or Landlord, Subtenant shall execute a commercially reasonably
subordination agreement in favor of such mortgagee or ground lessor.

11.Insurance and Indemnities.  Subtenant hereby agrees to indemnify and hold
Landlord and Sublandlord harmless with regard to Subtenant’s leasing and use of
the Subleased Premises, to the same extent that Sublandlord is required to
indemnify and hold Landlord harmless with respect to the Premises under the
Master Lease.  Likewise, Subtenant hereby agrees to obtain and provide evidence
satisfactory to Sublandlord and Landlord, on or before the Effective Date, that
Subtenant is carrying insurance in the same amounts and of the same types
required to be carried by Sublandlord under the Master Lease with regard to the
Premises. Neither Sublandlord nor Subtenant shall be liable to the other party
(by way of subrogation or otherwise) or to any insurance company insuring the
other party for any loss or damage to any building, structure or other tangible
property, or any resulting loss of income, or losses under workmans’
compensation laws and benefits, even though such loss or damage might have been
occasioned by the negligence of such party, its agents or employees if, and to
the extent, that any such loss or damage is covered by insurance benefiting the
party suffering such loss or damage or was required to be covered by insurance
pursuant to this Sublease.

12.Intentionally Omitted.

13.Parking. During the Sublease Term, Subtenant shall be provided with a
sufficient number of parking spaces in the parking area of the Premises as shall
be required by the City, which parking spaces shall be in close proximity to the
Subleased Premises.  Subtenant hereby agrees to comply with all of the terms and
conditions of the Master Lease relating to parking.

14.No Brokers.  Sublandlord and Subtenant each hereby represent and warrant to
the other, and shall indemnify and defend the other for any breach of the
foregoing representation or warranty hereof by a party, that no brokers’ or
finders’ fees or commissions will be owed arising out of the entering into this
Sublease as a result of the warranting party’s actions or inactions.

15.Sublandlord’s Representations and Certain Covenants.

(a)Sublandlord hereby represents that (i) a true and correct copy of the Master
Lease (including, without limitation, all amendments and/or supplements thereto)
is attached hereto as Exhibit “A”, and the Master Lease is in full force and
effect; (ii) Sublandlord has not received or given any notice of default from or
to Landlord relating to the Master Lease, and Sublandlord is not aware of any
occurrence or circumstance which, with notice or the passage of time, would be
deemed a default by either Sublandlord or Landlord under the Master Lease; and
(iii) Sublandlord has no knowledge, nor has Sublandlord received written notice
from any governmental authority or any other person, of any existing or
threatened material violation of any laws applicable to the use or condition of
the Premises or any part thereof.

(b)During the Sublease Term, Sublandlord will (i) pay, when and as due, all rent
and other charges payable by Sublandlord under the Master Lease, (ii) not
exercise any voluntary right to terminate the Master Lease prior to the end of
the term of the Master Lease without the prior written consent of Subtenant, and
(iii) not amend or modify the Master Lease in any respect which creates
additional obligations of Subtenant under this Sublease, or decreases
Subtenant’s rights under this Sublease, without the prior written consent of
Subtenant.  

Exhibit “C”-4

--------------------------------------------------------------------------------

 

(c)Sublandlord shall indemnify, defend and hold Subtenant harmless from any and
all damages suffered by Subtenant as a result of any breach of the foregoing
representations, warranties or covenants, which indemnification obligation shall
survive any termination of this Sublease.

(d)Sublandlord will perform all of its covenants and obligations under the
Master Lease, and will not default thereunder.  If Sublandlord receives any
notice of default or potential default from Landlord under the Master Lease,
Sublandlord will promptly send a copy of such notice to Subtenant, and unless
such default results from any act or omission which is a default by Subtenant
under this Sublease, Sublandlord will cure such default within any applicable
cure period set forth in the Master Lease.

16.Notices:  Any notice, demand or other communication required or permitted to
be given or served by either party to this Sublease shall be in writing, and
shall be deemed given when either (i) personally delivered, or (ii) deposited
with the United States Postal Service, postage prepaid, by registered or
certified mail, return receipt requested, or (iii) delivered by a nationally
recognized overnight delivery service providing proof of delivery, properly
addressed to the other party at the address set forth below (as the same may be
changed by giving written notice of the aforesaid in accordance with this
Section 16).  

Sublandlord’s Address:

228 Manhattan Beach Boulevard
Manhattan Beach, CA  90266
Attn:  David Weinberg, COO

With a copy to:

Philip Paccione, Esq.
Skechers U.S.A., Inc.
228 Manhattan Beach Boulevard
Manhattan Beach, CA  90266

Subtenant’s Address:

Highland Fairview Properties
14225 Corporate Way
Moreno Valley, CA  92553
Attn:  Iddo Benzeevi

With a copy to:

James Lieb, Esq.
Executive Vice President
The Trump Group
400 Park Avenue
New York, NY  10022

 

17.Counterparts.  This Sublease may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same document.

Exhibit “C”-5

--------------------------------------------------------------------------------

 

18.Capitalized Terms.  Any capitalized term used in this Sublease which is not
defined herein shall have the same meaning attributable to that term in the
Master Lease.

19.Miscellaneous.  This Sublease shall be governed by the laws of the State of
California.  This Sublease supersedes all prior discussions and agreements
between the parties and incorporates their entire Agreement with respect to the
matters set forth herein.  This Sublease may not be amended or modified except
by a writing executed by both parties.

20.Condition of Subleased Premises.  The Subleased Premises shall be delivered
to Subtenant on the Sublease Commencement Date in its “as is” condition.  By
accepting possession of the Subleased Premises, Subtenant shall be deemed to
have accepted the physical condition thereof, except to the extent that Landlord
has made any warranties or representations to Sublandlord as to the condition of
the Premises, which may be enforced in the same manner as Serb forth herein for
the enforcement of other obligations of Landlord.  Sublandlord has no obligation
to improve or construct any improvements to the Subleased Premises.  It is
understood that any necessary demising wall which shall separate the Subleased
Premises from the rest of the Premises shall be constructed by Landlord pursuant
to its construction obligations under the Master Lease, and any additional cost
thereof imposed by Landlord on Sublandlord shall be paid by Subtenant.

(Remainder of Page Intentionally Left Blank)

Exhibit “C”-6

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of the day
and year first above written.

SUBLANDLORD:

SKECHERS, U.S.A., INC., a Delaware corporation

By:

 

 

 

Name:

 

 

Title:

 

 

SUBTENANT:

HIGHLAND FAIRVIEW PROPERTIES, a Delaware general partnership

By:

 

 

 

Name:

Iddo Benzeevi

 

Title:

President and Chief Executive Officer

 

 

 

 

Exhibit “C”-7

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Exhibit “A”
Master Lease

 

Exhibit “C”-8

--------------------------------------------------------------------------------

 

Exhibit “B”

Subleased Premises

[gp0uocwwhi45000004.jpg]

 

 

Exhibit “C”-9

--------------------------------------------------------------------------------

 

EXHIBIT “C

FOURTH AMENDMENT TO LEASE AGREEMENT

THIS FOURTH AMENDMENT TO LEASE AGREEMENT (the “Fourth Amendment”) is made and
entered into this _____ day of _____________, 2019 by and between HF
LOGISTICS-SKX T1, LLC, a Delaware limited liability company (“Landlord”) and
SKECHERS U.S.A., INC., a Delaware corporation (“Tenant”).

RECITALS

A.

HF LOGISTICS I, LLC, a Delaware limited liability company and Tenant entered
into that certain Lease Agreement dated September 25, 2007 (the “Original
Lease”), as amended by that certain Amendment to Lease Agreement dated
December 18, 2009 (the “First Amendment”), and as further amended by that
certain Second Amendment to Lease Agreement dated April 12, 2010 (the “Second
Amendment”), and as further amended by that certain Third Amendment to Lease
Agreement dated August 18, 2010 (the “Third Amendment”).  HF Logistics I, LLC
assigned all of its right, title and interest as landlord under the Lease to
Landlord, and Landlord assumed the obligations of HF Logistics I, LLC as
landlord under the Lease.  The Original Lease, as amended by the First
Amendment, the Second Amendment and the Third Amendment, is referred to herein
as the “Lease”.  Pursuant to the Lease, Tenant has leased from Landlord certain
premises situated at the northwest corner of Theodore Street and Eucalyptus
Avenue in Moreno Valley, California, as more fully described therein.

B.

The parties desire to further amend the Lease to extend the term, so that the
Termination Date will be the same date as the termination date of that certain
Lease dated of even date herewith between HF Logistics-SKX T2, LLC, a Delaware
limited liability company, as landlord, and Tenant, as tenant, for approximately
35.30 acres of land situated adjacent to the Premises, upon which will be
constructed an approximately 750,000 square foot building (the “Expansion Parcel
Lease”).

NOW, THEREFORE, for a good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.The Termination Date shall be the “Termination Date” as set forth in the
Expansion Parcel Lease.

2.The Base Rent payable under the Lease from the original Termination Date
(November 15, 2031) until the new Termination Date (as established under this
Fourth Amendment) shall be at the same rates per square foot that are then
payable under the Expansion Parcel Lease.

3.The parties agree that the provisions in the Lease relating to the Expansion
Site (Addendum 4, Paragraph 3) are of no further force or effect.  Upon request
of Landlord, Tenant will execute and deliver any instrument reasonably required
to remove from the public records any memorandum of option which may have been
recorded with respect to the Expansion Site.

1

--------------------------------------------------------------------------------

 

4.Paragraph 23 of the Lease is hereby amended by adding the following clause
(viii):

“viii.Tenant shall default (beyond any applicable notice and/or cure period)
under that certain lease of even date herewith between HF Logistics-SKX T2 LLC,
as landlord, and Tenant, as tenant, for approximately 35.30 acres of land
adjacent to the Premises.”

5.Capitalized terms used in this Fourth Amendment shall have the same meanings
as set forth in the Lease, unless a different definition is set forth herein.

6.Except as amended by this Fourth Amendment, all terms and conditions of the
Lease shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the
date first above written.

“LANDLORD”

“TENANT”

 

 

 

 

 

 

 

HF LOGISTICS I, LLC, a Delaware limited liability company

SKECHERS U.S.A., INC., a Delaware corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By

 

 

By

 

 

 

Iddo Benzeevi, President and Chief Executive Officer

 

David Weinberg, Chief Operating Officer

 

 

 

2

--------------------------------------------------------------------------------

 

 

EXHIBIT “D”

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
HF LOGISTICS-SKX T2, LLC

 

THE LIMITED LIABILITY COMPANY INTERESTS IN HF LOGISTICS-SKX T2, LLC (THE
“INTERESTS”) ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER TERMS AND
CONDITIONS SET FORTH IN Article 11 AND MAY NOT BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS THEREOF. THEREFORE, PURCHASERS OF THE INTERESTS
WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENTS FOR AN INDEFINITE PERIOD
OF TIME. THE INTERESTS HAVE NOT BEEN REGISTERED (i) UNDER ANY SECURITIES LAWS OF
THE SEVERAL STATES (THE “STATE ACTS”), OR (ii) UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “FEDERAL ACT”), IN RELIANCE UPON
EXEMPTIONS PROVIDED THEREIN, AND NEITHER THE INTERESTS NOR ANY PART THEREOF MAY
BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED, OR TRANSFERRED AT
ANY TIME EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF Article 11 AND
(1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE
ACTS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS
OR WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH STATE ACTS, AND (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE FEDERAL ACT OR IN A TRANSACTION WHICH
IS EXEMPT FROM REGISTRATION UNDER THE FEDERAL ACT OR WHICH IS OTHERWISE IN
COMPLIANCE WITH THE FEDERAL ACT. IN ADDITION, ANY INTERESTS ACQUIRED BY NON-U.S.
PERSONS MAY NOT, DIRECTLY OR INDIRECTLY, BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED, OR TRANSFERRED IN THE UNITED STATES OR TO OR FOR
THE ACCOUNT OF A U.S. PERSON EXCEPT IN COMPLIANCE WITH THIS AGREEMENT AND THE
FEDERAL ACT AND ALL APPLICABLE STATE ACTS.  AS USED HEREIN, “UNITED STATES”
MEANS THE UNITED STATES OF AMERICA, ITS TERRITORIES AND POSSESSIONS, AND ALL
AREAS SUBJECT TO ITS JURISDICTION, AND A “U.S. PERSON” MEANS A CITIZEN OR
RESIDENT OF THE UNITED STATES (INCLUDING THE ESTATE OF ANY SUCH PERSON), A
CORPORATION, COMPANY, OR OTHER PERSON CREATED OR ORGANIZED UNDER THE LAWS OF THE
UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF OR THEREIN, AND AN ESTATE OR
TRUST THE INCOME OF WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME TAXATION
REGARDLESS OF ITS SOURCE.

 

 

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TABLE OF CONTENTS

Page

Article 1 DEFINED TERMS

1

 

 

Article 2 ORGANIZATIONAL MATTERS

8

 

 

Article 3 PURPOSE

10

 

 

Article 4 CAPITAL CONTRIBUTIONS; MEMBER LOANS; CAPITAL ACCOUNTS

10

 

 

Article 5 DISTRIBUTIONS AND ALLOCATIONS

13

 

 

Article 6 LOANS

15

 

 

Article 7 MANAGEMENT AND OPERATION OF BUSINESS

22

 

 

Article 8 BUY-SELL PROVISIONS

30

 

 

Article 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS

32

 

 

Article 10 TAX MATTERS

34

 

 

Article 11 TRANSFERS AND WITHDRAWALS

37

 

 

Article 12 ADMISSION OF MEMBERS

39

 

 

Article 13 DISSOLUTION AND LIQUIDATION

39

 

 

Article 14 AMENDMENT OF AGREEMENT

42

 

 

Article 15 DISPUTE RESOLUTION

42

 

 

Article 16 DEFAULTS / REMEDIES

43

 

 

Article 17 GENERAL PROVISIONS

44

 

 

 

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HF LOGISTICS-SKX T2 LLC

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF HF
LOGISTICS-SKX T2, LLC (the “Company”), is entered into and effective as of the
____ day of ______________, 2019 (the “Effective Date”) by and between HF
LOGISTICS I, LLC, a Delaware limited liability company (“HF”), SKECHERS R.B.,
LLC, a Delaware limited liability company (“Skechers,” or the “Skechers
Member”), and Highland Fairview Partners V, a Delaware general partnership
(“HFPV”, and together with HF, the “HF Member,” and the HF Member together with
Skechers, the “Members”).  

RECITALS

WHEREAS, on or about April 12, 2010, HF Logistics-SKX, LLC, a Delaware limited
liability company (“SKX LLC”), as the sole member of the Company, entered into
that certain Limited Liability Company Agreement of HF Logistics-SKX T2, LLC
(the “Original Agreement”) which set forth the terms and conditions under which
the Company would be organized, managed and operated; and

WHEREAS, concurrently herewith, SKX LLC has assigned 50% of its Company Interest
to HF and 50% of its Company Interest to Skechers; and

WHEREAS, concurrently herewith, with the consent of HF and Skechers, HFPV has
been admitted as a Member of the Company; and

WHEREAS, the Members desire to amend and restate the Original Agreement so as to
reflect the terms and conditions upon which the Company will hereafter be
organized, managed and operated.

NOW, THEREFORE, in consideration of the premises, the mutual promises and
agreements herein made, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Members, intending to be
legally bound, have agreed and do hereby agree as follows:

This Agreement amends and supersedes the Original Agreement.

Article 1
DEFINED TERMS

Section 1.1Certain Defined Terms.  Unless otherwise clearly indicated to the
contrary, the following terms shall have the following meanings:

1.1.11.1.1“Act” means Sections 18-101 et seq. of the Delaware Corporation Laws
Ann., commonly known as the Delaware Limited Liability Company Act, as it may be
amended from time to time, and any successor to such statute.

1.1.21.1.2“Additional Capital Contributions” means the total of all Capital
Contributions made to the Company by the Members in accordance with
Section 4.1.2.

1.1.31.1.3“Additional Funding Obligation” has the meaning set forth in Section
6.9(a).

 

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1.1.41.1.4Intentionally Deleted.

1.1.51.1.5“Affiliate” means with respect to any Person, (a) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, or (b) any Person owning or controlling fifty-one percent (51%) or more
of the outstanding voting interests of such Person, or (c) any Person of which
such Person owns or controls fifty-one percent (51%) or more of the voting
interests.  For the purposes of this Agreement, it is agreed that HF and HFPV
are Affiliates of each other.

1.1.61.1.6“Agreement” means this Amended and Restated Limited Liability Company
Agreement of HF Logistics-SKX T2, LLC, as it may be amended, supplemented or
restated from time to time.

1.1.71.1.7“Assignee” means a Person to whom any Company Interest has been
transferred in a manner permitted under this Agreement, but who has not been
admitted to the Company as a Member.

1.1.81.1.8“Available Cash” means, with respect to any period for which such
calculation is being made:

(a)all cash revenues and funds received by the Company from whatever source,
including Capital Transaction Proceeds (except with respect to Liquidating
Transactions), plus the amount of any reduction in existing Reserves of the
Company;

(b)less the sum of the following:

(i)all required interest or principal payments, escrow account payments and any
other payments made during such period by the Company on account of the Debt of
the Company, if any;

(ii)all cash expenditures (including capital expenditures) made by the Company
during such period;

(iii)all payments made by the Company during such period to any Reserve account
(including the amount of any increase in any existing Reserves of the Company).

1.1.91.1.9“Bankruptcy Action” means (a) the filing of any voluntary or
involuntary bankruptcy (and in the case of an involuntary bankruptcy, such
proceeding shall not have been dismissed within ninety (90) days), insolvency or
reorganization case or proceeding, instituting any proceeding under any
applicable insolvency law or otherwise seeking any relief under any laws
relating to the relief from debts or the protection of debtors generally by or
against any Person, (b) the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, custodian or any similar official for any Person or a
substantial portion of its properties, (c) making any assignment for the benefit
of creditors by any Person, (d) any Person being adjudged a bankrupt or
insolvent, or having entered against it an order of relief in any bankruptcy or
insolvency proceeding, (e) any Person filing a petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, (f) any Person filing an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of the foregoing
nature, (g) the filing of any proceeding with respect to any Person seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, which has not been
dismissed within one hundred twenty (120) days after the commencement thereof,
or (h) the appointment of a trustee, receiver, assignee, sequestrator, custodian
or liquidator with respect to any Person which has not been vacated or stayed
within ninety (90) days after the appointment or such appointment is not vacated
within ninety (90) days after the expiration of any such stay.

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1.1.101.1.10“Breaching Member” shall mean any Member who has committed an Event
of Default.

1.1.111.1.11“Business Day” means any day except a Saturday, Sunday or other day
on which commercial banks in Riverside, California, are authorized or required
by law to close.

1.1.121.1.12“Buy-Sell Deposit” has the meaning set forth in Section 8.6.

1.1.131.1.13“Buy-Sell Notice” has the meaning set forth in Section 8.1.

1.1.141.1.14“Capital Account” means the Capital Account maintained for a Member
pursuant to Exhibit “A” attached hereto.

1.1.151.1.15“Capital Contribution” means, with respect to any Member, any cash,
cash equivalents or the Agreed Value (as defined in Exhibit “A”) of property
which such Member contributes or is deemed to contribute to the Company pursuant
to Article 4.  Such amounts shall be treated as contributions to the Company
pursuant to Section 721(a) of the Code.

1.1.161.1.16“Capital Transaction” has the meaning as set forth in Section
5.2(c).

1.1.171.1.17“Capital Transaction Proceeds” has the meaning as set forth in
Section 5.2(c).

1.1.181.1.18“Certificate” means the Certificate of Formation of the Company
filed in the office of the Secretary of State of the State of Delaware, as
amended from time to time.

1.1.191.1.19“Closing Date” means the Effective Date.

1.1.201.1.20“Code” means the Internal Revenue Code of 1986, as amended.  Any
reference herein to a specific Section or Sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.

1.1.211.1.21“Company” has the meaning set forth in the preamble.

1.1.221.1.22“Company Assets” means (a) the Property and the Project, and (b) all
other assets of the Company.

1.1.231.1.23“Company Interest” means the ownership interest in the Company held
by a Member, which includes any and all benefits to which the holder of such a
Company Interest may be entitled as provided in this Agreement (including any
voting rights and rights to receive distributions of Available Cash), together
with all obligations of such Member to comply with the terms and provisions of
this Agreement.

1.1.241.1.24“Company Record Date” means the record dates established by the
Managing Members for the distribution of Available Cash, or if they fail to
agree as to any record date, such term means the last day of the current month.

1.1.251.1.25“Company Year” means the fiscal year of the Company.

1.1.261.1.26“Completion of the Project” has the meaning set forth in the
Development Management Agreement.  

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1.1.271.1.27“Construction Lender” means any lender under the Construction Loan.

1.1.281.1.28“Construction Loan” means a construction loan from a Construction
Lender to be taken out to finance the development of the Property in accordance
with the Lease.

1.1.29“Construction Loan Documents” means any and all documents which evidence
the Construction Loan, including a construction loan agreement, promissory
notes, deeds of trust, assignments of leases and rents, security agreements,
financing statements, pledge agreements and environmental indemnity agreements.

1.1.291.1.30“Contribution Percentages” means the ratio at which the Members are
required to make Capital Contributions, which is twenty-five percent (25%) for
HF, 25% for HFPV and fifty percent (50%) for Skechers.

1.1.301.1.31“Debt” means, as to any Person as of any date of determination,
(a) all indebtedness of such Person for money borrowed or for the deferred
purchase price of property or services; (b) all amounts owed by such Person to
banks or other Persons in respect of reimbursement obligations under letters of
credit, surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (c) all indebtedness for money
borrowed or for the deferred purchase price of property or services secured by
any lien on any property owned by such Person, to the extent attributable to
such Person’s interest in such property, even though such Person has not assumed
or become liable for the payment thereof; and (d) lease obligations of such
Person which, in accordance with generally accepted accounting principles,
should be capitalized.

1.1.311.1.32“Default” has the meaning set forth in Section 4.1.5(c).  For
clarification, the use of the word “default” (uncapitalized) in this Agreement
shall mean any default other than a Default which is defined in
Section 4.1.5(c).

1.1.321.1.33“Default Amount” has the meaning set forth in Section 4.1.5(c).

1.1.331.1.34“Default Date” has the meaning set forth in Section 4.1.5(c).

1.1.341.1.35“Default Member” has the meaning set forth in Section 4.1.5(c).

1.1.351.1.36“Default Notice” has the meaning set forth in Section 4.1.5(b).

1.1.361.1.37“Deposit Date” has the meaning set forth in Section 8.6.

1.1.371.1.38“Determination” has the meaning set forth in Section 15.2.

1.1.381.1.39“Development Budget” has the meaning set forth in the Development
Management Agreement.  

1.1.391.1.40“Development Management Agreement” means that certain Development
Management Agreement of even date herewith between the Company and HFC Holdings,
LLC, a Delaware limited liability company (which is an Affiliate of HF), a copy
of which is attached hereto as Exhibit “B”.  

1.1.401.1.41“Development Manager” has the meaning set forth in the Development
Management Agreement.

4

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1.1.411.1.42Intentionally Deleted.

1.1.421.1.43“Distribution Percentages” means the ratio at which the Members are
entitled to receive distributions of Available Cash, which is twenty-five
percent (25%) for HF, 25% for HFPV and fifty percent (50%) for Skechers, subject
to adjustment as set forth in Section 4.1.5.

1.1.431.1.44“Effective Date” has the meaning set forth in the preamble.

1.1.441.1.45“Embargoed Person” has the meaning set forth in Section 2.5.10.

1.1.451.1.46“Event of Default” shall mean a default by a Member (which includes
a default by a Member in its capacity as Managing Member) in the performance of
its obligations under this Agreement which is not cured within any applicable
cure period set forth herein, but excluding a default under Article 4 or Article
6 with respect to required Additional Capital Contributions or required loans.

1.1.461.1.47“Event of Dissolution” has the meaning set forth in Section 13.1.

1.1.471.1.48“HF” has the meaning set forth in the preamble.

1.1.481.1.49“HF Loan” has the meaning set forth in Section 6.5(a).

1.1.491.1.50“HF Managing Member” means HF acting in its capacity as a Managing
Member of the Company.

1.1.501.1.51“HFPV Property” means approximately 12.93 acres of land situated in
the City of Moreno Valley, California consisting of Parcel 3 of Parcel Map No.
35629 (APNs: 488-350-027, 032 and 036).

1.1.511.1.52“HF-SKX Property” means approximately 22.37 acres of land situated
in the City of Moreno Valley, California consisting of Parcel 2 of Parcel Map
No. 35629 (APNs: 488-350-031 and 035).

1.1.521.1.53“Incapacity” or “Incapacitated” means (a) as to any individual
Member, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate;
(b) as to any corporation which is a Member, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (c) as to any partnership or limited liability company (or partnership)
which is a Member, the dissolution and commencement of winding up of the
partnership or the limited liability company (or partnership); (d) as to any
estate which is a Member, the distribution by the fiduciary of the estate’s
entire interest in the Company; or (e) as to any trustee of a trust which is a
Member, the termination of the trust (but not the substitution of a new
trustee).

1.1.531.1.54“Indemnitee” means (a) any Person made a party to a proceeding
brought by an unaffiliated third party by reason of such Person’s status as (i)
a Member, or (ii) a director, officer, member, manager, partner, trustee, or
shareholder of the Company, or a Member or an Affiliate of a Member, or (b) such
other Persons acting in good faith on behalf of the Company as determined by the
Managing Members in their reasonable judgment.  

1.1.541.1.55“Initial Capital Contributions” means the total of all Capital
Contributions made to the Company by the Members in accordance with
Section 4.1.1.

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1.1.551.1.56“Invoking Member” has the meaning set forth in Section 8.1.

1.1.561.1.57“IRS” means the United States Internal Revenue Service.

1.1.571.1.58“Lease” means that certain lease of even date herewith between the
Company, as landlord, and Skechers Parent, as tenant, and any subsequent
amendments.

1.1.581.1.59“Lender” means any Construction Lender or any Permanent Lender, as
the case may be, or their respective successors-in-interest.

1.1.591.1.60“Liquidating Transaction” means any transaction or series of related
transactions which results in the sale or other disposition of all or
substantially all of the Company Assets.

1.1.601.1.61“Liquidator” has the meaning set forth in Section 13.2.1.

1.1.611.1.62“Loan” means either a Construction Loan or a Permanent Loan, as the
case may be.

1.1.621.1.63“Loss Item” has the meaning set forth in Section 7.6.1.

1.1.631.1.64“Managing Member” means either HF or Skechers, as the case may be,
acting in the capacity as a Managing Member of the Company.  

1.1.641.1.65“Managing Members” means both HF and Skechers, each acting in the
capacity as a Managing Member of the Company.

1.1.651.1.66Intentionally Omitted.

1.1.661.1.67“Members” has the meaning set forth in the preamble.  

1.1.671.1.68“Offeree Member” has the meaning set forth in Section 8.1.

1.1.681.1.69“Operating Budget” means a reasonably detailed budget of the
estimated revenues and expenditures (including capital expenditures) of the
Company, and a reasonably detailed business plan, which shall be prepared by the
Skechers Managing Member and approved by the HF Managing Member in accordance
with Section 7.9, as amended from time to time (with the approval of both
Managing Members).  The initial Operating Budget, which has been approved by the
Managing Members, is attached as Exhibit “C”.  

1.1.691.1.70“Permanent Lender” means any lender under a Permanent Loan.

1.1.701.1.71“Permanent Loan” means a loan or loans taken out by the Company to
pay-off a Construction Loan (whether or not designated as a “permanent loan”,
and including, without limitation, a “mini-perm loan”), or any replacements or
refinancing thereof.

1.1.711.1.72“Person” means an individual, corporation, partnership, limited
liability company (or partnership), trust, unincorporated organization,
association or other entity.

1.1.721.1.73“Plans and Specifications” means the Approved Plans (as defined in
the Development Management Agreement), which have been transmitted by HF to
Skechers (by “You Send It”) on January 29, 2010.

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1.1.731.1.74“Prescribed Laws” has the meaning set forth in Section 2.5.10.

1.1.741.1.75“Prime Rate” means the highest prime rate reported in the Money
Rates column or section of The Wall Street Journal from time to time, as having
been the rate in effect for corporate loans at large United States of America
money center commercial banks (whether or not such rate has actually been
charged by any such bank).  If The Wall Street Journal ceases publication of the
Prime Rate, the “Prime Rate” shall mean the prime rate (or base rate) announced
by Wells Fargo Bank, National Association, from its Los Angeles, California
office (whether or not such rate has actually been charged by such bank).  If
such bank discontinues the practice of announcing the Prime Rate, the “Prime
Rate” shall mean the highest rate charged by such bank on short-term, unsecured
loans to its most creditworthy large corporate borrowers.

1.1.751.1.76“Project” means the development of an approximately 750,000 square
foot building and related improvements on the Property in accordance with the
Lease.  

1.1.761.1.77“Project Schedule” has the meaning set forth in the Development
Management Agreement.  

1.1.771.1.78“Property” means approximately 35.30 acres of land located in the
City of Moreno Valley (Rancho Belago), California, as further described in the
Lease, and consisting of both the HFPV Property and the HF-SKX Property.

1.1.781.1.79“Purchasing Member” has the meaning set forth in Section 8.6.

1.1.791.1.80“Regulations” has the meaning set forth in Exhibit “A”.

1.1.801.1.81“Reserves” means cash set aside into a segregated account (or
maintained in a non-segregated Company account but specifically “earmarked” as a
reserve) as reserves for the Company’s operations or obligations under the Lease
(such as, but not limited to, roof replacement and repair and replacement of
structural aspects of the building under the Lease, as reasonably determined by
the Managing Members, or as set forth in an Operating Budget.  Reserves shall
include any amounts required to be set aside as reserves under the Loans or
under any other agreements executed by the Company which call for reserves of
this nature.

1.1.811.1.82Intentionally Omitted.

1.1.821.1.83“Securities Act” means the Securities Act of 1933, as amended.

1.1.831.1.84“Selling Member” has the meaning set forth in Section 8.6.

1.1.841.1.85“Skechers” has the meaning set forth in the preamble.

1.1.851.1.86“Skechers Loan” has the meaning set forth in Section 6.5(b).

1.1.861.1.87“Skechers Parent” means Skechers U.S.A., Inc., a Delaware
corporation.

1.1.871.1.88“Skechers Managing Member” means Skechers, acting in its capacity as
a Managing Member of the Company.

1.1.881.1.89“Stated Amount” has the meaning set forth in Section 8.2.

1.1.891.1.90“Subsidiary’s Assets” means all assets of any Subsidiary.

7

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1.1.901.1.91“Subsidiaries” means any future subsidiaries of the Company.

1.1.911.1.92“T1” means HF Logistics SKX-T1, LLC, a Delaware limited liability
company.

1.1.921.1.93Intentionally Omitted.

1.1.931.1.94“Tax Matters Partner” has the meaning set forth in Section 10.2.1.

1.1.941.1.95“Tenant” means the Skechers Parent, or its permitted assignee as the
tenant under the Lease.

1.1.951.1.96“Unrecovered Contribution” with respect to each Member means the
aggregate Capital Contributions made by such Member to the Company, reduced by
all amounts of cash distributed to such Member pursuant to Section 5.2 (or made
under Section 5.2 pursuant to Section 13.2.1(d)).

Section 1.2Other Terms.  All capitalized terms used in this Agreement which are
not defined in this 0 shall have the meanings set forth elsewhere in this
Agreement.

Article 2
ORGANIZATIONAL MATTERS

Section 2.1Formation; Application of Act.

Formation of Company

2.1.2.  The Company has been formed by the filing of the Certificate with the
Delaware Secretary of State.  The Members hereby agree to become Members and to
operate the Company as a limited liability company under and pursuant to the
provisions of the Act, and in accordance with the provisions of this Agreement.

2.1.3Application of Act.  The Company is a limited liability company pursuant to
the provisions of the Act and upon the terms and conditions set forth in this
Agreement.  Except as expressly provided herein to the contrary, the rights and
obligations of the Members and the administration and operation of the Company
shall be governed by the Act.

Section 2.2Name.  The name of the Company is HF Logistics-SKX T2, LLC.  The
Company’s business may be conducted under the foregoing name, or under any other
name or names deemed advisable by the Managing Members.  The words “Limited
Liability Company,” “L.L.C.”, “LLC” or similar words or letters shall be
included in the Company’s name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires.

Section 2.3Registered Office and Agent; Principal Office.  The address of the
registered office of the Company in the State of Delaware shall be established
by the Managing Members.  The registered agent for service of process on the
Company in the State of Delaware at such registered office is Corporation
Service Company.  The principal office of the Company is c/o Highland Fairview
Properties, 14225 Corporate Way, Moreno Valley, California 92553, or such other
place as the Managing Members may from time to time determine.

Section 2.4Term.  The term of the Company commenced on the date that the
Certificate was filed with the Delaware Secretary of State, and shall continue
for a period of fifty (50) years thereafter,

8

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unless it is dissolved sooner pursuant to the provisions of Article 13, or as
otherwise provided under the Act.

Section 2.5Representations of Members.  Each Member represents as follows:

2.5.1Such Member will acquire its Company Interest for its own account and not
with a view to or for sale in connection with any public distribution thereof
within the meaning of the Securities Act.

2.5.2Such Member has sufficient knowledge and experience in financial and
business matters to enable it to evaluate the merits and risks of investment in
its Company Interest.  Such Member has the ability to bear the economic risk of
acquiring its Company Interest.

2.5.3Such Member has been supplied with, or had access to, information to which
a reasonable investor would attach significance in making investment decisions,
including, without limitation, any Company information with respect to the
Company’s financial condition, business and prospects, and any other information
such Member has requested, to answer all of its inquiries about the Company, and
to enable it to make its decision to acquire its Company Interest.

2.5.4Such Member is aware that the Company Interests are not registered under
the Securities Act or any state securities laws and cannot be resold or
transferred without registration thereunder or exemption therefrom.

2.5.5Such Member is an “accredited investor” as such term is defined in
Regulation D promulgated under the Securities Act.

2.5.6There are no consents or approvals of governmental authorities or other
Persons that are required for the execution and delivery of this Agreement by
such Member; the execution of this Agreement by such Member shall not constitute
a default under any material contract or agreement to which such Member is
bound; and no agreement or obligation exists that affects such Member that has
the effect of restricting the ability of such Member to perform its obligations
under this Agreement.

2.5.7There is no litigation, action or proceeding pending or, to the best
knowledge of such Member threatened, to which such Member is party that, if
adversely determined, could have a material adverse effect on, or enjoin,
restrict or otherwise prevent, the consummation of any of the transactions
contemplated by this Agreement or the ability of such Member to perform its
obligations under this Agreement.

2.5.8This Agreement has been duly authorized by all requisite action (corporate,
partnership, limited liability company, or otherwise), and has been duly
executed and delivered by such Member.

2.5.9Such Member has the power and authority to enter into this Agreement and
consummate the transactions herein provided.

2.5.10None of the funds or other assets of such Member shall constitute property
of, or shall be beneficially owned, directly or indirectly, by any Person
subject to trade restrictions under the Prescribed Laws (each such Person, an
“Embargoed Person”) with the result that the transactions contemplated by the
terms of this Agreement would be in violation of the Prescribed Laws.  For
purposes of this Section 2.5.10 and Section 2.5.11 and Section 2.5.12, the term
“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening
America by Providing Appropriate Tools Required to

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Intercept and Obstruct Terrorism Act of 2001 (Public Law 107 56) (The USA
PATRIOT Act), (b) Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism,
(c) the International Emergency Economic Power Act, 50 U.S.C. § 1701 et. seq.
and (d) all other legal requirements relating to money laundering or terrorism.

2.5.11No Embargoed Person shall have any interest of any nature whatsoever in
such Member, with the result that the transactions contemplated by the terms of
this Agreement is or would be in violation of the Prescribed Laws.

2.5.12None of the funds of such Member shall be derived from any unlawful
activity with the result that the transactions contemplated by the terms of this
Agreement is or would be in violation of the Prescribed Laws.

2.5.13As long as Skechers Parent is a publicly traded company, the restrictions
in Sections 2.5.10 and 2.5.11 shall not apply to any Persons who are
shareholders of Skechers Parent who purchase such shares in the public
marketplace or from other shareholders.

Article 3
PURPOSE

Section 3.1Purpose.  The purpose and nature of the business to be conducted by
the Company is (a) to acquire the Property and to develop the Project on the
Property, and to operate manage, lease, mortgage, encumber, sell and otherwise
deal with the Property, the Project and other Company Assets for the production
of income and profit, and (b) to conduct any activities that may be lawfully
conducted by a limited liability company organized pursuant to the Act in
furtherance of the foregoing.  The purpose of the Company shall not be changed
unless all Members consent (any dispute in this regard shall not be subject to
the expedited arbitration provisions in Article 15).

Section 3.2Powers.  The Company is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes described herein and for the
protection and benefit of the Company.

Article 4
CAPITAL CONTRIBUTIONS; MEMBER LOANS; CAPITAL ACCOUNTS

Section 4.1Capital Contributions of the Members.

4.1.1Initial Capital Contributions.  The Members shall make Initial Capital
Contributions to the Company as follows:

(a)On the Closing Date, Skechers shall make an Initial Capital Contribution to
the Company in the amount of Seven Million Dollars ($7,000,000), which shall be
contributed in cash.  The obligation to fund such Initial Capital Contribution
shall be guaranteed by Skechers Parent.  

(b)On the Closing Date, HFPV shall convey to the Company, as its Initial Capital
Contribution, all of HFPV’s interest in the HFPV Property, free and clear of all
monetary liens and encumbrances (other than a lien of current property taxes),
but subject to all other matters then of record.  The HFPV Property has an
Agreed Value of $7,000,000, and HFPV will receive a Capital Account credit in
that amount.  HFPV shall be deemed to have made representations to the Company,
HF and Skechers as set forth on Exhibit “D” attached hereto.  Any documentary
transfer tax payable with

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respect to the conveyance of the HFPV Property to the Company shall be paid by
HF (but the amount thereof, up to Seven Thousand Seven Hundred Dollars ($7,700),
shall become part of the HF Loan) and an owner’s title insurance policy (ALTA
2006 form with customary endorsements) shall be purchased, at HF’s expense (up
to policy amounts aggregating $7,000,000, with the additional expense being
borne by the Company) insuring the Company’s fee title ownership of the HFPV
Property (the policy limits of such policies to be reasonably determined by the
Members, not to be less than Seven Million Dollars ($7,000,000)).  After
Completion of the Project, the Managing Members may elect to increase the amount
of such insurance up to the then insurable fair market value of the Property and
all improvements thereon.

(c)On the Closing Date, HF and Skechers shall cause the HF-SKX Property to be
free and clear of all monetary liens and encumbrances (other than a lien of
current property taxes), but subject to all other matters of record).  The
HF-SKX Property has an Agreed Value of $14,000,000, and HF and Skechers shall
each receive Capital Account credit in the amount of $7,000,000.  HF and
Skechers shall be deemed to have made the representations to the Company and
HFPV as set forth on Exhibit “E” attached hereto.

4.1.2Additional Capital Contributions.  If either Managing Member determines in
the exercise of its reasonable business judgment that Additional Capital
Contributions are necessary for the operation of the business of the Company, or
to enable the Company to perform its obligations under the Lease, which cannot
be funded from Available Cash or obtained through financing (or which are
impractical to be obtained through financing), such Managing Member may (but
shall not be required to) give notice to all Members, including the amount
required and the purposes therefor.  Such Additional Capital Contributions shall
be contributed by the Members, pro rata, according to their respective
Contribution Percentages, within ten (10) days after receipt of such notice
calling for such Additional Capital Contributions.  Failure by a Member to make
its required Additional Capital Contribution shall give the other Members the
rights and remedies specified in Section 4.1.5.  If a Member who receives a call
for an Additional Capital Contribution disputes the reasonableness of such
Additional Capital Contribution, it shall give notice to the Managing Member who
made such call and to the other Members within such ten (10) day period, and if
the Members cannot resolve the dispute within ten (10) Business Days thereafter,
the dispute shall be submitted to expedited arbitration as set forth in Article
15. During the pendency of such arbitration, even though the Member who failed
to make the Additional Capital Contribution shall not be deemed to be a Default
Member under Section 4.1.5(c), the other Members may elect to loan to the
Company (on a pro rata basis according to Contribution Percentages) the amount
which such Member failed to contribute in accordance with the provisions of
Section 4.1.5(d)(i).  Provided, however, that if it is determined through
arbitration that such Additional Capital Contribution (or part thereof) was not
reasonable, then the loan (to the extent of any amount which was not determined
to be reasonable) shall not bear interest.

4.1.3Return of Capital Contributions.  Except as otherwise expressly provided
herein, the Capital Contributions of the Members will be returned to the Members
only in the manner and to the extent provided in Article 5 and Article 13, and
no Member may withdraw from the Company or otherwise have any right to demand or
receive the return of its Capital Contributions to the Company.  Under
circumstances requiring a return of any Capital Contributions, no Member shall
have the right to receive property other than cash, unless expressly otherwise
provided in this Agreement.  Except as otherwise provided in this Agreement, no
Member shall be entitled to interest on any Capital Contribution or Capital
Account notwithstanding any disproportion therein as among the Members.  Neither
the Members nor the Company shall be personally liable for the return of any
portion of the Capital Contributions of the Members, and the return of such
Capital Contributions shall be made solely from the Company Assets to the
extent, and in the priority, set forth in this Agreement.

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4.1.4Liability of Members.  Except for the obligation to make Capital
Contributions (including the Initial Capital Contributions under Section 4.1.1
and any required  any Additional Capital Contributions under Section 4.1.2), and
any amounts which a Member may be obligated to repay to the Company under
applicable law, no Member shall be required to make any Capital Contributions to
the Company.  Except for the foregoing, no Member shall have any personal
liability to contribute money to, or in respect of, the liabilities or the
obligations of the Company to third parties, nor shall any Member be personally
liable for any obligations of the Company to third parties (unless otherwise
provided in any Loan documents or other documents executed by the Members, such
as personal guarantees).

4.1.5Default in Making Required Additional Capital Contributions.

(a)If any Member fails to make its Initial Capital Contribution to the Company,
in addition to all other rights and remedies of the other Members, the other
Members who made its Initial Capital Contribution may, by notice to the Member
who fails to make its Initial Capital Contribution, with a copy to the other
Members, elect to declare this Agreement null and void, and in such event any
Initial Capital Contributions (whether in cash or in property) made to the
Company by any Member shall be immediately returned, and the Company shall be
wound up and dissolved.  

(b)If any Member fails to make a required Additional Capital Contribution, any
of the other Members may send a notice (the “Default Notice”) to such Member who
failed to make the required Additional Capital Contribution, with a copy to the
other Members, notifying such Member of its failure to make such Additional
Capital Contribution, the amount of such Additional Capital Contribution, and
demanding that such Additional Capital Contribution be made immediately.

(c)If a Member who receives a Default Notice fails to make a required Additional
Capital Contribution within five (5) Business Days after receiving the Default
Notice (the failure to make such Additional Capital Contribution is referred to
as a “Default” and the date that is five (5) Business Days after the receipt of
the Default Notice is referred to as the “Default Date”), then such Member shall
be in default (a “Default Member” and the amount that the Default Member has
failed to contribute is referred to as the “Default Amount”).  The Members other
than the Default Member are referred to herein as the “Non-Defaulting
Members.”  No Member shall be deemed to be a Default Member during the pendency
of any expedited arbitration under Article 15 to determine whether a request for
an Additional Capital Contribution is reasonable under Section 4.1.2.  If as a
result of such arbitration, it is determined that the request for an Additional
Capital Contribution was reasonable, then the Member who failed to make such
Additional Capital Contribution shall, within five (5) Business Days thereafter,
make any such Additional Capital Contribution which was not made (and which was
determined to be reasonable), and failing to do so, such Member shall be a
Default Member.

(d)If a Default Member fails to make such Additional Capital Contribution on or
before the Default Date, the Non-Defaulting Members may, in their sole and
absolute discretion, as their sole remedy, take either of the following courses
of action:

(i)Any Non-Defaulting Member can withdraw any Additional Capital Contribution
made by it in connection with the capital call which resulted in the Default
(and to that end; in such event, such Non-Defaulting Member shall have the right
to make a loan to the Company in the amount of the Additional Capital
Contribution required of such Non-Defaulting Member and the Default Member under
Section 4.1.2, which loan shall bear interest (except as provided in Section
4.1.2) at the lesser of the Prime Rate plus ten percent (10%) per annum, or the
maximum amount allowable by law, which loan shall be repayable upon
demand.  Such loan will have priority over any distributions to be made to the
Members pursuant to Section 5.2 or Section 13.2 and over the repayment of any
loan payable to the Default Member (or its Affiliate); or

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(ii)Any Non-Defaulting Member may make an Additional Capital Contribution to the
Company in the amount of the Default Amount, and then, effective as of the date
on which such Non-Defaulting Member makes such Additional Capital Contribution
to the Company, the Distribution Percentages of the Members shall automatically
be adjusted to reflect the new ratio of the Capital Contributions of the
respective Members to the total of all Capital Contributions of all Members.

(e)Notwithstanding anything herein to the contrary, for the purposes of this
Section 4.1.5, the Company Interests of HF and HFPV shall be treated as one, and
therefore, if either HF or HFPV fails to make a required Additional Capital
Contribution and the other does not cure such default on behalf of the
defaulting Member, then both HF and HFPV shall be deemed to be a Default Member
and Skechers, as the Non-Defaulting Member, shall have the right to pursue the
remedies in this Section 4.1.5 against both HF and HFPV.

4.1.6EACH MEMBER ACKNOWLEDGES AND AGREES THAT IT FULLY UNDERSTANDS THAT ITS
INTEREST IN DISTRIBUTIONS AND CAPITAL MAY BE SUBSTANTIALLY DILUTED FOR FAILING
TO MAKE REQUIRED ADDITIONAL CAPITAL CONTRIBUTIONS UNDER THIS Article 4.  EACH
MEMBER FURTHER ACKNOWLEDGES AND AGREES THAT EXCEPT AS SET FORTH IN
SECTION 4.1.5(a) THIS SECTION 4.1.6, AND IN section 5.2(b), THE REMEDIES ABOVE
ARE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO THE NON-DEFAULTING MEMBERS AS A
RESULT OF SUCH DEFAULT.  NOTWITHSTANDING THE FOREGOING, IF A DEFAULT BY SKECHERS
UNDER Article 4 RESULTS IN THE INABILITY OF THE COMPANY TO PERFORM ITS
OBLIGATIONS UNDER THE LEASE THEN THE TENANT UNDER THE LEASE SHALL NOT BE
ENTITLED TO DECLARE THE COMPANY TO BE IN DEFAULT UNDER THE LEASE AS A RESULT
THEREOF.  ADDITIONALLY, IF A DEFAULT BY ANY MEMBER UNDER Article 4 RESULTS IN
THE INABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER THE LEASE THEN, IN
ADDITION TO ANY RIGHTS AND REMEDIES THAT THE NON-DEFAULTING MEMBERS MAY HAVE
AGAINST THE DEFAULT MEMBER HEREUNDER, THE DEFAULT MEMBER SHALL BE SOLELY
RESPONSIBLE FOR ALL CLAIMS OF TENANT UNDER THE LEASE AS A RESULT THEREOF.

Article 5
DISTRIBUTIONS AND ALLOCATIONS

Section 5.1Distributions:  General Principles.  Except as provided in Section
13.2, Available Cash shall be distributed to the Members monthly in accordance
with the provisions of Section 5.2.

Section 5.2Distributions.  Except as provided in Section 5.2(b) and 5.2(c),
distributions of Available Cash shall be made to the Members in the following
order of priority set forth in Section 5.2(a):

(a)To the Members pari passu in proportion to their respective Distribution
Percentages.

(b)Notwithstanding the foregoing priority set forth in Section 5.2(a), the
following special distribution rules shall apply: If a Member fails to make an
Additional Capital Contribution under Section 4.1.2, and the Non-Defaulting
Member elects to make an Additional Capital Contribution under Section
4.1.5(d)(i), then the amount of such Additional Capital Contribution shall
accrue a preferred return at the rate of 11% per annum, and the total amount of
such Additional Capital Contribution, plus such preferred return, shall become a

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priority distribution to be made before any other distributions to the Members
under Section 5.2(a), or pursuant to Section 13.2.1(c), and before any repayment
of any loan payable to the Defaulting Member under Article 6.

(c)Notwithstanding any provision to the contrary in this Agreement, before any
distribution of Available Cash under Article 5 (including any distribution or
special distribution under Sections 5.2(a) or 5.2(b)), any payments of other
Loans due to any Member as described in Section 6.5, and any payments due to any
Member under the buy-sell provisions in Article 8 or in any liquidation or
disposition of the Company or any of the Company Assets is made, Skechers shall
be entitled to receive distributions in cash equal in amounts to the principal,
interest (with interest calculated at the “fixed rate” which would be applicable
after giving effect to any swap contract with respect to Loan in question (or
any refinancing or replacement financing thereof), fees (including all swap
costs), costs and expenses paid by the Company to the holders of such Loan
during the month (including any payments on maturity) in which the distribution
is made.  Distributions under this clause (c), other than distributions made
pursuant to this clause (c) in an amount equal to the monthly principal payments
made on any Loan referenced in the first sentence of this Section 5.2(c), shall
not reduce the Unrecovered Contributions of Skechers.  The Members further agree
that, if Skechers receives any distribution of Available Cash from a refinancing
of a Loan (or any replacement financing) in excess of the total distribution (if
any) received by the HF Member from such refinancing or replacement financing
(such excess being referred to in this clause (c) as the “Refinancing Excess
Distribution”), the amount of the distributions to be paid to Skechers under
this Section 5.2(c) shall be reduced to the extent of the additional debt
service resulting from such Refinancing Excess Distribution.

(d)Notwithstanding the provisions of Section 5.2(a)-(c) or any other provision
to the contrary in this Agreement, all Capital Transaction Proceeds shall be
paid to Skechers until the Unrecovered Contributions of both Members are equal,
and any excess distributions shall be made in accordance with the Members'
Distribution Percentages.  As used herein, the following terms have the meanings
indicated:

“Capital Transaction” means any of the following: (i) a sale, exchange,
transfer, assignment or other disposition of all or a portion of any Company
Asset (but not including sales in the ordinary course of business of inventory,
operating equipment or furniture, fixtures, and equipment); (ii) any financing
or refinancing of, or with respect to, any Company Asset except for equipment
leases or purchase money financing for movables; (iii) any condemnation or
transfer in lieu of condemnation of all or a portion of any Company Asset; (iv)
any collection in respect of property, hazard, or casualty insurance (but not
business interruption insurance) or any damage award; or (v) any other
transaction the proceeds of which, in accordance with generally accepted
accounting principles, are considered to be capital in nature.

“Capital Transaction Proceeds” means all cash received by the Company from a
Capital Transaction, less the sum of the following for which Capital Transaction
Proceeds are used by the Company, (i) all expenses paid or incurred in
connection with such Capital Transaction, (ii) amounts received from a Capital
Transaction applied to repayment of indebtedness and (iii) such additions to
reserves for capital expenditures, liabilities or obligations of the Company or

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other purposes as Skechers may determine to be necessary.  All amounts released
from time to time from such reserves other than for application to the purpose
for which the reserve was established shall be deemed to be Capital Transaction
Proceeds.

Section 5.3Allocations.  Profits and losses of the Company (and all related
items of income, gain, loss, deduction and credit) shall be allocated between
the Members in the manner provided in Exhibit “A”.

Article 6
LOANS

Section 6.1Construction Loan.  The Company shall take out a Construction Loan or
Construction Loans to finance the development of the Project on the
Property.  Except as set forth in Section 6.4, the Lender of the Construction
Loan(s) shall be selected by the HF Managing Member.  Any guarantees
(completion, payment or otherwise) required by the Lender of the Construction
Loan(s) shall be provided by both HF (or an Affiliate of HF) and Skechers (or an
Affiliate of Skechers).  HF shall cause an HF Affiliate acceptable to the
Construction Lender to provide such guarantees, and Skechers shall cause a
Skechers Affiliate acceptable to the Construction Lender to provide such
guarantee..  If a Construction Loan (or Construction Loans) sufficient to fund
the entire cost of developing the Project on the Property cannot be obtained, HF
may, at its option, loan its own funds (or funds of its Affiliates) to the
Company in lieu of the Construction Loan (the interest rate on the in-lieu
construction loan shall be the rate which is then being charged by institutional
construction lenders in the marketplace for construction loans of this amount
and nature, and the terms and conditions of such loan shall be comparable to
loans then being made by such institutional construction lenders).  HF shall
take the lead in procuring the Construction Loan, and Skechers shall cooperate
with HF in connection therewith.  Skechers shall have the right to review and
comment on the terms and conditions of the Construction Loan(s), and the
Construction Loan documentation, but (except as set forth in Section 6.4) the
decisions of HF in this regard shall control and will be final and conclusive
(provided that HF shall act in good faith and consistent with its fiduciary
duties hereunder) and the HF Managing Member, acting alone, is authorized and
empowered to execute and deliver on behalf of the Company, all Construction Loan
Documents, and the Construction Lender may rely on the signature of the HF
Managing Member as binding the Company regardless of any possible claims by
Skechers that HF did not act in good faith or consistent with its fiduciary
obligations hereunder.  Notwithstanding the foregoing, Skechers Parent shall not
be required to materially amend or modify the Lease in connection with obtaining
the Construction Loan (except for any reasonable and customary modifications
which may be required under a subordination, non-disturbance and attornment
agreement).  Skechers shall be given reasonable advance notice of any regularly
scheduled meetings with the prospective Construction Lender at which material
issues regarding the Construction Loan are expected to be discussed and shall
have the right to attend all such meetings (whether conducted in person or by
telephone or electronic meeting).  Skechers shall also have the right to
communicate directly with the Construction Lender to discuss the status of the
Construction Loan, but will not negotiate any of its terms or conditions without
the express prior approval of the HF Managing Member.

Section 6.2Permanent Loan.  The Company shall take out a Permanent Loan as soon
as practical after the Completion of the Project being developed on the
Property, although nothing herein shall prohibit HF from seeking such Permanent
Loan at an earlier time.  HF (or its Affiliate) will be required to execute any
“bad boy” nonrecourse carve-out guarantees reasonably required by the Lender of
the Permanent Loan, but shall not otherwise be required to guarantee the
Permanent Loan.  However, if any Permanent Loan refinances Skechers’ share of
construction costs and/or is used for a distribution to Skechers, then such “bad
boy” non-recourse carve-out guarantee shall be provided by both HF (or an
Affiliate of HF) and Skechers (or an Affiliate of Skechers).  HF shall cause an
HF Affiliate acceptable to the Permanent Lender to provide such guarantees.  HF
shall take the lead in procuring the Permanent

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Loan, and Skechers shall cooperate with HF in connection therewith (including
using commercially reasonable efforts, at Company expense, to obtain a credit
rating from a recognized credit rating agency as may be required by the
Permanent Lender.  Skechers shall have the right to review and comment on the
terms and conditions of the Permanent Loan (including a possible participating
equity interest in the Company or any Subsidiary afforded to the Permanent
Lender), and the Permanent Loan documentation, but, except as provided in
Section 6.4, the decisions of HF in this regard shall control and will be final
and conclusive (provided that HF shall act in good faith and consistent with its
fiduciary duties hereunder).  Notwithstanding the foregoing, Skechers Parent
shall not be required to materially amend or modify the Lease in connection with
obtaining the Permanent Loan (except for any reasonable and customary
modifications which may be required under a subordination, non-disturbance and
attornment agreement) or otherwise.  Skechers shall be given reasonable advance
notice of any regularly scheduled meetings with the prospective Permanent Lender
at which material issues regarding the Permanent Loan are expected to be
discussed and shall have the right to attend all such meetings (whether
conducted in person or by telephone or electronic meeting).  Skechers shall also
have the right to communicate directly with the Permanent Lender to discuss the
status of the Permanent Loan, but will not negotiate any of its terms or
conditions without the express prior approval of the HF Managing Member.  

Section 6.3Indemnification.  The Company and the Subsidiaries shall indemnify HF
(or its Affiliates) and Skechers (or its Affiliates) from any liability which
may be incurred in connection with their respective guarantees of the
Construction Loan, and shall indemnify HF (or its Affiliates) from any liability
which may be incurred in connection with a “bad boy” nonrecourse carve-out
guarantee of the Permanent Loan, but excluding in each case liability resulting
from a default by the Development Manager under the Development Management
Agreement, the occurrence of an Event of Default by HF or Skechers under this
Agreement, or the gross negligence or willful misconduct HF or its Affiliates,
or Skechers or its Affiliates, as the case may be.  However, to the extent that
liability under the “bad boy” nonrecourse carve-out guarantee results from the
acts or omissions of Skechers or the occurrence of an Event of Default by
Skechers under this Agreement, or a default by Skechers Parent under the Lease,
then such indemnification shall be afforded primarily by Skechers and only
secondarily by the Company.

Section 6.4Further Actions with Respect to Permanent Loans.

(a)Notwithstanding any provision to the contrary in this Agreement, but subject
to Section 7.1.4 and except as provided in Section 6.4(b), all actions,
consents, approvals or decisions to be made by the Company in connection with
the Permanent Loans (including, without limitation, any amendment of the
Permanent Loan) or any other financing of the Project, or the pledge or
encumbrance of Company Assets or assets of any Subsidiary shall only be made
with the consent of all Members, which consent will not be unreasonably
withheld.  Inasmuch as it is the intent of the HF Member to obtain maximum
financing for construction and to refinance the Construction Loan at maturity,
the consent of the Skechers Member shall only be required as to the terms and
conditions of the Construction Loan and any such refinancing (including, without
limitation, the amount of such refinancing if the amount is in excess of the
principal then outstanding, plus 50% of the “excess value”, as described below),
and not as to whether the outstanding principal amount of such Loan should be
paid off, paid down or refinanced, and not to the taking out of such Loan.  Each
Permanent Loan will, to the extent financeable, be in an original principal
amount equal to the unpaid balance of the Loan which it refinances, plus the
“excess value” of the Property (over the unpaid balance of the Construction
Loan), as determined by an appraisal obtained by the new Lender, such that an
amount equal to such “excess value” can be distributed to the Members upon such
Permanent Loan closing.  If Skechers declines to take its share of such
distribution, the amount of the applicable Permanent Loan shall be reduced by
50% of the “excess value” and the HF Member may still take such distribution,
and which will then create an Unrecovered Contribution Difference for Skechers,
as defined in Section 6.4(b).  If Skechers elects to fund (a “Skechers
Funding”)  its share of construction costs (rather than having its share of the
Construction Loan borrowed for construction or refinanced), then the amount of
the Skechers Funding shall be added to the unpaid principal balance of the
Construction Loan (after giving effect to the Skechers Funding) for the purpose
of calculating the “excess value” in the preceding sentence.

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(b)Notwithstanding any provision to the contrary in this Agreement or Section
6.4(a), the Skechers Member may at any time, or from time to time, after the
initial Construction Loan has been refinanced, if Skechers elected not to take a
distribution of cash from such refinancing Loan, cause the Company to refinance
the existing Loan or increase the principal amount of the then existing Loan for
the purpose of distributing sufficient funds to the Company so that the Company
may provide a distribution to the Skechers Member (or an Affiliate of the
Skechers Member) up to an amount equal to the difference between the Skechers
Member’s Unrecovered Contribution and the HF Member’s Unrecovered Contribution
at such time (the “Unrecovered Contribution Difference”).  The HF Member hereby
consents to the foregoing use of proceeds of such refinancing or increase, it
being understood and agreed that the HF Member shall not receive any proceeds of
such refinancing or increase until the Skechers Member has received the
Unrecovered Contribution Difference as described in the preceding sentence.  To
the extent that any such refinancing or increase to the principal amount of a
Loan results in Capital Transaction Proceeds, such Capital Transaction Proceeds
shall be distributed in the manner set forth in Section 5.2(d).  The terms and
loan documentation for such refinancing or increase to the Loan shall be
determined by the Skechers Member in its sole and absolute discretion, without
any required consent or approval by the HF Member.  Provided, however, that if
the interest rate applicable to such refinancing or increase is less favorable
to the Company than the terms of such Loan, arrangements shall be made (by an
amendment to this Agreement, or otherwise) such that the HF Member shall not,
through the maturity date of such Loan, be in a less favorable economic position
than it was immediately prior to such refinancing or increase.

(c)Notwithstanding any provision to the contrary in this Agreement, if upon any
refinancing or extension of a Loan, or any replacement refinancing thereof
(other than a refinancing, extension or replacement financing under Section
6.4(b)) (the “Subject Refinancing”), the Company is unable to obtain sufficient
financing to cause a distribution in the amount of the Unrecovered Contribution
Difference to be made to the Skechers Member, the HF Member hereby agrees to
immediately make a contribution to the Company (which amount shall be
immediately distributed to the Skechers Member) in the amount necessary so that,
after giving effect to such Subject Refinancing, the Unrecovered Contributions
of both Members are equal (the “HF Unrecovered Contribution Difference
Payment”). If the HF Member fails to make the HF Unrecovered Contribution
Difference Payment as set forth above, the Skechers Member shall have all rights
and remedies available under this Agreement, including, without limitation,
Section 6.9 and, in addition, the HF Member shall immediately be deemed to have
transferred and assigned all of its Company Interests to the Skechers Member
(for no additional consideration), the Skechers Member shall be deemed to be the
legal and beneficial owner of all such Company Interests and the HF Member shall
cease to be a Member of the Company and shall cease to have any rights or claims
under this Agreement or with respect to the Company Interests. Without limiting
the automatic nature of the transfer of the Company Interests set forth in the
preceding sentence, the HF Member hereby agrees to take any and all actions
reasonably requested by the Skechers Member to evidence such transfer of the
Company Interests, and the HF Member hereby irrevocably constitutes and appoints
the Skechers Member and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the HF Member and in the name of
the HF Member, or in its own name, for the purpose of taking any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Section or
Section 6.9 and to evidence such transfer of the Company Interests by the HF
Member to the Skechers Member in accordance with this Section or Section
6.9.  The Members hereby agree that the HF Member shall not be permitted to make
demand for or request an Additional Capital Contribution or an additional loan
from Skechers for all or any part of the HF Unrecovered Contribution Difference
Payment (whether under Section 4.1.2 or Article 6 of this Agreement or
otherwise).  THE HF MEMBER ACKNOWLEDGES AND AGREES THAT IT FULLY UNDERSTANDS
THAT ITS COMPANY INTERESTS AND ITS INTEREST IN DISTRIBUTIONS AND CAPITAL MAY BE
LOST FOR FAILING TO MAKE THE REQUIRED HF UNRECOVERED

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CONTRIBUTION DIFFERENCE PAYMENT UNDER THIS SECTION 6.4(c).  THE HF MEMBER
FURTHER AGREES THAT A BREACH OF ANY OF THE AGREEMENTS CONTAINED IN THIS SECTION
6.4(c) WILL CAUSE IRREPARABLE INJURY TO THE SKECHERS MEMBER, THAT THE SKECHERS
MEMBER DOES NOT HAVE AN ADEQUATE REMEDY AT LAW IN RESPECT OF SUCH BREACH AND, AS
A CONSEQUENCE, THAT EACH AND EVERY COVENANT AND AGREEMENT CONTAINED IN THIS
SECTION 6.4(c) SHALL BE SPECIFICALLY ENFORCEABLE AGAINST THE HF MEMBER, AND THAT
THE HF MEMBER HEREBY WAIVES AND AGREES NOT TO ASSERT ANY DEFENSES TO THE EFFECT
THAT SPECIFIC PERFORMANCE OF SUCH COVENANTS OR AGREEMENTS IS NOT AVAILABLE AS A
REMEDY.

(d)Notwithstanding any provision to the contrary in this Agreement, at the time
the Construction Loan or any replacement thereof is proposed to be refinanced
(in whole or in part), the maturity date thereof is proposed to be extended, the
principal amount thereof is proposed to be increased or the terms and conditions
thereof are proposed to be changed in any material respect, Skechers shall be
entitled to notice of any such proposal (which notice shall set forth the terms
and conditions thereof), and Skechers (or one of its Affiliates) shall have the
right to become the lender to the Company on the same terms and conditions so
proposed, provided that Skechers gives the HF Member notice of such election
within five (5) Business Days after receipt of such proposal.

Section 6.5Member Loans.

(a)Concurrently with the contribution of the Initial Capital Contributions as
described above, HF will (and will cause its Affiliates to) transfer and assign
to the Company all of its right, title and interest in all personal property and
contracts relating to the development of the Project, and all plans,
specifications, architectural drawings and renderings, surveys and other
collateral material relating to the ownership and development of the
Property.  In consideration of such transfer and assignment, HF will be deemed
to have extended a loan to the Company in the amount of at least $1,781,768.26
(the “HF Loan”).  The foregoing amount was computed as of November 30, 2018 and
may have increased as of the Effective Date.  The HF Loan will bear interest at
the rate of six percent (6%) per annum, with interest and principal payable
monthly from the first Available Cash (prior to any distributions of Available
Cash to the Members), with any unpaid balance of interest and principle payable
upon the earliest to occur of (i) the Construction Loan (if permitted by the
Construction Lender), (ii) the refinancing or sale of the Project, or (iii) the
liquidation of the Company (again, before any distributions of Available Cash to
the Members except as provided in Section 5.2(c)).

(b)If the HF Managing Member determines in the exercise of its reasonable
business judgment that additional capital is needed as a result of construction
cost overruns relative to the construction of the Project on the Property (which
specifically excludes increased construction costs due to change orders
requested by Skechers and approved by the landlord under the Lease, or resulting
from the acts or omissions of Skechers under the Lease), which cannot be funded
from Available Cash or obtained through financing (or which are impractical to
be obtained through financing), such capital shall be loaned to the Company 50%
by HF (or its Affiliate) and 50% by Skechers (or its Affiliate) and the amount
thereof will be added to the HF Loan and the Skechers Loan; provided, however,
that cost overruns resulting from an Event of Default by HF under this Agreement
or a default by the Development Manager under the Development Management
Agreement, or which involves the gross negligence, fraud or willful misconduct
of HF (or its Affiliate) shall not be considered part of the HF Loan.  

(c)If the HF Managing Member determines in the exercise of its reasonable
business judgment that additional capital is needed as a result of increased
construction costs due to change orders requested by Skechers and approved by
the Company, or resulting from the acts or

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omissions of Skechers under the Lease, then such capital shall be loaned to the
Company by Skechers (or its Affiliate) (the “Skechers Loan”), provided that the
increase in construction costs covered by the Skechers Loan shall not exceed One
Million Dollars ($1,000,000), and any excess construction costs over $1,000,000
shall be paid by Skechers as its own expense, and such amount shall not be
considered income of the Company, or a loan or a Capital Contribution to the
Company, or part of the Skechers Loan, or an Additional Capital Contribution by
Skechers.  Provided, however, that any increased construction costs resulting
from acts or omissions of Skechers (or its Affiliate) which constitute an Event
of Default by Skechers under this Agreement or a default by Skechers Parent
under the Lease, or which involves gross negligence, fraud or willful misconduct
of Skechers or Skechers Parent (or their Affiliates) shall not be considered as
part of the Skechers Loan; and provided, further that to the extent that the
Skechers Loan is increased as a result of the foregoing Base Rent under the
Lease, shall be increased proportionately by the ratio that the increase in the
Skechers Loan bears to the total Project Costs (as such term is defined in the
Development Management Agreement).  The HF Managing Member shall not
unreasonably withhold its consent to any change order requested by Skechers
Parent if Skechers funds the entire cost of such change order (including any
resulting increases in the Project Costs).  If there is a dispute as to whether
the refusal of the HF Managing Member to give its consent to any change order
proposed by Skechers is reasonable, the matter shall be submitted to expedited
arbitration in accordance with Article 15.

(d)If there is any dispute regarding the reasonableness of the determination by
the HF Managing Member that additional capital is required under Section 6.5(b)
or (c), such dispute shall be submitted to expedited arbitration as set forth in
Article 15.  During the pendency of such arbitration, even though the Member who
has failed to make a loan to the Company shall not be deemed to be in default
under this Agreement, the other Member may elect to loan to the Company the
amount which the other Member failed to loan, and if it is determined through
arbitration that the required loan was not reasonable, then the amount loaned by
the other Member (to the extent of any amount which was not determined to be
reasonable) shall not bear interest.

Section 6.6Default in Making Required Loans.

(a)If either Skechers or HF fails to make any required loan pursuant to Section
6.5 (an “Additional Funding Obligation”), the other Member may send a notice to
such Member who failed to make the required Additional Funding Obligation,
notifying such Member of its failure to make such Additional Funding Obligation,
the amount to be funded and demanding that such Additional Funding Obligation be
made immediately.

(b)If the Member who receives such notice fails to make the required Additional
Funding Obligation within five (5) Business Days after the receipt of such
notice, then the other Member shall have the following rights:

(i)Such Member may loan the required funds to the Company, which amount so
loaned shall bear interest and be payable in the same manner as the loan
described in Section 4.1.5(d)(i); or

(ii)Such Member may make an Additional Capital Contribution to the Company in
the amount of the required Additional Funding Obligation, in which event the
Distribution Percentages shall be adjusted in the manner set forth in Section
4.1.5(d)(ii).

Section 6.7EACH MEMBER ACKNOWLEDGES AND AGREES THAT IT FULLY UNDERSTANDS THAT
ITS INTEREST IN DISTRIBUTIONS AND CAPITAL MAY BE SUBSTANTIALLY DILUTED FOR
FAILING TO MAKE A REQUIRED ADDITIONAL FUNDING

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OBLIGATION UNDER THIS Article 6.  EACH MEMBER FURTHER ACKNOWLEDGES AND AGREES
THAT EXCEPT AS SET FORTH IN THIS Section 6.7 AND IN SECTION 5.2(b), THE REMEDIES
ABOVE ARE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO THE NON-DEFAULTING MEMBER
AS A RESULT OF SUCH DEFAULT.  NOTWITHSTANDING THE FOREGOING, IF A DEFAULT BY
SKECHERS UNDER Article 6 RESULTS IN THE INABILITY OF THE COMPANY TO PERFORM ITS
OBLIGATIONS UNDER THE LEASE THEN THE TENANT UNDER THE LEASE SHALL NOT BE
ENTITLED TO DECLARE THE COMPANY TO BE IN DEFAULT UNDER THE LEASE AS A RESULT
THEREOF.  ADDITIONALLY, IF A DEFAULT BY ANY MEMBER UNDER Article 6 RESULTS IN
THE INABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER THE LEASE THEN, IN
ADDITION TO ANY RIGHTS AND REMEDIES THAT THE NON-DEFAULTING MEMBERS MAY HAVE
AGAINST THE DEFAULTING MEMBER HEREUNDER, THE DEFAULTING MEMBER SHALL BE SOLELY
RESPONSIBLE FOR ALL CLAIMS OF TENANT UNDER THE LEASE AS A RESULT THEREOF.

Section 6.8Repayment of Loan.  Notwithstanding any provision to the contrary in
this Agreement or otherwise, the Members hereby agree that if the obligations
under any Loan, or any replacement or refinancing thereof which occurs after the
HF Member has received a distribution of 50% of the excess value as described in
Section 6.4(a) (other than a refinancing requested pursuant to Section 6.4(b))
(the "Subject Permanent Loan") become due at maturity, by acceleration, as a
result of the occurrence of any prepayment event or for any other reason
whatsoever (including, without limitation, the inability for any reason to
refinance or replace the Subject Permanent Loan), the HF Member shall (to the
extent it has received a greater distribution than the Skechers Member) be
obligated to immediately contribute sufficient funds to the Company in order to
cause the repayment of any and all obligations (whether for principal, interest,
fees, costs, expenses or otherwise) due and payable under the Subject Permanent
Loan and the loan documentation therefor (the "HF Repayment Contribution").  If
the HF Member fails to make the HF Repayment Contribution as set forth above,
the Skechers Member shall have all rights and remedies available under this
Agreement, including, without limitation, Section 6.9, and, in addition, the
Skechers Member shall have the right to (but shall not be obligated to) make a
contribution to the Company in the amount of the HF Repayment Contribution in
order to cause the repayment of any and all obligations (whether for principal,
interest, fees, costs, expenses or otherwise) due and payable under the Subject
Permanent Loan and the loan documentation therefor (the "Skechers Payoff
Contribution").  Notwithstanding any provision to the contrary in this Agreement
or otherwise (including, without limitation, Sections 4.1.4 and 17.14 of this
Agreement), if Skechers makes the Skechers Payoff Contribution, the HF Member
shall immediately be deemed to have transferred and assigned all of its Company
Interests to the Skechers Member (for no additional consideration), the Skechers
Member shall be deemed to be the legal and beneficial owner of all such Company
Interests and the HF Member shall cease to be a Member of the Company and shall
cease to have any rights or claims under this Agreement or with respect to the
Company Interests.  Without limiting the automatic nature of the transfer of the
Company Interests set forth in the preceding sentence, the HF Member hereby
agrees to take any and all actions reasonably requested by the Skechers Member
to evidence such transfer of the Company Interests, and the HF Member hereby
irrevocably constitutes and appoints the Skechers Member and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the HF Member and in the name of the HF Member or in its own name, for
the purpose of taking any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Section or Section 6.9 and to evidence such transfer of the
Company Interests by the HF Member to the Skechers Member in accordance with
this Section or Section 6.9.  The Members hereby agree that the HF Member shall
not be permitted to make demand for or request an Additional Capital
Contribution or an additional Loan from Skechers for all or any part of the HF
Repayment Contribution (whether under Section 4.1.2 or Article 6 of this
Agreement or otherwise).  THE HF MEMBER

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ACKNOWLEDGES AND AGREES THAT IT FULLY UNDERSTANDS THAT ITS COMPANY INTERESTS AND
ITS INTEREST IN DISTRIBUTIONS AND CAPITAL MAY BE LOST FOR FAILING TO MAKE THE
REQUIRED HF PREPAYMENT CONTRIBUTIONS UNDER THIS SECTION 6.8.  THE HF MEMBER
further agrees that a breach of any of the AGREEMENTS contained in this Section
will cause irreparable injury to THE SKECHERS MEMBER, that the SKECHERS MEMBER
DOES NOT have AN adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant AND AGREEMENT contained in this
Section shall be specifically enforceable against THE HF MEMBER, and THAT THE HF
MEMBER hereby waives and agrees not to assert any DEFENSES TO THE EFFECT THAT
SPECIFIC PERFORMANCE OF SUCH COVENANTS OR AGREEMENTS IS NOT AVAILABLE AS A
REMEDY.

Section 6.9PLEDGE OF COMPANY INTERESTS BY HF MEMBER.

In the event that any Loan is refinanced resulting in an Unrecovered
Contribution Difference, then in order to secure the prompt payment in full in
cash, and the prompt and full performance, of the obligations of the HF Member
under Section 6.4(c) and Section 6.8, the HF Member will then pledge to the
Skechers Member and grant to the Skechers Member a security interest in and to
all of the HF Member’s Company Interests, whether then existing or thereafter
arising (the “Collateral”).  The security interest and pledge created hereby
shall continue in effect so long as any obligation is owed to the Skechers
Member under Section 6.4(c) and Section 6.8.  The agreements in this paragraph
are a continuing and irrevocable agreement of the HF Member.  The Skechers
Member may (and is hereby authorized to) file with any filing office such
financing statements, amendments, addenda, continuations, terminations,
assignments and other records (whether or not executed by HF Member) as the
Skechers Member may deem necessary in its sole discretion to perfect and to
maintain perfected its security interests in the Collateral.  Such documents may
designate the Skechers Member as the secured party and the HF Member as the
debtor, identify the Skechers Member security interest in the Collateral, and
contain any other items required by law or deemed necessary by the Skechers
Member.  Upon the occurrence of a breach by the HF Member of its obligations
under Section 6.4(c) and Section 6.8 (each an “HF Default”), at the option of
the Skechers Member, exercisable by giving written notice to the HF Member of
its election to exercise this option, all rights of the HF Member to exercise
the voting and other consensual rights which it would otherwise be entitled to
exercise with respect to the Company Interests shall cease, and all such rights
shall thereupon become vested in the Skechers Member who shall have the sole
right to exercise such voting and other consensual rights.  Furthermore, upon
the occurrence of an HF Default, the Skechers Member may pursue any remedy
available under this Agreement or at law (including under the provisions of the
Uniform Commercial Code) or in equity to collect, enforce or satisfy any of the
obligations then owing under this Agreement, whether by acceleration or
otherwise, all of which remedies may be pursued by the Skechers Member
separately, successively or simultaneously, and at the sole option of and in the
sole discretion of the Skechers Member, including the following specific
remedies:  (a) in accordance with applicable law, to foreclose the liens and
security interests relating to the Collateral by any available judicial
procedure or without judicial process, and to sell, assign or otherwise dispose
of the Collateral or any part thereof, either at public or private sale or at
any broker’s board or securities exchange, in whole or in parts (without
omitting the generality of the foregoing, the Collateral may be sold in its
entirety to one buyer or in parts to more than one buyer), for cash, on credit
or on future delivery, or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to the Skechers Member;
and (b) whether or not any of the Collateral has been effectively registered
under the Securities Act of 1933, as amended, or other applicable laws, the
Skechers Member may, in its sole and absolute discretion, sell all or any part
of the Collateral at private sale in such manner and under such circumstances as
the Skechers Member may deem necessary or advisable in order that the sale may
be lawfully conducted.  Without limiting the foregoing, the Skechers Member may
(a)

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approach and negotiate with a limited number of potential purchasers, and (b)
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or resale thereof.  In the
event that any of the Collateral is sold at private sale, the HF Member agrees
that if the Collateral is sold for a price which the Skechers Member in good
faith believes to be reasonable, then (1) the sale shall be deemed to be
commercially reasonable in all respects, (2) the HF Member shall not be entitled
to a credit against the obligations owed in an amount in excess of the purchase
price, and (3) the Skechers Member shall not incur any liability or
responsibility to the HF Member in connection therewith, notwithstanding the
possibility that a substantially higher price might have been realized at a
public sale.  The HF Member recognizes that a ready market may not exist for
Collateral which is not regularly traded on a recognized securities exchange or
in another recognized market, and that a sale by the Skechers Member of any such
Collateral for an amount substantially less than a pro rata share of the fair
market value of the issuer’s assets minus liabilities may be commercially
reasonable in view of the difficulties that may be encountered in attempting to
sell Collateral that is privately trade.  The HF Member represents and covenants
that it has and at all times shall have good and marketable title to all
Collateral in which the HF Member is purporting to grant a security interest to
the Skechers Member, it has not transferred, pledged or assigned any of its
interests in the Collateral since the Effective Date, and the Collateral shall
not at any time be transferred or assigned to any Person (other than the
Skechers Member) or be subject to any lien or encumbrance (other than in favor
of the Skechers Member).  The HF Member represents that it has the right and
power to pledge and grant to the Skechers Member a security interest in the
Collateral on the terms set forth in this Agreement.

Article 7
MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1Management.

7.1.1Powers of the Managing Members.

(a)Subject to the limitations set forth herein, all management powers over the
business and affairs of the Company are exclusively vested in the Managing
Members, and no Member other than the Managing Members shall have any right to
participate in or exercise control or management power over the business and
affairs of the Company.  

(b)Unless and until it is removed as a Managing Member pursuant to Section
7.1.5, the Skechers Managing Member shall have exclusive management,
responsibility and control over the operations of the building which is the
subject of the Lease after completion of construction and Skechers taking
possession of the premises described in the Lease (subject to the obligations of
the tenant under the Lease).  In addition to the foregoing, the Skechers
Managing Member shall have exclusive management responsibility and control over
the Company’s or a Subsidiary’s rights to pursue remedies for any default by the
Development Manager under the Development Management Agreement, for any default
by any HF Affiliate under any agreement between the Company or a Subsidiary and
such HF Affiliate, any default by HF under this Agreement, any negotiations with
the POA which involve any wrongdoing or alleged wrongdoing by HF or any HF
Affiliate.

(c)Unless and until it is removed as Managing Member pursuant to Section 7.1.5,
the HF Managing Member shall have the exclusive management, responsibility and
control over, (i) any consents, approvals or decisions to be made by the
landlord under the Lease, (ii) [reserved], (iii) [reserved], (iv) all matters
pertaining to the entitlements affecting the Property (including, but not
limited to, zoning issues, CFD formation, mapping and subdivision), including
interactions and negotiations with governmental entities, (v) except as set
forth in Section 7.1.1(b), all matters pertaining

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to the Property Owners Association (“POA”) for the Corporate Park in which the
Project is located (provided, however, HF Managing Member may not take any
action in connection with the POA without Skechers Managing Member’s approval
that will materially reduce or eliminate any of Skechers Parent’s rights as
tenant under the Lease, or that will materially increase Tenant’s costs and
expenses thereunder, other than the obligation to pay reasonable POA
assessments), and (vi) subject to Section 7.1.1(e), all matters relating to the
development (but not the sale) of the Project and other professionals,
preparation of construction drawings, and all aspects of construction (subject
to the rights of Skechers Parent as tenant under the Lease and the provisions of
the Development Management Agreement).  Notwithstanding the exclusive rights
granted to HF Managing Member hereunder, the Skechers Managing Member shall have
the right to approve any insurance company recovery, award or settlement, any
condemnation award and any settlement of any lawsuit or threatened lawsuit with
respect to the Property or the Project, which consent will not be unreasonably
withheld.  Further, subject to any provisions in the Lease, the Construction
Loan documents and the Permanent Loan Documents, any insurance proceeds received
by the Company or a Subsidiary as a result of damage or destruction to any
improvements within the Project shall be used to reconstruct such improvements,
to the extent legally permissible, and provided that the Lease continues in
force and effect.  HF Managing Member shall keep Skechers reasonably informed
about negotiations involving the construction contract (including the selection
of the general contractor) and shall promptly upon request provide Skechers with
copies of drafts of the proposed construction contract during the course of its
negotiation.  HF Managing Member will consider any comments offered by Skechers
with respect to the foregoing, but ultimately the decisions of HF Managing
Member regarding the selection of the general contractor and the terms and
conditions of the construction contract shall control, subject to any express
provisions in this Agreement or the Development Management
Agreement.  Notwithstanding item (i) of this Section 7.1.1(c), nothing herein
shall be interpreted as a waiver of, or prohibition on, the right of Skechers
Parent, as tenant under the Lease, to contest the withholding of any requested
landlord consent or approval under the Lease.

(d)To the extent that the management and control of the Company is within the
scope of the exclusive authority of either the HF Managing Member or the
Skechers Managing Member, such Managing Member may act on behalf of the Company
or a Subsidiary (and may bind the Company or such Subsidiary) alone and without
the consent, approval, ratification or signature of the other Managing
Member.  To that end, it is expressly agreed that the signature of the HF
Managing Member alone on the Construction Loan Documents shall bind the Company.

(e)Any issues relating to the management and control of the Company which are
not within the scope of the exclusive authority of either the HF Managing Member
or the Skechers Managing Member shall be matters which require the joint
consent, approval or ratification (and joint signature, as applicable) of both
Managing Members, which consent shall not be withheld unreasonably or delayed;
provided, however, that the Members acknowledge that the Skechers Managing
Member may cause the Company or each Subsidiary to adopt such internal controls
as are reasonably necessary, upon advice of Skechers Parent’s counsel, to comply
with the Skechers Parent’s obligations under SEC Rule 404.  The Members
acknowledge, without limitation, that (i) a sale of the Project or the Property,
(ii) an amendment of the Development Management Agreement, and (iii)
modifications of either the Development Budget or the Project Schedule requiring
Company’s or a Subsidiary’s consent under the Development Management Agreement
shall require the mutual consent of the Managing Members.  Additionally, the
engagement of attorneys and accountants by the Company or a Subsidiary, other
than with respect to the development of the Project, shall be mutually agreed to
by the Managing Members.  In connection with the foregoing, HF Managing Member
acknowledges that Skechers Parent is a publicly traded company and Skechers may
need to require that particular accountants be used by the Company or any
Subsidiary.  As such, HF Managing Member agrees to use KPMG or such other
accountants as Skechers Parent may use as the Company’s or a Subsidiary’s
accountants in accordance with Article 9.  If there is a dispute regarding the
reasonableness of the withholding of consent, approval

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or ratification of any matter which requires the joint consent, approval or
ratification of both Managing Members, unless otherwise provided herein, the
matter shall be submitted to expedited arbitration in accordance with Article
15.  Except as set forth in Section 15.3, the Determination of the arbitrator
shall be limited to whether or not the Managing Member acted reasonably, and the
other Managing Member shall not be entitled to seek or obtain any monetary
damages as a result of the unreasonable withholding of consent, approval or
ratification.

(f)In addition to the powers now or hereafter granted to a manager of a limited
liability company under the Act or under any other provision of this Agreement,
the Managing Members, to the extent of either their exclusive scope of authority
or joint authority as the case may be, shall have full power and authority to do
all things deemed necessary or desirable by them to conduct the business of the
Company and the Subsidiaries, to exercise all powers set forth in Section 3.2
and to effect the purposes set forth in Section 3.1, including, without
limitation:

(i)the making of any expenditures, the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of evidences
of indebtedness (including the securing of same by mortgage, deed of trust or
other lien or encumbrance on the Company Assets) and the incurring of any
obligations of the Company;

(ii)the making of regulatory and other filings, or rendering of periodic or
other reports to governmental or other agencies having jurisdiction over the
business of the Company and/or the Company Assets;

(iii)the acquisition, disposition and leasing of the Project and other Company
Assets;

(iv)the negotiation, execution, performance and administration of (including the
exercise of any rights or remedies under) any contracts (including contracts
with Affiliates of the Members);

(v)the opening and closing of Company bank accounts (which bank accounts shall
be in the name of the Company but on which representatives of both Managing
Members shall be signatories, subject to the limitations set forth in the
Development Management Agreement with respect to bank accounts into which
Construction Loan draws will be funded prior to Completion of the Project), the
investment of Company funds in securities, certificates of deposit and other
instruments, and the distribution of Available Cash;

(vi)the engagement and dismissal of agents, outside attorneys, accountants,
engineers, appraisers, consultants, contractors and other professionals for the
Company and the determination of their compensation and other terms of any such
engagement or dismissal;

(vii)the control of any matters affecting the legal rights and obligations of
the Company, including the conduct of litigation and the incurring of legal
expenses and the settlement of claims and litigation;

(viii)obtaining and maintaining casualty, liability and other insurance on the
Company Assets, including the Project and the Members; and

(ix)the execution, acknowledgment and delivery of any and all documents and
instruments to effect any or all of the foregoing.

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(g)Notwithstanding the rights of the HF Managing Member under Section
7.1.1(c)(i), the Landlord Improvements (as defined in the Lease) will be bid
competitively, and upon request of the Skechers Managing Partner, all bids will
be disclosed to it on an “open book” basis.

No Approval Required for Above Powers

7.1.3.  The applicable Managing Member (or the Managing Members, jointly, as the
case may be) is authorized to execute, deliver and perform the above-mentioned
documents and transactions on behalf of the Company or a Subsidiary without any
further act, approval or vote of the Members.  Notwithstanding the foregoing, if
a Managing Member is authorized to act alone to the extent practical, it shall
give at least five (5) Business Days prior notice (which shall be reduced to two
(2) Business Days prior notice until Completion of the Project) to the other
Managing Member of any actions it intends to take on behalf of the Company or a
Subsidiary which might have a material impact on the business, Company Assets, a
Subsidiary’s Assets or obligations of the Company or a Subsidiary.  In any
event, the Members will cooperate in all reasonable respects with the Managing
Members to facilitate the exercise of the powers of management and control by
the Managing Members.

7.1.4No Obligation to Consider Tax Consequences to the Members.  In exercising
authority under this Agreement, the Managing Members may, but shall be under no
obligation to, take into account the tax consequences to the Members of any
action taken by the Managing Members, and neither the Company or a Subsidiary
nor any Managing Member acting in good faith shall have any liability to either
Member under any circumstances as a result of an income tax liability incurred
by such Member as a result of an action (or inaction) by the Managing Members
pursuant to their authority under this Agreement.

7.1.5Removal of Managing Members.  A Managing Member may be removed by the other
Managing Member (or by the other Member, if there is only one Managing Member),
as follows:

(a)If such Managing Member materially defaults under this Agreement (except for
a default under Article 4 or Article 6, which are governed by provisions in
those Articles), subject to notice from the other Managing Member and ten (10)
Business Days to cure such default; provided, however, that in the case of any
default which can be cured but not within such ten (10) Business Day period,
such Managing Member fails to begin reasonable steps to cure such breach within
such ten (10) Business Day Period, or does not thereafter diligently prosecute
such cure to completion or in any event if such default is not cured within
sixty (60) days following the date of notice thereof from the other Managing
Member; or

(b)If such Managing Member (or any of its controlling Persons) is convicted of
any criminal act involving the Company Assets, a Subsidiary’s Assets, or
business of the Company or a Subsidiary, or is found by a court of competent
jurisdiction to have breached its fiduciary duty under this Agreement, or to
have committed fraud involving the Company Assets, a Subsidiary’s Assets, or
business of the Company or a Subsidiary, or to have been grossly negligent in
performing its duties under this Agreement; or

(c)If such Managing Member becomes Incapacitated or commits or suffers a
Bankruptcy Action; or

(d)In the case of the Skechers Managing Member, if the Skechers Parent commits a
material default under the Lease and such default is not cured within any
applicable time period set forth therein; or

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(e)In the case of the HF Managing Member, if the Development Manager commits a
material default under the Development Management Agreement and such default is
not cured within any applicable time period set forth therein; or

(f)In the case of either Managing Member, if the Company or a Subsidiary
defaults under the Lease by reason of any act or omission of such Managing
Member and such default is not cured within any applicable time period set forth
therein; or

If a Managing Member is so removed, the other Managing Member shall serve as the
sole Managing Member (and shall thereafter have the management authority and
attendant management obligations of replaced Managing Member in addition to the
management authority and attendant management obligations which it previously
had).  For clarification, if the HF Managing Member is removed, the Skechers
Managing Member shall have the right to enforce the Company’s rights under the
Development Management Agreement, and if the Development Management Agreement is
terminated, the Skechers Managing Member may enter into a new development
management agreement on behalf of the Company and may engage a new Development
Manager, subject to the provisions of Section 7.5.  The removed Managing Member
shall retain all of the rights and obligations hereunder as a Member, other than
those which pertain to its management authority as a Managing Member, but such
Managing Member shall remain liable to the Company and the other Member for any
damages resulting from the acts (or omissions) which resulted in its removal.

Notwithstanding the foregoing, if the Managing Member whose removal is being
sought gives notice of its objection to such removal within five (5) Business
Days after receiving notice of any attempted removal, then the matter shall be
submitted to expedited arbitration in accordance with Article 15.  If a
Determination is made in the arbitration proceeding that the grounds for removal
have been satisfied, then prior to the actual removal of such Managing Member,
such Managing Member shall have an additional ten (10) Business Days to
effectuate a cure of the default (if the default is of a nature that it can be
cured).

Notwithstanding anything herein to the contrary, if the Lender declares a
default under the Construction Loan Documents, other than due to the acts or
omissions of Skechers or Skechers Parent, and refuses to continue to fund the
Construction Loan, unless the HF Managing Member provides alternative funding at
no additional cost or expense to Skechers or the Company within thirty (30) days
of the expiration of the applicable notice and cure period set forth in the
Construction Loan Documents, the Skechers Managing Member (and not the HF
Managing Member) shall have exclusive management rights with respect to the
development of the Project, to the same extent that the HF Managing Member
previously had such exclusive management rights pursuant to
Section 7.1.1(c)(vi).  In addition, if the Lender declares a default under the
Construction Loan Documents as a result of any act or omission other than one
caused by Skechers or Skechers Parent, and the Skechers Managing Member is
reasonably dissatisfied with the progress of any attempt to cure such default by
the HF Managing Member, then the Skechers Managing Member, in its sole
discretion, may seek to effectuate the cure itself, without waiving any rights
or remedies which it might have against HF or the HF Managing Member as a result
of such default.  Any Lender may rely on the foregoing as the Members’
authorization to accept a cure by Skechers Managing Member on behalf of the
Company.

Section 7.2Certificate of Formation.  The Managing Members shall file any
required amendments to and restatements of the Certificate, and shall do all the
things to maintain the Company and each Subsidiary as a limited liability
company under the laws of the State of Delaware, the State of California and
each other jurisdiction in which the Company or either Subsidiary may elect to
do business or own property.  The Managing Members shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited liability company in the State of
Delaware, the State of California, and any other jurisdiction in which the
Company or a Subsidiary may elect to do business or own property.

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Section 7.3Compensation of Managing Members.

7.3.1No Compensation.  The Managing Members shall not be compensated for
rendering services as Managing Members of the Company.  The foregoing is not
intended to prohibit the payment to the Members, or their Affiliates, of fees
under any agreement entered into by the Company or a Subsidiary and any such
Member or its Affiliate pursuant to this Agreement (including the Development
Management Agreement).  

7.3.2Reimbursement for Expenses.  The Company shall be responsible for and shall
pay all expenses relating to the Company’s ownership of the Company Asset or the
ownership of a Subsidiary’s Assets, and the operation of, or for the benefit of,
the Company, and the Managing Members shall be reimbursed on a monthly basis,
for all reasonable and customary out-of-pocket expenses actually incurred by the
Managing Members on behalf of the Company or any Subsidiary directly relating to
the ownership of the Company Assets or the ownership of a Subsidiary’s Assets
and the operation of, or for the benefit of, the Company or any Subsidiary;
provided, however, that the Company shall not reimburse the legal fees and costs
of a Member in any arbitration or court proceeding that is solely between the
Company or any Subsidiary, on one hand, and either Member or its Affiliates, on
the other hand, or between Members and their Affiliates, until the conclusion of
such arbitration or court proceeding (at which time, legal fees and costs shall
be awarded to the prevailing party).  Further, it is understood that neither
Member nor its Affiliates shall be entitled to any property management fees for
management of the Project (but the foregoing does not prohibit the payment of a
fee to the Development Manger under the Development Management Agreement).

Section 7.4Devotion of Time and Outside Activities of the Members.

(a)Nothing herein contained shall prevent or prohibit the Members or any
Affiliates of the Members from entering into, engaging in or conducting any
other activity or performing for a fee any service, including engaging in any
business dealing with real property of any type or location; owning, managing,
leasing or disposing of any real property of any type or location; acting as a
director, officer or employee of any corporation, as a trustee of any trust, as
a general partner of any partnership, or as an administrative official of any
other business entity; or receiving compensation for services to, or
participating in profits derived from, the investments of any such business,
property, corporation, trust, partnership or other entity, regardless of whether
such activities are competitive with the Company or any Subsidiary
(collectively, the “Outside Activities”), and nothing herein shall require any
Member or any Affiliates thereof to offer any interest in such Outside
Activities to the Company or any Subsidiary or to any other Member.

Section 7.5Contracts with Affiliates.  Neither Managing Member nor any of its
Affiliates shall (a) sell, transfer or convey any property to, or purchase any
property from, the Company or any Subsidiary, directly or indirectly, or
(b) enter into any agreement (or amendment thereto) for the provision of
services to the Company or any Subsidiary, or pursuant to other transactions or
agreements unless the terms thereof are fair and reasonable, such terms and are
no less favorable to the Company or any Subsidiary than those that would be
obtained from an unaffiliated third party, and such Managing Member provides the
other Member with at least ten (10) Business Days prior written notice of its
intent to enter into such arrangement, together with the material terms thereof,
and such Managing Member does not receive a written notice of objection from the
other Member regarding the reasonableness of such arrangement.  Notwithstanding
the foregoing, the Members acknowledge that Company has entered into the
Development Management Agreement with an Affiliate of HF and HFPV.  Further,
except as set forth in Section 6.1, no Affiliate of a Member may become either
the Construction Lender or the Permanent Lender unless both Managing Members
agree (and if there is a dispute in this regard, the matter shall not be subject
to the expedited arbitration provisions in Article 15).  

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Section 7.6Indemnification.

7.6.1General.  The Company shall indemnify, to the full extent allowed by the
Act, each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including reasonable legal fees and
expenses), judgments, fines, settlements, and other amounts (collectively, “Loss
Items”) arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative brought by an unaffiliated
third party, that relate to the operations of the Company or any Subsidiary as
set forth in this Agreement in which such Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise (but excluding
indemnification for any Loan guarantees, which are separately addressed in
Section 6.3), except to the extent it is established in a final court proceeding
that the Loss Item is proximately caused by: (a) the act or omission of such
Indemnitee that was material to the matter giving rise to the proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty, fraud, willful misconduct or gross negligence or such Indemnitee’s
uncured breach of this Agreement, the Development Management Agreement, or the
Lease; (b) such Indemnitee actually receiving an improper personal benefit in
money, property or services; or (c) in the case of any criminal proceeding, such
Indemnitee having reasonable cause to believe that the act or omission was
unlawful.  The termination of any proceeding by judgment, order or settlement
does not create a presumption that such Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.6.1.  The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent, or
an entry of an order of probation prior to judgment, creates a rebuttable
presumption that such Indemnitee acted in a manner contrary to that specified in
this Section 7.6.1.  Any indemnification pursuant to this Section 7.6 shall be
made only out of the Company Assets.  Notwithstanding anything in this Agreement
to the contrary, no Indemnitee who is an individual shall be denied
indemnification or shall have any personal liability to the Company or its
Members or any Subsidiary with respect to any Loss Item, except to the extent
such Loss Item is proximately caused by such Indemnitee’s actual active and
deliberate dishonesty, or fraud.  

7.6.2In Advance of Final Disposition.  Except as provided in Section 7.3.2,
reasonable expenses incurred by an Indemnitee who is a party to a proceeding may
be paid or reimbursed by the Company in advance of the final disposition of the
proceeding upon receipt by the Company of (a)  a written affirmation by the
Indemnitee of the Indemnitee’s good faith belief that the standard of conduct
necessary for indemnification by the Company as authorized in this Section 7.6
has been met and (b) a written undertaking by or on behalf of the Indemnitee to
repay the amount if it shall ultimately be determined that the standard of
conduct has not been met.

7.6.3Other Than by This Section.  The indemnification provided by this Section
7.6 shall be in addition to any other rights to which an Indemnitee may be
entitled under any agreement with the Company or any Subsidiary, or under any
other provision of this Agreement.

7.6.4Liability of the Managing Members.  Notwithstanding anything to the
contrary set forth in this Agreement, the Managing Members shall not be liable
to the Company or any Subsidiary or any Members for losses sustained or
liabilities incurred as a result of errors in judgment, or as a result of any
act or omission by such Managing Member, except for losses sustained or
liabilities incurred in whole or in part by such Managing Member’s bad faith,
fraud, willful misconduct, gross negligence, acting beyond the scope of such
Managing Members’ authority or commission of any Event of Default under this
Agreement (subject to limitations on remedies set forth elsewhere in this
Agreement).  Neither Managing Member shall be liable to the Company or any
Subsidiary, or to any Member for any losses sustained or liabilities incurred as
a result of the acts or omissions of the other Managing Member.

Section 7.7Other Matters Concerning the Managing Members.

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7.7.1Reliance on Documents.  The Managing Members may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document reasonably believed by them to be genuine
and to have been signed or presented by the proper party or parties.

Reliance on Consultants and Advisers

7.7.3.  The Managing Members may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by them, and any act taken or omitted to be taken in reliance
upon and in accordance with the opinion of such Persons as to matters which the
Managing Members reasonably believe to be within such Person’s professional or
expert competence shall be prima facie evidence that such act was done or
omitted in good faith.

7.7.4Action Through Officers and Attorneys In Fact.  The Managing Members shall
have the right, in respect of any of their powers or obligations hereunder, to
act through any of their duly authorized officers (or partners or managers, as
applicable) and their duly appointed attorneys-in-fact.  Each such Person, to
the extent provided by the Managing Members in the power of attorney or other
authorizing instrument, shall have full power and authority to do and perform
all and every act and duty which is permitted or required to be done by the
Managing Members hereunder.

Section 7.8Reliance by Third Parties.  Any Person dealing with the Company shall
be entitled to assume that the Managing Members have full power and authority to
encumber, sell or otherwise use in any manner any and all Company Assets and to
enter into any contracts on behalf of the Company, and such Person shall be
entitled to deal with the Managing Members, or either of them, as if they were
the Company’s sole party in interest, both legally and beneficially.  In no
event shall any Person dealing with the Managing Members or their
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the Managing Members or their representatives.  Each and every
certificate, document or other instrument executed on behalf of the Company by
the Managing Members or their representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (a) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Company and (c) such
certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Company.  Nothing herein is intended to afford either Managing Member
greater power or authority than is otherwise granted under this Agreement, or to
exculpate either Managing Member from any liability for acting beyond the scope
of such Managing Member’s authority as set forth herein.

Section 7.9Operating Budgets.  The initial Operating Budget for 2019 is attached
as Exhibit “C” which has been approved by both Managing Members.  No later than
the first (1st) day of the last quarter of each Company Year, the Skechers
Managing Member shall submit a proposed Operating Budget (which shall include
capital expenditures which are the landlord’s obligation under the Lease, and a
business plan) for the next ensuing Company Year for approval by the HF Managing
Member.  Proposed amendments to any Approved Operating Budget may be submitted
by the Skechers Managing Member to the HF Managing Member at any time.  Such
proposed Operating Budget (or any proposed amendment thereto) shall not be
deemed to be effective until such time as it has been approved by the HF
Managing Member.  The HF Managing Member shall respond in writing to each such
proposed Operating Budget (or any proposed amendment thereto) within thirty
(30) days after receipt thereof.  In such response, the HF Managing Member shall
specify in detail its disapproval of any item or items therein or its
disapproval of the whole, and any proposed modifications requested by the HF
Managing Member or recommended changes therein.  Within fifteen (15) days after
receipt by Skechers of the HF Managing Member’s disapproval of any proposed
Operating Budget (or any proposed amendment

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thereto), the Skechers Managing Member may re-submit to the HF Managing Member a
revised Operating Budget (or amendment) for its approval.  The HF Managing
Member shall not unreasonably withhold or delay approval of any Operating Budget
or amendment (with the issue of reasonableness being determined by expedited
arbitration under Article 15).  In the event that any Company Year shall
commence without an Operating Budget approved by both the Skechers Managing
Member and the HF Managing Member pursuant to the terms of this Section, the
Managing Members shall be entitled to make expenditures for items specified in
the Operating Budget for the most recent Company Year which has been approved by
both Managing Members, and for the actual amount of the utility cost, property
taxes, insurance premiums or special assessments incurred by the Company or any
Subsidiary in the current Company Year and any other non-discretionary items
(including Debt service and stated increases in Company obligations or
Subsidiary obligations under contracts for the year), and for any expenditures
on the Project which, in the Managing Members’ reasonable good faith judgment,
is necessary to prevent imminent damage to the Project and/or injury to
Persons.  The Operating Budget shall not include the budget for development of
the Project (although the Members acknowledge that a development budget has been
approved and a copy is attached as an exhibit to the Development Management
Agreement).

Article 8
BUY-SELL PROVISIONS

Section 8.1At any time commencing on a date which is one (1) year after the
“Substantial Completion” (as defined in the Lease) of the Project, or the date
that a Notice of Completion is recorded, whichever occurs earlier, either HF and
HFPV together, or Skechers (hereinafter referred to as  “Invoking Member”) may
deliver to the other (such other Member hereinafter referred to as the “Offeree
Member”), written notice that the Invoking Member is invoking the provisions of
this Section 8.1 (the “Buy-Sell Notice”).

Section 8.2The Buy-Sell Notice shall set forth the gross price (the “Stated
Amount”) at which the Invoking Member would be willing to purchase all of the
Company Assets from the Company.

Section 8.3The Buy-Sell Notice shall constitute an offer by the Invoking Member
to purchase the entire Company Interest of the Offeree Member for a price equal
to the amount of cash which would be distributable to such Offeree Member
pursuant to Section 13.2.1 if the Project and all other Company Assets were sold
to a third party pursuant to a bona-fide, arm’s length transaction at the Stated
Amount and had the Company then (a) paid in full all of its Debt, including the
repayment of the Loans and any loans payable to the Members (and made all
apportionments customarily made in the closing of real estate transactions in
the jurisdictions in which the Project is located, and all other customary
closing costs, including, but not limited to title insurance premiums, survey
costs, a reasonable and customary real estate commission and transfer taxes
normally payable by a seller of real estate), (b) not established any Reserves
and (c) distributed the net proceeds of the sale, and all other cash of the
Company to the Members in accordance with the provisions of
Section 13.2.1.  Such calculations shall be made as of the date of closing set
forth in Section 8.8.  Provided, however, that the Stated Amount may not be less
than an amount which would result in the distribution to the Selling Member of
at least the Selling Member’s Unrecovered Contribution (or, if the Selling
Member is Skechers, the Unrecovered Contribution Difference (if greater)), and
the repayment of any Loans owed by the Company to the Selling Member as of the
date of closing.  The Buy-Sell Notice shall also constitute an offer by the
Invoking Member to sell its entire Company Interest to the Offeree Member for a
price equal to the amount of cash which would be distributable to the Invoking
Member in the manner described above if it were the Selling Member.

Section 8.4Upon receipt of the Buy-Sell Notice, the Offeree Member may, at its
option, either elect to purchase the entire Company Interest of the Invoking
Member at the price described above, or to sell its entire Company Interest to
the Invoking Member at the price described above.

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Section 8.5The Offeree Member shall give notice of its election under Section
8.4 to the Invoking Member within sixty (60) days after such Offeree Member’s
receipt of the Buy-Sell Notice; provided, however, that in the event the Offeree
Member shall fail to give the Invoking Member notice of its election within such
sixty (60) day period, such Offeree Member shall be conclusively deemed to have
elected to sell its entire Company Interest to the Invoking Member.

Section 8.6The Member, which under this Article 8 is to purchase the Company
Interest of the other Member (the “Purchasing Member”) shall, within ten (10)
days after the determination is made as to who the Purchasing Member will be
(the “Deposit Date”), deliver to an escrow holder which is a national title
insurance company selected by the Purchasing Member cash in the amount of five
percent (5%) of the purchase price (the “Buy-Sell Deposit”) which Buy-Sell
Deposit will be applied against the purchase price for the Company Interest of
the Selling Member whose Company Interest is being purchased (the “Selling
Member”).

Section 8.7Notwithstanding anything to the contrary contained in this Agreement,
in no event may a Default Member, or a Member that is Incapacitated, or a Member
that is subject to a Bankruptcy Event, or a Member that is a Breaching Member,
be an Invoking Member under or otherwise initiate the procedures of this Article
8, and if a Member suffers any of the foregoing after it has initiated the
procedures under this Article 8 as the Invoking Member, then at the option of
the Offeree Member, the buy-sell process may be immediately terminated (provided
that the closing of the purchase and sale of the Company Interest has not
consummated).  

Section 8.8The closing of a sale and purchase pursuant to this Article 8 shall
be consummated through escrow on a date which is six (6) months after the
Deposit Date (or sooner at the election of the Purchasing Member), or such other
date and manner as the Members shall agree upon.  At such closing, the
Purchasing Member shall pay the entire purchase price for the Company Interest
of the Selling Member, in cash in immediately available funds, and the Selling
Member shall execute all documents that may be necessary or desirable, in the
reasonable opinion of counsel for the Purchasing Member (including customary
representations and warranties regarding the Company Interest of the Selling
Member, but not regarding the Project, the other Company Assets or the Company),
to effect the sale of the Company Interest of the Selling Member to the
Purchasing Member free and clear of all liens and encumbrances.  In the event
the Selling Member or the Purchasing Member shall fail or refuse to execute any
instruments required to consummate the closing, the other Member is hereby
granted an irrevocable power of attorney, which shall be binding on the Member
refusing to execute such documents as to all third Persons, to execute and
deliver on behalf of the Member refusing to execute such documents all such
required documents.  The aforesaid power, being coupled with an interest, is
irrevocable by death, dissolution or otherwise.

Section 8.9In the event the Selling Member then has any outstanding Debt to the
Company or any Subsidiary, all proceeds of the purchase price due the Selling
Member shall be paid to the Company until all such Debt shall have been paid and
discharged in full.  In the event that such proceeds are not sufficient to
discharge such Debt, the Selling Member shall repay all such unpaid Debt at the
closing.  In the event that any loans are then outstanding from the Company or
any Subsidiary to the Selling Member, then all of such loans shall concurrently
be repaid by the Company at the closing.  In the event the Selling Member or any
Affiliate of the Selling Member shall have guaranteed any Loan, then either
(a) the Loan which is the subject of such guaranty shall be paid in full by the
Company at the time of closing or (b) the Selling Member and any such Affiliate
of the Selling Member shall be unconditionally released by the obligee for any
liability on account thereof.  If the Selling Member is a Breaching Member, the
Company shall reserve any rights to pursue the Selling Member for damages after
the closing, to the extent otherwise allowable under this Agreement.

Section 8.10The Selling Member and the Purchasing Member shall each pay their
own expenses in connection with such purchase and sale of a Company Interest.

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Section 8.11From and after the giving of a Buy-Sell Notice, and until either the
consummation of the sale of the Company Interest in accordance with this Article
8, or termination of the buy-sell process as provided herein, neither Member
shall exercise any transfer rights under Article 11.

Section 8.12In the event the Purchasing Member defaults in its obligation to
purchase the Company Interest of the Selling Member, then Selling Member as its
sole and exclusive remedy shall be entitled to retain the Buy-Sell Deposit as
full liquidated damages for such default of the Purchasing Member, in which
event the buy-sell transaction shall be terminated and the Purchasing Member
shall have no further rights to initiate the buy-sell provisions (as an Invoking
Member) under this Article 8.  The Selling Member, at its election and in lieu
of the remedy set forth above, may elect within sixty (60) days of such default
to dissolve and liquidate the Company and any Subsidiaries.  The Members hereby
acknowledge and agree that it is impossible to more precisely estimate the
damages to be suffered by the Selling Member upon the Purchasing Member’s
default, and the Members expressly acknowledge and agree that the Buy-Sell
Deposit which may be retained by the Selling Member is a reasonable and fair
estimate of such damages and is intended not as a penalty, but as full
liquidated damages for such default of the Purchasing Member.

Section 8.13In the event that the Selling Member defaults in its obligation to
sell its Company Interest to the Purchasing Member, the Purchasing Member shall
be entitled to pursue any and all remedies available at law or in equity,
including specific performance.

Article 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1Records and Accounting.  The HF Managing Member shall keep
appropriate books and records with respect to the Company’s business, all of
which shall be and remain the property of the Company.  Any records maintained
by or on behalf of the Company or a Subsidiary in the regular course of its
business may be kept on, or be in the form of, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the
records so maintained are convertible into clearly legible written form within a
reasonable period of time.  The books of the Company and each Subsidiary shall
be maintained for financial purposes on an accrual basis in accordance with
generally accepted accounting principles (except that Capital Accounts shall be
maintained in accordance with Exhibit “A”) and for tax reporting purposes on the
accrual basis.  The Members may, upon reasonable notice to the HF Managing
Member and during normal business hours and at its own expense, examine the
books and records of the Company and each Subsidiary, which will be maintained
at the principal office of the HF Managing Member.

Section 9.2Fiscal Year.  The fiscal year of the Company and each Subsidiary
shall be the calendar year, unless the Managing Members decide otherwise.

Section 9.3Reports.

9.3.1Annual Reports.  Within ten (10) days after the end of each Company Year,
the HF Managing Member shall prepare or cause to be prepared and delivered to
the Members an annual report, as of the close of the Company Year, containing
financial statements of the Company and each Subsidiary for such Company Year,
presented in accordance with generally accepted accounting principles.

9.3.2Quarterly Reports.  As soon as practicable, but not later than ten (10)
days after the end of each calendar quarter, the HF Managing Member shall
prepare or cause to be prepared and delivered to the Members a report as of the
last day of the calendar quarter (except the last calendar quarter of each
year), containing unaudited financial statements of the Company and each
Subsidiary, and

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such other information as may be required by applicable law or regulation, or as
the HF Managing Member reasonably determines to be appropriate.

9.3.3Other Reports.  Each Managing Member shall promptly give notice to the
other Managing Member  of the occurrence of any of the following:  receipt by
such Managing Member of actual knowledge of any material (that is, seeking
damages in excess of $250,000 or seeking injunctive relief of any nature)
threatened or pending litigation against the Company, any Subsidiary, the
Property or the Project; the occurrence of any felony indictment or conviction
of any Person in senior management at such Managing Member; receipt by such
Managing Member of any offer to purchase all or any part of the Property or the
project; and receipt of written notice from any governmental authority  which
alleges any material adverse claim against the Company, any Subsidiary, the
Property or the Project.

Section 9.4Special Provisions Re Books and Records, Accounting and
Reports.  Notwithstanding the provisions of this Article 9, for so long as
Skechers Parent is a publicly traded company and the operations of the Company
are required to be consolidated with the operations of Skechers parent for
reporting purposes, the following provisions shall apply:

(b)The Company and each Subsidiary will use KMPG (or another certified public
accounting company designated by Skechers) as its auditor and preparer of its
tax returns, as long as its fees for such work are competitive in the
marketplace (if they exceed competitive fees, any excess shall be paid by
Skechers);

(c)KMPG will undertake annual audits of the Company and each Subsidiary, at
Company expense;

(d)All of the quarterly and annual reports and all Company tax returns must be
in forms reasonably acceptable to the Skechers Managing Member as a result of
consultation with KPMG and its legal counsel (it is expected that both GAAP and
cash basis records will be required for the determination of distributions to
Members), with appropriate and reasonable certifications by the HF Managing
Member;

(e)Reasonable internal controls may be required to satisfy the obligations of
Skechers Parent under the Federal Act and specifically SEC Rule 404; provided
that if the cost of implementing such internal controls is more than nominal, it
shall be borne by Skechers;

(f)The Skechers Managing Member shall have unrestricted right to speak with (and
to give directions, to the extent that it is the sole Managing Member or
otherwise in connection with any matter where Skechers Managing Member has the
authority to take such action without the consent of the HF Managing Member) to
the Company’s accountants, attorneys and other professional advisors, and those
of any Subsidiaries and shall have the right to receive copies of documents in
their possession which relate to the Company, any Subsidiary or its operations
(and HF shall not be entitled to invoke attorney-client privilege as a basis to
deny Skechers Managing Member access to any such Persons or documents); and

(g)Skechers Managing Member shall upon the advice of its legal counsel, have the
right to disclose in Skechers Parent’s public reports and to Skechers Parent
board of directors any information regarding the Company, any Subsidiary, the
Property, the Project, the Lease, the Development Management Agreement, the
Development Manager or the HF Managing Member notwithstanding the
confidentiality provisions of this Agreement.

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Article 10
TAX MATTERS

Section 10.1Preparation of Tax Returns.  The Tax Matters Partner shall arrange
for the preparation and timely filing of all returns of Company and Subsidiary
income, gains, deductions, losses and other items required of the Company for
federal and state income tax purposes and shall use all reasonable efforts to
furnish, within ninety (90) days after the close of each taxable year, the tax
information reasonably required by the Members for federal and state income tax
reporting purposes.  If the Tax Matters Partner fails to file the Company’s tax
returns on or before any applicable deadlines (including extensions), the other
Managing Member may prepare and file the Company’s tax returns as it determines.

Section 10.2Tax Matters Partner.

10.2.1General.  The HF Managing Member shall be the “Tax Matters Partner” of the
Company for federal income tax purposes, and shall be referred to herein as the
“Tax Matters Partner,” but such designation shall not be construed or used as
evidence to support any claim that the Company is a partnership, rather than a
limited liability company.  Upon the HF Managing Member becoming a Breaching
Member or becoming Incapacitated or suffering a Bankruptcy Action, the Skechers
Managing Member shall automatically become the Tax Matters Partner.  Pursuant to
Section 6223(c) of the Code, upon receipt of notice from the IRS of the
beginning of an administrative proceeding with respect to the Company, or any
Subsidiary, the Tax Matters Partner shall furnish the IRS with the name, address
and capital and profits interest of each of the Members.  The Tax Matters
Partner shall keep the Members reasonably informed of any action that it takes
in such capacity which has a material impact on the other Members or the Company
or any Subsidiary.

10.2.2Powers.  The Tax Matters Partner is authorized, but not required:

(a)to enter into any settlement with the IRS with respect to any administrative
or judicial proceedings for the adjustment of Company or Subsidiary items
required to be taken into account by a Member for income tax purposes (such
administrative proceedings being referred to as a “tax audit” and such judicial
proceedings being referred to as “judicial review”), and in the settlement
agreement the Tax Matters Partner may expressly state that such agreement shall
bind all Members, except that such settlement agreement shall not bind any
Member (i) who (within the time prescribed pursuant to the Code and Regulations)
files a statement with the IRS providing that the Tax Matters Partner shall not
have the authority to enter into a settlement agreement on behalf of such Member
or (ii) who is a “notice partner” (as defined in Section 6231 of the Code) or a
member of a “notice partner” (as defined in Section 6231 of the Code), and, to
the extent provided by law, the Tax Matters Partner shall cause any Member to be
designated a notice partner;

(b)in the event that a notice of a final administrative adjustment at the
Company or Subsidiary level of any item required to be taken into account by a
Member for tax purposes (a “final adjustment”) is mailed or otherwise given to
the Tax Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court, or the
filing of a complaint for refund with the District Court of the United States
for the district in which the Company’s principal place of business is located
or the United States Court of Federal Claims;

(c)to intervene in any action brought by any other Member for judicial review of
a final adjustment;

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(d)to file a request for an administrative adjustment with the IRS at any time
and, if any part of such request is not allowed by the IRS, to file an
appropriate pleading (petition, complaint or other document) for judicial review
with respect to such request;

(e)to enter into an agreement with the IRS to extend the period for assessing
any tax which is attributable to any item required to be taken into account by a
Member for tax purposes, or an item affected by such item;

(f)to take any other action on behalf of the Members, a Subsidiary or the
Company in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations; and

(g)Subject to any restrictions contained elsewhere in this Agreement, to engage
attorneys, accountants and other professionals to advise it and to file any
required income tax returns and other documents associated with its rights and
authority as the Tax Matters Partner.

(h)Notwithstanding the foregoing, the Tax Matters Partner shall not take any
action under Section 10.2.2(b), (d), (e) or (f) unless it has given the other
Member at least ten (10) Business Days prior notice of its intent to take such
action and the other Member has not given notice of its objection within five
(5) Business Days after receipt of such notice.  If notice of objection is
timely given and the parties cannot otherwise resolve the dispute, either Member
may submit the matter to expedited arbitration under Article 15.

The taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent required by
law, is a matter in the reasonable discretion of the Tax Matters Partner, and
the provisions relating to indemnification of the HF Managing Member set forth
in Section 7.6 of this Agreement shall be fully applicable to the Tax Matters
Partner in its capacity as such.

10.2.3Reimbursement.  The Tax Matters Partner shall receive no compensation for
its services.  All reasonable third-party costs and expenses incurred by the Tax
Matters Partner in performing its duties as such (including reasonable legal and
accounting fees) shall be borne by the Company.  The costs of any professionals
engaged by the Tax Matters Partner pursuant to Section 10.2.2(g) shall be paid
or reimbursed by the Company.

10.2.4Partner Representative.  The Members shall take all reasonable actions to
avoid the application to the Company of the provisions of Section 6221 through
6241 of the Code, as amended by the Bipartisan Budget Act of 2015, including
filing all necessary elections to avoid the application of such provisions.  If,
however, such provisions do apply to the Company, the Tax Matters Partner shall
act as the “Partnership Representative” for purposes of Sections 6221 through
6241 of the Code, as so amended.

Section 10.3Organizational Expenses.  The Company shall elect to deduct
expenses, if any, incurred by it in organizing the Company, or its Subsidiaries,
either immediately or ratably over a one hundred eighty (180) month period (or
such other period) as permitted by and provided for in Section 709 of the Code.

Section 10.4Withholding.  The Members hereby authorize the Company to withhold
from or pay on behalf of or with respect to the Members any amount of federal,
state, local, or foreign taxes that the Tax Matters Partner reasonably
determines that the Company is required to withhold or pay with respect to any
amount distributable or allocable to the Members pursuant to this Agreement,
including

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any taxes required to be withheld or paid by the Company pursuant to
Section 1441, 1442, 1445, or 1446 of the Code.  The Tax Matters Partner shall
give prompt notice to the Members with respect to which withholding is effected
in accordance with this Section 10.4 and shall provide each such Member with a
written explanation of the basis for their determination so to withhold or
pay.  Any amount paid on behalf of or with respect to a Member shall constitute
a loan by the Company to such Member which loan shall be repaid by such Member
within fifteen (15) days after notice from the Tax Matters Partner that such
payment must be made unless (a) the Company withholds such payment from a
distribution which would otherwise be made to such Member in accordance with
Section 5.2 or Section 13.2 or (b) the Tax Matters Partner determines, in its
sole and absolute discretion, that such payment may be satisfied out of the
Available Cash of the Company which would, but for such payment, be distributed
to such Member.  Any amounts withheld pursuant to the foregoing clauses (a) or
(b) shall be treated as having been distributed to such Member and shall be
promptly paid, solely out of funds of the Company, by the Tax Matters Partner to
the appropriate taxing authority.  Each Member hereby unconditionally and
irrevocably grants to the Company a security interest in such Member’s Company
Interest to secure the Member’s obligation to pay to the Company any amounts
required to be paid pursuant to this Section 10.4.  In the event that a Member
fails to pay any amounts owed to the Company pursuant to this Section 10.4 when
due, the Tax Matters Partner may, in its sole and absolute discretion, elect to
make the payment to the Company on behalf of such defaulting Member, and in such
event shall be deemed to have loaned such amount to such defaulting Member and
shall succeed to all rights and remedies of the Company as against such
defaulting Member (including, without limitation, the right to receive
distributions which would otherwise be made to the Member until such loan, with
interest, has been paid in full).  Any amounts payable by a Member hereunder
shall bear interest at a per annum rate of interest equal to the Prime Rate,
plus five percent (5%) (but not higher than the maximum lawful rate) from the
date such amount is due (i.e., fifteen (15) days after demand) until such amount
is paid in full.  The Members shall take such actions as the Company or the Tax
Matters Partner shall request in order to perfect or enforce the security
interest created hereunder.

Section 10.5Tax Elections.  Except as otherwise provided herein, the Tax Matters
Partner shall, in its reasonable discretion, determine whether to make any
available election pursuant to the Code; provided, however, that the Tax Matters
Partner shall make the election under Section 754 of the Code in accordance with
applicable Regulations thereunder and shall do so at the request of either
Member who transfers its Company Interest.  The Tax Matters Partner shall have
the right, after the first taxable Company Year, to seek to revoke any election
(other than the election under Section 754 of the Code, which revocation
requires the consent of both Members) upon the HF Tax Matters Partner’s
determination in its reasonable discretion that such revocation is in the best
interests of the Company.

Article 11
TRANSFERS AND WITHDRAWALS

Section 11.1Transfer.

11.1.1Definition.  The term “transfer” (including the term “transferred”), when
used in this Article 11 with respect to a Company Interest, shall be deemed to
refer to a transaction by which a Member transfers its Company Interest, or any
part thereof, to another Person and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise of the Company Interest, any part thereof.

11.1.2Requirements.  No Company Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11.  Any transfer or purported transfer of a Company Interest not made
in accordance with this Article 11 shall be null and void.

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11.1.3Transfer of Member’s Company Interest.  The HF Member may not transfer any
portion of its Company Interest without Skechers’ consent until the Completion
of the Project pursuant to the Plans and Specifications.  Neither the HF Member
nor Skechers may transfer its Company Interest (other than any transfer to an
Affiliate which shall require the consent of the other Member, which consent may
not be unreasonably withheld or delayed), in whole or in part, to any Person,
without first offering such Company Interest (or part thereof) to the other
Member on the same terms and conditions.  If a Member desires to transfer its
Company Interest, or any part thereof (whether or not it has received an offer
to purchase same), it shall send notice to the HF Member (in the case of a
transfer by Skechers) or Skechers (in the case of a transfer by the HF Member)
stating the extent of the Company Interest which it intends to transfer, the
terms and conditions of the proposed transfer, including the purchase price
therefor, and the identity of the proposed transferee.  Upon request of the
receiving Member, additional information regarding the proposed transfer and
financial and other information concerning the transferee will be promptly
provided.  Within twenty (20) days after receipt of the notice of intended
transfer, the receiving Member may, by notice to the Member proposing to
transfer, elect to purchase the entire Company Interest proposed to be
transferred at the same purchase price and on the same terms and conditions as
set forth in the notice, but the closing shall not occur sooner than six (6)
months after the date of such notice to the Member proposing to transfer.  If
the Member receiving the notice of proposed transfer fails to elect to purchase
the Company Interest as set forth above within such twenty (20) day time period,
the Member proposing the transfer may proceed to transfer the Company Interest,
but only on the terms and conditions and to the proposed transferee set forth in
the notice, and provided that such proposed transfer is consummated within sixty
(60) days thereafter (if there is any change in the foregoing or the transfer is
not consummated within such sixty (60) day period, then a new notice of intent
to transfer is required).  If the transfer is consummated, the transferring
Member shall promptly give notice to the other Member.  The transferee shall be
an Assignee and shall not become a Member of the Company until the provisions of
Article 12 have been complied with.  Any transfer or purported transfer of a
Member’s Company Interest not made in accordance with this Article 11 shall be
null and void.  

Section 11.2Prohibited Transfers.  Notwithstanding anything herein to the
contrary, a Member may deny any proposed transfer of the other Member’s Company
Interest to any Person which is owned and controlled directly or indirectly, by
any Person described below (and the Member who denies such transfer need not
elect to purchase the Company Interest of such other Member pursuant to
Section 11.1.3 to prevent such transfer):

(a)A business competitor of the non-transferring Member or any Affiliate
thereof; or

(b)A Person which does not have the financial strength to fulfill its
obligations under this Agreement; or

(c)A Person who is an Embargoed Person or who has been convicted of a felony or
any violations of State Acts, the Federal Act, or any other securities laws;

(d)A Person who has been engaged in any pending or previous litigation or
arbitration in opposition to the non-transferring Member or any Affiliate
thereof; or

(e)A Person who has a reputation in the real estate community as being
“litigious” as a result of the filing of multiple “strike suits”.  The Member
seeking to prohibit a transfer on the grounds set forth in this clause (e) shall
have the burden of proof, and if there is a dispute regarding this matter, it
shall be submitted to expedited arbitration under Article 15.

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11.2.1Timing of Transfers.  Transfers pursuant to this Article 11 may only be
made on the first day of a calendar month, unless the Managing Members otherwise
agree.

11.2.2Allocations and Distributions When Transfer Occurs.  If any Company
Interest is transferred during any quarterly segment of the Company’s fiscal
year, income and loss of the Company and all other items attributable to such
interest for such fiscal year shall be divided and allocated between the
transferor Member and the transferee Member by taking into account their varying
interests during the fiscal year in accordance with Section 706(d) of the Code,
using the interim closing of the books method.  Solely for purposes of making
such allocations, each of such items for the calendar month in which the
transfer or redemption occurs shall be allocated to the Person who is a Member
as of midnight on the last day of said month.  All distributions of Available
Cash with respect to which the Company Record Date is before the date of such
transfer or redemption shall be made to the transferor Member, and all
distributions of Available Cash thereafter shall be made to the transferee
Member.

11.2.3Certain Prohibited Transfers.  Notwithstanding anything herein to the
contrary, no transfer by a Member of its Company Interest may be made to any
Person if legal counsel for the Company or the other Member renders written
advice to the effect that it believes that there is a significant risk that (a),
such transfer would be effected or would be deemed to be effected through an
“established securities market” or a “secondary market” (or the substantial
equivalent thereof) within the meaning of Section 7704 of the Code and the
Regulations thereunder, or (b) such transfer would violate any Securities Laws.

11.2.4Default.  Notwithstanding anything herein to the contrary, no transfer of
any Company Interest shall be permitted if such transfer would create a default
under any Loan, or any material agreement to which the Company or any Subsidiary
is a party.

11.2.5Withdrawal.  Except in connection with a permitted Transfer, no Member may
withdraw from the Company without the consent of both Managing Members (and any
dispute in this regard shall not be subject to the expedited arbitration
provisions in Article 15).

11.2.6Management.  If a Member transfers its Company Interest, the transferee
will (upon admission to the Company as a Member) be entitled to appoint a
Managing Member to the same extent as the transferring Member.

Article 12
ADMISSION OF MEMBERS

Section 12.1Admission of Successor Members.  A successor to a Member’s Company
Interest that is transferred pursuant to Section 11.1.3 shall be entitled to
admission to the Company as a Member on the terms and conditions set forth
herein.  The business of the Company and any Subsidiary shall be carried on
after such transfer without dissolution.  In each case, the admission to the
Company is conditioned upon the successor Member executing and delivering to the
Company an acceptance of all of the terms and conditions of this Agreement and
such other documents or instruments as may be required by the remaining Managing
Member(s) to effect the admission.  Upon admission of the successor Member to
the entire Company Interest of the transferring Member, the transferring Member
shall be released from all further liability under this Agreement.

Section 12.2Amendment of Agreement and Certificate.  Upon the admission to the
Company of any successor Member, the Managing Members shall take all steps
necessary and appropriate under the Act to amend the records of the Company and,
if necessary, to prepare as soon as practical an amendment of this Agreement
and, if required by law, shall prepare and file an amendment to the Certificate.

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Article 13
DISSOLUTION AND LIQUIDATION

Section 13.1Dissolution.  The Company shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following (each an “Event of
Dissolution”):

Expiration of Term

13.1.2.  The expiration of its term as provided in Section 2.4;

Judicial Dissolution Decree

13.1.4.  Entry of a decree of judicial dissolution of the Company pursuant to
the provisions of Section 18-802 of the Act;

Sale of Company’s Assets

13.1.6.  The sale, exchange or other disposition of all or substantially all of
the Company Assets, unless such sale or other disposition involves the deferred
payment of the consideration for such sale or disposition, in which latter event
the Company shall dissolve on the last day of the calendar month during which
the balance of such deferred payment is received by the Company;

Mutual Agreement

13.1.8.  The agreement of both Managing Members (and any dispute in this regard
shall not be subject to the expedited arbitration provisions in Article 15); or

13.1.9Other Event.  Any other event permitting the dissolution or liquidation of
the Company under this Agreement.

Section 13.2Winding Up.

13.2.1General.  Upon the occurrence of an Event of Dissolution, the Company
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
the Members.  No Member shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Company’s business and
affairs.  A Person appointed by the Managing Members (excluding any Managing
Member which is a Breaching Member) which may be one (1) or both Managing
Members who is not a Breaching Member (the “Liquidator”), shall be responsible
for overseeing the winding up and dissolution of the Company and shall take full
account of the Company’s liabilities and property and the Company Assets shall
be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom shall be applied and distributed in the
following order:

(a)First, to the payment and discharge of all of the Company’s Debt to creditors
other than the Members;

(b)Second, to Skechers, until the Unrecovered Contributions of the Members are
proportionately equal;

(c)Third, to the payment and discharge of all of the Company’s Debt to the
Members, first with respect to any such Debt which has priority under any other
provision of this Agreement, and thereafter pro rata in accordance with amounts
owed to each such Member;

(d)Fourth, to the Members pari passu, in proportion to their respective
Unrecovered Contributions; and

(e)Finally, the balance, if any, shall be distributed to the Members in the
order and priority set forth in Section 5.2.

No Member shall receive any additional compensation for any services performed
as Liquidator pursuant

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to this Article 13, but any Liquidator which is not otherwise a Member or an
Affiliate of a Member shall be entitled to receive reasonable compensation for
rendering such services.

13.2.2When Immediate Sale of Company Assets Impractical.  Notwithstanding the
provisions of Section 13.2.1 which require liquidation of the Company Assets,
but subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Company the Liquidator determines that an immediate sale of
part or all of the Company Assets would be impractical or would cause undue loss
to the Members, the Liquidator may, in its sole and absolute discretion, defer
for a reasonable time (consistent with the provisions of Section 13.2.3 below)
the liquidation of any Company Assets except those necessary to satisfy current
liabilities of the Company (including to those Members who are also creditors)
or, with the consent of both Members, distribute to the Members, in lieu of
cash, as tenants in common, either directly or in trust, and in accordance with
the provisions of Section 13.2.1, undivided interests in the Company Assets as
the Liquidator deems not suitable for liquidation.  Any such distributions in
kind shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Members, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time.  Any
property distributed in kind shall be valued at fair market value by the
Liquidator using such reasonable method of valuation as it may adopt (for
purposes of adjusting Capital Accounts) and treated as though the property were
sold for such value and the cash proceeds were distributed.

13.2.3Compliance With Timing Requirements of the Regulations; Allowance for
Contingent or Unforeseen Liabilities or Obligations.  Notwithstanding anything
to the contrary in this Agreement, in the event the Company is “liquidated”
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) and with respect
to such liquidation there is an Event of Dissolution, distributions under
Section 13.2.1(d) to the Members who have positive Capital Account balances
shall be made in compliance with the requirements in Regulations
Section 1.704-1(b)(2)(ii)(b)(2) but all distributions shall still be made in the
order of priority set forth in Section 5.2.  In the discretion of the
Liquidator, a pro rata portion of the distributions that would otherwise be made
to the Members pursuant to this Article 13 may be: (a) distributed to a
liquidating trust established for the benefit of the Members for the purposes of
liquidating the Company Assets, collecting amounts owed to the Company, and
paying any contingent or unforeseen liabilities or obligations of the Company or
of the Liquidator arising out of or in connection with the Company (the assets
of any such trust shall be distributed to the Members from time to time, in the
reasonable discretion of the Liquidator, in the same proportions as the amount
distributed to such trust by the Company would otherwise have been distributed
to the Members pursuant to this Agreement); or (b) withheld to provide a
reasonable Reserve for Company liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment obligations owed to the
Company; provided, that such withheld amounts shall be distributed to the
Members as soon as practicable.

13.2.4Deemed Distribution and Recontribution.  Notwithstanding any other
provision of this Article 13, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Event of Dissolution
has occurred, the Company’s property shall not be liquidated, the Company’s
liabilities shall not be paid or discharged, and the Company’s affairs shall not
be wound up.  Instead, the Company shall be deemed to have transferred all of
the Company Assets and liabilities to a successor entity (having the same
federal income tax characteristics as the Company) in exchange for an interest
in the successor entity and, immediately thereafter, the Company will be treated
as distributing its interest in the successor entity to the Members in
liquidation of the Company.

13.2.5Rights of Members.  Except as specifically provided in this Agreement,
each Member shall look solely to the Company Assets for the return of its
Capital Contribution and repayment of any loans owned to it by the Company or a
Subsidiary to the extent provided in this Agreement and

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shall have no right or power to demand or receive property other than cash from
the Company or a Subsidiary to the extent provided in this Agreement.  Except as
specifically provided in this Agreement, no Member shall have priority over any
other Member as to the return of its Capital Contributions, distributions or
allocations.  No Member has any ownership interest in any Company Assets and the
Company Interest of the Members shall be personal property for all purposes.

13.2.6Notice of Dissolution.  In the event an Event of Dissolution occurs, the
Liquidator shall, within ten (10) days thereafter, provide written notice
thereof to each of the Members and to all other Persons with whom the Company or
any Subsidiary regularly conducts business and shall publish notice thereof in a
newspaper of general circulation in each place in which the Company or any
Subsidiary regularly conducts business.

13.2.7Cancellation of Certificate of Formation.  When all liabilities and
obligations of the Company and each Subsidiary have been paid or discharged, or
adequate provision has been made therefor, and all of the remaining Company
Assets have been distributed to the Members according to their respective rights
and interests as provided in Section 13.2.1, the Company shall be terminated and
a Certificate of Cancellation shall be executed on behalf of the Company by the
Members (or such other Person or Persons as the Act may require or permit) and
shall be filed with the Office of the Secretary of State of the States of
Delaware and California, and the Liquidator or such other Person or Persons
shall take such other actions, and shall execute, acknowledge and file any and
all other instruments, as may be necessary or appropriate to reflect the
dissolution and termination of the Company and each Subsidiary.

13.2.8Reasonable Time for Winding-Up.  Subject to Section 13.2.3, a reasonable
time shall be allowed for the orderly winding-up of the business and affairs of
the Company and each Subsidiary and the liquidation of its assets pursuant to
this Section 13.2, in order to minimize any losses otherwise attendant upon such
winding-up, and the provisions of this Agreement shall remain in effect between
the Members during the period of liquidation.

Article 14
AMENDMENT OF AGREEMENT

Section 14.1Amendments.

14.1.1General.  Amendments to this Agreement may be proposed by Member.  Except
as provided in Section 14.1.2 or Section 14.1.3, a proposed amendment shall be
adopted and be effective as an amendment hereto only if it is approved by all
Members.  Any dispute among the Members regarding any proposed amendment shall
not be subject to the expedited arbitration provisions in Article 15.

14.1.2Managing Member’s Power to Amend.  Notwithstanding Section 14.1.1, either
Managing Member shall have the power to amend this Agreement as may be required
to facilitate or implement any of the following purposes:

(a)to reflect the admission, substitution, termination, or withdrawal of Members
in accordance with this Agreement; or

(b)to satisfy any order, directive, opinion, ruling or regulation of a federal
or state agency or contained in federal or state law applicable to the Company
or any Subsidiary and required to be complied with; or

(c)to conform to any “single-purpose entity” requirements of a Lender; or

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(d)to correct any non-substantive, typographical errors in this Agreement.

The Member proposing the amendment will provide at least ten (10) days’ prior
written notice to the other Member when any action under this Section 14.1.2 is
taken.

14.1.3Consent of Adversely Affected Member Required.  Notwithstanding Section
14.1.2 hereof, this Agreement shall not be amended without the consent of any
Member adversely affected if such amendment would (a) modify the limited
liability of such Member, (b) alter rights of such Member to receive
distributions pursuant to Article 5 or Article 13, the allocations specified in
Exhibit “A”, or the Capital Contribution obligations set forth in Article 4, (c)
cause the termination of the Company prior to the time set forth in Section 2.4
or Section 13.1, or (d) amend this Section 14.1.3.  Further, no amendment may
alter the restrictions on the Managing Members’ authority set forth herein
without the consent of all Members.

Article 15
DISPUTE RESOLUTION

Section 15.1Mediation.  In the event of any dispute among the Members under this
Agreement, prior to (and as a condition which must be satisfied before) any
Member institutes litigation or arbitration (but not arbitration under a Section
of this Agreement calling for expedited arbitration), the Members agree to
submit the dispute to nonbinding mediation with JAMS or another mutually
acceptable mediator.  Such Mediation shall be completed no later than ninety
(90) days after it is requested by any Member by notice to the
other.  Notwithstanding the foregoing, if appropriate, any Member may seek a
provisional remedy (such as, but not limited to, injunctive relief) prior to
commencing or completing such mediation.

Section 15.2Arbitration.  Should any dispute arise among the Members for which
expedited arbitration is expressly called for under this Agreement, the parties
shall submit such dispute to final and binding arbitration to be administered in
accordance with the Streamlined Arbitration Rules and Procedures of JAMS
(Judicial Arbitration and Mediation Service).  Should any other dispute (other
than pursuant to Section 3.1 or Section 14.1) arise among the Members which has
not been resolved by mediation under Section 15.1, such dispute shall likewise
be submitted to final and binding arbitration with JAMS.  Unless the parties
mutually agree otherwise, the arbitration shall take place at a JAMS Resolution
Center in Los Angeles County, California, the arbitration shall be conducted by
one arbitrator (who must be disinterested and independent of the Members), and
the arbitrator shall award attorneys’ fees and the costs of arbitration (JAMS
fees and the fees of the arbitrator) to the prevailing party.  The decision of
the arbitrator (the “Determination”) shall be binding and conclusive on the
parties, except to the extent that appeals are permitted under California Code
of Civil Procedure §1286.2.  After the Determination, subject to any cure rights
set forth in this Agreement, the prevailing party under the Determination may
enforce its rights under this Agreement notwithstanding the filing or pendency
of any appeal, but such party shall be responsible for any damages caused as a
result of the taking of such action if the Determination is eventually set aside
on appeal and either the court renders a decision on the merits in favor of the
appealing party, or the appealing party is eventually the prevailing party in
any subsequent arbitration proceeding.  The arbitration award may be enforced in
accordance with California Code of Civil Procedure §1285, et seq. or the Federal
Arbitration Act (9 U.S.C. §1, et seq.).  To the extent that matters of law are
to be considered by the arbitrator, Delaware law shall apply (but the procedural
aspects of the arbitration, as described above, shall be in accordance with
California law).  The Members need not submit any matter for which expedited
arbitration is called for to Mediation under Section 15.1.  Nothing herein shall
prohibit a Member from seeking a provisional remedy from a court of competent
jurisdiction (e.g., a temporary restraining order or preliminary injunctive
relief) pending the results of any mediation or arbitration.

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Section 15.3Increased Costs. If, as a result of the institution of any
arbitration among the Members, there is any increase in the cost to complete the
construction of the Project, then any such increased cost shall be funded by the
Member who is not the prevailing party in such arbitration (with no increase in
such Member’s Capital Account, Capital Contributions, or in either the HF Loan
or the Skechers Loan, as the case may be).  The amount of any such increase in
cost shall be determined by the arbitrator, and any Member may raise such issue
in the arbitration regardless of who initiated the arbitration or the nature of
the dispute which caused the arbitration.

Article 16
DEFAULTS / REMEDIES

Section 16.1Defaults.  Except as otherwise expressly provided in this Agreement,
if any Member defaults in the performance of its obligations under this
Agreement, either of the other Members shall provide notice of such default and
the allegedly defaulting Member shall have a period of fifteen (15) days to cure
the default (but if the nature of the default is such that it cannot reasonably
be cured within such fifteen (15) day period, then the allegedly defaulting
Member shall have an additional reasonable amount of time, not to exceed another
sixty (60) days, to cure the default if it commences the cure within the fifteen
(15) day period and diligently pursues same to completion.  Provided, however,
that if the default cannot be cured, then no cure period shall be
required.  Provided, further, that this provision shall not apply to a default
in making required Capital Contributions or loans under Article 4 or Article 6,
as the provisions of Article 4 or Article 6 control under those
circumstances.  Any material breach by a Member of any of its material
representations or warranties under this Agreement shall be a default (but
subject to notice and cure as provided herein, to the extent applicable).  In
addition to other possible defaults under this Agreement, the following shall
constitute defaults hereunder:

(a)If the HF Affiliate who has executed the assignment of contracts to the
Company pursuant to Section 6.5(a) fails to honor its indemnification
obligations thereunder, it shall be a default by HF hereunder.

Section 16.2Remedies.  Except as provided in this Agreement to the contrary,
upon a default by any Member which is not cured as provided herein (or which
cannot be cured) the non-defaulting Members shall have all rights and remedies
at law and equity, as well as all rights and remedies afforded under this
Agreement.  If there is a dispute regarding whether or not a Member is in
default, the matter shall be submitted to expedited arbitration in accordance
with Article 15.

Section 16.3Offset Rights.  If any final judgment of a court of competent
jurisdiction (or arbitration award, if arbitration is called for under this
Agreement) is rendered against a Member, the other Members shall have the right
to offset the amount thereof against any amounts thereafter due to be
distributed to or otherwise payable to such Member, including distributions of
Available Cash, the HF Loan or the Skechers Loan, as applicable, or any proceeds
due to such Member under the Buy-Sell provisions in Article 8.

Article 17
GENERAL PROVISIONS

Section 17.1Addresses and Notice.  All notices to be given under this Agreement
shall be in writing, and may be either delivered personally, by certified mail
return receipt requested, or by a nationally recognized overnight courier
providing proof of delivery (e.g., United Parcel Service or Federal Express)
directed to the parties at their respective addresses set forth below. Notices
to the Company shall be delivered at its principal place of business.

43

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HF:

HF Logistics I, LLC

c/o Highland Fairview Properties

14225 Corporate Way

Moreno Valley, California 92553

Attention:  Iddo Benzeevi

With Copy To:

Baker & Hostetler LLP

11601 Wilshire Boulevard, Suite 1400

Los Angeles, California 90025-7120

Attention:  Bruce R. Greene, Esq.

With Additional Copy To:

James Lieb, Esq.

Executive Vice President

The Trump Group
400 Park Avenue
New York, NY  10022

SKECHERS:

Skechers U.S.A., Inc.

228 Manhattan Beach Boulevard

Manhattan Beach, California 90266

Attention:  David Weinberg, COO

With Copy To:

Greenberg Traurig, LLP

2450 Colorado Avenue

Suite 400 East

Santa Monica, California 90404

Attention:  Eric Rowen, Esq.

With Additional Copy to:

Philip Paccione, Esq.

Skechers U.S.A., Inc.

228 Manhattan Beach Boulevard

Manhattan Beach, California 90266

Notices given personally shall be deemed received upon delivery.  Notices sent
by overnight courier shall be deemed given upon delivery to the courier
service.  Mailed notices shall be deemed given on the date of mailing by
certified mail.  The time to respond to any notice shall begin to run on the
date of delivery at the proper address (or refusal of delivery during normal
business hours).  Any Member hereto may designate a different address to which
notices shall thereafter be directed by notice to the other Members given in the
manner hereinabove set forth.

44

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Section 17.2Titles and Captions.  All article or section titles or captions in
this Agreement are for convenience only and shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof.  Except as specifically provided otherwise, references to
“Articles” and “Section” are to Articles and Sections of this Agreement.  All
schedules and exhibits annexed or attached hereto are expressly incorporated
into and made a part of this Agreement.

Section 17.3Interpretation.  Whenever the context may require, any pronoun used
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa.  The terms “include” and “including” shall be construed
as if followed by the phrase “without limitation”.

Section 17.4Further Action.  The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.

Section 17.5Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and assigns, subject to the restrictions on
transfer set forth herein.  No Member may assign its rights under this Agreement
or delegate its obligations under this Agreement, except as expressly permitted
hereunder.

Section 17.6Waiver of Partition.  The Members hereby agree that the real
property of the Company and each Subsidiary is not and will not be suitable for
partition.  Accordingly, each of the Members hereby irrevocably waives any and
all rights (if any) that it may have to maintain any action for partition of any
of the Company Assets or any Subsidiary’s Assets or to maintain an action to
compel a judicial dissolution except to compel a liquidation or dissolution of
the Company or a Subsidiary  as expressly provided in this Agreement.

Section 17.7Entire Agreement.  This Agreement and the other agreements
referenced herein constitute the entire agreement among the parties with respect
to the matters contained herein; they supersede any prior letters of intent,
agreements or understandings among them with respect to the matters contained
herein and the Agreement may not be modified or amended in any manner other than
pursuant to Article 14.

Section 17.8Securities Law Provisions.  The Company Interests have not been
registered under the federal or state securities laws of any state and,
therefore, may not be resold unless appropriate federal and state securities
laws, as well as the provisions of Article 11, have been complied with.

Section 17.9Creditors.  None of the provisions of this Agreement shall be for
the benefit of, or shall be enforceable by, any third party creditor of the
Company, any Subsidiary, or any Person who is not a Member.

Section 17.10Waiver.  No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.

Section 17.11Execution Counterparts.  This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart.

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Section 17.12Applicable Law.  This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.  The parties both agree to submit to the
jurisdiction of any state or federal court in the State of California, and
further agree that venue in any legal action shall be in the County of Los
Angeles.

Section 17.13Invalidity of Provisions.  If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.

Section 17.14Limitation of Member Liability.  Any obligation or liability
whatsoever of the Members which may arise at any time under this Agreement shall
be satisfied, if at all, out of the Members’ assets only, except as expressly
provided in this Agreement.  No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of the Members’ shareholders, partners, members, trustees,
officers, employees or agents, regardless of whether such obligation or
liability is in the nature of contract, tort or otherwise, except as expressly
provided in this Agreement.  NEITHER THE COMPANY NOR ANY SUBSIDIARY NOR ANY
MEMBER SHALL BE RESPONSIBLE OR LIABLE TO ANY MEMBER, OR ANY OF THEIR RESPECTIVE
AFFILIATES, FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF THE BREACH OF THIS AGREEMENT.

Section 17.15WAIVER OF JURY TRIAL.  BECAUSE DISPUTES IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE MEMBERS WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE MEMBERS DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS; THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION (WITHOUT SUBMITTING TO ARBITRATION), TO THE FULLEST EXTENT ALLOWABLE
BY LAW, THE MEMBERS WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT.

Section 17.16Construction.  This Agreement shall be deemed to have been drafted
jointly by all Members and the provisions of this Agreement shall not be
construed against any Member as a result of any claim that such Member (or its
legal counsel) drafted same.

Section 17.17Attorneys’ Fees.  Should any Member be required to bring legal
action or arbitration to enforce its rights under this Agreement, the prevailing
party in such legal action or arbitration shall be entitled to recover from the
losing party its reasonable attorneys’ fees and costs in addition to any other
relief to which it is entitled.  Such recovery of attorneys’ fees shall include
any attorneys’ fees incurred in connection with any bankruptcy or reorganization
proceeding (including stay litigation) and any attorneys’ fees incurred on
appeal.  The parties further agree that any attorneys’ fees incurred in
enforcing any judgment are recoverable as a separate item, and that this
provision is intended to be severable from the other provisions of this
Agreement, shall survive the judgment, and is not to be deemed merged into the
judgment.

Section 17.18Confidentiality.  Subject to the provisions in Section 9.1, the
terms and conditions of this Agreement, including its existence, shall be
confidential information and shall not be disclosed by any Member to any Person
without the prior consent of the other Members, except that a Member may
disclose the terms and conditions of this Agreement to such party’s Affiliates,
attorneys and

46

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other advisers, and any Lender, provided that such Persons are advised of the
confidentiality restrictions contained herein, and except that any other
disclosure may be made if required by law (including any required SEC filings or
disclosures).  If any Member determines that it is required by law to disclose
information regarding this Agreement, such Member shall, within a reasonable
time before making any such disclosure, consult with the other Members regarding
such disclosure and seek confidential treatment for such portions of the
disclosure as may be reasonably requested by the other Members.

Section 17.19Adjacent Development.  HF represents to Skechers that HF or its
Affiliates own certain property which is situated in the proximity of the
Property, which is under development or which will be developed during the term
of this Agreement and the Lease.  Skechers acknowledges that it has no interest
in any such property or the developments thereon (except for the property which
is owned by T1), and that there will be a certain amount of noise, construction
dust and debris and inconvenience associated with such development.

Section 17.20HF-SKX Property Development.  Notwithstanding anything in this
Agreement to the contrary, in the event that Skechers Parent elects to terminate
the Lease as a result of the failure of the Company to obtain Entitlements (as
more fully set forth in the Lease), then the following shall occur.

(a)The Initial Capital Contribution of $7,000,000 made by Skechers’ Parent
pursuant to Section 4.1.1(a) shall be returned to Skechers within thirty (30)
days after the date that the Lease has been terminated.

(b)Within ninety (90) days after the date that the Lease has been terminated, HF
shall make an Additional Capital Contribution in the amount of $7,000,000 to the
Company, and the Company, shall distribute such amount to Skechers in full
redemption of the entire Company Interest of Skechers, and Skechers shall
thereafter cease to be a Member of the Company.  Skechers shall represent and
warrant to the Company and its remaining Members that it is the sole lawful
owner of its Company Interest, and that its Company Interest is not subject to
any liens, security interests or encumbrances.

(signature page follows)

 

47

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IN WITNESS WHEREOF, the Members have executed this Agreement as of the date
first written above.  

 

“HF”

 

“SKECHERS”

 

 

 

 

 

 

 

HF LOGISTICS I, LLC, a Delaware limited liability company

 

SKECHERS R.B., LLC, a Delaware limited liability company

 

 

 

 

 

 

 

By:

 

 

 

By:

Skechers U.S.A., Inc., a Delaware corporation, its sole member

 

Iddo Benzeevi, President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

David Weinberg, Chief Operating Officer

 

 

 

 

 

 

 

“HFPV”

 

 

 

 

 

 

 

 

 

 

 

 

HIGHLAND FAIRVIEW PARTNERS V, a Delaware limited liability

 

 

 

 

By:

 

 

 

 

 

Its:

 

 

 

 

 

 

 

By its signature hereon, Skechers Parent guarantees to HF, the Company and the
Subsidiaries its obligation to fund the Seven Million Dollar ($7,000,000)
Initial Capital Contribution of Skechers as set forth in Section 4.1.1(a),
subject to any conditions to such funding set forth in the Agreement for the
benefit of Skechers.

 

 

 

“SKECHERS PARENT”

 

 

 

 

 

 

SKECHERS U.S.A., INC., a Delaware corporation

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

David Weinberg, Chief Operating Officer

 

 

 

 

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EXHIBIT “A”

CAPITAL ACCOUNTS,

ALLOCATIONS OF PROFIT AND LOSS,

AND OTHER TAX MATTERS

ARTICLE 1
DEFINITIONS

Section 1.1Definitions.

All capitalized terms used herein shall have the meanings assigned to them in
the Agreement.  Notwithstanding the foregoing, the following definitions shall
be applicable to the following terms as used in this Exhibit “A” and such
definitions shall prevail in the event of a conflict with the definitions in the
Agreement. Referring to Sections “hereof” shall mean Sections of this Exhibit
“A”.

(a)Agreed Value.

“Agreed Value” of any property contributed to the capital of the Company shall
mean the fair market value of such property at the time of contribution (as
agreed to in writing by the Members without regard to Section 7701(g) of the
Code (i.e., determined without regard to the amount of Nonrecourse Liabilities
to which such property is subject)).

(b)Book Basis.

The initial “Book Basis” of any Company property shall be equal to the Company’s
initial adjusted tax basis in such property; provided, however, that the initial
“Book Basis” of any Company property contributed to the capital of the Company
shall be equal to the Agreed Value of such property.  Effective immediately
after giving effect to the allocations of profit and loss, as computed for book
purposes, for each fiscal year under Section 3.1 hereof, the Book Basis of each
Company property shall be adjusted downward by the amount of Book Depreciation
allowable to the Company for such fiscal year with respect to such property.  In
addition, but subject in all events to the provisions of Section 3.5 hereof,
effective immediately prior to any Revaluation Event, the Book Basis of each
Company property shall be further adjusted upward or downward, as necessary, so
that it will be equal to the fair market value of such property at the time of
such Revaluation Event (as agreed to in writing by the Members taking Section
7701(g) of the Code into account (i.e., such value shall not be agreed to be
less than the amount of Nonrecourse Liabilities to which such property is
subject)).

(c)Book Depreciation.

The amount of “Book Depreciation” allowable to the Company for any fiscal year
with respect to any Company property shall be equal to the product of (i) the
amount of Tax Depreciation allowable to the Company for such year with respect
to such property, multiplied by (ii) a fraction, the numerator of which is the
property’s Book Basis as of the beginning of such year (or the date of
acquisition if the property is acquired during such year) and the denominator of
which is the property’s adjusted tax basis as of the beginning of such year (or
the date of acquisition if the property is acquired during such year).  If the
denominator of the fraction described in clause (ii) above is equal to zero, the
amount of “Book Depreciation” allowable to the Company for any fiscal year with
respect to the Company property in question shall be determined under any
reasonable method selected by the Tax Matters Partner.

 

Exhibit “A” - 1

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(d)Book Gain or Loss.

“Book Gain or Loss” realized by the Company in connection with the disposition
of any Company property shall mean the excess (or deficit) of (i) the amount
realized by the Company in connection with such disposition (as determined under
Section 1001 of the Code) over (ii) the Book Basis of such property at the time
of the disposition.

(e)Book/Tax Disparity Property.

“Book/Tax Disparity Property” shall mean any Company property that has a Book
Basis which is different from its adjusted tax basis to the Company.  Thus, any
property that is contributed to the capital of the Company by a Member shall be
a Book/Tax Disparity Property if its Agreed Value is not equal to the Company’s
initial tax basis in the property. In addition, once the Book Basis of a Company
property is adjusted in connection with a Revaluation Event to an amount other
than its adjusted tax basis to the Company, the property shall thereafter be a
“Book/Tax Disparity Property”.

(f)Capital Accounts.

“Capital Account” shall have the meaning assigned to such term in Section 2.1
hereof.

(g)Capital Transaction.

“Capital Transaction” means any of the following: (i) a sale, exchange,
transfer, assignment or other disposition of all or a portion of any Company
Asset (but not including sales in the ordinary course of business of inventory,
operating equipment or furniture, fixtures, and equipment); (ii) any financing
or refinancing of, or with respect to, any Company Asset except for equipment
leases or purchase money financing for movables; (iii) any condemnation or
transfer in lieu of condemnation of all or a portion of any Company Asset; (iv)
any collection in respect of property, hazard, or casualty insurance (but not
business interruption insurance) or any damage award; or (v) any other
transaction the proceeds of which, in accordance with generally accepted
accounting principles, are considered to be capital in nature.

(h)Company Minimum Gain.

“Company Minimum Gain” shall mean the amount of “partnership minimum gain” that
is computed in accordance with the principles of Section 1.704-2(d)(1) of the
Regulations. A Member’s share of such Company Minimum Gain shall be calculated
in accordance with the provisions of Section 1.704-2(g) of the Regulations.

(i)Deductible Expenses.

“Deductible Expenses” for any fiscal year (or portion thereof) shall mean all
items, as calculated for book purposes, which are allowable as deductions to the
Company for such period under federal income tax accounting principles
(including Book Depreciation but excluding any expense or deduction attributable
to a Capital Transaction).

(j)Economic Risk of Loss.

“Economic Risk of Loss” borne by any Member for any Company liability shall mean
the aggregate amount of economic risk of loss that such Member and all Related
Persons to such Member are treated as bearing with respect to such liability
pursuant to Section 1.752-2 of the Regulations.

 

Exhibit “A” - 2

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(k)Gross Asset Value.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis
for U.S. federal income tax purposes except as follows:

(i)the initial Gross Asset Value of any asset contributed by a Member to the
Company will be the gross Fair Market Value of the asset;

(ii)the Gross Asset Value of all Company Assets will be adjusted to equal their
respective gross fair market values as of the following times: (a) the
occurrence of a Revaluation Event; (b) the liquidation of the Company within the
meaning of Section 1.704- 1(b)(2)(ii)(g) of the Regulations; and (c) upon any
other event on which it is necessary or appropriate in order to comply with the
Regulations under Code Section 704(b);

(iii)the Gross Asset Value of any Company Asset distributed to any Member will
be adjusted to equal the gross fair market value of the asset on the date of
distribution; and

(iv)the Gross Asset Value of Company Assets will be increased (or decreased) to
reflect any adjustments to the adjusted basis of these assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining the Capital Accounts pursuant
to Section 1.704-1(b)(2)(iv)(m) of the Regulations.

(l)Gross Income.

“Gross Income” for any fiscal year (or portion thereof) shall mean the gross
income derived by the Company from all sources (other than from capital
contributions and loans to the Company and other than from Capital Transactions)
during such period, as calculated for book purposes in accordance with federal
income tax accounting principles.

(m)Liquidation.

“Liquidation” of a Member’s Company Interest shall mean and be deemed to occur
upon the earlier of (i) the date upon which the Company is terminated under
Section 708(b)(1) of the Code, (ii) the date upon which the Company ceases to be
a going concern (even though it may continue in existence for the limited
purpose of winding up its affairs, paying its debts and distributing any
remaining Company properties to the Members) or (iii) the date upon which there
is a liquidation of the Member’s Company Interest (but the Company is not
terminated) under Section 1.761-1(d) of the Regulations.  “Liquidation” of the
Company shall mean and be deemed to occur upon the earlier of (x) the date upon
which the Company is terminated under Section 708(b)(1) of the Code or (y) the
date upon which the Company ceases to be a going concern (even though it may
continue in existence for the limited purpose of winding up its affairs, paying
its debts and distributing any remaining Company properties to the Members).

(n)Member Minimum Gain.

“Member Minimum Gain” shall mean “partner nonrecourse debt minimum gain,” as
defined in Section 1.704-2(i)(2) of the Regulations and determined in accordance
with Sections 1.704-2(i)(3) and 1.704-2(k) of the Regulations.

 

Exhibit “A” - 3

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(o)Member Nonrecourse Deductions.

“Member Nonrecourse Deductions” shall mean “partner nonrecourse deductions,” as
defined in Section 1.704-2(i) of the Regulations.

(p)Member Nonrecourse Debt.

“Member Nonrecourse Debt” shall mean “partner nonrecourse debt,” as defined in
Section 1.704-2(b)(4) of the Regulations.

(q)Nonrecourse Deductions.

“Nonrecourse Deductions” shall mean any and all items of Book Depreciation and
other Deductible Expenses that are treated as “nonrecourse deductions” under
Section 1.704-2(c) of the Regulations.

(r)Nonrecourse Liability.

“Nonrecourse Liability” shall mean any Company liability (or portion thereof)
treated as a nonrecourse liability under Section 1.704-2(b)(3) of the
Regulations. Subject to the foregoing sentence, Nonrecourse Liability shall mean
any Company liability (or portion thereof) for which no Member bears the
Economic Risk of Loss.

(s)Operations.

“Operations” shall mean all revenue producing activities of the Company other
than activities constituting or relating to Capital Transactions.

(t)Profits and Loss.

“Profits” and “Loss” mean, for each Tax Period, an amount equal to the Company’s
taxable income or loss for such Tax Period, determined in accordance with Code
Section 703(a) (for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), with the following adjustments (without
duplication):

(i)Any income of the Company that is exempt from United States federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition of “Profits” and “Losses” shall be added to such taxable
income or loss;

(ii)Any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of “Profits” and “Losses,” shall
be subtracted from such taxable income or loss; and

(iii)Any items of income, loss or deduction specially allocated under Article 3
of this Exhibit “A” shall not be taken into account in computing “Profits” or
“Loss.”

 

Exhibit “A” - 4

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(u)Recourse Debt.

“Recourse Debt” shall mean any Company liability (or portion thereof) that is
not a Nonrecourse Liability.

(v)Regulations.

“Regulations” shall mean the regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions of the
Code.  All references herein to sections of the Regulations shall include any
corresponding provision or provisions of succeeding, similar, substitute
proposed or final Regulations.

(w)Related Person.

“Related Person” shall mean, as to any Member, any person who is related to such
Member (within the meaning of Section 1.752-4(b) of the Regulations).

(x)Revaluation Event.

“Revaluation Event” shall mean any of the following occurrences: (i) the
contribution of money or other property (other than a de minimis amount) by a
new or existing Member to the capital of the Company as consideration for the
issuance of an additional interest in the Company; (ii) the distribution of
money or other property (other than a de minimis amount) by the Company to a
retiring or continuing Member as consideration for an interest in the Company or
(iii) any other event permitting a revaluation of Capital Accounts under the
Regulations.  Notwithstanding the foregoing, an event described in the preceding
sentence shall not constitute a Revaluation Event if both Members reasonably
determine that it is not necessary to adjust the Book Basis of the Company’s
Property or the Members’ Capital Accounts in connection with the occurrence of
any such event.

(y)Tax Depreciation.

“Tax Depreciation” for any fiscal year shall mean the amount of depreciation,
cost recovery or other amortization deductions allowable to the Company for
federal income tax purposes for such year.

(z)Tax Items.

“Tax Items” shall mean, with respect to any property, all items of profit and
loss (including Tax Depreciation) recognized by or allowable to the Company with
respect to such property, as computed for federal income tax purposes.

(aa)Unrealized Book Gain or Loss.

“Unrealized Book Gain Or Loss” with respect to any Company property shall mean
the excess (or deficit) of (i) the fair market value of such property (as agreed
to in writing by the Members taking Section 7701(g) of the Code into account
(i.e., such value shall not be agreed to be less than the amount of Nonrecourse
Liabilities to which such property is subject)), over (ii) the Book Basis of
such property.

 

Exhibit “A” - 5

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ARTICLE 2
CAPITAL ACCOUNTS

Section 2.1Capital Accounts.

A separate “Capital Account” (herein so called) shall be maintained for each
Member for the full term of the Agreement in accordance with the capital
accounting rules of Section 1.704-1(b)(2)(iv) of the Regulations.  Pursuant to
the basic rules of Section 1.704-1(b)(2)(iv) of the Regulations, the balance of
each Member’s Capital Account shall be:

(a)Increased by the amount of money contributed by such Member (or such Member’s
predecessor in interest) to the capital of the Company pursuant to ARTICLE 4 of
the Agreement and this Exhibit “A” and decreased by the amount of money
distributed to such Member (or such Member’s predecessor in interest) pursuant
to ARTICLE 5 or ARTICLE 13 of the Agreement;

(b)Increased by the fair market value of the Property (determined without regard
to Section 7701(g) of the Code) (i.e., determined without regard to the amount
of Nonrecourse Liabilities to which such property is subject)) contributed by
such Member (or such Member’s predecessor in interest) to the capital of the
Company pursuant to ARTICLE 4 or ARTICLE 13 of the Agreement and this
Exhibit “A” (net of all liabilities secured by such property that the Company is
considered to assume or take subject to under Section 752 of the Code) and
decreased by the fair market value of the Property (determined without regard to
Section 7701(g) of the Code (i.e., determined without regard to the amount of
Nonrecourse Liabilities to which such property is subject)) distributed to such
Member (or such Member’s predecessor in interest) by the Company pursuant to
ARTICLE 5 of the Agreement (net of all liabilities secured by such property that
such Member is considered to assume or take subject to under Section 752 of the
Code);

(c)Increased by the amount of each item of Company Profit (and other items of
income or gain) allocated to such Member (or such Member’s predecessor in
interest) pursuant to Section 3.1 hereof;

(d)Decreased by the amount of each item of Company Loss (and other items of loss
or deduction) allocated to such Member (or such Member’s predecessor in
interest) pursuant to Section 3.1 hereof; and

(e)Otherwise adjusted in accordance with the other capital account maintenance
rules of Section 1.704-1(b)(2)(iv) of the Regulations including, without
limitation, the capital account maintenance rules for the treatment of
liabilities as set forth in Section 1.704-1(b)(2)(iv)(c) of the Regulations
(provided that there shall be no double counting of items taken into account in
the definition of “Profit” or “Loss.”

Section 2.2Additional Provisions Regarding Capital Accounts.

(a)If a Member pays any Company indebtedness, such payment shall be treated as a
contribution by that Member to the capital of the Company, and the Capital
Account of such Member shall be increased by the amount so paid by such Member.

(b)Except as otherwise provided herein, no Member may contribute capital to, or
withdraw capital from, the Company.  To the extent any monies which any Member
is entitled to receive pursuant to the Agreement would constitute a return of
capital, each of the Members consents to the withdrawal of such capital.

 

Exhibit “A” - 6

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(c)A loan by a Member to the Company shall not be considered a contribution of
money to the capital of the Company, and the balance of such Member’s Capital
Account shall not be increased by the amount so loaned.  No repayment of
principal or interest on any such loan, reimbursement made to a Member with
respect to advances or other payments made by such Member on behalf of the
Company or payments of fees to a Member or Related Person to such Member which
are made by the Company shall be considered a return of capital, or any other
form of distribution, or in any manner affect the balance of such Member’s
Capital Account.  No Member or Related Person to such Member shall make a loan
to the Company unless such loan is authorized pursuant to the provisions of the
Agreement.

(d)No Member with a deficit balance in its Capital Account shall have any
obligation to the Company, any other Member or any other Person to restore said
deficit balance.  In addition, no venturer or partner in any Member shall have
any liability to the Company or any other Member for any deficit balance in such
venturer’s or partner’s capital account in the Member in which it is a partner
or venturer.  Furthermore, a deficit Capital Account balance of a Member (or a
capital account of a partner or venturer in a Member) shall not be deemed to be
a liability of such Member (or of such venturer or partner in such Member) or a
Company Asset or property.  The provisions of this Section 2.2(d) shall not
affect any Member’s obligation to make capital contributions to the Company that
are required to be made by such Member pursuant to the Agreement.

(e)Except as otherwise provided herein or in the Agreement, no interest will be
paid on any capital contributed to the Company or the balance in any Member’s
Capital Account.

ARTICLE 3
ALLOCATIONS OF PROFIT AND LOSS

Section 3.1Allocations of Profit and Loss.  Subject to the provisions of Section
3.1, Section 3.2, Section 3.3, Section 3.4, and Section 3.5, hereof, all items
of Profit and Loss realized by the Company during each fiscal year shall be
allocated among the Members (after giving effect to all adjustments attributable
to all contributions and distributions of money and property effected during
such year) in the manner prescribed in this Section 3.1.

(a)Minimum Gain Chargeback.  Pursuant to Section 1.704-2(f) of the Regulations
(relating to minimum gain chargebacks) and notwithstanding any other provision
of the Agreement, if there is a net decrease in Company Minimum Gain for such
year (or if there was a net decrease in Company Minimum Gain for a prior fiscal
year and the Company did not have sufficient amounts of Gross Income and Book
Gain during prior years to allocate among the Members under this Section 3.1(a),
then items of Company Gross Income and Book Gain shall be allocated, before any
other allocation is made pursuant to the succeeding provisions of this Section
3.1 for such year, to each Member in an amount equal to such Member’s share of
the net decrease in such Company Minimum Gain (as determined under Section
1.704-2(g)(2) of the Regulations), subject to any exceptions to such requirement
contained in the Regulations.  Such items shall consist of (i) Book Gain from
the disposition of property subject to a Nonrecourse Liability, and (ii) if
necessary, a pro rata portion of other items of Gross Income and Book
Gain.  This Section 3.1(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Regulations and shall be
interpreted consistently therewith.

(b)Member Minimum Gain Chargeback.  Pursuant to Section 1.704-2(i)(4) of the
Regulations (relating to chargebacks of partner nonrecourse debt minimum gain)
and not withstanding any other provisions of this Agreement, if there is a net
decrease in Member Minimum Gain for such year (or if there was a net decrease in
Member Minimum Gain for a prior fiscal year and the Company did not

 

Exhibit “A” - 7

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have sufficient amounts of Gross Income and Book Gain during prior years to
allocate among the Partners under this Section 3.1(b)), then items of Company
Gross Income and Book Gain shall be allocated, before any other allocation is
made pursuant to the succeeding provisions of this Section 3.1 for such year, to
each Member in an amount equal to such Member’s share of the net decrease in
such Member Minimum Gain (as determined pursuant to Section 1.704-2(i)(4) of the
Regulations), subject to any exceptions to such requirement contained in the
Regulations.  Such items shall consist of (i) Book Gain from the disposition of
property subject to a Member Nonrecourse Debt, and (ii) if necessary, a pro rata
portion of other items of Gross Income and Book Gain not allocated pursuant to
Section 3.1(a) above.  This Section 3.1(b) is intended to comply with the
partner nonrecourse debt minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.

(c)Qualified Income Offset.  Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Regulation Sections 1.704-I
(b)(2)(ii)(d)(4), (5) or (6) of the Regulations that causes a deficit balance in
its Capital Account (in excess of any amounts which such Member is obligated to
restore to the Company, if any, or any deemed deficit restoration obligation
pursuant to Regulation Sections 1.704-2(g)(1) and (i)(5) of the Regulations),
shall be allocated items of Gross Income and Book Gain before any other
allocation is made pursuant to the succeeding provisions of this Section 3.1 for
such year in an amount and a manner sufficient to eliminate, to the extent
required by the Treasury Regulations, such deficit balance as quickly as
possible.  This Section 3.1(c) is intended to comply with the alternate test for
economic effect set forth in Section 1.704-1(b)(2)(ii)(d) of the Regulations and
shall be interpreted and applied in a manner consistent therewith.

(d)Nonrecourse Deductions.  All Nonrecourse Deductions shall be allocated among
the Members, pro rata in accordance with their respective Contribution
Percentages and in a manner consistent with Section 1.704-2(e) of the
Regulations.

(e)Member Nonrecourse Deductions.  All Member Nonrecourse Deductions
attributable to Member Nonrecourse Debt shall be allocated among the Members
bearing the Economic Risk of Loss for such debt consistent with Section
1.704-2(i)(1) of the Regulations.

(f)Nonrecourse Liabilities.  For purposes of Section 752 of the Code, all
Nonrecourse Liabilities of the Company shall be shared among the Members in the
ratio of their Contribution Percentages.

(g)Code Section 754 Adjustment.  To the extent an adjustment to the adjusted tax
basis of any Company property, pursuant to Code Sections 734(b) or 743(b) is
required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4)
of the Regulations, to be taken into account in determining Capital Accounts as
a result of a distribution to a Member in complete liquidation of its interest
in the Company, the amount of such adjustment to Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specifically allocated to the Members in accordance with their interests in the
Company (in the event Section 1.704-1(b)(2)(iv)(m)(2) of the Regulations
applies) or to the Members to whom such distribution was made (in the event
Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations applies).

(h)Special Allocation of Amounts Required.  In the event and to the extent that
any amount paid by the Company to a Member or to a person related to a Member is
treated as having been received in a partner capacity for federal income tax
purposes, there shall be specially allocated to such Member, before any
allocation is made pursuant to Section 3.1(i) hereof, an amount of Gross Income
equal to such amount that is so treated.

 

Exhibit “A” - 8

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(i)General Allocations.  After giving effect to the special allocations in
Sections 3.1(a) through (h) above, all items of Profit and Loss realized by the
Company shall be allocated among the Members in such a manner that would cause
their respective Capital Account balances (determined prior to taking into
account distributions actually made within the fiscal year), to the greatest
extent possible, to be equal to (i) the amount that would be distributed to each
Member, if (a) the Company were to sell all of its assets for their Gross Asset
Values, (b) all Company liabilities were satisfied (limited with respect to each
nonrecourse liability to the Gross Asset Values of the assets securing such
liability), and (c) the Company were to distribute the sale proceeds and other
assets of the Company pursuant to Section 5.2 of the Agreement, plus (ii) the
amount of cash and other property that was distributed to the Member within such
fiscal year, minus (iii) such Member’s share of Company Minimum Gain or Member
Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical
sale of assets.

(j)Character of Income and Loss.  For purposes of determining the nature (as
ordinary or capital) of any Company profit allocated among the Members for
federal income tax purposes pursuant to this Section 3.1, the portion of such
profit required to be recognized as ordinary income pursuant to Sections 1245
and/or 1250 of the Code shall be deemed to be allocated among the Members in the
same proportion that they were allocated and claimed the Book Depreciation
deductions, or basis reductions, directly or indirectly giving rise to such
treatment under Sections 1245 and/or 1250 of the Code or in any other manner
required by temporary or final Regulations.

(k)Limitations On Allocations.  Notwithstanding the provisions of Section 3.1(h)
above:

(i)No Loss or items of loss or deduction shall be allocated to any Member that
has a deficit Capital Account balance exceeding its actual or deemed obligation
to restore the same or would have a deficit Capital Account balance exceeding
its actual or deemed obligation to restore the same as a result of any such
allocation while any other Member has a positive Capital Account balance, it
being the intention of the Members that such loss shall be allocated in those
circumstances solely to the Member(s) with positive Capital Account balances;

(ii)In the event no Member has a positive Capital Account balance, Loss shall be
allocated between the Members pro rata based on their respective Contribution
Percentages; and

(iii)Any Loss from a Liquidating Transaction, as well as any Profit or Loss for
the fiscal year in which the Liquidating Transaction takes place, shall be
allocated among the Members in such a manner as to cause their respective
positive Capital Account balances, immediately following such allocations, to be
equal, to the maximum extent possible, to the distributions each would receive
under ARTICLE 5 of the Agreement upon the distribution of the available
liquidation proceeds.

Section 3.2Allocations of Income and Loss in Respect of Interests Transferred.

If any Company Interest is transferred, or is increased or decreased by reason
of the admission of a new Member or otherwise, during any fiscal year, each item
of Profit and Loss for such year shall be divided and allocated among the
Members in question by taking account of their varying interests in the Company
during such year (on a daily, monthly or other basis, an interim closing of the
books method or any other permissible method under Section 706 of the Code and
the Regulations thereunder) as determined by the Managing Members.

 

Exhibit “A” - 9

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Section 3.3Allocation of Tax Items.

(a)Except as otherwise provided in the succeeding provisions of this Section
3.3, each Tax Item shall be allocated among the Members in the same manner as
each correlative item of Profit or Loss, is allocated pursuant to the provisions
of Section 3.1 hereof.

(b)The Members hereby acknowledge that all Tax Items in respect of Book/Tax
Disparity Property are required to be allocated among the Members in the same
manner as under Section 704(c) of the Code (as specified in Sections
1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g) of the Regulations) and that the
principles of Section 704(c) of the Code require that such Tax Items must be
shared among the Members so as to take account of the variation between the
adjusted tax basis and Book Basis of each such Book/Tax Disparity
Property.  Thus, notwithstanding anything in Section 3.1 or 3.3(a) hereof to the
contrary, the Members’ distributive shares of Tax Items in respect of each
Book/Tax Disparity Property shall be separately determined and allocated among
the Members in accordance with the principles of Section 704(c) of the
Code.  The method for making all Section 704(c) allocations of the Company with
respect to the Initial Capital Contribution shall be mutually agreed upon by the
Managing Members, and if the Managing Members cannot mutually agree, then the
“traditional method” shall be used.  HF agrees to provide Skechers with its
adjusted tax basis in the Property (as of the Closing Date) within sixty (60)
days after the Closing Date.

(c)The Members agree that the contribution by HF of all property relating to the
Project (including fee title to the Property and all of right, title and
interest in all personal property and all plans, specifications, architectural
drawings and renderings, surveys and other collateral material relating to the
ownership and development of the Property) to the Company pursuant to Section
4.1.1(b) of the Agreement and the HF Loan made pursuant to Section 6.4 of the
Agreement will be treated by the Company and HF on their respective tax returns
as follows under the Regulations under Code Section 707:

(i)Pursuant to Section 1.707-4(d) of the Regulations, the first payments of
principal made under the HF Note are to be treated for all purposes as payments
made to HF to reimburse HF for capital expenditures incurred by HF with respect
to all property relating to the Project during the two (2) year period preceding
the transfer by HF to the Company of such property, subject to the limitation
contained in such Regulation that such pre-formation expenditures shall not
exceed twenty percent (20%) of the fair market value of such property at the
time of contribution (the “20% Limitation”) unless the fair market value of such
property does not exceed one hundred twenty percent (120%) of the adjusted basis
of such property at the time of contribution (in which case such 20% Limitation
shall not apply);

(ii)The remainder of the principal payments made under the HF Note shall be
treated as payments made with respect to a sale to the Company by HF of a
proportionate amount of all property relating to the Project on the date of the
contribution of such property to the Company (with the portion of such property
that is deemed to have been sold by HF to the Company being determined under the
Regulations under Section 707 of the Code); and

(iii)As required by Regulations Sections 1.707-3(c)(2) and 1.707-8, the Company
shall disclose to the IRS the Company’s treatment of the HF Note payments as
pre-formation expenses to the extent described in Section 3.3(c)(i) above.

 

Exhibit “A” - 10

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Section 3.4The allocations set forth in Sections 3.1(a) through 3.1(h) hereof
(the “Regulatory Allocations”) are intended to comply with the requirements of
Sections 1.704-1(b) and 1.704-2 of the Regulations and, in all events, shall be
interpreted and applied consistently therewith.

Section 3.5Revaluation Events and Capital Adjustments for Book Items.

Pursuant to the capital account maintenance rules of Section 1.704-1(b)(2)(iv)
of the Regulations, effective immediately prior to any Revaluation Event, the
Capital Account balance of each Member shall be adjusted to reflect the manner
in which items of Profit or Loss, equal to the Unrealized Book Gain or Loss then
existing with respect to each asset owned (to the extent not previously
reflected in the Members’ Capital Accounts) by the Company would be allocated
among the Members pursuant to Section 3.1 hereof if there were a taxable
disposition of such property immediately prior to such Revaluation Event for its
fair market value (as determined by the Managing Member taking Section 7701(g)
of the Code into account).  In all events with respect to all items of Company
Profit and Loss, the balances of the Members’ Capital Accounts shall be adjusted
solely for allocations of such items, as computed for book purposes, under
Section 3.1 hereof and shall not be adjusted for allocations of correlative Tax
Items under Section 3.3 hereof.

Section 3.6Intent of Liquidating Distributions.

The parties intend that the allocation provisions of this Exhibit “A” shall
produce final Section 704 Capital Account balances of the Member being equal to
the distributions required pursuant to Section 5.2 of the Agreement.  To the
extent that the allocations required in this Exhibit “A” would fail to produce
such Capital Account balances (determined at the close of each taxable year as
provided in Section 3.1(i)), (a) such allocations provisions shall be amended by
the Managing Members if and to the extent necessary to produce such result and
(b) items of Company income, gain, loss, or deduction for prior open taxable
years shall be reallocated among the Members to the extent it is not possible to
achieve such result with allocations of Company income, gain, loss or deduction
for the current taxable year and future taxable years.  This Section 3.6 shall
control notwithstanding any reallocation or adjustment of taxable income,
taxable loss, or items thereof by the Internal Revenue Service or any other
taxing authority.

Section 3.7Curative Allocations.

The Regulatory Allocations are intended to comply with certain requirements of
the Regulations. It is the intent of the Members that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss or deduction pursuant to this Section 3.7.  Therefore, notwithstanding any
other provision of this Agreement (other than the Regulatory Allocations), the
Managers shall make such offsetting allocations of Company income, gain, loss or
deduction in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Member’s Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have
had if the Regulatory Allocations were not part of this Agreement.

 

Exhibit “A” - 11

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ARTICLE 4
OTHER TAX MATTERS

Section 4.1Consistent Treatment.

The Members shall take positions with respect to Tax Items that are consistent
with the positions taken by the Company with respect to the same Tax Items in
all U.S. federal, state, local, or foreign tax returns, all notices to
government bodies, and in any audit or other proceedings with respect to taxes.

 

 

Exhibit “A” - 12

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EXHIBIT “B”

DEVELOPMENT MANAGEMENT AGREEMENT

(Attached)

 

 

Exhibit “B”

--------------------------------------------------------------------------------

 

EXHIBIT “C”

INITIAL APPROVED OPERATING BUDGET

SKX Expansion
Opinion of Cost

 

General Liability Insurance

$109,792

Difference in Conditions (Earthquake)

$258,542

Property Taxes

$1,073,500

POA

$103,531

Repair, Replace & Maintenance

$87,125

Annual:

$1,632,489

Monthly:

$136,041

 

 

Exhibit “C”

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EXHIBIT “D”

HFPV REPRESENTATIONS AND WARRANTIES

The following constitute representations and warranties of HFPV to Skechers, HF
and the Company, which are made as of the Effective Date, and also as of the
Closing Date, and which may be enforced by any of Skechers, HF or the Company:

a.HFPV has all legal power, right and authority to convey, or cause to be
conveyed, its entire right, title and interest in the HFPV Property to the
Company pursuant to this Agreement and to execute and deliver, or cause the
execution and delivery, of all documents required to consummate the transactions
contemplated hereby.

b.All requisite action has been taken in connection with the conveyance of
HFPV’s interest in the HFPV Property to the Company pursuant to this Agreement
and the execution of all documents required to consummate the transactions
contemplated hereby.

c.The execution and delivery of the conveyance documents contemplated hereby do
not require the consent or approval of any third party nor shall such execution
and delivery result in a breach or violation of any applicable law or conflict
with, breach, result in a default under or violate any contract or agreement to
which HFPV is a party, or by which HFPV or the HFPV Property is bound.

d.Neither HFPV nor any HFPV Affiliate has received written notice or has actual
knowledge of any pending or threatened actions, suits, arbitrations, claims or
proceedings, at law or in equity, affecting the HFPV Property, or in which HFPV
is, or will be, a party by reason of its interest in the HFPV Property.

e.Neither HFPV nor any HFPV Affiliate has received written notice of or has
actual knowledge of any attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings pending against HFPV.

f.Neither HFPV nor any HFPV Affiliate has entered into any contracts for the
sale, exchange or other disposition of the HFPV Property, or any portion
thereof, which are still in force and effect, nor do there exist any rights of
first refusal, options or other rights of any other Person to purchase all or
any portion of the HFPV Property.

g.HFPV holds fee simple title to the HFPV Property.  

h.Neither HFPV nor any HFPV Affiliate has received written notice of or has
actual knowledge of the commencement or intended commencement of any proceeding
in eminent domain, or similar proceeding by any governmental authority which
would affect the HFPV Property.

i.In accordance with California Health and Safety Code §25359.7, HFPV hereby
gives HF, Skechers and the Company notice and informs them that HFPV has no
knowledge of the release of any hazardous materials located on or beneath the
HFPV Property, except to the extent (if any) reflected in any environmental
reports delivered to Skechers and HFPV.

j.Neither HFPV nor any of its Affiliates has received any written notice or has
other actual knowledge of any change contemplated in any laws, ordinances or
restrictions affecting the HFPV Property, or any judicial or administrative
action, or any action by adjacent landowners with respect to the HFPV Property,
and neither HFPV nor any of its Affiliates has received any written notice

Exhibit “D” - 1

--------------------------------------------------------------------------------

 

or has other actual knowledge or any other fact, circumstance or condition,
financial or otherwise, which would materially present, limit, impede or render
materially more costly the construction of the Project or the use or operation
of the HFPV Property as contemplated by this Agreement.

k.To HFPV’s and the HFPV Affiliates’ actual knowledge, except as disclosed in
any environmental reports delivered by HFPV to HF and Skechers, there are no
acts, omissions, events, circumstances or conditions on, at, under or in
connection with the HFPV Property that constitute a material violation of, or
require remediation under, any applicable environmental law, including any
pollution, contamination, degradation, damage or injury caused by, related to,
arising from or in connection with the generation, use, handling, treatment,
storage, disposal, discharge, emission or release of a hazardous material at the
HFPV Property (an “Environmental Condition”).  HFPV or an HFPV Affiliate has
satisfied all material applicable governmental reporting requirements in
connection with any known Environmental Condition existing on the HFPV
Property.  To HFPV’s actual knowledge, there is no basis for a claim by any
third party against HFPV in connection with an Environmental Condition at the
HFPV Property.

l.Neither HFPV nor any HFPV Affiliate has entered into or is subject to any
leases, occupancy agreements, licenses or similar agreements affecting the
occupancy or possession of the HFPV Property.

m.The HFPV Property is not subject to any monetary liens or encumbrances (other
than the lien of current real property taxes), or to any nonmonetary
encumbrances which would have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement or Skechers Parent’s
ability to perform its obligations under the Lease, or which could result in the
termination or extinguishment of the Lease.

 

 

 

Exhibit “D” - 2

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EXHIBIT “E”

HF AND SKECHERS REPRESENTATIONS AND WARRANTIES

The following constitute representations and warranties of Skechers and HF
(collectively, the “Contributing Members”) to HFPV and the Company, which are
made as of the Effective Date, and also as of the Closing Date, and which may be
enforced by either HFPV or the Company.  The representations and warranties of
the Contributing Members hereunder are several and not joint, and neither HF nor
Skechers shall be liable for the breach of any representation or warranty of the
other.

a.Neither Contributing Member nor any Affiliate of such Contributing Member has
received written notice or has actual knowledge of any pending or threatened
actions, suits, arbitrations, claims or proceedings, at law or in equity,
affecting the HF-SKX Property, or in which such Contributing Member is, or will
be, a party by reason of such Contributing Member’s interest in the HF-SKX
Property.

b.Neither the Contributing Member nor any Affiliate of such Contributing Member
has received written notice of or has actual knowledge of any attachments,
execution proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings pending against such
Contributing Member.

c.There are no contracts for the sale, exchange or other disposition of the
HF-SKX Property, or any portion thereof, which are still in force and effect,
nor do there exist any rights of first refusal, options or other rights of any
Person to purchase all or any portion of the HF-SKX Property from SKX LLC.

d.Immediately prior to the execution of this Agreement, each Contributing Member
held a 50% Company Interest, and the Company holds fee simple title to the
HF-SKX Property.  

e.Neither Contributing Member nor any Affiliate of such Contributing Member has
received written notice of or has actual knowledge of the commencement or
intended commencement of any proceeding in eminent domain, or similar proceeding
by any governmental authority which would affect the HF-SKX Property.

f.In accordance with California Health and Safety Code §25359.7, each
Contributing Member hereby gives HFPV and the Company notice and informs them
that such Contributing Member has no knowledge of the release of any hazardous
materials located on or beneath the HF-SKX Property, except to the extent (if
any) reflected in any environmental reports delivered to HFPV.

g.Neither Contributing Member nor any of its Affiliates has received any written
notice or has other actual knowledge of any change contemplated in any laws,
ordinances or restrictions affecting the HF-SKX Property, or any judicial or
administrative action, or any action by adjacent landowners with respect to the
HF-SKX Property, and neither the Contributing Member nor any of its Affiliates
has received any written notice or has other actual knowledge or any other fact,
circumstance or condition, financial or otherwise, which would materially
present, limit, impede or render materially more costly the construction of the
Project or the use or operation of the HF-SKX Property as contemplated by this
Agreement.

h.To each Contributing Member’s and such Contributing Member’s Affiliates’
actual knowledge, except as disclosed in any environmental reports delivered to
HFPV, there are no acts, omissions, events, circumstances or conditions on, at,
under or in connection with the Property that

3

089402.000005 4845-7650-5721.3

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constitute a material violation of, or require remediation under, any applicable
environmental law, including any pollution, contamination, degradation, damage
or injury caused by, related to, arising from or in connection with the
generation, use, handling, treatment, storage, disposal, discharge, emission or
release of a hazardous material at the HF-SKX Property (an “Environmental
Condition”).  SKX LLC has satisfied all material applicable governmental
reporting requirements in connection with any known Environmental Condition
existing on the HF-SKX Property.  To each Contributing Member’s actual
knowledge, there is no basis for a claim by any third party against SKX LLC or
either Contributing Member in connection with an Environmental Condition at the
Property.

i.There are no leases, occupancy agreements, licenses or similar agreements
affecting the occupancy or possession of the HF-SKX Property.

j.The HF-SKX Property is not subject to any monetary liens or encumbrances
(other than the lien of current real property taxes), or to any nonmonetary
encumbrances which would have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement or Skechers Parent’s
ability to perform its obligations under the Lease, or which could result in the
termination or extinguishment of the Lease.

4

089402.000005 4845-7650-5721.3

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DEVELOPMENT MANAGEMENT AGREEMENT

THIS DEVELOPMENT MANAGEMENT AGREEMENT (this “Agreement”) is made and entered
into effective as of the ____ day of ____________, 2019 (the “Effective Date”),
by and between HF LOGISTICS-SKX T2, LLC (hereinafter, “Owner”); and HFC
HOLDINGS, LLC, a Delaware limited liability company (“Development Manager”).

RECITALS:

A.Owner is a Delaware limited liability company formed pursuant to that certain
Amended and Restated Limited Liability Company Agreement (as further amended
from time to time, the “LLC Agreement”) dated of even date herewith between HF
Logistics I, LLC, a Delaware limited liability company and Highland Fairview
Partners V, a Delaware general partnership (together, the “HF Member”), and
Skechers R.B., LLC, a Delaware limited liability company (“Skechers Member”).

B.Section 7.5 of the LLC Agreement provides that the Owner shall enter into this
Agreement.

C.The Owner has caused the Project Architect to prepare the Approved Plans for
the Improvements (the construction of the Improvements on the Land in accordance
with the Approved Plans is herein called the “Project”).

D.The Owner has approved the Development Budget for the Project.

E.Owner and Development Manager intend that the Development Manager perform or
cause to be performed the Development Services and receive the Development
Manager Fee, in accordance with this Agreement.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing (all of which is incorporated
in this Agreement by this reference) and other good and valuable consideration,
receipt and sufficiency of which are hereby acknowledged, Owner and Development
Manager hereby agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.1Certain Definitions.  As used in this Agreement, the following terms
have the following meanings:

“Added Costs” has the meaning given to that term in Section 4.1.

“Agreement” has the meaning given to that term in the introductory paragraph.

“Applicable Laws” means all applicable statutes, ordinances, rules, regulations,
codes and interpretations by all federal, state and local governmental
authorities having jurisdiction over the Project.

“Approval by (or of) Owner” means to be approved in writing by Owner.

“Approved Plans” has the meaning given to that term in Section 2.4.

“Bid Documents” has the meaning given to that term in Section 2.7(e)(i).

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“Building” means the building which constitutes part of the Improvements.

“Close-Out” has the meaning given to that term in Section 2.11(a).

“Completion Notice” means a notice from Development Manager (or the General
Contractor) to the Owner that Substantial Completion has occurred for the
Improvements, as described in Section 2.10(a).

“Completion of the Project” has the meaning given to that term in Section
2.11(c).

“Construction Loan” means the loan to be made to Owner by Lender, the proceeds
of which shall be used to construct the Project.

“Contract Documents” means the Approved Plans, the Project Construction
Contract, and other documents governing the performance obligations of the
General Contractor.

“Development Approvals” has the meaning given to that term in Section 2.7(g).

“Development Budget” has the meaning given to that term in Section 2.3.

“Development Budget Amendment” has the meaning given to that term in Section
2.8(f).

“Development Manager” has the meaning given that term in the introductory
paragraph.

“Development Manager Fee” has the meaning given to that term in Section 5.1.

“Development Services” has the meaning given to that term in Section 2.1.

“Due Care” means to act in good faith, within the scope of one’s authority, with
the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent real estate professional experienced in such matters would use in
the conduct of the development of an industrial/warehouse building of the type
and quality envisioned in the Approved Plans.

“Effective Date” has the meaning given to that term in the introductory
paragraph.

“Entitlement Requirements” has the meaning given to that term in Section
2.7(a)(i).

“Force Majeure” has the meaning given to that term in Section 4.2.

“General Contractor” means the general contractor selected by the Development
Manager and engaged by Owner to construct the Project.

“Hard Costs” means those Project Costs so designated in the Development Budget.

“Hazardous Materials” means any hazardous, toxic or dangerous waste, substance
or material, pollutant or contaminant, as defined for purposes of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended, or the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, or any other federal,
state or local law, ordinance, rule or regulation applicable to the Land or the
Project, or any substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any
substance which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), or radon gas, urea formaldehyde, asbestos or
lead.

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“Improvements” means an approximately 750,000 rentable square foot Building and
other improvements to be constructed by Owner on the Land in accordance with the
Lease and the Approved Plans.

“Indemnified Parties” has the meaning given to that term in Section 4.3.

“Land” means the tract of land which is the subject of the Lease and upon which
the Project will be constructed.

“Lease” means that certain Lease of even date herewith between Owner, as
landlord, and Skechers Parent, as tenant, as amended.

“Lender” means the lender which extends the Construction Loan to Owner, or any
future holder of the note and other documents which evidence the Construction
Loan.

“LLC Agreement” has the meaning given that term in the Recitals.

“Owner” has the meaning given to that term in the introductory paragraph.

“Party” means either Owner or Development Manager.

“Project” has the meaning given that term in the Recitals.

“Project Architect” means [HPA Architects].

“Project Construction Contract” has the meaning given to that term in Section
2.7(e)(v).

“Project Costs” means all costs of construction of the Project (Hard Costs and
Soft Costs) as reflected in the Development Budget.

“Project Engineers” means the mechanical, structural and electrical engineers’
engaged in connection with the Project.

“Project Manager” has the meaning given to that term in Section 3.2.

“Project Schedule” has the meaning given to that term in Section 2.3.

“Project Team” has the meaning given to that term in Section 2.2.

“Punchlist” has the meaning given to that term in Section 2.10(c).

“Punchlist Items” means any items necessary to complete the Improvements in
compliance with Applicable Laws, the Approved Plans and the other requirements
of this Agreement after receipt of the Completion Notice (it being understood
that the nature of the Punchlist Items is such that they will, not materially
interfere with the use, occupancy or enjoyment of the Building by Skechers
Parent as tenant under the Lease).

“Skechers Parent” means Skechers USA, Inc., a Delaware corporation.

“Soft Costs” means those Project Costs so designated in the Development Budget.

“Standard of Quality” has the meaning given to that term in Section 2.5.

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“Statement of Project Costs” has the meaning given to that term in Section
2.11(b).

“Substantial Completion” has the meaning set forth in the Lease.

Section 1.2Other Definitions.  Other terms defined in this Agreement have the
meanings so given them.  Capitalized terms used but not defined herein shall
have the same meaning herein as in the LLC Agreement.

Section 1.3Terminology.  Unless the context of this Agreement clearly requires
otherwise, (a) pronouns, wherever used herein, and of whatever gender, shall
include natural persons and corporations, partnerships, limited liability
companies and entities of every kind and character, (b) the singular shall
include the plural wherever and as often as may be appropriate, (c) the word
“includes” or “including” shall mean “including without limitation”, and (d) the
words “hereof”, “herein”, “hereunder”, and similar terms in this Agreement shall
refer to this Agreement as a whole and not any particular section or article in
which such words appear.  The section, article, and other headings in this
Agreement are for reference purposes and shall not control or affect the
construction of this Agreement or the interpretation hereof in any
respect.  Article, section, subsection, and exhibit references are to this
Agreement unless otherwise specified.  All exhibits attached to this Agreement
constitute a part of this Agreement and are incorporated herein.  

ARTICLE 2

SCOPE OF SERVICES

Section 2.1General.  Development Manager shall perform, using Due Care, the
services described in this ARTICLE 2 (the “Development Services”) required for
the development of the Project.  Development Manager will coordinate with the
Owner with respect to the matters for which the Owner is involved in accordance
with this Agreement and Development Manager will coordinate with the Skechers
Member with respect to matters for which the Skechers Member is involved in
accordance with this Agreement.  It is understood that any decisions, approvals,
consents or other rights or obligations of the Owner under this Agreement shall
be subject to the provisions of the LLC Agreement which allocate the authority
to make such decisions, approvals, consents or to exercise such rights or
obligations between the Skechers Member and the HF Member, and nothing in this
Agreement is intended to modify or amend such provisions of the LLC Agreement.

Section 2.2Project Team.  Development Manager shall coordinate and provide
leadership for the development, design and construction team (the “Project
Team”) for the Project.  The Project Team shall consist of Development Manager,
Owner, the Project Architect, the Project Engineers and the General Contractor,
and others engaged by Owner to work on the development, design or construction
of the Project.

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Section 2.3Development Budget and Project Schedule.  Attached hereto marked
Exhibit “A” is a development budget (as amended, the “Development Budget” and
which includes any Added Costs) and a project schedule (as amended, the “Project
Schedule”) for the Project.  It is understood and agreed that the Development
Budget contains estimates of the costs of construction of the Project (including
both the costs of the Landlord Improvements and the Tenant Improvements, as such
terms are defined in the Lease), and that such costs of construction may change
based upon the actual time of construction, final specifications, tariffs and
regulatory changes.  Landlord has no control over the cost of labor and
material, competitive bidding, or market conditions, and the opinion of costs is
based on consultations with experienced general contractors and adjusted to
accommodate factors known at the time.  Development Manager shall revise the
Development Budget and the Project Schedule from time to time, but except as set
forth in Section 4.1, no amendment or modification of the Development Budget or
the Project Schedule shall be effective until Approved by Owner and approved by
Skechers Member.  Notwithstanding anything herein to the contrary, the
Development Manager shall not be responsible if Completion of the Project does
not occur by the date set forth in the Project Schedule, except as a result of
the gross negligence or the willful misconduct of Development Manager.

Section 2.4Plans.  Development Manager has coordinated the preparation of the
plans and specifications for the Project which have been approved by both the
tenant under the Lease, and Owner (the “Approved Plans”).  The Approved Plans
may not be amended or modified in any material respect without the approval of
Owner and the approval of the tenant under the Lease.

Section 2.5Standard of Quality.  Development Manager has prepared and Owner has
approved detailed general and specific standards for the overall development of
the Project, as set forth in the Approved Plans and covering site use, selection
of materials, building systems, landscaping, parking and other features related
to development of the Project (the “Standard of Quality”).

Section 2.6Compliance With Applicable Laws.  Development Manager shall have the
Project Architect (or other appropriate professional) confirm that the Approved
Plans for the Project satisfy the Standard of Quality, and are in substantial
compliance in all material respects with the requirements of the Construction
Loan and all Applicable Laws.

Section 2.7Predevelopment Phase.  Subject to the general provisions of Section
2.1 through Section 2.6 above, Development Manager shall perform the following
predevelopment phase services, to the extent that it has not already done so:

(a)Initial Planning.  Development Manager shall:

(i)Ascertain the significant subdivision, zoning, building code and other
governmental compliance issues for the Project (collectively, the “Entitlement
Requirements”);

(ii)Provide to Owner soils reports, environmental reports and other reports and
studies in Development Manager’s possession in connection with the Project;

(iii)Obtain preliminary site plans, surveys, topographical surveys and schematic
designs and elevations for the Project; and

(iv)Coordinate preparation and submission of materials, plans and information as
necessary under the Entitlement Requirements, and coordinate the Project
development requirements of governmental agencies.

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(b)Schematic Design.  Development Manager shall coordinate the Project
Architect’s preparation of schematic design drawings for the Project and assist
in evaluating design alternatives in light of Owner’s construction, timing,
function and marketing goals and objectives.

(c)Design Development.  Development Manager shall review all plans and
specifications prepared by the Project Architect and evaluate such plans and
specifications in light of the approved design concept for the Project, Owner’s
cost and time constraints and Owner’s objectives.  

(d)Working Drawings.  Development Manager shall:

(i)Coordinate the preparation by the Project Architect of the construction
drawings; and

(ii)Make recommendations regarding alternative design and construction solutions
whenever design details appear to adversely affect construction feasibility, the
Development Budget or the Project Schedule or to deviate from the Approved
Plans.

(e)Contractor Bidding and Selection.  Development Manager shall:

(i)Coordinate the preparation of the “Bid Documents,” which shall consist of,
among other things, the Approved Plans, construction drawings (to the extent
completed), proposed form of Project Construction Contract and instructions to
bidders.  

(ii)Make recommendations for prequalification criteria for bidders, including
any need for performance bonding of any bidder if selected as a contractor, and
develop a bid list for prospective contractors and subcontractors.

(iii)Develop competitive bidding procedures and requirements.

(iv)If appropriate, conduct prebid conferences to familiarize bidders with the
Bid Documents and any special or unique systems, materials, methods or
requirements.

(v)Prior to commencement of construction of any Improvements, including any site
work, the General Contractor and the Owner will enter into a guarantied maximum
cost construction contract for the Project (the “Project Construction
Contract”).  Development Manager shall assist Owner in negotiating the Project
Construction Contract and advise Owner as to holdbacks or retentions on
contractor payments and other contract provisions to be incorporated in the
Project Construction Contract so that Development Manager can properly manage
the General Contractor’s performance.  

(vi)Provide recommendations regarding the General Contractor’s proposed
temporary Project facilities, equipment, materials and services during
construction and the assignment of responsibilities relating to same.

(vii)Conduct pre-award conferences with the successful bidders, prepare and
negotiate the Project Construction Contract on terms and conditions acceptable
to Owner (for approval and execution by Owner) and advise Owner regarding
subcontractors and major suppliers for the Project.

(f)Payment of Project Architect and Project Engineers.  Development Manager
shall review and advise Owner with regard to all requests for payment from the
Project Architect, the

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Project Engineers and any other consultants having contracts with Owner or
Development Manager for the Project.

(g)Development Approvals.  Development Manager shall assist Owner, the General
Contractor, the Project Architect and the Project Engineers with any
governmental authorities having jurisdiction over the Project and shall process
and obtain all governmental and third party approvals required in connection
with the Project, including all approvals, permits, and authorizations necessary
for development, construction, use or occupancy of the Project, the subdivision
of the land, construction, use and occupancy of the Project, establishment of
communities facilities districts, establishment of a property owner’s
association and related documentation, and all necessary public improvement
agreements, easements, dedications or other similar agreements required in
connection with the Project (collectively, the “Development Approvals”).

(h)Meetings.  Development Manager shall meet with a representative of Owner on a
regular basis, to update Owner on the status of the Project and apprise Owner of
major events and issues anticipated by Development Manager with respect to the
Project.

(i)Contracts with Project Architect and the Project Engineers.  Development
Manager shall negotiate on Owner’s behalf (for approval and execution by Owner)
and advise Owner with respect to service contracts, including, but not limited
to, contracts with the Project Team and other consultants, if any, as are
necessary or appropriate in order to construct the Project.  

(j)Development Easements.  Upon Development Manager’s request, Owner shall enter
into and grant such development easements, rights of way and other similar
encumbrances affecting title to the Project to the extent reasonably required
for or in connection with the orderly development of the Project.

Section 2.8Construction Phase.  The “Construction Phase” shall commence at the
time designated in the Project Schedule.  Subject to the general provisions of
Section 2.1 through Section 2.6 above, and in addition to services described
under Section 2.7, which (to the extent applicable) continue throughout the term
of this Agreement, Development Manager shall perform the following construction
phase services, to the extent that it has not already done so:

(a)Critical Path Schedule.  Development Manager shall direct the General
Contractor (and others, where appropriate) to prepare and update a critical path
schedule for completion of the Project.  In the event of delays impacting the
critical path schedule, Development Manager shall make recommendations for
corrective action by the General Contractor.

(b)Site Preparation.  Development Manager shall monitor site work for the
Project, as well as any environmental remediation to be performed upon the
Land.  

(c)Applications for Payment Requirements.  Development Manager shall (i)prepare
procedures for the review and, subject to the provisions in subparagraph (o),
processing of applications for payment received from the General Contractor,
(ii) assure that permitted holdbacks or retentions are maintained upon payments
to the General Contractor, (iii) confirm that applications for payment are
complete and correct and accompanied by all required documents, (iv) obtain the
Project Architect’s certification of each application for payment and (v) make
recommendations to Owner concerning payment of applications for payment and
other Project Costs.  Development Manager shall prepare and coordinate orderly
procedures, consistent with the requirements of the Construction Loan, for
payment of all Project Costs.

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(d)Certificate.  Whenever certificates of the Project Architect or the Project
Engineers are required in accordance with the Construction Loan Agreement,
Development Manager shall coordinate delivery of such certificates to assure
that necessary certificates are received.

(e)Construction Administration.  Development Manager will provide overall
coordination of development of the Project, including the following:

(i)Meetings.  Schedule and conduct (not less than once per month) job-site
meetings to discuss construction procedures, progress and scheduling with
General Contractor and the Project Architect.  Development Manager shall prepare
or direct the General Contractor or Project Architect to prepare minutes of
construction meetings and distribute such meeting minutes to the Project Team.

(ii)Contract Performance.  Monitor the performance, assure maintenance of
applicable holdbacks and assist in the enforcement (short of instituting any
legal proceeding) of the obligations of the General Contractor under the terms
of the Project Construction Contract.

(iii)Bonds.  If required under the terms of the Construction Loan, prior to the
General Contractor performing Work (as defined in the Project Construction
Contract), Development Manager shall obtain from the General Contractor both a
General Contractor’s payment bond and a performance bond in the full value of
the Project Construction Contract issued by a corporate surety or sureties
reasonably satisfactory to Owner or the Lender, as applicable, naming Owner or
the Lender, as applicable, as a beneficiary.

(iv)General Contractor Identification.  Make timely recommendations to Owner for
the employment or dismissal of the General Contractor and all attorneys,
architects, engineers, consultants and other professionals and personnel as are
necessary or appropriate to construct and complete the Project.

(v)Lien Claims.  Obtain from the General Contractor the negotiation of
settlements with all material mechanics, materialmen and subcontractors, and if
any mechanic’s, materialman’s or similar lien and/or stop notices are filed with
respect to the Project, take such action (short of instituting legal
proceedings) which is within the power of Development Manager, or cause the
General Contractor to take such lawful action, as is appropriate to contest or
settle and discharge such lien or liens and/or stop notices and to remove the
same by bonding or otherwise within thirty (30) days after receiving notice of
the filing thereof.

(vi)Warranty Corrections.  Cause to be enforced (short of instituting any legal
proceeding) all warranties and guaranties of the General Contractor or
materialmen with a view to correcting any known or identified defects in the
construction of the Project or in the installation or operation of any equipment
or fixtures therein, at the expense of the General Contractor or materialmen and
cause inspections of the completed Project to be made by the Project Architect
with a view to discovering any such defects.

(vii)Monitor Work.  Monitor the performance of work by the Project Team
concerning matters relating to the Project.  If the Development Manager
determines that any members of the Project Team are not in compliance with the
terms and conditions of their respective agreements or contracts with Owner,
Development Manager shall notify Owner of such noncompliance and the nature
thereof and of Development Manager’s recommendations with respect thereto.  Any
legal action to be taken with respect to such noncompliance shall be entirely at
the discretion of and under the direction of Owner.  In connection with
monitoring the work, Development Manager shall not cause or knowingly

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permit any Hazardous Materials to be brought upon, kept or used in or about the
Land or Project except to the extent such Hazardous Materials: (A) are necessary
for the construction of the Project, (B) are required by the Approved
Plans,  and (C) are used, stored and disposed of in compliance with all
Applicable Laws.

(viii)Accidents.  Notify Owner of any material accidents or damage or injury
claims arising from work on the Project promptly after Development Manager has
actual knowledge of such events.

(ix)Shop Drawings and Other Submittals.  Coordinate the Project Architect’s
review and approval of shop drawings, product data and other submittals by the
General Contractor.  Coordinate the delivery by the General Contractor to Owner
of the guaranties, warranties, releases, affidavits, bonds, manuals, insurance
certificates and other items required by the Project Construction Contract.

(x)Utilities.  Coordinate the obtaining and installation of all utilities and
similar services required for the Project.

(f)Change Orders.  Development Manager shall coordinate the negotiation and
processing of all change orders to the Project Construction Contract for
Approval by Owner.  Copies of all change orders will be promptly provided to
Skechers Member.  The Development Budget and/or Project Schedule, as applicable,
will be revised to reflect Added Costs, if any, resulting from change orders
which are Approved by Owner.  Development Manager shall process and administer
change orders.  Owner and agrees to reasonably and timely consider and act upon
change orders and resulting changes in the Development Budget (each, a
“Development Budget Amendment”) and the Project Schedule (each, a “Project
Schedule Amendment”).  Notwithstanding the foregoing, Owner need not give
approval of any change order unless (i) the change is permitted under the
Construction Loan, and conforms to the Standard of Quality, and (ii) the
aggregate estimated total costs of the Project following such change order,
Development Budget Amendment do not exceed (and, prior to Completion of the
Project, are not reasonably estimated to exceed) the amount available to pay
such costs under the Development Budget immediately prior to such Development
Budget Amendment therefor (as a result of available funds in the contingency
line item or realized cost savings in another line item in the Development
Budget), or alternatively either the HF Member or the Skechers Member agrees to
fund such excess costs (as required under the LLC Agreement). Subject to
approval of the Lender, Development Manager may allocate any contingency line
item (Hard Cost or Soft Cost) in the Development Budget and realized cost
savings to other line items within the Development Budget.

(g)Construction Phase Reporting.  Development Manager shall furnish to Owner and
Skechers Member reports, not less frequently than monthly, containing (i) a
status of construction; (ii) a comparison of the Development Budget (which shall
be presented in such a fashion that it shows the original Development Budget and
all changes thereto, including Added Costs, if any) on a major line item basis
to construction costs by trade incurred through the date of the report and a
comparison of the Project Schedule to the work actually completed through the
date of the report; (iii) a summary of change orders made during the month
covered by the report; (iv) any revision to the Project Schedule and/or
Development Budget made during the month covered by the report; (v) an estimate
of the costs to be incurred in completing the Project and (or) any other
information reasonably requested by Owner or Skechers Member.  Reports will be
provided on a timely basis consistent with any Construction Loan requirements.

(h)Technical Inspections.  In instances where technical inspection and testing
unless are being provided by the Project Architect or other third party (which
shall be a Project Cost paid by

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Owner), Development Manager shall assist the Project Architect or other third
parties and the General Contractor in coordinating such technical inspection and
testing.  All technical inspection reports will be in a format approved by and
will be reviewed by Development Manager.

(i)Contract Enforcement.  When appropriate, Development Manager shall advise and
make recommendations with respect to the exercise of Project Construction
Contract prerogatives such as accelerating the work when scheduled goals are in
jeopardy or requiring that work found to be defective be repaired or replaced.

(j)Construction Loan.  Development Manager shall (i) act as Owner’s agent in
administering Owner’s responsibilities and assuring compliance by Owner with the
terms and provisions of the Construction Loan documents, and (ii) subject to
Owner’s cooperation with Development Manager, coordinate the timely delivery of
all necessary documents and information to obtain monthly advances of proceeds
of the Construction Loan to pay Project Costs in accordance with the
Construction Loan documents, including the General Contractor’s approved monthly
applications for payment, interest on the Construction Loan, fees and other
Project Costs reflected in the Development Budget.

(k)Insurance of Project Architects and Engineers.  Development Manager shall
confirm that the Project Architect, the General Contractor and all Project
Engineers obtain all insurance policies required under their respective
contracts, and shall obtain appropriate certificates of insurance from each as
required.

(l)Claims.  Development Manager shall keep track of delays in progress of the
work and perform a preliminary evaluation of the contents of all claims
(including claims for increases in the guarantied maximum cost under the Project
Construction Contract or extensions of time), obtain the factual information
concerning the claim, review the time/cost impact of the alleged claim and make
recommendations as to Owner’s position to the General Contractor or applicable
subcontractor.  Development Manager shall also coordinate the submission of all
insurance claims (whether by the General Contractor, Development Manager, Owner
or others) and shall process all paperwork relating to such claims.

(m)Preparation of Punchlist.  Development Manager shall assist the General
Contractor, the Project Architect and the Project Engineers in scheduling
inspections (which shall include Skechers Parent, as tenant under the Lease) to
determine the date of Substantial Completion (or Substantial Completion of
phases, if the Improvements are completed in phases), and the preparation of the
Punchlist.  Development Manager shall assist the Project Architect in reviewing
the Punchlist Items and interface with the Project Architect, the General
Contractor, and Skechers Parent, as tenant under the Lease, in coordinating
completion of all Punchlist Items.  Development Manager shall monitor the
General Contractor’s completion of all Punchlist Items.

(n)Shop Drawings.  Development Manager shall monitor the Project Architect’s
review of shop drawings, product data, sample and submittals, and will use
reasonable efforts to cause the Project Architect to respond in a timely fashion
so as not to cause delay in construction of the Project.

(o)Bank Accounts/Withdrawals.  

(i)Owner shall establish a bank account into which shall be deposited sufficient
funds to timely pay Project Costs as they are incurred (including deposits of
proceeds of the Construction Loan advanced by the Lender).  Designated
representatives of the Development Manager shall be the signatories on such bank
account, and withdrawals from such bank account (which includes checks, wire
transfers or other withdrawals) may be made upon the signature of any one of
such

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designated representatives.  Designated representatives of Skechers Member shall
also be signatories on such bank account, but shall not exercise any right to
withdraw funds from such bank account unless and until the HF Member has been
removed as a Managing Member under the LLC Agreement.  Notwithstanding the
foregoing,  Development Manager covenants that it shall diligently and prudently
coordinate and administer expenditures from the bank account in accordance with
the Development Budget and that all expenditures from the bank account shall be
made in strict conformance with the Development Budget in all respects
(including the nature, amount and timing of each such expenditure).

(ii)From time to time, but not more frequently than once each month (except
under unusual circumstances) Developer Manager shall submit to Skechers Member a
detailed schedule of all withdrawals which Development Manager has approved for
the payment of Project Costs, together with reasonable back-up documentation
such as invoices or statements for labor and/or material for which payment will
be made.

Section 2.9Affiliate Contracts.  Without the express prior written consent of
Owner, Development Manager shall not enter into any contract with an affiliate
of Development Manager or HF Member in connection with the Project, except to
the extent permitted under the LLC Agreement.

Section 2.10Occupancy; Punchlist.

(a)Upon Substantial Completion of the Project, the Development Manager shall
certify to the Owner (or cause the General Contractor to certify to the Owner)
in AIA form G-704 or substantial equivalent:  (i) that, to its knowledge, the
Substantial Completion of the Project has been achieved, in conformity with the
requirements of the Project Construction Contract, and in compliance in all
material respects with Applicable Laws, all Development Approvals, the Standard
of Quality and the Construction Loan documents, free of liens or outstanding
claims for payment for labor (excepting only liens or claims of liens relating
to matters that may be the subject of legitimate disputes between the Developer
and the General Contractor or subcontractors performing work on the Project,
provided the same have been bonded off or insured over to the reasonable
satisfaction of the Owner and the Lender by Development Manager), services,
materials or supplies, subject only to completion of the Punchlist Items; and
(ii) that, to its knowledge, the total cost to complete any remaining Punchlist
Items on the Punchlist is reflected on the Statement of Project Costs.

(b)Upon Substantial Completion of the Project, Development Manager shall apply
for, or have the General Contractor apply for, and obtain all required occupancy
permit(s) for the Improvements which are required to be obtained by Owner
pursuant to the Lease.

(c)Within five (5) business days following the Owner’s receipt of the Completion
Notice with respect to the Improvements (or portions thereof, if completed in
phases), Development Manager and the Owner (and, if requested by Owner, the
Project Architect and such other consultants as Owner shall desire), together
with representatives of Skechers Parent, as tenant under the Lease, will conduct
a walk-through inspection of the Improvements confirming that such Improvements
have achieved Substantial Completion in accordance with the requirements of this
Agreement, the Lease and the Contract Documents, and to jointly prepare a list
(the “Punchlist”) of the Punchlist Items needing correction or
completion.  Development Manager shall cause to be completed the Punchlist Items
for the Improvements within forty-five (45) days following delivery of the
Completion Notice for the Improvements, subject to delay for items which due to
season or the nature of the item are not practical to complete and which do not
interfere in any material respect with the use or enjoyment of the Building by
the tenant under the Lease.

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Section 2.11Close-Out.

(a)Upon Substantial Completion of the Project, Development Manager shall give
notice to Owner and Skechers Member.  Within thirty (30) days following delivery
of such notice (or, with respect to items that cannot reasonably be expected to
be completed within such thirty (30) day period, as soon thereafter as
Development Manager can, with the exercise of due diligence, complete such
items), Development Manager shall complete the following (herein sometimes
referred to as “Close-Out” of the Project), (i) deliver to Owner and Skechers
Member a Statement of Project Costs prepared by Development Manager and
certified as true and correct to its knowledge by Development Manager; (ii)
prepare or cause to be prepared and delivered to the Owner all certificates and
documents that Owner and/or Development Manager are required to deliver to the
Lender in accordance with the Construction Loan documents; (iii) prepare or
cause to be prepared and delivered to Owner such other documents and information
as Development Manager may be obligated to deliver to Owner in connection with
the Substantial Completion of the Project; (iv) monitor the compliance of the
Project Architect, the Project Engineers, and the General Contractor, as
appropriate, with the provisions of their respective contracts with the Owner
relating to the Close-Out of the Project; and (v) without limiting the
foregoing, ensure that each of the following shall have been completed and
delivered to Owner:

(i)As built drawings and specifications.

(ii)Change orders.

(iii)Reports including, but not limited to, soils reports, concrete reports,
equipment testing and balancing reports, termite reports, etc.

(iv)Operation maintenance manuals for all equipment.

(v)Certifications and test results required in accordance with Applicable Laws.

(vi)Warranties or guaranties, including but not limited to the roof warranties,
HVAC warranties, plumbing warranties, etc.

(vii)Keys for all locks.

(viii)Progress photos taken at least monthly throughout the Project.

(ix)Completion Notices as described in Section 2.10(a) above.

(x)All necessary governmental and municipal permits or approvals (including
certificates of occupancy) for the Improvements.

(xi)Final lien waivers from the General Contractor and all material
subcontractors and suppliers supplying services or material in connection with
the construction and equipping of the Project (excepting only liens or claims
relating to matters that may be the subject of legitimate disputes between the
Development Manager or Owner, on the one hand, and the General Contractor or
subcontractors performing work on the Project or any portion thereof, on the
other hand, provided the same have been bonded off or insured over to the
reasonable satisfaction of the Owner and the Lender).  

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(xii)An “ALTA-ACSM As Built” survey of the Project completed by a licensed
surveyor, certified as to accuracy.

(xiii)The Punchlist, including for each item shown thereon, the estimated time
and cost of completing such item.

(b)For purposes hereof, the “Statement of Project Costs” shall mean a statement
of the total of all Project Costs incurred in connection with the completion of
the Project, and also including all items on the Punchlist.  Development Manager
shall prepare and deliver to Owner a reconciliation of the Statement of Project
Costs with the Development Budget, both in the aggregate and for each major line
item in the Development Budget.

(c)Development Manager acknowledges that the Project shall not be deemed
complete until Development Manager has completed the Closeout of the Project,
including satisfaction of all of the conditions set forth in this Section 2.11,
completion of all items on the Punchlist, and satisfaction of all other
conditions to completion set forth in the Construction Loan Agreement (herein
referred to as “Completion of the Project”).  Upon Completion of the Project (or
if this Agreement is otherwise terminated), to the extent not previously done,
Development Manager shall do, and execute and/or deliver to Owner (and Skechers
Member with respect to item (i)) the following with respect to the Project, all
of which shall be done, executed and/or delivered as promptly as is reasonably
practicable:

(i)Prepare a final accounting of all funds possessed by or under the
coordination or control of Development Manager, reflecting receipts and
disbursements in connection with the Project through the date of Completion of
the Project or termination, as applicable.

(ii)Return the balance of monies of Owner held by Development Manager.

(iii)Execute and/or deliver all documents and instruments necessary to transfer
to Owner or its nominee, to the extent transferable, all permits held by
Development Manager necessary to construct the Project.

(iv)Take such other actions as Owner may reasonably require to assure an orderly
transition of management of the completion of the Project.

ARTICLE 3

TERM OF AGREEMENT AND PERSONNEL

Section 3.1Term.  The term of this Agreement shall commence upon the date of
this Agreement and shall continue, unless sooner terminated in accordance
herewith, until Completion of the Project.

Section 3.2Personnel.  Development Manager shall designate an individual to
serve as the project manager (the “Project Manager”).  Development Manager shall
ensure that the Project Manager shall be competent to perform the services
required as such.  

(a)Project Manager shall devote such portion of his or her time, efforts and
management skills to the Project using Due Care as is reasonably necessary and
appropriate to complete the Project, subject to Force Majeure, in accordance
with the Project Schedule and Development Budget.

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(b)Any communication given to the Project Manager by Owner shall be deemed to
have been given to Development Manager.

(c)Development Manager will also provide such personnel and assistants,
including professional and secretarial/clerical support staff, as may be
necessary to perform its Development Services in a diligent and timely
manner.  Development Manager shall be responsible out of its own funds for all
salaries, overhead, costs and expenses related to the employment of the Project
Manager and any other personnel by Development Manager, which salaries,
overhead, costs and expenses shall expressly not be a reimbursable item.  All
persons, other than independent contractors, employed by Development Manager in
the performance of its responsibilities hereunder shall be exclusively
controlled by and shall be the employees of Development Manager and not of
Owner, and Owner shall have no liability, responsibility or authority with
respect thereto.

ARTICLE 4

DEVELOPMENT BUDGET AND LIABILITY
OF DEVELOPMENT MANAGER

Section 4.1Increases in Development Budget.  Subject to any restrictions set
forth herein or in the LLC Agreement regarding increases in the Development
Budget, the Development Budget will automatically be increased from time to time
to include therein all of the following (collectively, the “Added Costs”):

(a)Increases in the Project Costs resulting from change orders which are
Approved by Owner;

(b)Increases in the Project Costs incurred in connection with changes in the
scope of the Project caused by changes in Applicable Laws that are required by
such Applicable Laws to be complied with;

(c)Increases in Project Costs due to expressly permitted increases in the
guarantied maximum cost under the Project Construction Contract;

(d)Increases in Project Costs due to (i) Force Majeure (as defined herein); or

(e)Increases in Project Costs pursuant to Section 4.6 below.

Increases in Project Costs include (without duplication) those increases which
result from time delays due to the occurrence of any of the foregoing events
((a)-(d)).

Section 4.2For purposes hereof, the term “Force Majeure” means the following
events or circumstances, to the extent that they cause the delay of performance
of any obligation hereunder by Development Manager and (except as otherwise
provided below) that could not, through the use of Due Care by Development
Manager, be anticipated and mitigated:  (a) strikes, lockouts or picketing; (b)
riot, civil commotion, insurrection and war; (c) fire or other casualty,
accidents, acts of God or public enemy; (d) unusually adverse weather conditions
not reasonably expected for the location of the Project and the time of year in
question, or (e) any other similar event which delays the Completion of the
Project and which is beyond the reasonable control of the Development
Manager.  However, in no event shall any of the following be deemed to
constitute Force Majeure: (i) failure to obtain financing for or, failure to
refinance, the purchase, construction or ownership of the Project; (ii)
inability to pay when due monetary sums; or (iii) the acts or omissions of the
Development Manager or any other Person acting by, through or

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under the Development Manager (including without limitation, the acts or
omissions of such Person that cause the event of Force Majeure).  If the
Development Manager shall be delayed, hindered or prevented from performance of
its obligation to achieve Completion of the Project in accordance with this
Agreement by reason of Force Majeure, the time for such performance shall be
extended on a day-for-day basis for each day of actual delay, provided that the
following requirements are complied with by the Development Manager:  (y) the
Development Manager shall give prompt written notice of such occurrence to Owner
and Skechers Member, describing the Force Majeure event with specificity, and
(z) the Development Manager shall diligently attempt to remove, resolve or
otherwise eliminate such Force Majeure event and minimize the cost and time
delay associated with such event, keep the Owner and Skechers Member advised
with respect thereto, and commence performance of its obligations under this
Agreement promptly upon such removal, resolution or elimination.  

Section 4.3Development Manager’s Indemnity.  Development Manager shall indemnify
Owner and its partners, members, managers, shareholders, directors, officers and
employees and the heirs, successors and assigns of each of the foregoing
(collectively, the “Indemnified Parties”), defend the Indemnified Parties and
hold the Indemnified Parties harmless from and against any and all suits,
actions or claims and from resulting damages, losses, costs or expenses
(including reasonable attorneys’ fees and court costs, but excluding
consequential damages and punitive damages) incurred by the Indemnified Parties
or any one or more of them due to or arising from, directly or indirectly, (a)
the grossly negligent acts, or omissions, willful misconduct or material breach
of this Agreement by Development Manager, (b) the misapplication or
misappropriation by Development Manager of any funds of Owner, (c) the actions
of Development Manager outside the scope of authority granted to Development
Manager under this Agreement, or (d) the material breach by the Development
Manager of any of its material obligations under this Agreement.

Section 4.4Owner’s Indemnity.  Owner shall indemnify the Development Manager and
its members, managers, shareholders, directors, officers and employees and the
heirs, successors and assigns of each of the foregoing (collectively, the
“Manager Indemnified Parties”), defend the Manager Indemnified Parties and hold
the Manager Indemnified Parties harmless from and against any and all suits,
actions or claims and from resulting damages, losses, costs or expenses
(including reasonable attorneys’ fees and court costs, but excluding
consequential damages and punitive damages) incurred by the Manager Indemnified
Parties or any one or more of them due to or arising from, directly or
indirectly, the willful misconduct or breach of this Agreement by Owner or any
other loss not subject to the indemnification obligations set forth in Section
4.3 arising from the performance of Development Manager’s obligations under this
Agreement (except to the extent resulting from the acts or omissions of HF
Member in violation of any provisions in the LLC Agreement).

Section 4.5Records.  Records of all time charged to the Project, and records of
Development Services performed shall be maintained on a customary and consistent
basis and shall be available to Owner at mutually convenient times and upon
reasonable prior written notice for review and audit. Development Manager shall
maintain all accounting records and receipts for at least three (3) years from
Completion of the Project.  Records regarding any dispute involving this
Agreement shall be maintained until such dispute is resolved.

Section 4.6Time Delays/Arbitration.  Under the LLC Agreement, certain matters
may be submitted to binding arbitration.  If, as a result of the institution of
any arbitration between HF Member and Skechers Member, the arbitrator determines
that there is a resulting change in the Project Schedule, then the Project
Schedule shall be modified accordingly.  

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ARTICLE 5

COMPENSATION

Section 5.1Development Manager Fee.  In consideration of Development Manager’s
Services hereunder, Owner shall pay to Development Manager a fee (the
“Development Manager Fee”), equal to three and one-half percent (3.5%) of the
total Project Costs (including both Hard Costs and Soft Costs, but exclusive of
the cost of the Land, as reflected in the Development Budget) minus the original
principal balance of the HF Loan (as defined in the LLC Agreement).  Subject to
availability of draws under the Construction Loan, such fee shall be paid in
equal monthly installments over the pro-forma construction period (as set forth
in the Project Schedule).  Development Manager shall not be entitled to
reimbursement of any expenses incurred in performing the Development Services
that represent compensation of any of Development Manager’s employees or
otherwise represent Development Manager’s overhead, but Development Manager
shall be entitled to reimbursement of reasonable out-of-pocket expenses incurred
in performing the Development Services.

Section 5.2Third Party Consultants.  It is contemplated that Owner will engage
all contractors, architects, engineers, attorneys and other consultants and
professionals to be employed in connection with the Project.  Development
Manager is not obligated to pay the compensation of any such third party
consultants or professionals (other than on behalf of Owner).

ARTICLE 6

INSURANCE

Section 6.1Development Manager Insurance.  Development Manager shall procure and
maintain (or cause the General Contractor to procure and maintain), throughout
the term of this Agreement all insurance required pursuant to this Section
6.1.  

(a)The form and substance of all insurance policies obtained by Development
Manager in meeting the requirements under this Section 6.1 shall be subject to
reasonable approval by Owner.  All such policies shall be issued by insurance
companies qualified to transact insurance in the state or commonwealth in which
the Project is located and with a minimum financial rating of A- Class IX by
A.M. Best, or otherwise acceptable to Owner.  Development Manager shall furnish
a certificate from its insurance carrier(s) ten (10) days before commencement of
the work, and annually thereafter, demonstrating that it has complied with the
above requirements and stating that the insurer will provide not less than
thirty (30) days prior notice of the cancellation, non-renewal, or material
change in any of the coverages so required.

(b)Insurance provided under Section 6.1(c):

(i)Shall be primary and not in excess of or contributing to any insurance or
self-insurance maintained by Owner, any other party whom Owner identifies, or
its respective consultants and agents;

(ii)For insurance specified by Section 6.1(c) shall be endorsed to state that
Owner, and any other party whom Owner identifies and their respective partners,
members, managers, directors, officers, and employees are named as Additional
Insureds as per ISO Form CG2037 1001. if reasonably available,  or its
substantial  equivalent.

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(c)(i)Commercial General Liability Insurance, with a combined single limit of
$1,000,000 for bodily injury and property damage per occurrence and annual
project aggregate of $2,000,000, and $1,000,000 for completed operations.

(ii)Business Automobile Liability Insurance, with a combined single limit for
bodily injury and property damage per accident of $1,000,000 covering any and
all owned, non-owned and hired autos and including Broadened Pollution Coverage
per CA9948 or its equivalent.

(iii)Worker’s Compensation and Employer’s Liability Insurance that provides the
statutory benefits required by law (but not less than $1,000,000 for Employer’s
Liability Insurance) .

(iv)Excess  liability insurance, following the form,  supplementing the general
liability, auto liability, and employers liability referenced above with minimum
limits of $5,000,000.

(d)Any insurance that contains a deductible or self-insured retention in excess
of $25,000 shall require Approval by Owner.

(e)Development Manager shall require the General Contractor to procure and
maintain insurance as specified in Section 6.1(c).

(f)If Development Manager desires to have limits in excess of those required or
desires to carry additional coverages for its own protection, the arrangements
therefor and the cost thereof shall be the sole responsibility of Development
Manager.  Otherwise, such insurance shall be paid for by Owner, to the extent
not paid by the General Contractor.

(g)Within ten (10) days of Owner’s request, Development Manager shall provide
such requesting party copies of all insurance policies required under Section
6.1(c).  

(h)In the event Development Manager does not comply with the insurance
requirements as set forth under Section 6.1, Owner may, at its option (and
without waiving any other rights or remedies),to the extent possible, obtain and
maintain such  insurance, and the cost of such insurance shall be paid by
Development Manager and may be deducted from Development Manager’s compensation.

Section 6.2Owner Insurance.  Owner shall procure and maintain all insurance
pursuant to this Section 6.2 covering Development Manager, the General
Contractor and all other contractors and professionals and Owner.

(a)All such policies shall be issued by insurance companies qualified to
transact insurance in the state or commonwealth in which the Project is located
and with a minimum financial rating of A- Class IX by A.M. Best.

(b)Insurance provided under Section 6.2(c):

(i)Shall be endorsed to state that the right of cancellation or material change
in coverage by the insurance carrier is waived, unless thirty (30) days’ written
notice is furnished by registered mail to Development Manager.

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(c)Within thirty (30) days following the Effective Date and for so long as the
Improvements are under construction pursuant to the Project Construction
Contract, Owner shall obtain and maintain “Builders Risk” Property Insurance on
an “all risk” peril form ( including all usual and customary coverage for a
Project of this nature) for an amount equal to the completed replacement value
of the Improvements.  Such insurance shall include the interests of Owner,
Development Manager, the General Contractor and subcontractors in the work, as
their interests may appear.  A certificate of insurance evidencing the foregoing
shall be provided to Development Manager upon request.

Section 6.3Waiver of Subrogation.  To the fullest extent permitted without
invalidating any insurance policies required hereunder, Owner and Development
Manager waive all rights against (a) each other and any of their subcontractors,
agents and employees, each of the other, and (b) the General Contractor, the
Project Architect, and any of their subcontractors, agents and employees, for
damages caused by fire or other perils to the extent covered by property
insurance obtained to this Section 6.3 or other property insurance applicable to
the construction of the Project, except such rights as they have to proceeds of
such insurance held by the Owner as fiduciary.  The Owner or Development
Manager, as appropriate, shall require of the General Contractor, the Project
Architect, and the subcontractors, agents and employees of each of them, by
appropriate agreements, written where legally required for validity, similar
waivers each in favor of other parties enumerated herein.  The policies shall
provide such waivers of subrogation by endorsement or otherwise.  A waiver of
subrogation shall be effective as to a person or entity even though that person
or entity would otherwise have a duty of indemnification, contractual or
otherwise, did not pay the insurance premium directly or indirectly, and whether
or not the person or entity had an insurable interest in the property damaged.

ARTICLE 7

LIMITATION AS TO SERVICES AND AUTHORITY

Section 7.1Limitation.  Without otherwise relieving Development Manager of its
obligation to perform the Development Services:

(a)Nothing in this Agreement shall be construed to relieve the Project
Architect, the Project Engineers, or any other contractors, subcontractors,
consultants, suppliers, attorneys or other professionals rendering services in
connection with the Project of their responsibilities to perform their duties in
accordance with the terms of their respective contracts, or to preclude Owner or
Development Manager from pursuing their respective rights vis-à-vis such
consultants or professionals.  Furthermore, the furnishing of services by the
Owner or other consultants of Owner shall not be construed to relieve
Development Manager of its responsibility to perform its duties in accordance
with this Agreement.

(b)Development Manager shall have no right or obligation to execute any contract
or agreement for or on behalf of Owner except as expressly authorized in writing
from time to time by Owner.

Section 7.2Owner and Skechers Member Approvals.   Except to the extent expressly
permitted under the Development Budget or this Agreement, and without limitation
on the other restrictions contained in this Agreement, Development Manager shall
not take any action, expend any sum, make any decision, give any consent,
approval or authorization, enter into any agreement or incur any obligation with
respect to any of the following matters unless and until the same have been
Approved by Owner and approved by Skechers Member: (a) any change in the
Approved Plans; or (b) any material expenditure or incurring of any material
obligation by or on behalf of Owner except for expenditures made and obligations
incurred pursuant to and specifically set forth in the Development Budget.

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ARTICLE 8

OWNER AND INDEPENDENT CONSULTANTS

Section 8.1Owner’s Inspection Rights.

(a)Development Manager acknowledges that Owner has the right to inspect the
Project and to review all of General Contractor’s applications for payment and
all of Development Manager’s applications for disbursement of Construction Loan
proceeds during normal business hours and upon reasonable prior written notice
to Development Manager.  Development Manager agrees (i) to reasonably cooperate
with Owner in connection with the performance by Development Manager of its
Development Services hereunder, (ii) to provide Owner and Skechers Member copies
of all correspondence, notices, schedules and other information that Development
Manager provides, or is required hereunder to provide to Lender, such delivery
to be simultaneous with delivery of such information to Lender, (iii) except as
expressly permitted under this Agreement and/or the LLC Agreement, not to amend
this Agreement, the Approved Plans, the Development Budget or the Project
Schedule without the Approval by Owner and approval by Skechers Member.  

(b)Skechers Member may retain (at its expense) independent third-party
consultants to advise and assist with the Project. Development Manager agrees to
reasonably cooperate with such consultants, and to allow such consultants
access, with no time, place or prior notice requirement or other restrictions,
requirements or limitations (except as provided in this Agreement and reasonable
safety regulations of the General Contractor that apply also to Development
Manager) to inspect the Project, the work in progress, all work sites involved
in connection with construction of the Project (whether located on the Land or
otherwise) and Development Manager’s and the General Contractor’s books and
records in connection therewith.  Without limiting the generality of the
foregoing, representatives of Skechers Member shall have the right to attend all
monthly construction meetings of the General Contractor and the Project
Architect or the Project Engineers, and all construction meetings of the General
Contractor and representatives of the Lender.  Development Manager shall keep
Skechers Member reasonably informed of any such meetings so that representatives
of Skechers Member may attend.

ARTICLE 9

TERMINATION

Section 9.1Termination by Owner.  If (a) Development Manager defaults in the
performance of any of its obligations hereunder in any material respect and
fails to cure such failure within thirty (30) days following written notice
thereof or, in the case of any such failure which can be cured but not within
such thirty (30) day period, if Development Manager fails to begin reasonable
steps to cure such failure within thirty (30) days following written notice
thereof or does not thereafter diligently prosecute such cure to completion
within ninety (90) days in the aggregate following written notice thereof, or
(b) Development Manager commits any act in its capacity as Development Manager
involving fraud, bad faith, willful misconduct or gross negligence, or (c)  the
HF Member defaults under the LLC Agreement (after any applicable notice and cure
period) then Owner may, without prejudice to Owner’s other rights or remedies
under the LLC Agreement, at law or in equity, terminate this Agreement and take
possession of all work performed hereunder by Development Manager and perform
the Development Services by whatever method Owner may deem expedient including
continuing to use any contractors, subcontractors or other professional
consultants engaged on the Project.  In the event this Agreement is terminated
pursuant to this Section 9.1, Development Manager shall not be entitled to any
portion of the Development Manager Fee not theretofore paid to Development
Manager, and if termination is pursuant to clauses (a) or (b) above, in addition
to any other measure of damages available

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under the LLC Agreement, at law or in equity, Owner shall be entitled to recover
from Development Manager all actual damages (expressly excluding consequential
or punitive damages) incurred by Owner in connection with the Project resulting
from Development Manager’s default hereunder, including all costs and expenses
incurred by Owner in pursuing remedies hereunder or in contracting with another
development manager to complete the Project.  

Section 9.2Suspension and Termination by Development Manager.  If Owner fails to
pay Development Manager any portion of the Development Manager Fee due to
Development Manager hereunder, then (except in the case of a good faith dispute
as to amounts due or in the case of a failure to pay resulting from the acts or
omissions of the HF Member), Development Manager may, without prejudice to
Development Manager’s other rights or remedies, after giving Owner ten (10)
days’ written notice, suspend performance unless Owner makes the required
payment within such ten (10) day period.  If Development Manager suspends
performance, it will be without prejudice to Development Manager’s right to
terminate this Agreement at any time after the date that is thirty (30) days
following the date of such default by Owner unless Owner timely cures the
default in question within the aforesaid 30-day period.  Any suspension by
Development Manager of its performance hereunder pursuant to this Section 9.2
shall in no event cause Development Manager to be in default hereunder and (a)
any additional costs incurred for the Completion of the Project as a result of
or in connection with such suspension of performance shall be deemed to be
included within the meaning of “Added Costs” as used in this Agreement; and (b)
any delays in the Completion of the Project as a result thereof or in connection
therewith shall be deemed to extend all affected dates set forth in the Project
Schedule.  In addition, whether Development Manager suspends performance or
terminates this Agreement pursuant to this Section 9.2, Development Manager
shall be entitled to any and all rights and remedies available at law or in
equity (expressly excluding consequential or punitive damages).

ARTICLE 10

MISCELLANEOUS

Section 10.1Protection of Persons or Property.  If Development Manager becomes
aware of any emergency on the Project affecting the safety of persons or
property, Development Manager shall take all commercially reasonable prudent
actions to prevent threatened damage, injury or loss, and Development Manager
shall notify Owner as soon as practicable thereafter of such emergency.  Unless
such emergency was caused by the gross negligence or willful misconduct of
Development Manager, Owner shall reimburse Development Manager for all
reasonable costs incurred by it in connection with such actions.

Section 10.2Applicable Law.  This Agreement shall be construed in accordance
with the laws of the State of California.

Section 10.3Jurisdiction.  Jurisdiction for all legal actions, including cross
claims brought by Owner or Development Manager against the other, which may
arise as a result of any question, matter or dispute concerning the Project or
this Agreement shall lie exclusively with the appropriate California court in
the County of Los Angeles.

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Section 10.4Notices.  All notices required under this Agreement shall be deemed
to have been received by the addressee if delivered to a duly authorized
representative of the Person for whom they are intended or if sent by certified
mail, return receipt requested, by hand or by overnight courier, addressed as
follows:

If to Owner:

HF Logistics-SKX T2, LLC
c/o Highland Fairview Properties
14225 Corporate Way
Moreno Valley, California 92553
Attention:Iddo Benzeevi

With a copy to:

Skechers R.B., LLC
c/o Skechers USA, Inc.
228 Manhattan Beach Boulevard
Manhattan Beach, California 90266
Attention:David Weinberg
Chief Operating Officer

If to Development Manager:

HFC Holdings, LLC
c/o Highland Fairview Properties
14225 Corporate Way
Moreno Valley, California 92553
Attention:Iddo Benzeevi

With Additional Copy to:

James Lieb, Esq.

Executive Vice President

The Trump Group
400 Park Avenue
New York, NY  10022

 

 

Either party may change its address for the giving of notices by notice given in
accordance with this Section.

Section 10.5Extent of Agreement.  This Agreement represents the entire and
integrated agreement between the parties hereto with respect to Development
Services and supersedes all prior negotiations, representations or agreements,
either written or oral. This Agreement may only be amended by written instrument
executed by Development Manager, Owner, and Skechers Member.

Section 10.6Severability.  In the event that any of the provisions, or portions
or applications thereof, of this Agreement are held to be unenforceable or
invalid by any court of competent jurisdiction, such invalid or unenforceable
provision shall in no way affect the validity and enforceability of the
remaining provisions, or portions or applications thereof.

Section 10.7Successors and Assigns.  Owner and Development Manager,
respectively, bind themselves, their successors, assigns and legal
representatives to the other party to this Agreement and to the successors,
assigns and legal representatives of such other party with respect to all
covenants of this Agreement.  Neither party may assign this Agreement or any of
its obligations to perform under this Agreement without the express written
consent of the other.  However, Owner has the right to assign its rights
hereunder to the Lender.  

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Section 10.8Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original agreement and all of
which together shall constitute one agreement.

Section 10.9Third Party Beneficiaries.  This Agreement is intended for the
benefit of, and shall be enforceable by, only Development Manager, Owner,
Skechers Member and their respective permitted successors and assigns, and not
by any third parties, including creditors of Owner or Development Manager,
except to the extent that Owner’s rights under this Agreement have been assigned
to the Lender.

Section 10.10Effect of Waiver or Consent.  A waiver or consent, express or
implied, to or of any breach or default by any party in the performance of that
party of its obligations under this Agreement is not a consent or waiver to or
of any other breach or fault in the performance by that party of the same or any
other obligation with that party with respect to this Agreement.  Failure on the
part of that party to complain of any act of any party or to declare any party
in default with respect to this Agreement, irrespective of how long that failure
continues, does not constitute a waiver by that party of its rights with respect
to that default until the applicable statute of limitations has run.

Section 10.11Further Assurances.  In connection with this Agreement and the
transactions contemplated hereby, each party shall execute and deliver any
additional documents and instruments in performing additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.

Section 10.12Attorneys’ Fees.  If any litigation is instituted by any party
against another party relating to this Agreement or the subject matter thereof,
the party prevailing in such litigation shall be entitled to recover, in
addition to all damages allowed by law and other relief, all court costs and
reasonable attorneys’ fees incurred in connection therewith.

Section 10.13Independent Contractor; Licenses.  In performing its services
hereunder, Development Manager shall be an independent contractor.  Development
Manager shall, at its own expense, qualify to do business in California (if not
already qualified) and obtain and maintain such licenses, if any, as may be
required to be issued and held in its name for the performance by Development
Manager of the Development Services under this Agreement.

Section 10.14Agreement Negotiation.  This Agreement is the result of detailed
negotiations between the parties and the terms herein have been agreed upon
after prolonged discussions.  All parties agree and acknowledge that they were
represented by competent counsel in such negotiations and that in construing
this Agreement neither party shall be considered to have drafted this Agreement.

Section 10.15Skechers Member Approvals.  Any approvals or consents to be given
by Skechers Member hereunder shall not be unreasonably withheld or delayed.

(signature pages follow)

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.

 

“OWNER”

 

 

“DEVELOPMENT MANAGER”

 

 

 

 

 

 

 

HF LOGISTICS –SKX T2, LLC, a Delaware limited liability company

 

 

HFC HOLDINGS, LLC, a Delaware limited liability company

 

 

 

 

 

 

 

By:

HF Logistics I, LLC, a Delaware limited liability company, it’s Managing Member

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

Iddo Benzeevi, its Chief Executive Officer

 

By:

 

 

 

 

 

 

 

Iddo Benzeevi, President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

By:

Skechers R.B., LLC, a Delaware limited liability company, it’s Managing Member

 

 

 

 

 

 

 

 

 

 

 

By:

Skechers R.B., LLC, a Delaware limited liability company, it’s Managing Member

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

David Weinberg, Chief Operating Officer

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

Robert Greenberg, Chief Executive Officer

 

 

 

 

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089402.000005 4845-7650-5721.3

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JOINDER

 

Skechers R.B., LLC, a Delaware limited liability company and Skechers USA, Inc.,
a Delaware corporation, each hereby joins in the execution of this Agreement as
a third party beneficiary of this Agreement and for the purposes of confirming
their agreement to comply with and perform those obligations applicable to
Skechers Member or Skechers Parent set forth herein.

 

“SKECHERS PARENT”

 

“SKECHERS MEMBER”

 

 

 

 

 

 

 

SKECHERS USA, INC., a Delaware corporation

 

SKECHERS R.B., LLC, a Delaware limited liability company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

Skechers USA, Inc, a Delaware corporation, its sole member

By:

 

 

 

 

 

 

 

David Weinberg, Chief Operating Officer

 

 

By:

 

 

 

 

 

 

 

David Weinberg, Chief Operating Officer

By:

 

 

 

 

 

 

 

Robert Greenberg, Chief Executive Officer

 

 

By:

 

 

 

 

 

 

 

Robert Greenberg, Chief Executive Officer

 

 

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EXHIBIT “A”

DEVELOPMENT BUDGET AND PROJECT SCHEDULE

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